Uber took stock of the effect the coronavirus outbreak has had on its business in a call with investors on March 19th, and the early numbers are pretty grim. The company’s gross bookings in Seattle, a city hit hard by the novel coronavirus, is down by 60-70 percent, the company’s CEO Dara Khosrowshahi said.
And while the company didn’t release exact numbers for other US cities, Khosrowshahi says they are assuming similar declines in other big markets that have also been affected, including San Francisco, Los Angeles, and New York City.
“We are seeing a similar pattern — if I plot curves, there’s a difference in timing — but the curves in SF, LA, NYC are looking similar in shape,” Khosrowshahi said, “and my guess is some of them will be higher by 5 percent, some of them may be lower by a couple of percent. But there are going to be a lot of cities around the world that look like Seattle, at least that’s what the curves are looking like.”
He added, “These are really, really uncertain and strange times.”
As Americans “shelter in place,” self-isolate, practice social distancing, or just stay at home, Uber has naturally seen a sharp decline in ridership. Saving money is also a top concern: people are spending 21 percent less on ride-hailing services like Uber and Lyft nationwide, according to data from Edison Trends.
And drivers are saying those trends are reflected in a steep drop in ride requests. According to Harry Campbell, a former driver who operates the website The Rideshare Guy, 81 percent of Uber and Lyft drivers have said they’ve seen a decrease in demand. In addition, 80 percent say earnings are down.
Although Uber has never had a profitable quarter, the company claims it has “ample liquidity” that should allow it to weather the crisis. Khosrowshahi said the company has $10 billion in “unrestricted cash” on hand as of the end of February, as well as $1.5 billion for mergers and acquisitions through the end of the year (such as its recent deals to acquire Careem and Cornershop).
Uber has responded to the outbreak by suspending its carpooling service UberPool in most major markets and providing financial assistance for drivers who have contracted COVID-19, the disease caused by the coronavirus, or who have had their accounts suspended or told to quarantine by public health officials. The company has also frozen headcount, meaning it is not doing any recruiting or hiring at this time. And it has pulled back $150 million in marketing and incentive spending, which typically goes toward subsidizing fares.
Khosrowshahi said the company modeled “an extreme edge case” in which trip volume plummeted 80 percent. Even in that dire circumstance, Uber would still end the year with $4 billion in unrestricted cash, plus $2 billion in revolving credit.
But things are likely to get worse before they get better for Uber, especially as some of their more lucrative cities are all but shutdown. Uber shares have fallen more than 50 percent in the past month due to investor concerns about the impact of the virus on bookings and a broader market decline. It’s especially bad timing for a money-losing business like Uber that had been aiming to achieve profitability in the fourth quarter of this year. In the call with investors, Khosrowshahi said he would likely have an update on that prediction at a later date.