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Lyft Inc. delivered its first-ever adjusted profit during the second quarter, a milestone for a company that has racked up losses since its founding. The company had previously said it would not turn a profit before taxes, depreciation and other expenses until the following quarter.
Lyft’s adjusted profit was US$23.8 million, helped along by surging demand for its ride-hailing services and deep cost cuts the company made last year. The adjusted profit beat analysts’ estimates that the company would lose US$40.2 million during the quarter. Lyft’s stock was little changed in after-hours trading.
“This is not a one-time thing,” Lyft’s co-founder and president, John Zimmer, told Bloomberg in an interview. “It unlocks our ability to control our destiny and lean into growth.”
In a call with investors, executives said the company would continue to pay incentives to entice drivers to return to the platform in the third quarter and beyond in order to meet rising demand. The company has grappled with a driver shortage in recent months. Asked about the bonuses, Chief Financial Officer Brian Roberts said, “It’s the right thing to do.” He also said that drivers are currently at “all-time record earnings now.”
Roberts said he expected that the company would turn an adjusted profit for the full year of 2021, and that the company would make from US$25 million to US$35 million in the third quarter. That’s higher than analyst estimates of US$11.3 million.
The San Francisco-based ride-hailing company brought in US$765 million in revenue for the quarter, beating the US$700.7 million average analyst estimate compiled by Bloomberg. Revenue was up 26 per cent from the previous quarter, as the country was just beginning to emerge from pandemic lockdowns, and more than double the amount during the same period last year, during the depths of the pandemic.
Lyft reported 17.1 million active riders, more than the 15.4 million analysts predicted. The revenue per active rider was US$44.63, compared to analysts’ estimate of US$45.31.
Although it turned a profit on an adjusted basis, Lyft still posted a US$251.9 million net loss for the quarter -- a sum that includes US$207.8 million in stock-based compensation and related payroll tax expenses. The loss narrowed from US$437.1 million during the same period last year but was more than the US$230.1 million analysts expected.
As the coronavirus pandemic ebbed in the U.S., Lyft and its larger rival Uber Technologies Inc. have struggled to lure drivers back to their platforms. Thousands of drivers stopped working during the past year because of depressed ride demand and their own health concerns over ferrying around strangers in close quarters. Some turned to delivering food, groceries and other items. As a result, prices paid by passengers increased and the ride-hailing giants offered short-term incentives and bonuses to drivers, even as the companies worked toward profitability.
Lyft aggressively courted workers and brought 50 per cent more new drivers to its platform during the second quarter compared to the previous one, Zimmer told Bloomberg.
Zimmer declined to say how many drivers this represented or how much Lyft spent to entice them. Ron Josey of JMP Securities estimated that Lyft spent US$12 million during the second quarter to woo drivers.
Lyft executives said that they expected driver supply and demand to balance out eventually, and pointed to the expiration of enhanced federal unemployment benefits as a catalyst for some workers to return to the app. JMP’s Josey also said that the end of benefits in September should “loosen up” the supply of drivers available to service what he predicted would be an upward and continuing demand surge for Lyft services. “It’s always about the demand,” Josey said.
Lyft’s business, which only operates in North America, has benefited from rising vaccination rates against COVID-19 increasing demand in major markets. However, the recent explosion of the more easily transmissible delta variant has threatened reopening plans in the U.S., and has also slowed return-to-office plans for Lyft’s employees. The company pushed its return date back to February, and is requiring those who choose to work on-site in the meantime to be vaccinated and to wear masks.
The company has lowered costs since last year, when it cut hundreds of employees, and continued tight cost controls this year. In April, Lyft said it would sell its self-driving division to a subsidiary of Toyota Motor Corp. for US$550 million, a move designed to offload expensive driverless car research while cementing a partnership to dispatch those cars on its network once the technology was mature.
In July, Lyft announced a deal with Ford Motor Co. and Argo AI to launch dozens of robo-taxis on the Lyft network in Miami and Austin, Texas, by the end of the year. The plan, which would be the largest such commercial rollout of self-driving cars yet, calls for a gradual expansion from the initial locations to dispatch 1,000 vehicles in the coming years. On the earnings call, Zimmer said Lyft would also continue to advance its scooter, bike and car rental services while investing in mapping and other technology.
Said Zimmer: “The future is electric, autonomous and shared.”