Uber, Lyft see 'huge victory' in California over drivers
Lyft Inc.’s sales surged by almost half in the third quarter from the previous period, and its losses narrowed, showing that the ride-hailing company is bouncing back from a pandemic-induced slump more swiftly than analysts predicted.
Lyft reported US$499.7 million in sales for the quarter, an improvement from earlier this year that slightly beat analyst expectations, but still 48 per cent lower than the same period in 2019, before pandemic-related heath restrictions froze travel across its major markets. Lyft shares were up more than five per cent in after-hours trading.
The company’s loss, excluding tax, interest and other costs, widened from the previous year to US$239.7 million, better than Wall Street’s expected loss of US$250 million for the quarter, according to data compiled by Bloomberg. Lyft Chief Financial Officer Brian Roberts reiterated the company’s goal to turn an adjusted profit by the end of 2021, “even with a slower recovery.”
In an interview Tuesday, John Zimmer, the co-founder and president of Lyft, sounded an optimistic note about the promise of a coronavirus vaccine bringing the pandemic to a close. Earlier this week, Pfizer Inc. said it has developed a Covid-19 vaccine that was 90 per cent effective in a trial, a breakthrough that broadly rallied the stock market, and increased hope that transportation and other industries would rebound more quickly.
“We believe the vaccine will accelerate our recovery,” Zimmer said. “As the economy recovers and people get out again, it directly correlates” to Lyft’s performance.
Lyft also scored a legislative win this month, when California voters approved a ballot measure exempting it -- along with Uber Technologies Inc., Instacart Inc. and other app-based gig companies -- from a state law designed to make drivers employees.
“For us, the election was a turning point,” Zimmer said, adding that next, “we want to get something done on a national scale. Better than a patchwork of regulations state by state would be providing something on a federal level,” he said. Lyft will take both approaches, talking with policy and labor leaders at both state and federal levels to “see which one is most fruitful,” Zimmer said.
Winning the California vote was critical to Lyft, which had said it could be forced to temporarily pull out of California if the measure did not go its way.
The number of Lyft customers who took at least one ride during the third quarter dipped 44% from the year before to 12.5 million, about in line with analysts’ estimates, but still up from the company’s 8.7 million riders in the previous quarter.
“Grinding it out is the right way to think about this business,” said Ron Josey, an analyst at JMP Securities. “The revenue and rider growth was interesting and better than expected, but I don’t think anything was quite remarkable.”
Lyft was particularly unprepared for a global pandemic. Uber, its largest competitor, has a growing food delivery business that has helped offset steep declines in ridership. Uber has suggested that by the time the virus recedes, that business could be even bigger than its ride-hailing unit. Lyft does not have a standalone consumer delivery operation, though in recent months the company has struck partnerships to deliver food via Grubhub and provide non-emergency medical transportation for riders through electronic health record provider Epic Systems Corp. On a call Tuesday, Lyft’s management told investors it will continue to pursue more partnerships to grow its business.
The company said it had US$2.5 billion in cash at the end of the quarter.