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Uber CFO focuses on revenue growth after achieving profitability milestones

Uber Technologies Of a corporation

The chief financial officer said the ride-hailing service company has focused on increasing revenue and revenue after achieving significant profitability milestones in the last quarter.

San Francisco-based Uber said in early November that it recorded $ 8 million in interest, taxes, depreciation and pre-amortization adjusted profits for the quarter ending September 30. This indicator is underpinned by the recovery of the vehicle business and the continued strength of Uber Eats, the food delivery sector.

“Our current goal is to continually improve adjusted Ebitda, but the real focus is on long-term growth,” said Chief Financial Officer Nelson Chai. ..

However, the company’s quarterly net loss increased from $ 1.09 billion in the year-ago quarter to $ 2.42 billion. This has significantly reduced losses from equity investments in companies such as the Chinese ride-hailing company Didi Global. Ltd

Uber posted two net incomes in the second quarter of 2018 and this year, thanks to unrealized gains on its investment holdings, based on generally accepted accounting principles.

After serving as Chief Financial Officer of the CIT Bank and Warranty Group and Treasury Officer of the Financial Crisis and Merrill Lynch of NYSE Euronext, Chai, who has been Uber’s CFO since 2018, said: Before that.

The company, which continues to strive to achieve positive free cash flow, plans to update its investors in February with earnings targets and spending plans. Chai declined to comment on when Uber can report net income based on business strength rather than return on investment.

Sanford C. Bernstein & Co. Analyst Nikhil Devnani said investors want to increase margins and market share after years of heavy losses. “They need to strike a balance between investing in the highly competitive delivery market and proving to the street that they have a profitable business with cross-platform synergies.”

The pandemic has helped Uber reduce costs, including by dismissing workers.


Photo:

Laura Dale / Zuma Press

Uber’s ride-hailing service was hit hard during the pandemic, with bookings temporarily down by 80%. This could result in the dismissal of employees, saving about $ 1 billion in costs. The company also sold various assets such as self-driving units and bicycle and scooter businesses while maintaining the freight business.

According to Chai, the company withdrew from many countries last year that failed to gain market-leading positions. According to a spokeswoman, the move included about 20 actions, including withdrawals and deals to sell the business to rivals.

Chai said the company expects some increase in personnel over time as it works to regain the ground lost during the pandemic. Uber had 24,700 employees in the quarter through September 30, an increase from 21,600 in the previous year. Drivers are not included in the tally because they are not classified as employees. About 500 to 800 people who took over the financial function of Mr. Chai are engaged in finance.

Chai is targeting a total annual booking of $ 90 billion by the end of the year. These bookings, which refer to the total value of vehicles and goods sold through Uber, were $ 23.11 billion in the previous quarter, up 57% from the year-ago quarter.

“If we have a total of $ 90 billion in bookings, it would be great to scale it up,” Chai said. He said the company will continue to invest in services such as grocery and pharmacy deliveries.

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

“What’s behind is Uber’s share price, which has fallen by more than 16% since the beginning of the year,” he said. The chief financial officer added that he checks stock prices “frequently.” Uber’s share price fell 1.4% on Wednesday to close at $ 42.08.

Analysts and investors have pointed out some of the ways the CFO can withdraw. This includes releasing funds by selling or reducing shares, and raising the tax rate, which is the percentage of freight or delivery orders that Uber receives as a commission.

Robert Molins, Director of Research Provider Gordon Haskett Research Advisors, said: “The road is almost there.”

Uber’s mobility business take rate (percentage to total bookings) was 22.3% in the last quarter, down from 23.1% in the previous year. On the other hand, the take rate of the delivery business was 17.4%, up from 13.3%.

“We believe US tax rates will rise, primarily because we can reduce some of our driver incentives,” Chai said of financial support aimed at attracting more drivers to the platform. bottom. In other markets, such as Australia, tax rates are likely to fall, he said.

“We believe that the value of many stocks will continue to rise,” Chai said of Uber’s interest in other companies.

In 2016, Uber sold its business in China to Didi in exchange for its minority stake. Currently, we own about 11% of Didi’s shares, subject to the lockup period that began with the initial public offering of a Chinese company. The lockup period ends at the end of the year, giving Uber the option to sell or reduce its shares.

Apart from its Didi holdings, Uber also owns other shares, including self-driving startup Aurora Innovation. Ltd

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

“Transactions within the app are very seamless,” says Allaire. “They have a large economies of scale.”

Write in NinaTrentmann at Nina.Trentmann@wsj.com

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Uber CFO focuses on revenue growth after achieving profitability milestones

Source link Uber CFO focuses on revenue growth after achieving profitability milestones

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