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Uber plunges to $2.9bn loss but 'encouraged' as lockdowns ease

Uber has reported a loss of $2.9bn (£2.3bn) for the first quarter as the coronavirus took its toll, but said it saw encouraging signs in markets beginning to open up after lockdowns.

The Silicon Valley firm said its ride-hailing business had been "hit hard by the ongoing pandemic", though its smaller Uber Eats division was buoyed by a surge in food deliveries.

Uber's results come a day after it announced that it was to cut 3,700 jobs as the coronavirus had resulted in a slump in ride bookings.

But shares rose in after-hours trading following latest results, as chief executive Dara Khosrowshahi said bookings in the US started to recover last week as some states reopen following lockdowns.

Mr Khosrowshahi said: "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, focus additional resources on Uber Eats, and prepare us for any recovery scenario.

"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."

The bulk of Uber's quarterly losses came from a $2.1bn (£1.7bn) writedown on the value of the company's overseas investments including in Chinese ride-hailing giant Didi and Singapore-based Grab, as demand collapsed in the markets where they operate.

Uber has been battling to turn its rapid expansion into underlying profits by the end of this year but last month abandoned its guidance on annual financial results due to the uncertainty caused by COVID-19 pandemic.

The company's loss of $2.9bn for the January to March period this year is nearly three times worse than the $1bn (£800m) loss reported a year earlier.

Revenues from ride hailing in the latest quarter were up 2% to $2.47bn (£1.97bn) - though that was more than 18% down on the October to December period.

Uber Eats grew on both measures, with its revenue of $819m (£652m) up 53% compared to last year, though the pace of that expansion was slower than in the fourth quarter.

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IDFIMH

mere pocket change to them

from an email I received

Uber Technologies Inc’s Quarter 1 2020 Earnings Overview

• Late yesterday evening Uber Technologies Inc reported its first-quarter earnings for 2020, revenue was up at $3.54bn (Q1 19: $3.09bn), however, the company reported a deeper net loss of $-2.9bn (Q1 19: $-1.02bn).
• The net loss of $-2.9bn, included $2bn in impairment charges from companies in which Uber has a stake, represented Uber’s biggest loss in three quarters.
• The results widely missed market earnings estimates and they also fell short on revenue despite it increasing. (Please note that the results are for the whole of Uber worldwide and the company did not give detail on its UK business).
• We are not going to burden the reader down with details on the results but the full earnings release can be found here.

Our Key Takeaways
• The results are only up to the end of March, and thus they are only impacted by a few weeks of lockdown restrictions in its markets, therefore Q2 20 results are going to be even worse.
• The CEO stated that bookings were down circa 80% since mid-March; Uber’s stock initially fell, then reversed the fall as the CEO stated that they were seeing green shoots in usage in markets that were starting to reopen. At the time of writing Uber’s stock is up c. 8% since the release.
• Globally they have seen positive week on week growth albeit from a low base (c. 10-12%) for the last 3 weeks. They believe that they have passed the bottom in the USA. Interestingly, they also said that in Hong Kong bookings were back close to 70% of its peak.
• The company also said that the crisis is presenting Uber opportunities to partner with transport companies and businesses in helping get people and employees to move around in the future.
• In terms of how they plan to ensure safety of passengers and drivers, the company was lacking detail besides saying that they are looking at technology and distributing PPE and cleaning supplies for drivers to disinfect cars.
• The CEO also stressed that their Uber Eats business has seen rapid growth (+54%) and they believe that this category will continue to grow even when lockdowns are lifted. Please note that the Eats business only makes up 23% (Q1 19: 17%) of the company’s revenues at present.




Liquidity Position
• The company reiterated its liquidity position which provides it with adequate flexibility to navigate the current crisis. Unrestricted cash, cash equivalents, and short-term investments were $9.0bn, compared to $11.3bn at the end of 2019.
• The company also has a $2bn undrawn bank facility that it can use if needed.
• Our view is that Uber has adequate liquidity to see it through the current crisis.

Other Recent Developments
• On Tuesday May 5th, it was announced in the press that Uber was being sued, along with Lyft, by the state of California for allegedly misclassifying drivers as contractors, rather than employees to avoid paying for health benefits and other worker protections.
• On Wednesday May 6th, Uber said it was laying off 3,700 of its employees and that its CEO would forgo his base salary of around $1mn, for the rest of 2020. The layoffs impacted Uber’s customer support and recruiting teams, primarily, and represent about 14% of the 26,900 people the company said it employed at the end of 2019. This move could present UK PHV operators an opportunity if cuts are made in the UK and especially if Uber errors by cutting too much in this key market.

Our View
• As expected the results were weak, and they were worse than expected. However, forward looking statements on a recovery made by the CEO is supporting optimism on Uber’s future, and this has been translated into its stock price rallying.
• We were hoping for some details from the company on how they are performing in the UK market and how they plan to manage safety issues but unfortunately, it didn’t come in any real detail.
​• Overall, we still view Uber as well placed to weather the current crisis.

Uber’s next earnings (Q2 20) will be released c. August 6th 2020.

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lack of modern legislation is the iceberg sinking the titanic of the transport sector