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Lyft beats Q1 earnings estimates, co-founder says 'recovery is clear'

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Yahoo Finance’s Julie Hyman, Brian Sozzi, and Myles Udland speak with Lyft Co-Founder and President John Zimmer about the company’s latest earnings report.

Video Transcript

BRIAN SOZZI: Lyft easily beat analyst estimates for the first quarter sales and profits. This week, the company credited a bounce back in its ride-hailing business as more people ventured outside after getting their COVID-19 vaccine. But Lyft said ride-share rides fell in April versus March, which has put some pressure on the stock here.

John Zimmer is Lyft's Co-Founder and President, and he joins us now. John, good to speak with you again here. I want to-- may we clarify a little bit what you saw in April. The second half of April, the last two weeks of April, did your business pick up? And did that momentum, if there was any-- did that momentum continue into May?

JOHN ZIMMER: I'm not going to break down week by week, but I can tell you we do expect continued growth in the coming months. We had an extremely strong quarter. We beat estimates on all accounts. We had our smallest adjusted EBITDA loss since going public with, I think, about 36% less revenue, 7% revenue growth for the quarter-- so definitely excited to see a strong rebound and for the quarters ahead.

BRIAN SOZZI: What states are you seeing the biggest rebound in?

JOHN ZIMMER: It typically correlates to vaccination rates as well as the rules and regulations around people's ability to get out there and go to restaurants and things like that. East Coast, a little stronger, a little quicker to rebound than West Coast, generally.

JULIE HYMAN: And, John, it's Julie here, I want to ask about attracting drivers, because that seems to be an issue not just in the ride-share industry, but across a number of different industries here-- just getting people back to work. What are you guys seeing on that front? And how are you dealing with it?

JOHN ZIMMER: Yeah, I mean, having such strong demand with riders wanting to get back out there is a good problem to have. But you're right-- we're doing a lot to incentivize drivers to get back out on the road. I think you know we're just coming out of a pandemic. A lot of people have been staying at home. And so it takes a little bit of time-- we expect by the second half of the year to have really good balance between drivers and riders. But it's the other side of the pandemic, and one we're working hard to correct.

MYLES UDLAND: You know, John, you guys are-- you have a pending sale of that autonomous driving unit. I'm curious how you guys at Lyft are now thinking about-- let's just call it the future of mobility-- some mix of electrified vehicles and self-driving vehicles. I think five years ago, it would have seemed like the last five years would have been a time when it would have happened.

Things are not maybe where some predictions had been. How are you guys thinking about those dynamics today? And where is your position now, I guess, selling that unit, but certainly staying very focused on what those opportunities could unlock for Lyft going forward?

JOHN ZIMMER: Yeah. At a high level, still strongly believe that future is shared, electric, and autonomous-- also believe that as more and more people, or younger generations, come of age to get their vehicle, they're not that excited about all the elements of car ownership. The average American household spends $9,000 a year owning and operating a vehicle that they use 4% of the time.

So we are extremely well-positioned for a transition from ownership to service, where more and more people spend their transportation money in a network ecosystem like Lyft. Specific to autonomous, we have retained our primary part of the strategy, which is being the platform of choice for self-driving systems. We've done over 100,000 paid commercial AV rides to date. And we're going to continue to scale out that platform.

JULIE HYMAN: John, to go back to the cars with people actually driving-- non-autonomous-- ones where people actually drive the car-- what do we call regular cars, just regular driving cars?

JOHN ZIMMER: Cars.

JULIE HYMAN: Cars. To come back to the attracting drivers question for just a minute-- I'm wondering if you guys have been raising rates for drivers, and if you expect to continue to do so.

JOHN ZIMMER: Yeah. We have been increasing incentives for drivers to get back on the platform. And if you look at driver earnings, which is, you know, based on these incentives, but also just on how busy it is-- so how many rides you can get in an hour-- earnings in many markets are at an all-time high. Some markets are top markets. Drivers can earn between $35 and $40 an hour. And generally, we're seeing, you know, 20%, 30% higher driver earnings because of this higher utilization as well as the incentives.

BRIAN SOZZI: Has the cost of taking a ride on the platform gone up, and by how much?

JOHN ZIMMER: It depends on the time of day, obviously, and the market. But yes, if it's more busy at a given time, we've always had dynamic pricing. And so that's the important piece about getting drivers back on the platform to bring things into a better balance.

BRIAN SOZZI: And, John, Myles mentioned-- so you did-- you are selling that autonomous driving unit. And you expect to be adjusted EBITDA profitable in the third quarter. Do you expect to be a sustainably profitable company moving forward after that third quarter?

JOHN ZIMMER: That is the plan, yes, you know, on an adjusted EBITDA basis. And then we'll follow, obviously, with full profitability at the right point. But this is-- the economics of this model are good. We're ready to show that to the world to the market while also investing in growth.

There's a lot more to come. We're scratching the surface on this transition to transportation as a service. And we intend to lead that into the coming years.

JULIE HYMAN: John, how big a risk to that profitability goal is the idea of reclassification of drivers as full time employees? Obviously, we've seen it in some places around the country, in some places around the globe. How are you guys thinking about that? How are you gaming it out?

JOHN ZIMMER: So we recently, with that autonomous announcement about a week ago-- a little over a week ago-- we pulled in our adjusted EBITDA profitability from Q4 to Q3. And we maintain that we will hit that, regardless of anything around policy. Specific to policy, following the prop 22 vote in California, where the far majority of drivers and the general public supported independence or independent contractors plus benefits, we've noticed a shift in the conversations we've had at the state, and local, and even federal level around finding a solution that allows drivers to retain that independence but get more benefits, which have typically been tied only to employment. So I expect to see that type of model continue to come up in more states in the coming year.

BRIAN SOZZI: So, John, is it-- before we let you go, is it just going to be harder for the ride-sharing industry to do business with the Biden administration?

JOHN ZIMMER: I'm not convinced of that. You know, I think we understood coming in that a new administration would have different opinions than the previous administration. And that's no surprise. Any of the recent comments have had no impact on the business, have had no impact on the laws governing classification at the state level, which is typically where this happens. And we're having productive conversations with the administration. And I'm optimistic that we can find common ground.

BRIAN SOZZI: Well, certainly good to see the comeback. Jon Zimmer, Lyft Co-Founder and President, always good to speak with you. We'll talk to you soon.

JOHN ZIMMER: You as well. Thanks.