Former Uber Chief Business Officer on his outlook for the company

Rideshare company Uber reported first quarter earnings that highlighted a miss on estimates due to the coronavirus pandemic. Uber's former Chief Business Officer Emil Michael joins Yahoo Finance Live to share predictions on what's next for the company.

Video Transcript

JEN ROGERS: Welcome back to Yahoo Finance. We're breaking down Uber's results here after the bell. The company posting a surprise jump in bookings, revenue in Q1, but the loss widening to nearly $3 billion. I want to bring in Emil Michael. He is former Uber chief business officer. So I want to start with something that's in the release here about the company and how they are trying to prepare for any recovery scenario. Looking at these numbers today, what do you think the Uber in three months looks like? Do you get any sense of what they're doing here?

EMIL MICHAEL: It's hard to tell, but I think what you'll see is the Q1 numbers don't really tell you a lot about what Q2 is, because COVID-19 really didn't really affect Q1 until really the last part of March. So you're really seeing that decline really happen-- of bookings really happen in one part of March. You're really going to see some ugly numbers in Q2 is my guess. And they're not hiding-- no one can hide that-- Lyft or Uber.

In Q3 is really what the question-- really what the big question is going to be-- is it going to come back? And I think what Dara said with comments, and you'll probably see him say tomorrow, is my guess is he's hoping for a big recovery in Q3. What you're seeing in China and what you're seeing in other countries that have recovered from COVID-19 is a recovery in ride-sharing, and that coupled with strong Uber Eats should be a strong recovery in both parts of Uber's business and, therefore, some optimism in Uber's overall business prospects.

AKIKO FUJITA: You know, we were just having this debate before the break about how Uber is positioned in comparison to a rival like Lyft. I mean, you could argue that Uber has the parts in place to be to be flexible with any kind of change in consumer behavior coming out of this. You would think that they would become stronger on Eats, maybe grocery deliveries as well. And yet, you look at that loss of $2.9 billion-- I mean, how do we weigh the strengths that we see on one hand and yet the widening loss that it sounds like you think is going to continue to widen?

EMIL MICHAEL: Well, here's one thing to note about that big loss is most of that loss is a non-cash loss that reflects their ownership stake in DD, the Russian taxi firm, and Grab. So that's basically their mark to market of the stock in those other firms that goes up and down based on the ridesharing industry. So a few quarters from now, you could see them with a huge gain based on the value of that write-on.

So the better metric to think about is their EBITDA-- their adjusted EBITDA. And that, frankly, they beat expectations on that based on this last quarter. So that's good. But relative to Lyft, I think the optimistic way of looking at this is when you take the Uber driver base that wasn't driving passengers just last quarter, they could say to them, hey, why don't you drive packages for groceries or why don't you drive Uber Eats? And so they can keep that driver base engaged. And when drivers-- or passengers come back online, they could divert them back. So I think that's a core strength. That's a synergy. And that synergy makes them a stronger potential party to rebound when the business comes back in Q3.

ANDY SERWER: Yeah, Emil, my question kind of actually takes off from that point, and it's kind of the ecosystem question-- is Uber an ecosystem, and maybe even more so? And then does the coronavirus accelerate that and/or send it into a new direction? How is that changing the business?

EMIL MICHAEL: Yeah, I mean, we-- back when we started Uber-- way back when-- we always thought about Uber as what we called an urban logistics network. We could get anyone or anything from one part of the city to another. And if you see that-- you know, it started with people, then it was food, and now it's things-- whether it's groceries or packages or whatever. And you see that partly in Uber Freight as well.

And I think that COVID-19 accelerates that vision, because it's proven now that you need those things in this crisis and beyond. And those things are going to accelerate. And I think that's a real strength of that business in the United States and elsewhere around the world. And I think that's something investors ought to be looking favorably on in this year and going forward. And while this is going to be a tough year for ridesharing in general, I think '21 and '22 ought to be really exciting years because of those possibilities that you're looking at as an ecosystem.

RICK NEWMAN: Emil, hey, Rick Newman here. I want to ask you about the question of whether the drivers should be full-time or permanent employees rather than ICs, independent contractors, in this lawsuit in California. So a couple of questions on that-- did Uber anticipate this could become a challenge at some point? And if Uber does have to consider these drivers as regular employees, does that wreck the business model? Or can they adapt to that?

EMIL MICHAEL: I think this was always something that-- there was an issue back, you know, for the last five, seven years that Uber, particularly in states like California and Massachusetts-- a few states have pretty strict ways of looking at these things. Ultimately, I think there is a-- there is a challenge with making drivers, employees. And that is very hard to scale up and very hard to scale down. So take a crisis like this, where driver demand-- rider demand goes down to almost zero. It's very hard-- what do you do with all these drivers?

It's very hard to take them down, unfortunately, and it's very hard to scale up when driver demand goes down. Take Instacart-- very hard to scale up to what they've done. They need 300,000 new shoppers and drivers on their network, and very hard to hire people that fast. Independent contractors, it's easier to do that. So I think the flexibility is something that you get as a business, and it's something that consumers want and need. Does the business model work when they're full-time employees or not? I don't know. I think it's a lot harder, because you have to schedule people and the business becomes less flexible and more expensive. So I think it sort of hampers the business, and it's not as good a business, frankly.

JEN ROGERS: Emil Michael, former Uber chief business officer, great to get a chance to talk with you on this Uber earnings day. And by the way, Uber right now trimming its losses, now down just about 1.5%. We're going to be back with much more on Yahoo Finance.

EMIL MICHAEL: Thanks for having me.