UBER Uber Technologies Inc

By Preetika Rana 

Uber Technologies Inc. said it would reach a measure of profitability a year sooner than it previously expected, as growth in ride hailing and food delivery boosted the company's top line in the fourth quarter.

Chief Executive Dara Khosrowshahi said he now sees the company profitable on an adjusted basis before interest, taxes, depreciation and amortization by the end of this year. Previously, he said the company hoped to reach that marker by the end of 2021.

"We plan to achieve this profitability target assuming only modest improvements in the current competitive environment, and without the assumption of any significant changes to our current portfolio of businesses," Mr. Khosrowshahi said Thursday in a conference call with analysts. He also said the new target assumes the regulatory environment won't change very much.

On that front, Uber has some work ahead. Its core ride-sharing business is under regulatory scrutiny in some of its most lucrative markets. In California, which accounts for about 9% of Uber's gross bookings, a so-called gig-economy law, known as AB5, may require the company to reclassify its drivers as employees which would raise costs significantly. In London, which contributes about 5% of its ride bookings, the company was stripped of its license to operate in November and is appealing the decision.

There have been some regulatory wins. This week, a Brazilian court ruled that Uber drivers weren't the company's employees. Brazil is Uber's biggest country by number of trips.

The company reported an adjusted Ebitda loss of $615 million in the three months ended Dec. 31, narrower than the $817 million loss it booked in the year-earlier quarter and better than the average estimate of analysts polled by FactSet for a loss of $705 million. The net loss for the period widened to $1.1 billion, bringing losses for the full year to $8.5 billion. Still, the loss was smaller than analysts' projected. Revenue climbed 37% to $4.07 billion, fueled by rapid growth in new business offerings and premium rides to consumers. Gross bookings in the quarter surged 28% to $18.13 billion,

The company also spent a smaller percentage of revenue on marketing and discounts than in the quarter a year earlier.

"We recognize that the era of growth at all costs is over," Chief Executive Dara Khosrowshahi said, adding that he wants Uber to be a leader in food delivery, a heavy cash-burning business. He has said Uber would exit markets where the company isn't the No. 1 or No. 2 food-delivery player.

Uber pulled out of food delivery in South Korea in September and sold its struggling Indian food-delivery unit last month. Together, those businesses accounted for more than a quarter of the adjusted Ebitda losses for Uber Eats last year, according to J.P. Morgan, and the exits are expected to lift the company's outlook this year.

Uber's leaders "finally are showing that profitability and a rationalized Eats business will be the focus in 2020 and beyond," Daniel Ives, a Wedbush Securities Inc. analyst, wrote in a research note following Thursday's earnings. He said Wall Street expected "another negative was going to come out of left field. Instead, Uber finally delivered a quarter with minimal noise."

Uber's profitability might come at a higher cost to consumers. Mr. Khosrowshahi said the company had already raised prices for rides in California as it tweaked its business to respond to the state's new gig-economy law, which went into effect Jan. 1.

The law requires companies to treat workers as employees -- eligible for sick days and other benefits -- rather than as independent contractors if they are controlled by their employer and contribute to its usual course of business. Uber has argued that it is a technology platform that connects riders with drivers, not a transportation company, so the drivers aren't part of its usual course of business.

The company has unveiled a host of changes to show its drivers are free of its control. Last month, it began testing a feature that allows some drivers in California the ability to set fares as high as five times Uber's price. It separately capped its commissions on rides across the state and allowed drivers to see where riders were going.

Mr. Khosrowshahi said the changes were "possibly a net positive for drivers," but a "net negative for riders."

"Hopefully we can get to a win-win" situation, he added. Uber, Lyft Inc., DoorDash Inc. and Postmates Inc. have raised more than $110 million for a planned ballot initiative this year, asking that voters exempt them from the law.

Uber's shares, up 38% over the past three months, climbed more than 5% in after-hours trading. They closed the regular session below their $45 initial-public-offering price at $37.09.

Write to Preetika Rana at preetika.rana@wsj.com

(END) Dow Jones Newswires

February 06, 2020 19:19 ET (00:19 GMT)

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