Uber CFO Focuses on Revenue Growth After Hitting Profitability Milestone

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Nelson Chai says company wants to improve adjusted EBITDA but long-term growth is the ‘real focus point’

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“Our current goal is to continue to improve our adjusted EBITDA, but the real focus point is focusing on long-term growth,” said Chief Financial Officer Nelson Chai.

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The company’s quarterly net loss, however, rose to $2.42 billion from $1.09 billion during the prior-year period, largely offset by losses from its equity investments in companies such as Chinese ride-hailing company Didi Global. Done. Inc.

Uber has posted net profit twice under generally accepted accounting principles, first in 2018 and again during the second quarter of this year thanks to an unrealized profit on investment holdings.

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“Our intention is to achieve GAAP profitability,” said Mr. Chai, who has been Uber’s CFO since 2018 after stints at CIT Bank and Warranty Group as chief executive and finance chief at Merrill Lynch during the financial crisis and NYSE Euronext. before that.

The company, which is still working to achieve positive free cash flow, plans to update investors on its profitability goals 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 profit.

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

Uber’s ride-sharing business suffered heavy losses during the pandemic – bookings temporarily fell by 80% – prompting the company to cut costs by nearly $1 billion by laying off workers. The company also sold various assets, including its autonomous driving unit and bike and scooter business, while maintaining its freight business.

The company pulled out of several countries last year where it did not see itself gaining market leadership, Mr. Chai said. A spokesman said the move includes about 20 actions, including exits and deals to sell operations to rivals.

As it works to regain ground lost during the start of the pandemic, the company expects some increases in head count over time, but they will be limited, Mr Chai said. Uber had 24,700 employees for the quarter ended September 30, up from 21,600 a year ago. Drivers are not classified as employees, so they are not included in the tally. About 800 people work in finance, up from about 500 when Mr. Chai took over finance.

Mr. Chai is targeting $90 billion in annual gross bookings by the end of the year. These bookings, which refer to the total value of rides and goods sold through Uber, came in at $23.11 billion during the last quarter, up 57% from the prior-year period.

“If we’re at $90 billion total bookings… then growth on that scale is pretty incredible,” Mr. Chai said. For example, the company will continue to invest in services such as grocery and pharmacy delivery, he said.

Uber is already profitable in many of its markets, Mr Chai said, adding that revenue growth and economies of scale will help boost overall profits.

“The one thing that’s lagging,” he said, is the share price of Uber, which has fallen more than 16% since the start of the year. The finance chief said he is checking the share price “frequently”. Shares of Uber closed down 1.4% on Wednesday at $42.08.

Analysts and investors pointed to a number of levers that the CFO could pull, including selling or cutting its equity portion, releasing funds and increasing the take rate, the percentage of rental or delivery orders that Uber charges. .

“Those are just a few ways to get profitability,” said Robert Molins, director of Gordon Haskett Research Advisors, a research provider. “Way too much there.”

Revenue, as a percentage of gross bookings in Uber’s mobility business, was up 22.3% during the latest quarter, up from 23.1% a year ago, while the take rate for the delivery business was up from 13.3% to 17.4%.

“We think the tech rate will increase in the US, and that is largely because we will be able to reduce some of that driver incentives,” said Mr. Chai of financial support aimed at attracting more drivers to his platform. Referring to. He added that in other markets, for example Australia, take rates are likely to be lower.

As far as Uber’s interests in other companies are concerned, Mr. Chai said, “We believe many of the stakes will continue to accrue in value.”

In 2016, Uber sold its operations in China to Didi in exchange for a minority stake in the company. It now holds about 11% stake in Didi, subject to a lockup period that began with the Chinese company’s initial public offering. The lockup 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 has other equity stakes, including that of self-driving startup Aurora Innovation. Inc.

Uber is benefiting from its strategy to sell more services to existing customers, said Dennis Allaire, partner at Soma Equity Partners, which held 8.25 million Uber shares during the most recent quarter.

“It is very intuitive to transact within the app,” Mr. Allaire said. “They have great economies of scale.”

Nina Trentmann at Nina [email protected]

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