Lyft announced second quarter of 2022 earnings Monday, reporting a net profit on an adjusted basis, compared to a loss last year benefitting from continued recovery in ride-hailing. LYFT shifted gears from initially expecting to ramp up spending in Q2 the ride sharer dialed back those plans. The shift helped EPS and adjusted EBITDA expectations and report one of its strongest quarters in recent history, capitalizing on robust rideshare demand and a more balanced driver supply and demand environment, while effectively managing expenses.
LYFT Q2 2022 Earnings
Solid cost management partly explains how LYFT generated record adjusted EBITDA of $79.1 mln, smashing its forecast of $10-$20 mln. That outperformance relative to estimates is great, but what really stands out in our view is the company’s significant profitability improvements.
- Adjusted profit of $46.4 million for the second quarter of 2022, compared to a loss of $18 million in the same period of last year.
- On an unadjusted basis, it was a net loss of $377.2 million or $1.08 per share, compared to a loss of $251.9 million or $0.76 per share in the prior-year period.
- At $990.7 million, revenues were up 30% year-over-year.
- Second-quarter adjusted EBITDA increased to $79.1 million from $23.8 million in the corresponding period of 2021.
High Inflation Changing Behavior Helping Lyft
The revision in strategy was brought about by heightened macroeconomic, credit and stock market volatility. The 40-year high inflation conversely helped the company’s strong results. Uber’s (UBER) said much the same a few days ago, LYFT CFO Elaine Paul noted more people may be turning to rideshare driving for supplemental earnings opportunities. With active drivers increasing by 25% yr/yr to reach the highest level in two years, it’s evident that this dynamic is playing out.
Pent up demand for travel, the return of workforces to office settings, and increased comfort levels with dining and shopping in public due to vaccines provided strong tailwinds for ride-share demand.
- Rideshare demand is robust due to the recovery in travel and a shift in consumer spending towards entertainment, dining, and experiences. Active Riders for LYFT hit a post-COVID high in Q2, climbing by 27% yr/yr to 19.86 mln.
- There’s no slowdown in sight as rideshare rides grew by nearly 4% month/month in July with LYFT anticipating a further acceleration in September due to back-to-school.
- Importantly, airport rides and longer trips are also recovering. In fact, airport rides reached an all-time high of 10.2% of total rideshare rides in Q2. These more profitable trips pushed Revenue per Active Rider higher by $5.26 yr/yr to $49.89, the second highest mark in LYFT’s history.
- Bikes and scooters, which carry high margins, were a key contributor this quarter. Contribution margin came in at 59.6%, which is 360 bps better than LYFT’s guidance. Without bikes and scooters in the mix, that outperformance would have only totaled 200 bps.
The organic increase in driver supply meant that LYFT could pull back on costly driver incentives that have previously dented its profits. At the same time, LYFT significantly slowed the pace of hiring and reduced discretionary spending, leading to a 130 bps yr/yr decrease in operations and support expenses on a percentage of revenue basis.
“We leaned in hard in Q2 and the team did fantastic work to drive strong results. We generated the highest Adjusted EBITDA in our company’s history and saw COVID highs for Active Riders, drivers, and rides. It’s clear consumer transportation is a good long-term business with a massive addressable market,” said Logan Green, chief executive officer of Lyft.
Outlook
The ride-sharing market has come a long way from hitting rock bottom as the pandemic decimated demand, causing Lyft (LYFT) and Uber (UBER) to downsize and drastically cut costs.
LYFT issued upside guidance for Q3, forecasting revenue of $1.040-$1.060 bln and adjusted EBITDA of $55-$65 mln. LYFT also offered a longer-term outlook, projecting adjusted EBITDA of $1.0 bln and free cash flow of $700 mln in FY24.
Where LYFT has an edge on UBER is that its business is streamlined to capitalize on the rebound in the U.S. ride-share market since it only operates in North America, while UBER’s operations are more sprawled out across geographies and businesses. Both companies have slashed expenses over the past year.
Government Risk
There is always the risk of any new regulations that may be imposed on companies that employ gig workers like LYFT, UBER, and DoorDash (DASH). It seems unlikely that the government would levy draconian measures that would inflict massive damage on the companies’ business models. Recall that LYFT and UBER were both ready to suspend operations in California had voters not passed Proposition 22 last November. Proposition 22 characterizes app-based drivers as independent contractors and not as employees.
To avoid a more disruptive scenario on a nationwide scale, perhaps government officials will take a “middle-of-the-road” approach, striking a balance between workers’ rights and the viability of the businesses. In any event, the development created some serious anxiety among investors while completely mitigating the story surrounding the bullish trends in the ride-share market.
Source: TC, Lyft
From The TradersCommunity News Desk