Lyft reports dramatic revenue drop of 61% but points to uptick in rides in July

Lyft reported second-quarter earnings Wednesday, which showed a 61% revenue drop versus the same period last year, but a glimmer of hope for its core ride-hailing business with monthly rides increasing 78% in July, as compared to April.

President and co-founder of Lyft, John Zimmer, said on an earnings call Wednesday that the company may need to suspend its ride-hailing operations in California starting on August 21 if a court does not overturn its recent ruling which requires the company (and competitor Uber) to classify drivers as employees eligible for benefits, not independent contractors. California makes up about 16% of total rides for Lyft, Zimmer said.

Here’s how Lyft did versus Wall Street expectations for the period ending June 30, 2020:

• Loss per share: 86 cents, adjusted vs. an expected 99 cents, adjusted, according to analysts surveyed by Refinitiv.
• Revenue: $339 million, vs. $337 million expected per Refinitiv.
• Active Riders: 8.7 million
• Revenue per active rider: $39.06

Shares traded as high as 6% following the report’s release, but went negative after Lyft said it may have to suspend operations in California. Lyft’s announcement followed a similar one from Uber CEO Dara Khosrowshahi, who said in an interview with MSNBC Wednesday that his company might have to stop service in California if the court doesn’t overturn its ruling.

Net losses for Lyft amounted to $437.1 million during the second quarter, compared to $644.2 million in the same period last year.

The company did not offer top line guidance, but said it is on track to achieve profitability on an adjusted basis during the fourth quarter of next year. It expects to become profitable with 20% to 25% fewer rides than it had predicted as of October 2019.

Lyft makes money through ride-hailing, scooter- and bike-sharing, and its relatively new vehicle rentals business. Unlike its primary competitor, Uber, it does not have a food delivery, freight or investments and operations overseas to help it make up for losses in travel and transportation. 

To try to make drivers and rides feel comfortable with ride-hailing again, despite the persistence of Covid-19 in the U.S, Lyft made it a requirement for riders and drivers to wear a mask during trips starting in May, and after that began to distribute masks and hand sanitizer to drivers. Last month, the company announced that it was distributing tens of thousands of vehicle partition shields to its top drivers as a protection against the novel coronavirus. 

California state regulators want Lyft to do even more for drivers, of course — treat them like employees, not freelancers.

Lyft and Uber are facing multiple lawsuits in the U.S. over alleged misclassification of drivers and wage theft. They have previously treated drivers strictly as independent contractors. Like others in the “gig economy,” including Doordash and Instacart, Uber and Lyft have argued that workers want freedom and flexibility that they cannot get if they are classified as employees.

Critics including UC Hastings professor of employment law, Veena Dubal, say that a desire for flexibility should not to be confused with a desire to remain an independent contractor. Interviewing drivers, Dubal found that they overwhelmingly wanted employee benefits, even as they feared how companies (including Uber, Lyft and others) might behave as employers.