Uber CEO Dara Khosrowshahi said in an email received by CNBC that he will focus on becoming a slimmer business to cut spending and deal with “earthquake changes” in investor sentiment.
“I spent a few days meeting investors in New York and Boston after making a profit,” Khosrowshahi said in an email sent late Sunday. “It is clear that the market is experiencing earthquake changes and we need to respond accordingly.”
High-tech stocks Plunge With the coronavirus pandemic highs, investors are worried about the outlook for the end of the cheap money era, which defined the historic bull market.The Nasdaq Composite Index Last week it recorded a decline for the fifth straight week, the longest weekly loss since 2012.
To deal with changing economic sentiment, Uber will reduce marketing and incentive spending and treat employment as a “privilege,” Kosloshahi said.
“Before we grow up, we need to make sure that the unit’s economics work,” wrote the Uber boss. “The most inefficient marketing and incentive spending will be withdrawn.”
“We treat hiring as a privilege and carefully consider when and where to add personnel. It’s even more hardcore in terms of overall costs.”
This makes the ride-hailing service giant a state-of-the-art technology company that warns of slowing hiring. Facebook told staff last week that it would do so Stop or slow Robin Hood Reduce labor force by about 9%..
Uber will focus on achieving profitability on a free cash flow basis rather than adjusted EBITDA (interest, taxes, depreciation, and pre-amortization revenue), Khosrowshahi said.
“We have made significant progress in terms of profitability and set a $ 5 billion target for adjusted EBITDA in 2024, but the goal post has changed,” said Khosrowshahi. “Now it’s about free cash flow. We can (and should) get there quickly.”
Uber’s first-quarter revenue more than doubled to $ 6.9 billion. This is because demand for the ride-hailing business has recovered thanks to the relaxation of Covid’s regulations. The company has relied heavily on Eat food delivery units to increase its pandemic sales.
Still, Uber $ 5.9 billion loss During the period, he quoted the slump in equity investment.
“We serve trillions of dollars in the market, but if it doesn’t make a profit, the size of the market doesn’t matter,” he said.
Investors are “satisfied” with Uber Eats’ growth from the pandemic, but this segment “should grow even faster,” Khosrowshahi said. He added that the company’s freight business is an opportunity for growth that “needs to grow.”
He finished the note with a rally call to the staff: “Make it a legend. Get it!”
Read the full letter below:
Team Uber-
After making a profit, I spent a few days meeting investors in New York and Boston. It is clear that the market is undergoing major changes and we need to respond accordingly. My meeting was very clear and I wanted to share some thoughts with you. When reading them, remember that investors don’t run a company, but they own a company-and they leave us to run the company well. We can make strategies and make decisions, but ultimately we need to do so in a way that benefits our shareholders and their long-term interests.
1. Investors demand safety at uncertain times. They recognize that we are a scaled leader in our category, but don’t know how much it’s worth. Channeling Jerry Magwire, we need to show them money. The 2024 adjusted EBITDA set a $ 5 billion target and made significant progress in terms of profitability, but the goal post has changed. Now it’s about free cash flow. We can (and should) get there early. Some companies are slow to put their heads in the sand and pivot. The harsh truth is that many of them cannot survive. The average Uber employee is just over 30 years old. In other words, I have built up a career with an unprecedented long bull run. This next period will be different and will require a different approach. Rest assured, we are not going to put our heads in the sand. Meet at that moment.
2. Investors ultimately understand that we are a completely different animal than Lyft and other ride-sharing dedicated platforms. They are very excited about the pace of our innovation, how fast we are rebounding, and the huge growth opportunities like Hailables and Taxi. They admit that we are winning, but we still don’t know the “prize size”. Their question runs from “Have anyone other than you made money on on-demand transportation?” “Ride sharing has been around for some time, why doesn’t anyone else make a profit?” They understand how big TAM is, but how big profits and free cash flow it is. I don’t understand what leads to. I have to show them.
3. Investors are pleased with the growth of deliveries from the pandemic and have confirmed that they are performing better than many other pandemic winners. I firmly believe that delivery should grow even faster, so I must admit that it was a bit of a surprise to me. The main question was, “Is delivery a good business and why?” And “What happens in a recession?” You need to answer both of these questions and get undeniably strong results.
4. Investors who ask about freight love freight. But less than 10% of them asked about it. Cargo needs to be even bigger so that investors recognize its value and love it as much as I do.
5. Satisfying the moment means making a trade-off. The hurdle rate for our investment will be higher, which means that some initiatives that require significant capital will be slowed down. Before it grows, you need to make sure that the unit’s economics work. The most inefficient marketing and incentive spending will be withdrawn. We treat recruitment as a privilege and carefully consider when and where to add personnel. It’s even more hardcore when it comes to overall costs.
6. We have begun to demonstrate the power of the platform. This is a structural advantage that makes us stand out. As you know, the strategy here is simple. Invite consumers with either mobility or delivery, encourage them to try the other, and connect everything with an engaging membership program. The benefits here are obvious, but you need to show the value of the platform in real money. We serve trillions of dollars in the market, but if that doesn’t make a profit, the size of the market doesn’t matter.
7. All of the above need to be done while continuing to provide consumers and earners with an outstanding and differentiated experience. Whether someone is booking a ride for a summer trip with a friend, or a new parent who relies on Uber Eats for everything from groceries to dinner and diapers, make everything a great deal. It is our responsibility to do so. The same goes for people who come to Uber and earn money. We responded to the pandemic by becoming a earner-centric in an unprecedented way. We are literally in their place by innovating for the earners, pondering their experience, driving, delivering and shopping on their own. With hundreds of improvements in this area, people who want to make money flexibly first come to Uber and benefit from our commitment to scale, diversification, and respect. increase.
We have never been convinced that we will win. But it will demand the best of our DNA: innovations that define hustle, grit, and categories. In some places, you need to pull back to sprint first. We will have to do more with absolutely less effort. This is not an easy task, but it can be magnificent. Remember who we are. We are Uber, a once-in-a-generation company that has become a verb and has changed the world forever. Work together as #OneUber to write the next chapter of the story and make it a legend.
I’m going to get it!
Dara
