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Lyft Tops Sales Estimates on Rider Growth; Raises Outlook

Lizette Chapman

(Bloomberg) -- Lyft Inc. blew past analysts’ revenue estimates for the third quarter and raised its 2019 forecast, suggesting efforts to add more active riders and gain pricing power are paying off.

The ride-hailing company said full-year revenue will be $3.57 billion to $3.58 billion, beating analysts’ projections of $3.51 billion. Increased ridership and higher revenue per rider drove the results and the company reiterated that it plans to turn a profit by the end of 2021.

Adjusted revenue in the three months ended Sept. 30 jumped 63% to $955.6 million. Analysts had expected revenue of $916.2 million. Lyft also narrowed its adjusted net loss, which excludes stock-based compensation, acquisition expenses and other costs, to $121.6 million compared to $245.3 million for the same period a year ago. Analysts had expected a loss of $212 million.

The results come as the ride-sharing sector’s grow-at-all costs mindset gives way to a focus on profits. The price war with chief rival Uber Technologies Inc. is easing, with both companies slicing rider discounts and driver incentives.

Uber reports financial results Monday. San Francisco-based Lyft said last week that it will become profitable a year earlier than analysts had expected because it’s focusing on profitable growth, rather than scale at all costs.

“The market is increasingly rational with the increasing trend where more people are paying full price for their rides,” Chief Financial Officer Brian Roberts said in a phone interview. Sales and marketing as a percentage of revenue dropped to 17% compared with 41% during the same period a year earlier.But unlike Uber, which continues to expand its food delivery service and offer new services like connecting gig workers with employers, Lyft is focused exclusively on transportation. Lyft operates in more than 300 markets across the U.S. and Canada, the overwhelming majority of which are in the U.S.

“The competition continues to be strong, but it has shifted to be on product rather than on discounts,” said Ron Josey, an analyst at JMP Securities.

Like Uber, Lyft’s shares have had a rough time since an initial public offering in March amid concerns about the companies’ business models, path to profitability and growing regulatory challenges. Lyft shares gained 1.5% in extended trading after closing at $44.11. The stock has declined almost 40% since its IPO, while Uber has dropped 25% since the start of its public trading in May.

Lyft’s strategy is to more deeply penetrate its existing markets, capturing additional riders by offering a range of price options on bikes, scooters and public transit. The company is continuing to experiment with subscription services; it introduced a radically cheaper option Tuesday which offers discounts, free bike and scooter rides and other perks for $20 a month. The company is also targeting the more lucrative corporate-user market, a population Uber has long courted and currently leads.

The company reported 22.3 million active riders during the third quarter and revenue per rider of $42.82, increases of 28% and 27%, respectively, compared with the same period last year.

Despite the strong performance, controlling costs and fending off external risks could prove challenging.

Recent lawsuits brought by women alleging Lyft drivers sexually assaulted them, and California legislation designed to push Lyft and others to reclassify drivers from independent contractors to employees, are both expected to increase costs for the company.

Lyft joined with Uber and DoorDash Inc. to bankroll a November 2020 ballot initiative to challenge the California law which goes into effect Jan. 1.

(Updates with comments from analyst in the eighth paragraph.)

To contact the reporter on this story: Lizette Chapman in San Francisco at lchapman19@bloomberg.net

To contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, Andrew Pollack, Alistair Barr

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