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

A traveler wearing a protective mask waits to put a suitcase in the back of ride-sharing car displaying Lyft signage at San Francisco International Airport on Monday, May 4, 2020.

Paul Morris | Bloomberg via Getty Images

Lyft just reported second-quarter earnings including 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 operations in California if a court does not overturn its recent ruling, which requires the company (and competitors Uber) to classify drivers as employees eligible for benefits, not independent contractors. The ride-hail companies have about a week left to appeal the preliminary injunction.

Here’s how the company 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

Analysts’ estimates ranged from losses of 50 cents per share to $1.15 per share, adjusted, for Lyft, and $269.5 million to $572.7 million in revenue for the quarter. 

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. 

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, the company 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. Now, the company also sells its protective barriers to drivers who want them.

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

On Monday, a California court issued a preliminary injunction that requires both Uber and Lyft to classify drivers as full employees with benefits in the state, at least pending further action by the court. Doing this would mean drivers would be eligible for benefits like health insurance, paid sick leave and more. The ride-hailing companies requested a brief stay during the appeals process, and now have until August 20 to make this change.

Uber CEO Dara Khosrowshahi said in an interview with MSNBC Wednesday that the company might have to stop service in California if the court doesn’t overturn the ruling.

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,” 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.

This story is developing.