Uber CEO Dara Khosrowshahi has vowed to rein in costs at the ride-sharing company in the face of a “seismic shift” in the financial market, according to a memo sent to employees that was first reported by CNBC.
The effort to cut spending is in response to dramatic turmoil in the labor market that has Uber scrambling to find drivers to meet rising demand. Khosrowshahi said the company will treat corporate hiring as a “privilege” going forward, suggesting that Uber may be looking to freeze or even reduce the number of employees in its goal of becoming a more efficient operation.
Uber is the latest company to commit to a hiring slowdown as the job market contracts and tech stocks in particular have plunged sharply since the start of the COVID-19 pandemic. Meta, the parent company of Facebook, also said it would slow down the hiring pace for mid-level positions.
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’s what the company’s investors now expect.
Uber has long been criticized for the way it calculates its adjusted earnings. The company’s definition of EBITDA includes an unusually large list of exclusions and is widely viewed as an inaccurate measure of the company’s overall profitability. The company’s share price is down more than 40 percent so far this year.
“Knowing the moment means making concessions,” Khosrowshahi wrote. “The hurdle rate of return on our investments has increased. And that means some initiatives that require substantial capital will slow down. We have to make sure our unit economics are working before we grow.”
It continues: “Less efficient marketing and incentive spending will be removed. We will treat hiring as a privilege and be deliberate about when and where we add staff. We will be even tougher on costs across the board.”
An Uber spokesperson confirmed the authenticity of the memo but declined to comment on its contents.
In its first-quarter earnings last week, Uber reported a $5.9 billion loss, which it said was largely due to equity investments in other mobility companies, including Grab, Aurora and Didi. The company says it expects to post “significant positive cash flows” for the full year of 2022, which would be the first.