Uber’s CFO has described a milestone in the company’s finances, but also warned of future challenges. Uber surpassed net income for the first time ever earlier this year, which is a promising sign for the company as it looks to grow revenue and save on costs going forward.
Uber, a ride-sharing service that has been in the news for some time now, recently hit a milestone of profitability. The company’s CFO is now focused on revenue growth after achieving this milestone.
The finance head of Uber Technologies Inc. said the ride-sharing and delivery firm is focused on increasing sales and income after hitting a key profitability milestone in the most recent quarter.
headquartered in San Francisco Uber reported $8 million in adjusted profits before interest, taxes, depreciation, and amortization for the quarter ended Sept. 30 in early November. Uber recorded a positive result for this statistic for the first time in its approximately decade-long existence, aided by a resurgence in its rides business and the sustained growth of its food-delivery operation, Uber Eats.
“Our immediate aim is to continue to enhance our adjusted Ebitda, but the actual emphasis is on long-term development,” said Nelson Chai, Chief Financial Officer.
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The business’s quarterly net loss, however, increased to $2.42 billion from $1.09 billion the year before, owing mostly to a loss on stock investments in companies such as Didi Global Inc., a Chinese ride-hailing startup.
Due to unrealized gains on investment assets, Uber has made a net profit twice under generally accepted accounting standards, first in 2018 and again in the second quarter of this year.
“We want to achieve GAAP profitability,” said Mr. Chai, who has been Uber’s CFO since 2018, after stints as CEO of CIT Bank and Warranty Group, as well as finance chief at Merrill Lynch during the financial crisis and NYSE Euronext before to that.
In February, the firm aims to update investors on its profitability objectives and expenditure plans, as it continues to move toward positive free cash flow. Mr. Chai refused to say when Uber could be able to post a net profit based on its operations rather than investment gains.
After years of huge losses, investors would want to see increases in margin and market share, according to Nikhil Devnani, an analyst at Sanford C. Bernstein & Co. “Uber is a growth business,” he said, “but it’s about profitable growth.” “They have to find a balance between investing in a competitive delivery industry and demonstrating to Wall Street that there is a high-margin company with cross-platform synergies beneath the hood,” says one analyst.
Uber was forced to slash expenditures as a result of the epidemic, including by laying off employees.
Laura Dale/Zuma Press photo
During the epidemic, Uber’s ride-sharing business took a hit, with bookings dropping by as much as 80%, causing the firm to slash expenses by $1 billion, in part by laying off people. The company also sold a number of assets, including its autonomous driving unit and the bikes and scooters division, while keeping the freight division.
According to Mr. Chai, the firm exited a number of nations last year where it didn’t envision itself establishing a market-leading position. According to a spokeswoman, the move encompassed around 20 steps, including departures and negotiations to sell assets to competitors.
The firm anticipates occasional gains in head count over time as it seeks to reclaim territory lost during the pandemic’s beginning, but these will be limited, according to Mr. Chai. In the quarter ended Sept. 30, Uber had 24,700 workers, up from 21,600 a year earlier. Because drivers aren’t considered workers, they aren’t included in the total. Finance employs roughly 800 individuals, up from around 500 when Mr. Chai took over the position.
By the end of the year, Mr. Chai hopes to have $90 billion in annual gross bookings. These bookings, which relate to the total value of Uber rides and commodities sold, totaled $23.11 billion in the third quarter, up 57 percent over the same time the previous year.
Mr. Chai said, “If we’re at $90 billion in gross bookings, expanding that at scale is quite extraordinary.” He said that the corporation would continue to invest in services such as supermarket and pharmacy delivery.
Mr. Chai said that Uber is currently profitable in several of its regions, and that revenue growth and economies of scale would assist to increase total profit.
“The one item that is trailing,” he remarked, referring to Uber’s stock price, which has dropped more than 16 percent since the start of the year. The finance head went on to say that he has been looking at the stock price “too much.” Uber’s stock fell 1.4 percent to $42.08 on Wednesday.
Analysts and investors pointed to a number of levers that the CFO may pull, including freeing cash by selling or lowering ownership shares and boosting the take rate, which is the proportion of a ride or delivery order that Uber keeps as a charge.
“They’re getting to profitability in a couple of ways,” said Robert Mollins, a director at Gordon Haskett Research Advisors, a research firm. “It’s almost there,” says the narrator.
Uber’s mobility business’ take rate, or revenue as a proportion of gross bookings, was 22.3 percent in the most recent quarter, down from 23.1 percent a year ago, while the delivery business’ take rate was 17.4 percent, up from 13.3 percent.
Mr. Chai said, “We believe the take rate in the United States will grow, and it’s partly because we’ll be able to curb some of that driving incentive.” He predicts that the take rate in other areas, such as Australia, would fall.
“We expect that many of the stakes will continue to accumulate in value,” Mr. Chai said of Uber’s other investments.
Uber sold its Chinese business to Didi in return for a minority ownership in the firm in 2016. It currently owns around 11% of Didi, which is subject to a lockup period that started with the Chinese firm’s first public offering. When the lockup term ends at the end of the year, Uber will have the option to sell or decrease its interest.
Uber holds other stock investments in addition to Didi, including Aurora Innovation Inc., a self-driving firm.
According to Dennis Allaire, a partner at SoMa Equity Partners, which had 8.25 million Uber shares during the most recent quarter, the company’s approach of selling new services to current users is continuing to pay off.
“Transacting inside the app is incredibly smooth,” Mr. Allaire added. “They have a lot of economies of scale,” says the narrator.
Nina Trentmann can be reached at Nina.Trentmann@wsj.com.
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Uber’s CFO has announced that the company will focus on revenue growth after hitting profitability milestones. Uber has been having a lot of trouble with its finances, but this announcement could be a sign of good things to come. Reference: uber financial situation.
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