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We’re finally seeing the light at the end of the tunnel: Uber

Uber reported mixed Q1 2021 earnings with its revenue missing expectations but losses reducing significantly. More importantly, the ride-hailing and food-delivery giant offered signs of things returning to pre-pandemic normal, at least in its primary market, the US. The company further reaffirmed its expectation to reach adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) profitability in the second half of the year.

“As vaccination rates rise, infections fall and restrictions lift, people quickly breathe a sigh of relief and start moving again. There’s pent-up demand to see family and friends. Offices, restaurants and bars are reopening and even airports are seeing improved traffic,” Uber CEO Dara Khosrowshahi said during the earnings call with investors on Wednesday.

Ride-hailing recovering to 2019 levels, but driver shortage to be addressed

Uber’s mobility division in the US, specifically in regions like New York City, New Jersey, Austin, Houston, Dallas, Atlanta are all 70% to 80% recovered versus 2019 gross booking levels. Miami has grown further to post growth versus 2019. Outside of the US, countries like Australia, New Zealand, Taiwan, and Hong Kong, which all managed the pandemic relatively well, saw positive growth compared to April 2019. The UK, which only started reopening in April, has also recovered 80% versus 2019. The only major market which continues to be adversely impacted is India, which is facing a deadly second wave and has imposed fresh lockdowns.

While riders are coming back to the platform, drivers are still hesitant. The primary concern for drivers seems to be safety and lack of rider demand. “On the safety front, we’re working hard to improve vaccine access for drivers and we continue to enforce our mask policies and provide free PPE and other supplies that keep both drivers and riders safe,” Khosrowshahi said during the earnings call. The company indicated that it will continue to invest in reviving the driver base during Q2 to match the excess demand. This issue, however, seems to be specific to Uber’s operation in the US and not its global operation.

Delivery segment continues to flourish

Uber’s delivery business “continues to grow faster than anyone could have predicted,” Khosrowshahi said. The company hopes to reach EBITDA breakeven for Delivery by year-end and has started broadening its offerings beyond food.

Uber also indicated that recovery in Mobility has not come at the expense of Delivery and that the company is seeing encouraging growth in delivery even as cities reopen. “For example, in Sydney, where dining fully reopened more than two months ago, Delivery trends remained healthy, even as Mobility has fully recovered and returned to growth versus 2019. In fact, Delivery in Sydney continues to be a bigger business for us than Mobility,” Uber CFO Nelson Chai said during the call.

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In response to a question on the synergies between the Mobility and Delivery segment, Khosrowshahi highlighted that about 13% of first time customer for Uber Eats come from Mobility either through the super-app or notifications. “And for perspective, the number of first-time eaters, for example, that our Mobility business delivers is actually bigger than the number of first-time eaters that we get out of pay channels for our Delivery business,” he added.

Khosrowshahi also revealed that the company currently has over 700,000 partner restaurants globally and it expects to grow this base for the next five years at least. “We think that a business that includes both walk-in and Delivery is just fundamentally better business. And I think for us, what’s interesting is we have a business — our Mobility business that’s all about getting people out and we think we can establish some pretty interesting relationships with restaurants as it relates to getting them out and dine-in and some promotions there. And we can continue to have relationships with our restaurant partners on the Delivery side.” Khosrowshahi said.

Independent workers will want to stay independent: Khosrowshahi

In response to multiple questions on how the new classification of Uber drivers as employees in the UK affects its prospects in other countries, the company said that it will try to engage in meaningful dialogue with local government bodies wherever it operates and try to “ultimately lead to a solution that gives the gig workers the protections they deserve while preserving the innovation that gives them the flexibility that they desire.”

“What comes through again and again in any piece of research done by anybody is that independent workers will want to stay independent. They do not want to be full-time employees, that the number one feature as it relates to gig work is fexibility. And what we’re talking about is taking it to the next level, which is providing fexibility and protections. We think that’s a really important dialog to have and we think that if you listen to drivers and couriers and then certainly you listen to voters, the answer is pretty clear, which is fexibility and bene!ts are the answer going forward, and we hope to have that conversation.” – Dara Khosrowshahi

Financial highlights — Q1 FY21

  • Revenue: $2.9 billion compared to $3.28 billion investors had expected
  • Net loss: $108 million, an improvement from the $968 million loss in Q4 2020
  • Gross bookings: $6.77 billion for Mobility, down 38% from a year ago; $12.46 billion for Delivery, up 166% from a year ago.
  • Trips on the platform: 1.45 billion, flat quarter-over-quarter and 13% below the same quarter a year ago

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