By Lizette Chapman
Uber Technologies Inc. said it will deliver a first-ever quarterly profit by the end of the year, signaling that cost-cutting measures are exceeding even the company’s own recent expectations.
The company will become profitable, on an adjusted basis, by the fourth quarter of 2020, Dara Khosrowshahi, the chief executive officer, said on a conference call to discuss financial results Thursday. A previous plan set this goal for 2021. The stock was up about 5% in extended trading.
The drive toward profitability is likely to take a toll on growth. Nelson Chai, the chief financial officer, said gross bookings will decline slightly in the first quarter from the previous period.
For the fourth quarter, Uber edged out Wall Street’s expectations, with bookings up 28% and a loss that was narrower than analysts’ estimates. Gross bookings for the fourth quarter were $18.1 billion, showing demand for transportation and food delivery orders remains strong. The measure, which represents the total value of rides, food orders and other businesses, is closely watched by investors.
Efforts to rein in spending are proving to be especially effective. The San Francisco-based company reported an adjusted loss of $615 million, compared with a $713 million average of analysts’ estimates compiled by Bloomberg. The loss, which excludes interest, taxes and other expenses, was $817 million in the same quarter a year earlier.
Uber is trying to more closely connect its various services and increase usage among the more than 100 million customers who open the app each month. The company is investing in electric bicycle and scooter rentals and experimenting with helicopter rides and temporary staffing.
The new businesses are pricey, though, and investors have punished the company for burning cash to fuel growth. The stock, which went public in May, trades below its initial offering price. Uber said Thursday that its loss for the year using generally accepted accounting principles was $8.51 billion. The startling figure was driven primarily by stock compensation and one-time costs associated with the IPO.
In the last year, Uber has taken steps to check its spending habit. It reduced marketing expenses, cut more than 1,000 employees and abandoned some unprofitable food delivery units. It ended delivery in South Korea and sold the delivery operation in India last month.
The company will consider abandoning delivery in other countries or acquiring businesses with the goal of only competing in markets where Uber Eats would be the biggest or second-biggest option, Khosrowshahi said. Eventually, Uber Eats will reduce discounts for customers, which will drive a decline in spending by the second quarter. The strategy is similar to what the company did in ride-hailing. “The Eats team is running the same exact play,” Khosrowshahi said. “It’s just running a year behind.”
The ride-hailing business was profitable on a standalone basis in the fourth quarter, Uber said. The company lost $130 million on its “other technology programs,” including the autonomous driving division, which is funded by Uber, SoftBank Group Corp., Toyota Motor Corp. and others.
Uber didn’t disclose the amount it spent battling government initiatives, like California’s Assembly Bill 5, a new law that seeks to reclassify gig economy workers as employees. Regulators in Colombia, London and parts of Canada have all moved to ban the service from operating, and Uber, in most cases, is appealing those decisions. The U.S. and Canada accounted for most of Uber’s revenue in the fourth quarter.
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