Uber CFO Focuses On Revenue Growth After Reaching Profitability Milestone

San Francisco-based Uber said in early November it reported adjusted earnings before interest, taxes, depreciation and amortization of $ 8 million for the quarter ended September 30. this move, aided by the resumption of its transportation business and the continued strength of its food delivery unit, Uber Eats.

“Our current goal is to continue to improve our Adjusted EBITDA, but the real goal is to focus on long-term growth,” said CFO Nelson Chai.

The company’s quarterly net loss, however, widened to $ 2.42 billion from $ 1.09 billion in the prior year period, largely due to a loss of its stakes in companies such as the Chinese ridesharing company Didi Global Inc.

Uber recorded net income under generally accepted accounting principles twice, first in 2018 and again in the second quarter of this year thanks to unrealized gains on investment holdings.

“We intend to achieve GAAP profitability,” said Mr. Chai, who has served as Uber’s CFO since 2018, after serving as Managing Director of CIT Bank and Warranty Group and CFO of Merrill Lynch during the financial crisis and NYSE Euronext. before that.

The company, which continues to strive for positive free cash flow, plans to brief investors on its profitability targets and spending plans in February. Mr Chai declined to comment on when Uber might report a net profit based on the strength of its operations rather than investment gains.

Investors would like to see margin and market share gains after years of heavy losses, said Nikhil Devnani, analyst at Sanford C. Bernstein & Co. “Uber is a growing company, but it is a growth company. profitable growth, ”he said. “They need to strike a balance between investing in a competitive delivery market and proving to the streets that there is a high-margin business with cross-platform synergies under the hood. “

Uber’s ridesharing business suffered badly during the pandemic – with bookings temporarily falling by as much as 80% – prompting the company to cut costs by around $ 1 billion, in part by laying off workers. workers. The company also sold various assets, including its autonomous driving unit and its bicycles and scooters business, while retaining its freight business.

Last year, the company pulled out of a number of countries where it did not see itself as a market leader, Chai said. The move involved around 20 stocks, including exits and deals to sell trades to rivals, a spokesperson said.

As it strives to regain ground lost at the start of the pandemic, the company expects staffing increases over time, but these will be limited, Chai said. Uber had 24,700 employees in the quarter ended Sept. 30, up from 21,600 a year earlier. Drivers are not classified as employees, so they are not included in the count. Around 800 people work in finance, up from around 500 when Mr. Chai took over the finance function.

Mr. Chai is targeting $ 90 billion in gross annual bookings by the end of the year. These bookings, which refer to the total value of rides and merchandise sold via Uber, amounted to $ 23.11 billion in the last quarter, up 57% from the previous year period. .

“If we’re down to $ 90 billion in gross bookings… increasing that on a massive scale is pretty amazing,” Mr. Chai said. The company will continue to invest, for example, in services such as grocery and drugstore delivery, he said.

Uber is already profitable in many of its markets, Chai said, adding that revenue growth and economies of scale would help increase overall profit.

“The only thing lagging behind,” he said, is Uber’s share price, which has fallen more than 16% since the start of the year. The CFO added that he was checking the share price “too often”. Uber shares closed at $ 42.08 on Wednesday, down 1.4%.

Analysts and investors have pointed out several levers that the CFO can pull, including unlocking funds by selling or reducing their holdings and increasing the take rate, the percentage of a tariff or delivery order that ‘Uber takes it as a charge.

“There are a number of ways for them to achieve profitability,” said Robert Mollins, director at Gordon Haskett Research Advisors, a research provider. “The way is pretty much there.”

The participation rate, or revenue as a percentage of gross bookings, in Uber’s mobility business was 22.3% in the last quarter, up from 23.1% a year earlier, while the Participation rate for the delivery business was 17.4%, compared to 13.3%.

“We believe the turnout in the United States will increase, and that’s largely because we’ll be able to reduce some of that driver incentive,” Chai said, referring to the financial support aimed at to attract more drivers to its platform. In other markets, for example Australia, the participation rate is likely to drop, he said.

Regarding Uber’s interests in other companies, Mr. Chai said, “We believe many of the holdings will continue to grow in value.”

Uber sold its activities in China to Didi in 2016 in exchange for a minority stake in the company. He now owns a roughly 11% stake in Didi, subject to a lock-in period that began with the Chinese company’s IPO. The blocking period expires at the end of the year, giving Uber the option to sell or reduce the stake.

In addition to its stake in Didi, Uber also owns other stakes, notably in the stand-alone startup Aurora Innovation Inc.

Uber continues to benefit from the strategy of selling more services to existing customers, said Dennis Allaire, partner of SoMa Equity Partners, which held 8.25 million Uber shares in its most recent quarter.

“Transactions within the application are very transparent,” said Mr. Allaire. “They have great economies of scale.”

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