Lyft Receives Investor Boost Following Q1 Earnings Report

Investors reacted positively to Lyft’s latest financial disclosures on Tuesday, granting a modest increase to the company’s valuation. The ride-hailing service reported first-quarter results that, while not stellar, surpassed both the company’s and Wall Street’s expectations. Following the release of its financial performance data for the initial three months of the year, Lyft’s stock experienced a surge of up to 4.5% during after-hours trading.

However, this initial gain subsequently moderated to a 2.5% increase as of the latest reporting. The company’s revenue for the first quarter of 2021 totaled $609 million, representing a 36% decrease compared to the same timeframe in the previous year.

Revenue Decline and Rider Statistics

This revenue reduction coincides with a significant drop in active riders, directly attributable to the disruptions caused by the COVID-19 pandemic on the transportation sector. Lyft reported 13.49 million active riders during the quarter, a decrease of 36.4% from the 21.2 million riders recorded in the first quarter of the preceding year.

Despite these declines, the results were less severe than anticipated by the company and its investors. Lyft highlighted that its quarterly revenue exceeded the midpoint of its previously issued guidance by $59 million.

Profitability Outlook and Adjusted EBITDA

This outperformance is viewed favorably by the market, and Lyft reaffirmed its earlier projection of achieving adjusted EBITDA profitability in the third quarter. The company’s adjusted EBITDA loss for the first quarter amounted to $73 million, considerably better than the expected $135 million deficit.

Furthermore, Lyft experienced a 7% increase in revenue compared to the fourth quarter of 2020, signaling a potential path toward recovery. Ridership also saw an improvement of approximately 8% from the previous quarter.

Ongoing Losses and Strategic Asset Sale

Despite these positive trends, Lyft continues to operate at a loss. The company reported a net loss of $427.3 million in the first quarter, a 7.3% increase from the $398.1 million net loss recorded during the same period last year.

This loss included $180.7 million in stock-based compensation and related payroll taxes, as well as $128.0 million related to adjustments in insurance liabilities mandated by regulatory bodies.

Lyft executives expressed optimism based on increasing rider demand observed in recent months. A key strategic move was the sale of its self-driving unit, Level 5, to Toyota’s Woven Planet Holdings for $550 million.

Details of the Level 5 Acquisition

This sale reflects a broader trend within the autonomous vehicle industry, driven by the substantial costs and extended timelines associated with commercializing self-driving technology. Uber also divested its autonomous vehicle technology, once considered crucial to its business model.

The Level 5 division will be integrated into Woven Planet Holdings upon completion of the transaction, anticipated in the third quarter of 2021. Lyft will receive $550 million in cash, with an initial payment of $200 million and the remaining $350 million distributed over five years.

Approximately 300 employees from Lyft Level 5 will join Woven Planet, continuing operations from their Palo Alto, California office. The Level 5 team, which once comprised over 400 individuals across the U.S., Munich, and London, will maintain its presence in Palo Alto.

Cash Reserves and Future Outlook

Lyft concluded the first quarter of 2021 with $2.2 billion in unrestricted cash, cash equivalents, and short-term investments. Analyzing the company’s performance, both optimistic and pessimistic perspectives can be formulated.

While Lyft remains smaller and continues to incur greater losses than in the previous year, the path to recovery may be protracted given the ongoing challenges posed by the COVID-19 pandemic, even with increasing vaccination rates.

Conversely, the company’s earnings presentation illustrates a positive trend towards recovery. Further insights will be gained when Uber releases its own first-quarter 2021 results.

Image Credits: Screenshot/Lyft