Uber Chief Executive Officer Dara Khosrowshahi told employees in an email obtained by CNBC it would reduce spending and focus on being a leaner business to address the “seismic” in investor sentiment.
“After the earnings, I spent a few days meeting with investors in New York and Boston,” Khosrowshahi said in an email sent late Sunday. “It’s clear that the market is going through an earthquake and we need to react accordingly.”
Tech stocks have decline Since the height of the coronavirus pandemic, as investors worried about the prospect of an end to the era of cheap money have defined a historic bull market. The Nasdaq Composite posted its fifth consecutive weekly decline last week, its longest weekly decline since 2012.
To address the shift in economic sentiment, Uber will cut spending on marketing and incentives, and treat hiring as a “privilege,” Khosrowshahi said.
“We have to make sure our unit economics work before we can thrive,” the Uber boss wrote. “Incentive spending and the least effective marketing will be scaled back.”
“We’ll consider hiring a privilege and consider when and where we add staff. We’ll be even stricter on costs across the board.”
It makes the ride-hailing giant the latest tech company to warn of a hiring slowdown. Facebook last week told employees that it would stop or slow down the rate at which intermediate or advanced roles are added, while Robinhood is cut about 9% of the workforce.
According to Khosrowshahi, Uber will now focus on achieving profitability on a free cash flow basis rather than adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).
“We’ve made a lot of progress on profitability, targeting $5 billion in Adjusted EBITDA by 2024, but the targets have changed,” Khosrowshahi said. “Now it’s about free cash flow. We can (and should) get there quickly.”
Uber’s revenue more than doubled to $6.9 billion in the first quarter, as demand for its ride-hailing business recovered from the easing of Covid restrictions. The company has relied heavily on its Eat delivery unit to drive sales during the pandemic.
However, Uber also posted a Loss of 5.9 billion USD during the period, citing a decrease in equity investment.
“We’re serving trillions of dollars worth of markets, but the market size isn’t right if it doesn’t translate to profitability,” he said.
While investors are “delighted” with the growth of Uber Eats out of the pandemic, the segment “will grow even faster,” Khosrowshahi said. He added the company’s freight business is a growth opportunity that “needs to get bigger.”
He ended the note with an appeal to the staff: “Make it a legend. GO GET IT!”
Read the full letter below:
Uber Team –
After the earnings, I spent a few days meeting with investors in New York and Boston. It is clear that the market is going through an earthquake and we need to react accordingly. My meetings are very clear and I want to share some thoughts with you all. As you read them, please note that while the investors don’t run the company, they own the company — and they trust us to run it well. We have to set strategy and make decisions, but we need to do it in a way that ultimately serves our shareholders and their long-term interests.
1. In times of uncertainty, investors seek safety. They recognize that we’re the leader of scale in our categories, but they don’t know how much that’s worth. Channeling Jerry Maguire, we need to show them the money. We’ve made a lot of progress on profitability, targeting $5 billion in Adjusted EBITDA by 2024, but the goals have changed. Now it’s about free cash flow. We can (and should) get there quickly. There will be companies that bury their heads in the sand and are slow to turn around. The hard truth is that many of them will not survive. The average employee at Uber is just over 30 years old, which means you’ve gone through your career for an unprecedented length of time. This next phase will be different, and it will require a different approach. Rest assured, we won’t stick our heads in the sand. We will meet right now.
2. Investors finally understand that we are a completely different animal from Lyft and other shared-only platforms. They are incredibly excited about our pace of innovation, our rapid recovery, and huge growth opportunities like Hailables and Taxi. While they acknowledge that we are winning, they still don’t know the “size of the prize”. Their questions stem from, “Does anyone other than you make money from on-demand shipping?” to “Car sharing has been working for a while, why isn’t anyone else profitable?” They see how big TAM is, they just don’t understand how that translates into substantial profits and free cash flow. We have to show them.
3. Investors are satisfied with the growth of Pandemic Escape Delivery and see that we have outperformed many other pandemic winners. I must admit it was a bit of a surprise for me as I firmly believe that Delivery will grow even faster. The key questions are: “Is delivery a good business and why?” and “What if we enter a recession?” We need to answer both of these questions with undeniable results.
4. Investors asked about Freight love Freight. However, less than 10% of them asked about it. Freight needs to be bigger for investors to realize its value and love it as much as I do.
5. Meeting the moment means trade-offs. The hurdle rate for our investments has gone higher, and that means some significant capital-requiring initiatives will be slowed. We had to make sure our unit economics worked before we grew big. Incentive spending and the least effective marketing will be scaled back. We will treat hiring as a privilege and consider when and where we add staff. We’ll be even stricter on costs across the board.
6. We have begun to demonstrate the Power of the Platform, which is a structural advantage that sets us apart. As you know, our strategy here is simple: engage consumers with Mobile or Delivery, encourage them to try the other, and tie it all together with a compelling membership program. . The advantage here is obvious, but we have to represent the value of the platform in real dollars. We’re serving trillions of dollars worth of markets, but the market size isn’t right if it doesn’t translate to profits.
7. We must do all of the above while continuing to deliver outstanding and differentiated experiences for consumers and earners. Whether someone is booking a trip for a summer getaway with friends, or a new parent who relies on Uber Eats for everything from groceries to dinner and diapers, we can make every interaction went great. The same goes for anyone who comes to Uber to make money. We have responded to the pandemic by being people-centered in a way that we have never done before. We’re innovating for earners, thinking deeply about their experience and putting ourselves in their shoes — literally — by driving, delivering, and shopping for ourselves. Because of the hundreds of innovations in this area, people who want to earn money on flexibility are now coming to Uber first, where they benefit from our scale, diversification, and commitment to treat customers with respect. surname.
I have never been more certain that we will win. But it will require what is best in our DNA: hustle, grit and category-defining innovation. In some places we will have to step back to sprint forward. We will absolutely have to do more with less. This won’t be easy, but it will be epic. Remember who we are. We are Uber, an age-old company that became a verb and changed the world forever. Let’s write the next chapter of our story, work together as #OneUber, and let’s make it legendary.
GO GET IT!