Uber’s CEO to investors: The coronavirus won’t kill our business
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Uber is trying to reassure investors that it will survive the slowdown of its ride-hailing business despite the global spread of the coronavirus, which is keeping more of its customers at home.
“Our balance sheet is incredibly strong,” CEO Dara Khosrowshahi said during an analyst briefing on Thursday. “We have plenty of liquidity on the books, which we think positions us to come out of this crisis—and we will come out of this crisis—strong, capable, and important.”
The ride-hailing company is “extensively” stress-testing its business models across a few scenarios, and all signs point to Uber surviving the slowdown, Khosrowshahi said. The company currently has $10 billion in unrestricted cash. In the worst-case scenario, the rides business drops 80% for the year without any recovery and still leaves Uber with $4 billion in cash with access to a $2 billion revolving line of credit. The company has also frozen hiring and said in two weeks it will have pulled back a total of $150 million in incentives and marketing.
Khosrowshahi did not provide an update on the company’s guidance but said he doesn’t expect the slowdown to change the margins of each of its services. Last month, he said the company expected to be profitable, excluding certain expenses, by the end of 2020. Uber’s stock was up about 30% trading at $19.38 per share following Thursday’s announcement.
The news comes as major companies, especially in the travel and transportation industry, prepare for major losses to their businesses. It also follows mounting pressure from Uber investors, who want to see the company finally turn a profit—Uber lost $8.5 billion in 2019. Meanwhile, the timeline of when business across the world will return to normal is still unclear.
Regardless, Khosrowshahi said the company is looking at its business through the lens of what has happened in Hong Kong, where demand for rides started improving after two months, and what’s happening in Seattle, one of the first U.S. cities to shut down nonessential business. Khosrowshahi said as Hong Kong, which is ahead of the U.S. in terms of progress with the virus, comes back online, people will first start going back to work, and then slowly begin “tiptoeing” back into their social lives.
“When the demand is there, the supply is going to be there instantly, because our driver partners need to work,” Khosrowshahi said. “When work turns on, Uber turns on.”
Uber said its strength comes from its cost structure—without demand for rides, Uber also has less costs—and from Uber Eats, which is giving drivers an opportunity to work and the company another revenue stream.
In Seattle, one of the hardest-hit cities in the states, the Uber Eats business is still growing. The company’s restaurant sign-ups increased 10-fold on its self-service website. Uber also has been aggressively cross-promoting its Uber riders to use its food delivery service, which has created “huge spikes” in the business over the past couple of a days.
“My job is to ensure the business is sound in any scenario,” Khosrowshahi said. “But, of course, the last few weeks have been anything but predictable.”
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