Above it will cut expenses and focus on becoming a leaner company to address a “seismic shift” in investor sentiment, CEO Dara Khosrowshahi told employees in an email obtained by CNBC.
“After the earnings, I spent several days meeting with investors in New York and Boston,” Khosrowshahi said in the email, which was sent late Sunday. “It is clear that the market is experiencing a seismic change and we must react accordingly.”
Technological stocks have precipitated abruptly from the highs of the coronavirus pandemic, as investors are concerned about the prospect of the end of the era of cheap money that has defined a historic bull market. the Nasdaq composite posted its fifth consecutive week of declines last week, the longest weekly losing streak since 2012.
To address the shift in economic sentiment, Uber will cut marketing and incentive spending and treat hiring as a “privilege,” Khosrowshahi said.
“We need to make sure our economic unit works before we get big,” the Uber chief wrote. “Less efficient marketing and incentive expenses will be withdrawn.”
“We will treat hiring as a privilege and consider when and where to add staff. We will be even more conscientious about costs across the board.”
It makes the transportation giant the latest tech company to warn of a slowdown in hiring. Facebook last week told staff it would stop or slow down the pace of adding mid-level or senior roles, while Robinhood is cutting about 9% of its workforce.
Uber now wants to focus on achieving profitability on a free cash flow basis rather than adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), Khosrowshahi said.
“We’ve made a lot of progress in terms of profitability, setting a goal of $ 5 billion in adjusted EBITDA in 2024, but the stakes have changed,” Khosrowshahi said. “Now it’s about free cash flow. We can (and should) get there fast.”
Uber’s revenues more than doubled to $ 6.9 billion in the first quarter as demand for its racing businesses rebounded thanks to the easing of Covid restrictions. The company relied heavily on its Eat food delivery unit to increase sales during the pandemic.
However, Uber also released a Loss of $ 5.9 billion in the period, citing a collapse in its holdings.
“We are serving multi-billion dollar markets, but the size of the market is irrelevant if it doesn’t translate into profit,” he said.
While investors are “happy” with Uber Eats’ growth as it emerges from the pandemic, the segment “should grow even faster,” Khosrowshahi said. She added that the company’s freight business is a growth opportunity that “needs to get even bigger.”
He concluded the note with an appeal to the staff: “let’s make it legendary. GO GET IT!”
Read the full letter below:
After the earnings, I spent several days meeting with investors in New York and Boston. It is clear that the market is experiencing a seismic change and we must react accordingly. My meetings have been super clarifying and I wanted to share some thoughts with all of you. As you read them, keep in mind that while the investors don’t run the company, they own the company and have hired us to run it well. We can define the strategy and make the 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 are the scale leader in our categories, but they don’t know what it’s worth. By channeling Jerry Maguire, we have to show them the money. We’ve made a lot of progress in terms of profitability, setting a goal of $ 5 billion in Adjusted EBITDA in 2024, but the targets have changed. Now it’s about free cash flow. We can (and should) get there quickly. There will be companies that put their heads in the sand and are slow to turn. The hard truth is that many of them will not survive. The average Uber employee is just over 30, which means you’ve spent your career in a long and unprecedented bull run. The next period will be different and will require a different approach. Rest assured, we won’t put our heads in the sand. We will meet the moment.
2. Investors finally understand that we are a completely different animal to Lyft and other travel-only platforms. They are incredibly excited about the pace of our innovation, the speed at which we are bouncing, and huge growth opportunities like Hailables and Taxi. Although they recognize that we are winning, they do not yet know the “prize size”. Their questions range from, “Has anyone other than you made money with on-demand transportation?” to “Ridesharing has been around for a while, why is no one else profitable?” They see how big the TAM is, they just don’t understand how that translates into significant profits and free cash flow. We have to show them.
3. Investors are happy with Delivery’s growth out of the pandemic and see that we have performed better than many other pandemic winners. I have to admit it was a bit of a surprise to me as I strongly believe that Delivery should grow even faster. The main questions were, “Is delivery good business and why?” and “What happens if we go into a recession?” We need to answer both of these questions with undeniably strong results.
4. Investors who have inquired about Freight love Freight. However, less than 10% of them asked for it. Transportation needs to get even bigger so that investors recognize its value and love it as much as I do.
5. Meeting the moment means making compromises. The hurdle rate for our investments has increased, which means that some initiatives that require large capital will slow down. We need to make sure our economic units are working before we get big. Less efficient marketing and incentive expenses will be withdrawn. We will treat hiring as a privilege and consider when and where to add staff. We will be even more serious about 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: attract consumers to Mobility or Delivery, encourage them to try the other, and tie it all together with an engaging subscription program. The advantage here is obvious, but we need to show the value of the platform in terms of real dollars. We are serving multi-billion dollar markets, but the size of the market is irrelevant if it doesn’t translate into profit.
7. We must do all of the above while continuing to deliver an exceptional and differentiated experience for consumers and revenue. Whether someone is booking rides for a summer trip with friends or a new parent relying on Uber Eats for everything from shopping to dinner and diapers, it’s up to us to make every interaction great. The same goes for anyone who comes to Uber to make money. We have responded to the pandemic by becoming income-focused in a way we’ve never been before. We are innovating for profit, thinking deeply about their experience and putting ourselves in their shoes, literally, driving, delivering and shopping ourselves. Due to hundreds of improvements in this area, people who want to earn flexibly now come first to Uber, where they benefit from our scale, diversity and commitment to treat them with respect.
I have never been so sure we will win. But it will require the best of our DNA: haste, grit and innovation that defines the category. In some places we will have to retreat to sprint forward. We will absolutely have to do more with less. It won’t be easy, but it will be epic. Remember who we are. We are Uber, a unique company that has become a verb and changed the world forever. Let’s write the next chapter of our story, working together as #OneUber, and make it legendary.
GO GET IT!