Lyft Inc. said ride-share volumes were on track to exceed pre-COVID levels as it reported the highest earnings in its history, a sign that investment to stem a shortage of drivers is paying off.

The San Francisco-based ride-hailing company reported adjusted earnings before interest, taxes, depreciation, and amortization of US$79.1 million in the second quarter, far surpassing the US$18.1 million average estimate in a Bloomberg analyst survey. Revenue rose 30 per cent from a year earlier to US$991 million, beating the US$986.7 million Street estimate. The shares fluctuated and were up about 5 per cent at 5:10 p.m. in New York.

The results are a sign that Lyft is approaching a full recovery from the pandemic amid a broad-based rebound in ride-hailing that also buoyed rival Uber Technologies Inc. in the period. Record Ebitda and plans to reduce spending on driver incentives may assuage investor concern on costs that sparked a rout in Lyft shares when it reported first-quarter results in May. 

The forecast for higher volumes would be realized in the medium term, Lyft co-founder and Chief Executive Officer Logan Green said in a call with analysts after reporting results. However, Lyft’s target for revenue of US$1.04 billion to US$1.06 billion and Ebitda of US$55 million to US$65 million for the third quarter came just short of analyst estimates for US$1.12 billion in revenue and US$67.4 million in Ebitda.

“We re-prioritized our R&D initiatives and reorganized teams to ensure laser focus on driving profitable growth,” Green said.

The company reported adjusted Ebitda of US$79.1 million in the three months to June, far surpassing the US$18.1 million average estimates in a Bloomberg analyst survey. Revenue rose 30 per cent from a year earlier to US$991 million, beating the US$986.7 million Street estimate. 

Lyft reported a 16 per cent increase in active riders from the same period last year to 19.9 million, the highest since the start of the pandemic and in line with the 19.8 million analysts predicted. Revenue per active rider was US$49.89, the company’s second-highest on record.

The second-quarter performance “was the result of us really taking decisive actions and seeing better business performance from active riders to driver supply,” Lyft co-founder and President John Zimmer said in an interview. “The driver situation is materially improving and it’s not as much of a concern as previously.”

Still, robust demand has outpaced the number of drivers on the ride-share apps, leading to higher fares and wait times for customers. Despite spending millions in incentives to get more cars on the road, Lyft’s and Uber’s efforts have been undercut by soaring gas prices that whittled down driver earnings and made it harder for companies to lure them back.

The number of active drivers on Lyft grew about 25 per cent from a year earlier, while new signups rose nearly 35 per cent. One reason is because of improvements to Lyft’s mapping technology and matching algorithm that enabled drivers to spend more hours completing rides instead of idle time waiting to be paired with a passenger. Zimmer said that the cost of driver incentives were largely being passed on to customers in the form of higher fares and that the cost per ride was steadily declining.

On Tuesday, Uber said it would be paring back spending on incentives and instead has focused on adding driver-friendly like the ability to see fares and destinations before accepting a trip to “build trust and transparency.” The company said new driver sign-ups in the US were up 76 per cent compared to last year.

Lyft, which rolled out its own version of upfront fares earlier this year, will be expanding the feature to other markets, Zimmer said.

“Both platforms have to be driver-centric,” said D.A. Davidson analyst Tom White. “If Uber is making changes that resonate with drivers, that puts the spotlight on Lyft to get creative too. With the inflation impact hitting drivers, especially with gas prices, those investments may not be enough,” he said.

Like other gig economy peers, Lyft is confronting investor pressure to rein in its cash burn amid a gloomy economic outlook. The company hived off its rental car business in July and said it would slow hiring to cut back on costs. 

But while both ride-hailing giants face some of the same pressures, Lyft shares have fallen about 60 per cent since the beginning of the year, a much bigger hit than the 24 per cent decline at Uber. Unlike Uber, which offers food delivery through Uber Eats, Lyft’s core business is ride-hailing. The company has explored tapping other revenue streams like facilitating last-mile delivery for businesses. Lyft did not provide guidance for earnings or revenue for the current period.

“A big focus for Lyft is whether it can find novel ways to diversify and tap other revenue streams,” White said.