Thursday, July 7, 2022

Uber CEO pledges to be ‘hardcore about costs’ in memo to employees

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Uber CEO Dara Khosrowshahi promised to curb costs at the taxi company in the face of a “seismic shift” in the financial market, according to a memo sent to employees. first reported by CNBC

The effort to cut spending is in response to the dramatic upheaval in the job market that has left Uber struggling to find drivers to meet growing demand. Khosrowshahi said the company will view hiring companies as a “privilege” in the future, suggesting that Uber may want to freeze or even reduce its workforce as it aims to become a leaner company.

Uber is the latest company committed to a hiring slowdown as the job market tightens and technology stocks in particular have plummeted from their highs at the start of the COVID-19 pandemic. Meta, Facebook’s parent company, also said it would slow the pace of hiring mid-level jobs.

Uber will now focus on achieving profitability based on free cash flow rather than adjusted earnings before interest, taxes, depreciation and amortization, Khosrowshahi said, noting that the company’s investors are now expecting.

Uber has long been criticized for the way it calculates its adjusted profits. The company’s definition of EBITDA includes an unusually large list of exclusions and is widely seen as an inaccurate measure of the company’s overall profitability. The company’s stock price has fallen more than 40 percent so far.

“Meeting the moment means making compromises,” Khosrowshahi wrote. “The threshold for our investments has become higher. And that means that some initiatives that require substantial capital are held back. We need to make sure our unit economy works before we get big.”

He continues: “The least efficient spend on marketing and incentives will be withdrawn. We consider hiring a privilege and will make informed decisions when and where to add staff. We will be even more hardcore about cost across the board.”

An Uber spokesperson confirmed the memo’s authenticity, but declined to comment on its contents.

In its first quarter results last week, Uber reported a loss of $5.9 billion, which it said was largely due to equity investments in other mobility companies, such as Grab, Aurora and Didi. The company says it expects “meaningful positive cash flows” for the full year 2022, which would be a first.

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