Uber's First Quarter Shows Food Delivery's Continuing Strength -- 2nd Update

By Preetika Rana 

Uber Technologies Inc.'s first-quarter bookings rose despite weak demand for its ride-sharing service, as sustained growth in its food-delivery business offset the slump in its core operations.

Uber's bookings grew 24% year-over-year to $19.5 billion in the three months ended March, of which $12.5 billion came from its food-delivery arm. Uber Eats' bookings more than doubled from a year earlier, while Uber's ride business declined 38% over the same period. Bookings are used to gauge consumer demand as they represent the total value of trips or food booked using Uber's platform. Uber earns revenue by taking a cut from these bookings.

Even though Uber's total bookings grew and beat analysts' forecasts, its overall revenue declined because of an adjustment tied tnew driver benefits in the U.K. The company reported revenue at $2.9 billion after setting aside $600 million tied to the U.K. changes. That compares with revenue of $3.2 billion in the same period last year.

In March -- after losing a monthslong legal battle -- Uber granted its U.K. drivers an employment status entitling them to vacation pay and pension contributions. While Uber won a major reclassification dispute in its home state of California late last year, regulatory challenges are far from over.

The Biden administration said earlier Wednesday it would block a Trump-era proposal that sought to make it easier for Uber and others to continue classifying gig workers as independent contractors. The move maintains the status quo, meaning Uber doesn't need to change its labor model. But the current administration's stance may add to regulatory snares down the road.

Despite the U.K. changes, the company reported a narrower net loss as it benefited from the recent sale of its self-driving unit. Uber reported a net loss of $108 million, compared with a loss of $2.9 billion in the year-earlier period.

The San Francisco-based ride-hailing company also narrowed its adjusted loss before interest, taxes, depreciation and amortization, beating Wall Street's projections. Uber reported an adjusted Ebitda loss of $359 million, compared with a loss by that measure of $612 million in the same year-ago period. Analysts surveyed by FactSet had expected an adjusted Ebitda loss of $452 million.

Investors are closely watching this number because Uber has said it expects to be profitable by this measure before the year ends. Silicon Valley startups often point to an adjusted metric that strips the business of certain costs so they can show investors a path to profitable growth.

On a conference call with analysts Wednesday, Uber executives said they expected the ride-hailing business to bounce back as vaccinations pick up in the coming months. But the company acknowledged it faced an imminent challenge: not enough drivers.

Chief Executive Dara Khosrowshahi said some drivers are still hesitant to ferry passengers over food. In addition to distributing free personal protective equipment, Uber is offering incentives for drivers to return, Mr. Khosrowshahi said. Rival Lyft Inc., which reported a 36% year-over-year decline in first-quarter revenue Tuesday, is also handing out similar incentives. Lyft beat analysts' revenue forecasts.

As a vaccinated public begins traveling and going to restaurants again, Uber cautioned that it had limited visibility into how its delivery business would fare in the coming months. "Year-over-year comparisons become tougher," Chief Financial Officer Nelson Chai said, as the company faces "forecasting uncertainty in predicting post-reopening consumer behavior."

To position itself for continued growth in a post-pandemic world, Uber last week intertwined its ride-hailing app with its delivery business so it could drive up Eats orders as more people took trips. One feature enables passengers to book and pick up meals while en route somewhere in an Uber. The company began pinging passengers requesting trips from airports, asking whether they would like food delivered through the Eats app wherever they are headed.

Even before last week's changes, the ride app drove more first-time users to Eats than all of its paid channels combined, Mr. Khosrowshahi told analysts. "Looking ahead, I'm confident that Uber will benefit from the complementary nature of our two large core opportunities," he said.

Write to Preetika Rana at [e-mail]

(END) Dow Jones Newswires

May 05, 2021 19:13 ET (23:13 GMT)

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