(Bloomberg) — Uber Technologies Inc. said quarterly bookings from ride-hailing customers declined for the first time ever due to the effects of the coronavirus but that the business is already beginning to recover.
The San Francisco-based company has never turned an adjusted quarterly profit and is unlikely to do so this year. Uber now expects to hit that milestone next year, thanks to cost cutting that will eliminate more than $1 billion in expenses, Dara Khosrowshahi, the chief executive officer, said on a conference call with analysts.
The ride-hailing business was down about 80% in April, but Khosrowshahi said sales have increased for each of the last three weeks and are on track to do so again this week. “We believe the U.S. is off the bottom,” he said. Shares were up about 6% in extended trading Thursday.
The problems last quarter for Uber’s rides business, and for most of the transportation industry, can be traced to the spread of the virus around the world. With the stock under pressure in the first quarter, Khosrowshahi sought to reassure investors on a conference call in March explaining the business would have a $4 billion cash cushion in a worst-case scenario.
Uber is a major investor in Didi Chuxing, the largest ride-hailing operator in China, where the virus originated. By April, Uber withdrew its financial forecast for the year and said it would take a significant charge on investments, which totaled $2.1 billion. That drove a quarterly net loss of $2.94 billion, nearly triple the loss a year ago.
However, Uber inched closer in the first quarter to its goal of generating an adjusted profit. The loss, excluding taxes, interest and other expenses, declined 30% from a year ago, to $612 million.
Another bright spot was food delivery, which helped offset the drop in rides. Homebound customers drove a 52% increase in food delivery gross bookings to $4.68 billion in the first quarter. Gross bookings from rides, a measure of the total value of fares that’s closely watched by investors, dropped 5% to $10.9 billion. A year earlier, growth was more than 20%.
“While our rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet,” Khosrowshahi said in a statement. “Along with the surge in food delivery, we are encouraged by the early signs we are seeing in markets that are beginning to open back up.”
During the past week, Uber has embarked on a blitz of cost-trimming moves. Uber said it will end food delivery operations in more than a half-dozen countries and that its Middle East unit Careem will terminate 31% of employees. On Wednesday, the company told employees it was cutting 14% of staff and indicated that more cost reductions would be conveyed in the next two weeks. Uber said Thursday it will transfer its bicycle and scooter business to another company, Lime, and invest more capital in the startup.
To achieve the company’s revised profit plan, all departments will need to make reductions, Nelson Chai, the chief financial officer, said on the conference call Thursday. “There are no sacred cows,” he said.
Even as Uber is hustling to cut costs and prepares to enforce a new policy requiring some drivers and passengers to wear face masks, a new threat has emerged. Its home state, California, sued Uber and its peer, Lyft Inc., this week alleging that they are violating a law enabling their drivers to reap employee benefits. If they lose the case, the companies face substantial new costs that will alter their business models in California and could embolden other governments to take similar actions. Uber has vowed to fight it in court and at voting booths with a ballot measure in November.
(Updates with CFO comments in the penultimate paragraph.)
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