Lyft Earnings Q12020 Review

Q1 Revenue Brief

Quarterly Revenue climbed up 23% to $956 million compared to the same period last year. Covid-19 began to have an impact on revenue as rides fell sharply mid-march

• After expenses, Lyft had a Net Loss of $398 million. This compared to a Net Loss of $ 1.1 Billion in the same period in 2019. This as Lyft continues its march towards profitability.    
• Lyft ended the quarter with $ 2.7 Billion in Cash or Cash equivalents. Cash on hand to pay fixed costs while revenue is still down. Similarly, we're seeing a lot of companies pulling money from their credit lines to have a Stronger balance sheet.

Rider Data

• Rides were down 75% in mid-march as people begun to stay indoors and social distance.
• Before Covid-19 impact on ridership, Active riders grew 3% to 21.2 million. Also Revenue generated per Active Rider grew from $37.86 to $45.06. Absent of Covid-19, Lyft's core business is still solid.

Looking Ahead to Q2

Lyft is following many other publicly traded companies by withdrawing guidance for the rest of 2020. Here are some April-May performance metrics shared during the earnings call.

• From the week ending in May 3rd, rides were up 16% nationally from the previous week.
• City Specific Metrics: From the Week ending April 5th, to week ending May 3rd:
• Rides increased 25% in ATL. 35% in Chicago, 29% in Houston, 39% in New Orleans, 22% in NY, 25% in Seatle
• City Specific Metrics: For the week ending May 3rd, compared to the previous week
• Las Vegas 22%, Florida 15% , Orlando 14%, Austin 16%, Houston 12

As different cities reopen, there will be some slight rebound in ridership. However this ridership will be recovering from a 75% drop.

Factors working in Lyft's Favor

There aren't too many things working in Lyft's favor at the moment. One group was mentioned during the earnings call. It is unfortunate however, that with greater unemployment there will be more drivers available as people will look to ride sharing platforms to earn some income in the short term. Infact Lyft now has a wait-list for new drivers. Lyft said they would do away with Driver on-boarding & retention(Bonuses I presume) leading to some cost save.

Some of the challenges affecting Lyft's business model

CEO Logan Green mentioned these factors to be significant headwinds Lyft has to navigate. In particular because the "Strength & duration of these headwinds cannot be estimated".

• Continued Social Distancing. If people are staying home. They aren't taking Lyfts to go places.
• Altered Consumer Behavior. Even after we do start going back outside, people will still be a little anxious to use commonly shared spaces. One thing that Lyft is doing about this is they turned Off shared rides back in mid-march. They also bought masks, cleaning & sanitizing products to share with their drivers.

Other factors not mentioned during the call that remain prevalent

• The People Of California Vs (Lyft/Uber). California has filed suit against Lyft/Uber for misclassifying drivers. Lawsuits cost a lot money, not only to mount a formidable defence, but should California prevail, there would be higher cost of revenue and operating expenses. With Lyft losing almost $400 million in Q1 2020 due to uncertainty and low ridership, this will exacerbate Lyft's short term challenges.

Follow Up Questions for next earnings call

• How have Ridership numbers performed since May? Some characteristics among cities that had higher ridership compared to others?

• Any changes in consumer behaviour on the Lyft Platform. Scooters/Bikers vs Ridesharing. Any willingness or hesitation from consumers to use the Plaform?

• What percentage of overall revenue is the Essentials Delivery & Essential Transportation Service?

• Competition with Uber? How does Lyft differentiate itself from a well funded Rival with an even bigger Market cap in the long term?

Takeaways

Variable Cost Structure: CEO & Co-Founder Logan Green noted during that earnings call that "2/3 of Lyft's costs are variable costs". It was mentioned that Lyft's biggest Cost of Revenue items were "Primary Auto Insurance & Transaction Processing" which are 100% variable. As ridership decreases so do these costs.
Foresight: Covid-19 has had a major setback to Lyft's core business, undoubtedly. Looking ahead, there's one important question to ask, As a company how does Lyft survive this?

• The only thing to do, the only thing that must be done. Cut costs. Start Ups are generally good at doing this. And in this case Lyft has moved decisively. 17% reduction in Lyft employees. For 3-months, Execs are taking a 3-month 30% reduction in salary. They've furlouged 300 employes. Salaried employees are taking a 10% cut as well. Reduction in R&D, as well as $300 million reduction in annualized fixed costs. In hard times you have to make the hard decisions.  

• The other thing a company can do is adopt, and in Lyft's case innovate. The Essentials Deliveries program for non-emergency medical deliveries is one such example. Could there be a health-care play for Lyft here? Lyft Co-Founder and President John Zimmer mentioned during the earnings call, "taking medicare members to doctors appointments like Dialysis, Prenatal appointments as examples of the essentials transportation program. There are 22 million medicare members living across 11 states and washington D.C" that Lyft can reach with this program.

• Stock price: Lyft is currently trading at 2-times less than its IPO price. The Stock IPO'd at 72$ dollars a share, while today it trades at around 30$. There's significant concern about Lyft's Long Term viability in the face of strong compeition from Uber.

Worker Classification: Team members, employees, drivers ...

There was no mention of Hazard Pay for drivers on the earnings call. The was mentioned of a program to support drivers during Covid. However no specific details were provided..

Some Key buzzwords that used repeatedly during the call

EssentialsDelivery

Some terms used & how they affect Lyft

Net Loss: Lyft's total costs & expenses came out to $1.3 billion. Incoming revenue covered 956 of this 1.3 billion hence the remaining $398.1 million Net Loss. Research and Development spend was $258 million. As Lyft looks to cut costs, after cutting 17% of its employees to save about 28 to 30 million in Q2. We can expect R&D spend to be lower. One example of this is doing more Simulation testing versus Road testing for their Autonomous Vehicle Programs.