Uber CEO Dara Khosrowshahi has a message for the company’s young workforce: Hang on for a bumpy ride.
The company plans to keep costs under control by cutting back on marketing, incentives, and “we will treat hiring as a privilege,” Khosrowshahi wrote in an email to employees.
In the email, obtained by CNBC, the Uber CEO told employees that his meetings with investors were “super clarifying” about the direction the company needs to take.
“After earnings, I spent several days meeting investors in New York and Boston. It’s clear that the market is experiencing a seismic shift and we need to react accordingly,” he wrote in the opening of his email.
“We get to set the strategy and make the decisions, but we need to do so in a way that ultimately serves our shareholders and their long-term interests,” he continued.
Khosrowshahi warned that many companies would fold in the anticipated recession — something a majority of the ridesharing company’s employees have never experienced.
“There will be companies that put their heads in the sand and are slow to pivot. The tough truth is that many of them will not survive,” Khosrowshahi said. “The average employee at Uber is barely over 30, which means you’ve spent your career in a long and unprecedented bull run. This next period will be different, and it will require a different approach.”
To combat the recession and alleviate investor concerns, the Uber chief said the company would focus on “free cash flow” as opposed to market share.
“In times of uncertainty, investors look for safety,” he wrote. “They recognize that we are the scaled leader in our categories, but they don’t know how much that’s worth. Channeling Jerry Maguire, we need to show them the money.
“We have made a ton of progress in terms of profitability, setting a target for $5 billion in Adjusted EBITDA in 2024, but the goalposts have changed. Now it’s about free cash flow. We can (and should) get there fast.”
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In his email, Khosrowshahi also said Uber would cut costs and be more selective in hiring.
“Meeting the moment means making trade-offs. The hurdle rate for our investments has gotten higher, and that means that some initiatives that require substantial capital will be slowed. We have to make sure our unit economics work before we go big.
“The least efficient marketing and incentive spend will be pulled back,” the Uber CEO wrote. “We will treat hiring as a privilege and be deliberate about when and where we add headcount. We will be even more hardcore about costs across the board.”
The email comes at a time when many tech companies are experiencing profit loss and some are wondering if it’s the end of an era.
Uber and Lyft rides skyrocketed during the pandemic due to driver shortages, and they’ve stayed high. Ride fares in New York went up 92 percent between January 2018 and July 2021, according to data from Rakuten Intelligence, and rising gas prices aren’t helping, New York Post reported.
PHOTO: Dara Khosrowshahi, CEO of Uber, speaks at the Bloomberg Global Business Forum in New York, Sept. 25, 2019. (AP Photo/Mark Lennihan, File)