Lyft rides post-COVID recovery to record earnings, but faces inflationary headwinds – TechCrunch

Ride-hail giant Lyft reported strong second-quarter earnings on Thursday. Earlier this year, investors were skeptical of Lyft’s ability to offset the cost of increased investment to attract and retain drivers. However, Lyft was able to benefit from significant internal cost-cutting measures combined with a post-COVID travel boom to post its best-ever quarter.

lyft only Surpassed Wall Street revenue expectations and posted second-quarter revenue of $990.7 million, up from $765 million in the same quarter last year. It’s also a 13% increase sequentially, based on Lyft Q1 revenue of $875.6 million.

Net loss for the second quarter increased year-on-year quarter after 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 due to $179.1 million in stock-based compensation and related payroll tax expenses.

While Lyft posted an unprofitable quarter, it sees some improvements from last year on an adjusted basis. The company’s Adjusted EBITDA for the second quarter was $79.1 million, up $55.3 million compared to the second quarter of 2021 and up $24.3 million sequentially.

The company ended the quarter with $1.8 billion in cash.

While Lyft’s shares traded more or less flat over the past month, shares rose 16% on the back of rival Uber’s favorable quarterly results. At the time of writing, Lyft is trading at $17.39, up 4.07% after the close.

The effects of belt buckles

In the second quarter, Lyft restructured and reprioritized to counteract inflation and rising economic pressures. While it doesn’t show up on its second-quarter balance sheet, that sort of belt-buckling is evident in Lyft’s recent decision to shut down its in-house car rental business and consolidate some of its vehicle driver support locations, which resulted in the layoff of nearly 60 employees .

Lyft’s chief financial officer, Elaine Paul, said during Thursday’s call that Lyft revised its operating plan, scaled back discretionary spending and significantly slowed hiring. Instead, Lyft will prioritize R&D initiatives and reorganize teams to remain focused on driving profitable growth.

After a brief and somewhat vague foray into the shared e-scooter industry, Lyft also decided to close its scooter operations in San Diego, suggesting it may exit other cities in the future. Similar to Lyft’s decision to maintain its third-party rental car program, Lyft has partnered with a third-party provider, micro-mobility company Spin, to continue staying in the choppy waters of Scooter stock.

What Lyft has to offer

One of the main things that irked investors about Lyft’s performance last quarter, despite a jump in sales following COVID lows, was that quarter after quarter Decline in revenue per driver and active driver count. From Q1 to Q2, active driver numbers increased from 17.8 million to 19.7 million. However, revenue per driver remained relatively flat at $49.89 per driver compared to $49.18 in the first quarter of 2022.

However, even that small gain is a record high for Lyft. Some of this increased revenue per driver can be attributed to increased airport trips as travel returns post-COVID. In fact, Lyft said its airport use case hit a historic all-time high at 10.2% of total ridesharing. The company also said bike and scooter rides more than doubled in the second quarter from the first quarter.

Lyft ridesharing is still at pre-COVID levels, but the company has steadily rolled out the cheaper offering in more cities and will continue to do so to increase ride frequency and loyalty.

Going out represents another growth opportunity for Lyft as people begin to leave their isolation caves and rejoin society. Not only does this increase demand for drivers, but it should also help with organic driver acquisition, Lyft said. In fact, according to the company, the total number of active drivers was the highest it had been in two years. Of course, two years ago was the peak of the pandemic, so that’s not saying too much, but it does show a recovery.

To attract and retain more drivers, Lyft has been testing new features like Upfront Pay — which allows drivers to see the driver’s pickup location, route details, and expected earnings before accepting the ride request. It’s not clear if Lyft will introduce some form of punishment for drivers who still don’t accept rides, but Lyft says offering these knowledge hits to drivers will increase the number of drivers using Lyft as well as the time they spend with spend driving.

Lyft’s updated guide

While Lyft saw a 4% increase in trips in July and the company expects that figure to stabilize over the summer and into September, the company moderated its assessment of the pace of recovery, leading to a lower forecast for the third Quarter and full-year sales led growth.

“We expect Q3 revenues from in between $1,040 billion and $1,060 Billion, the implies growth from in between 5% and 7% versus Q2, and growth from 20% and 23% versus Q3 lbranch year,” said Paul.

Lyft expects full-year 2022 revenue growth to be slower than the 36% achieved in 2021. The company also expects operating expenses to decrease slightly below cost of sales in the third quarter. As a result, Lyft expects Q3 Adjusted EBITDA to be between $55 million and $65 million and 2024 Adjusted EBITDA to be $1 billion.

Explaining the updated guidance, Lyft pointed to some macro headwinds, such as rising insurance costs being impacted by inflationary pressures. The company expects this to impact its contribution margin in Q3.

“We believe that over time we can offset higher insurance costs through both pricing and product and engineering efforts that deliver better economics per trip and further enhance the security of our network,” said Paul.

For example, Lyft continues to rely on its mapping technology to provide safer and cost-optimized routes that can lead to insurance savings, and uses its internal risk models to assess behavioral and environmental risk factors, Paul continued.

Lyft will continue to tightly control its corporate overheads by withdrawing hires, cutting travel and expense budgets, and generally reviewing each expense item in the most disciplined manner possible. In other words, gone are the days of overspending and moonshot projects, and the days of operating like a skinny startup are returning. Lyft rides post-COVID recovery to record earnings, but faces inflationary headwinds – TechCrunch

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