Ride-hail giant Lyft reported strong second-quarter results on Thursday. Earlier this year, investors were skeptical about Lyft’s ability to offset the cost of increased investment to attract and retain drivers. However, Lyft was able to take advantage of serious internal cost-cutting measures coupled with a post-COVID boom in travel to deliver its highest quarter to date.
Lyft only surpassed Wall Street’s revenue expectations, with second-quarter revenue of $990.7 million, up from $765 million in the year-ago quarter. It’s also a 13% increase on a quarterly basis over Lyft Q1 revenue of $875.6 million.
Net loss for the second quarter peaked year on year and quarter-on-quarter. Lyft lost $377.2 million this quarter, compared to $251.9 million in the second quarter of 2021 and $196.9 million in the first quarter of this year. The additional weight is attributable to $179.1 million in share-based compensation and related payroll taxes.
Although Lyft posted an unprofitable quarter, in adjusted terms, it sees some improvements from last year. The company’s adjusted EBITDA for the second quarter was $79.1 million, an increase of $55.3 million from the second quarter of 2021 and an increase of $24.3 million from the prior quarter.
The company ended the quarter with $1.8 billion in cash.
While Lyft shares have traded more or less flat over the past month, shares are up 16% following favorable quarterly results from rival Uber. At the time of writing, Lyft is trading at $17.39, up 4.07% after hours.
The Effects of Tensioning the Belt
During the second quarter, Lyft restructured and re-prioritised in an effort to cope with inflation and mounting economic pressures. While it won’t appear on Q2’s balance sheet, this kind of belt tightening is seen in Lyft’s recent decision to close its in-house car rental business and consolidate some of its vehicle driver support locations, which resulted in a layoff from nearly 60 employees.
Elaine Paul, Lyft’s chief financial officer, said during Thursday’s call that Lyft has revised its operating plan, scaled back discretionary spending and significantly slowed hiring. Instead, Lyft will prioritize R&D initiatives and reorganize teams to stay focused on driving profitable growth.
After a brief and somewhat vague foray into the shared e-scooter industry, Lyft also decided to end its scooter business in San Diego, suggesting it could leave other cities in the future. Much like Lyft’s decision to keep its third-party car rental program, Lyft has partnered with a third-party micromobility company Spin to keep its toes in the choppy waters of scooter-sharing.
What does Lyft have for it?
One of the main things that soured investors on Lyft’s performance over the past quarter, despite revenue surges after COVID lows, was the quarter-on-quarter decline in revenue per rider and active ridership. From Q1 to Q2, the number of active drivers went from 17.8 million to 19.7 million. However, revenue per rider remained relatively stable at $49.89 per rider, up from $49.18 in Q1 2022.
That said, even that small gain is a record high for Lyft. Some of that increased revenue per rider can be attributed to the increased number of airport rides, as travel is coming back after COVID. In fact, Lyft said airport usage hit an all-time high at 10.2% of total rides. The company also said bike and scooter rides more than doubled in Q2 versus Q1.
Lyft’s shared rides are still at the pre-COVID level, but the company has steadily introduced the cheaper offering in more cities and will continue to do so to increase ride frequency and loyalty.
Nights out represent another growth opportunity for Lyft as people begin to leave their isolation caves and rejoin society. Not only does this increase the demand for drivers, but it should help acquire organic drivers, Lyft said. According to the company, the total number of active drivers was even the highest in two years. Of course, two years ago was the peak of the pandemic, so that’s not saying much, but it does show recovery.
To attract and retain more drivers, Lyft has been trialling new features such as Upfront Pay – which allows drivers to see the rider’s pick-up location, route details, and projected earnings before accepting the ride request. It’s not clear whether Lyft will apply any form of punishment to drivers who still don’t accept rides, but Lyft says offering those knowledge hits to drivers could increase the number of drivers using Lyft, as well as the time they spend driving. .
Lyft .’s updated guidelines
While Lyft saw a 4% increase in rides in July, and expects this to stabilize in the summer and September, the company tempered its view on the pace of recovery, resulting in lower expectations for revenue in the third quarter and full year. grow.
“We to expect Q3 income from among $1,040 billion and $1,060 billion, which implies grow from among 5% and 7% versus Q2, and grow from 20% and 23% versus Q3 last years,” says Paul.
Lyft expects revenue growth for the full year 2022 to be slower than the 36% achieved in 2021. The company also expects operating expenses below cost of sales to decline slightly in the third quarter. As a result, Lyft expects adjusted EBITDA of $55 million to $65 million in the third quarter and $1 billion in adjusted EBITDA in 2024.
In explaining updated guidance, Lyft pointed to some macro headwinds, such as rising insurance costs, which are being impacted by inflationary pressures. The company expects this to impact its contribution margin in the third quarter.
“We believe we can offset higher insurance costs over time through pricing as well as product and engineering efforts that deliver better cost-effectiveness per trip and continue to improve the security of our network,” said Paul.
For example, Lyft is leaning further into its mapping technology to provide safer and more cost-optimized routes that can deliver insurance savings, and to leverage its internal risk models to assess behavioral and environmental risk factors, Paul continued.
Lyft will also continue to keep a close eye on the company’s overheads by withdrawing hiring, cutting travel and expense budgets, and generally scrutinizing every cost item to be as disciplined as possible. In other words, the days of gross overruns and moonshot projects are over, and returning are the days of operating as a meager startup.