The Uber share price gained 8% in late trading yesterday after the ride hailing app giant posted Q1 revenues that were up 14% on last year despite the impact of the Covid-19 pandemic. The company also announced a new $170 million investment in the e-bike and e-scooter rental start-up Lime. The move is an attempt to capture the expected commuter trend away from trains and buses to bikes and scooters, as those traveling to work prefer modes of transport that bring them into close contact with others.
Uber, yesterday announced that it is to downsize its workforce by 14%, around 3700 jobs, in an effort to cut costs and trim excess capacity in customer support and recruiting. Rival Lyft made an almost identical announcement a couple of days earlier. Nelson Chai, the company’s chief financial officer, yesterday told investors that hiring levels were unlikely to rebound to their previous levels even if the company recovers to where it was before the Covid-19 pandemic. His reasoning was succinct: “The reality is the world has change”.
While Uber’s Q1 results were better than had been expected, growth in the core ride sharing business unit has been ‘crushed’. However, this was partly offset in a surge in growth for Uber Eats, the food delivery spin-off.
The rides business was down 5% on the same period last year as a result of business falling off a cliff edge in March. But Uber Eats was, in contrast, up 52% as housebound families increased their orders of food deliveries for home. But the growing unit still booked a $313 million loss discounting interest, tax, depreciation and amortisation costs.
Overall, Uber booked a total loss of $2.9 billion, which included a $2.1 billion writedown on the value of a handful of investments the company holds minority stakes in. Discounting the writedown, ebitda losses were $612 million, which is 30% better than in 2019 and ahead of analyst expectations.
CEO Dara Khosrowshahi said “green shoots” of recovery had been apparent over the course of April, with ride numbers steadily growing over the last 3 weeks of the month. But overall volumes were down a whole 80%, which will inevitably hit Q2 figures hard. However, he reassured investors the company is convinced it will benefit hugely from the new normal, as mass modes of public transit are avoided.
The other major announcement was the $170 million investment in e-scooters and bikes brand Lime. Eventually Lime will take over Uber’s Jump brand, which operates in the same ‘micromobility’ space. Lime’s new chief executive is to be Wayne Ting, a former Uber manager who originally joined Lime as its head of operations.
Alongside Uber, Alphabet investment division GV and Bain Capital are also investing in Lime. The company was only founded in 2017 in San Francisco but now has operations across much of North America and Europe.
Lime’s scooters and e-bikes will be listed alongside Jump’s in Uber’s app and Lime will also offer Uber’s Jump bikes through its app.