Uber sees driver costs rising as the US economy recovers
© Reuters. FILE PHOTO: An Uber logo is seen during the global coronavirus disease (COVID-19) outbreak in Redondo Beach, Los Angeles, California, the United States, Nov. 2, 2020. REUTERS / Lucy Nicholson
By Tina Bellon and Akanksha Rana
(Reuters) -Uber Technologies Inc signaled it would cost drivers more to get cars back on the road once the U.S. economy recovers from the pandemic and announced a $ 600 million fee to UK Providing benefits to drivers is a sign of the potential cost the United States is demanding more driver compensation.
Uber (NYSE 🙂 shares fell roughly 4.6% in after-hours trading. The stock fell 3.4% during the regular session after the Biden administration blocked a Trump-era rule affecting gig workers.
The cost and speed of the business recovery are of the greatest concern to investors, and Uber executives said Wednesday that take rate, an indicator of how Uber earns per-trip fees, would decrease to 20% from the previous quarter. A lower cut allows Uber drivers to earn more.
James Cordwell, an analyst at Atlantic Equities, said stocks fell after hours due to take rate pressures and implied driver incentives.
The grocery delivery business continued to grow in the first quarter, but hail bookings were flat from the previous quarter.
In addition, the mobility business had to take $ 600 million in success to reach an agreement with its 70,000+ UK drivers and give them more benefits.
“Company results were hurt by the UK ruling, which increased costs and reminded investors that a similar move in the US could have a much bigger impact,” said Haris Anwar, senior analyst at Investing.com.
Uber posted an adjusted loss of $ 359 million before interest, taxes, depreciation and amortization for the first quarter – a metric that excludes one-time charges including stock-based compensation and reduces losses by nearly $ 100 million from the previous quarter.
Analysts had expected, on average, that the company would post an adjusted EBITDA loss of around $ 452 million, according to Refinitiv data.
Uber has promised to be profitable on this metric by the end of the year, three months after its smaller hailfighter Elevator Inc (NASDAQ :), which announced on Tuesday that it would report sustainable adjusted earnings starting in the third quarter.
Revenue in Uber’s delivery segment, which includes Uber Eats’ restaurant delivery business, more than tripled year over year, increasing 28% from the most recent quarter to $ 1.7 billion.
Uber’s gross bookings, which fell last year due to the pandemic, were roughly unchanged from the last quarter, down 38% year over year.
Uber’s first quarter results follow the company’s announcement last month that March was the best month in its nearly 12-year history. The mobility business saw the most bookings since the pandemic began, and demand for deliveries outpaced the supply of drivers.
Both Uber and Lyft have been scrambling to handle the spring upswing in hail driving as consumer demand temporarily exceeds driver supply, resulting in higher prices and longer waiting times in some U.S. cities. Uber announced in April that it will invest an additional $ 250 million to further increase driver revenue and offer payment guarantees to incentivize new and existing drivers.
Excluding the $ 600 million fee, Uber had revenue of $ 3.5 billion for the first quarter, an average analyst estimate of $ 3.29 billion, according to Refinitiv data.
Uber and Lyft stocks fell last week when US Labor Secretary Marty Walsh told Reuters in an interview that “many gig workers should be classified as white-collar workers”.
Tony West, Uber’s chief legal officer, said on a conference call Wednesday that the company was confident of having a dialogue with the labor department of the Biden administration that “may ultimately lead to a resolution.”
The gig companies rely on low-cost, flexible employees and say that if the employees were classified as employees, their services would no longer be available.