The disclosure, along with a decline in first-quarter revenue, sent the stock tumbling more than 4% in extended trading.
Uber Chief Executive Officer Dara Khosrowshahi reaffirmed his commitment to turn a quarterly adjusted profit by the end of the year. And the first-quarter results showed otherwise strong growth of 24% in gross bookings, driven by the delivery business. The total value of customer spending on Uber reached $19.54 billion, exceeding an average of analysts’ estimates compiled by Bloomberg.
The ride-hailing and delivery company narrowed its adjusted loss, Uber said in a statement Wednesday. It was $359 million before interest, tax and other expenses, easily beating analysts’ estimates. The loss was 6 cents a share.
The company trimmed costs considerably in the coronavirus pandemic. It cut staff and sold businesses, including a pricey, years-long effort to develop self-driving car technology.
Now Uber is searching for new ways to get people into the back seats of its cars. It added a new feature to the app a week ago for booking vaccine appointments and transportation to a nearby Walgreens and back. Gross bookings from the mobility business were $6.8 billion in the first quarter, more than analysts expected.
Making customers comfortable with riding in strangers’ cars is only one part of the equation. Many drivers switched to other jobs or stayed at home when the coronavirus wiped out ride-hailing demand. The company is trying to draw drivers back. Uber said last month it would spend $250 million on bonuses and other incentives. It said Wednesday that the program contributed to increased costs in the first quarter.
Lyft Inc., the main alternative to Uber in the U.S., reported financial results Tuesday. The company said ridership demand rebounded from the prior quarter and that its loss narrowed.
Almost as much as the pandemic wounded the rides business, it was a catalyst for Uber’s delivery operation. The company quickly expanded from meals to booze, groceries, packages and prescriptions. On Tuesday, Uber said it will add convenience store items for delivery from GoPuff, a fast-growing startup.
“We believe consumer behavior around delivery is likely to prove sticky as Uber Eats offers a better product today than pre-pandemic,” wrote Ron Josey, equity research analyst at JMP Securities, in a note to clients.
Delivery revenue rose another 28% from the prior quarter to $1.7 billion. That’s more than triple what it was a year ago.
However, Uber’s financial results were impacted by a landmark ruling in the U.K. The company agreed to grant some government-mandated benefits to its drivers, resulting in a $600 million expense, which weighed on revenue and added to its loss. Sales fell 11% to $2.9 billion. Excluding that cost, revenue grew 8%.
The driver reclassification in the U.K. serves as a reminder of a severe risk facing Uber’s business. Making drivers eligible for employment benefits is expensive. The company won a reprieve from voters in California in the November election, but it faces many similar battles across the U.S. and around the world.
Another front in Uber’s regulatory battles is over the fees delivery apps charge to restaurants. Major cities imposed caps on those fees during the pandemic, and some are debating permanent action. “There is a looming cloud on food delivery,” wrote Tom White, an analyst at DA Davidson & Co. “Pre-pandemic there was virtually no oversight.”
Meanwhile, Uber still needs to draw customers back to its services. One closely watched metric — the number of people who use the platform each month — fell 5% to 98 million in the first quarter, falling short of Wall Street estimates of 100 million. Uber ended the quarter with $5.65 billion in cash and equivalents, more than expected.