Uber is accelerating cost-cutting measures in an effort to navigate the devastating impact of coronavirus on its core business.
The company announced on Monday plans to slash 3,000 jobs, just two weeks after cutting thousands more, among other cutbacks at the ridehailing giant. Uber (UBER) - Get Report shares rose 6.9% on Monday to $34.72.
In addition to the additional job cuts, Uber is closing 45 offices around the world, scaling back non-core divisions such as artificial intelligence, and reassessing emerging lines of business such as Uber Freight, according to a staff memo cited by the WSJ.
Uber CEO Dara Khosrowshahi said "will not make any claims with absolute certainty regarding our future” in the note, but indicated that Uber will double down on its core businesses and restructure the company to maximize efficiency.
Prior to the pandemic, Uber had sought to turn a profit by the end of this year. But a steep decline in rides has pushed that goal out of reach -- and Uber's profit timeline now depends on the trajectory of the virus.
"We are taking steps to make sure...that we can get to profitability," said Uber's CFO Nelson Chai at a JP Morgan conference last week. "To the extent the recovery happens faster, it just means we get to profitability faster...we believe we are -- I don't know if rightsizing is the wrong word, but we think we're making the right strategic choices today. We think that when we get through there are other levers we can do."
Uber's core ridehailing segment accounts for the majority of its overall revenue, and prior to the virus, Uber had been working to boost the profitability of the segment.
Khosrowshahi told investors on its recent first quarter earnings that its global rides business is "very profitable," with EBIDTA margins over 30% in January and February "as a percentage of Uber's ANR [adjusted net revenue]."
Shutdown orders, business closures and greatly diminished travel decimated Uber's global ridehailing segment by 80% in April. Khosrowshahi pointed to glimmers of a bounce back in markets that have reopened activity, such as Georgia and Texas. But a full recovery of ridehailing bookings looks like a remote prospect, particularly given the possibility of new outbreaks and lasting economic damage.
The company is hoping that Uber Eats will lift its prospects in the meantime.
Uber said that Eats generated $4.7 billion in gross bookings in the first quarter, up 54% year-over-year. The segment lost $313 million on an EBIDTA basis.
Chai pointed to the segment's take rate, or the percentage of sales that it retains, of 11.6%, an increase of almost 200 basis points compared to a year ago, he said. The company is targeting a 15% take rate over the long term, which will make it possible to "deliver that 33-type-percent segment EBITDA," said Chai. "We know the path there is going to take some time, but we think we're making progress there."
Chai would not comment on recent reports that Uber is in talks to buy Grubhub (GRUB) - Get Report, which would increase its footprint in food delivery, but said Uber is "going to be more assertive in terms of our strategy." Uber has exited several Uber Eats markets, such as South Korea, where it didn't believe it could become a dominant player.
Uber also announced plans to buy Cornershop, a grocery delivery startup serving Latin American markets, in October 2019. That deal has not yet closed.
Uber shares are up about 10% year to date.