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Earnings

Lyft earnings: A COVID-19 referendum on ride-hailing

Lyft earnings: A COVID-19 referendum on ride-hailing
  • Q1 revenue: $955.7 million (+23% YoY, -6% QoQ vs. $898 million expected)
  • Q1 loss: $398.1 million (down 65% YoY from $1.138 billion Q1 2019, up 12% QoQ)
  • Guidance: Lyft withdrew its full-year guidance in late April and said on an earnings call Wednesday that it is focused on slashing spending by up to $300 million this year.

The big number: While the number of rides on Lyft's platform plummeted 75% in April compared to last year, the average revenue the company collected from each rider grew to $45.06, up 19% from the same time last year. Despite the pain from coronavirus, investors liked what they saw, driving the stock up more than 15% in after-hours trading. But will the tolerance for spending more on rides last in a down economy and socially distant society?

People are talking: "Rides last week were still down more than 70% year-on-year," Lyft CEO Logan Green told investors on Wednesday's earnings call. "Even as shelter-in-place orders and travel restrictions are modified or lifted, we anticipate that continued social distancing, altered consumer behavior and expected corporate cost-cutting will be significant headwinds for Lyft."

Opportunities: To survive the pandemic, Lyft and gig companies like it must navigate an escalating labor war while encouraging consumer demand for cheap on-demand services. Green told investors his company will be able to withstand plummeting ridership because of a strong balance sheet and an "inherently resilient" financial model, in which about two-thirds of costs are variable. If and when people return to ride-hailing, executives said the company will be positioned to capture laid-off workers seeking new income — although a lot is riding on whether Lyft, Uber, Instacart, DoorDash and Postmates can convince California voters to back their $90 million ballot effort to circumvent state law AB 5, which would require gig companies to compensate workers as employees.

Threats: One existential issue is what happens if courts or California voters push back on Lyft and similar companies' plans to codify low-cost, benefit-light gig work as a permanent part of the economy. Another question for the business is how deep the cuts will go in the meantime, and what will be left afterward. Just this week, Lyft slashed 17% of its workforce, furloughed nearly 300 additional employees and announced 10% to 30% pay cuts. "Every other expense line is being scrutinized," Green said, which the company expects will trim about $300 million off projected 2020 spending.

The power struggle: Watch how many drivers get back on the road in the coming weeks. As it stands, Lyft has paused onboarding of new drivers and started a wait list for applicants, executives said Wednesday. But if ridership recovers and Lyft sees anywhere near the demand for new work that gig economy peers like Instacart have seen, the company could win more political leverage in a perilous moment for unemployment. Lyft and its allies already got one tacit endorsement from on high, when lawmakers and President Trump allowed gig workers to be written into an emergency federal relief package, even though the companies hadn't paid into unemployment insurance funds and incited backlash for offering workers few protections from the virus.

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