Lyft released its results for the third quarter of 2020, and we learned more about how Lyft is seeking to become an ‘all-around transportation network’ with some diversification – including into delivery. RSG contributor Tyler Philbrook outlines what happened during the quarterly earnings announcement and breaks down how it affects drivers below.
- Proposition 22 was a big win for Lyft – much-needed
- Lyft has recovered half of its business
- Lyft is piloting delivery programs – but this is already a crowded market
Lyft’s announcement comes with an interesting surprise: they beat expectations of revenue, and though like many companies their revenue is down based on last year, they are showing great strides in cutting costs and holding on to more money.
Let’s take a look at the numbers, what they mean for drivers, and how you can make more money.
Lyft’s Third Quarter Results
Lyft reported quarter 3 earnings of $499.7 million versus $955.6 million in the same quarter of 2019, a decrease of 48%, but an increase of 47% from the second quarter of 2020.
This revenue is higher than the $486.6 million expected per Refinitiv.
Lyft had 12.5 million active riders on the platform, with a revenue per active rider of $39.94.
Lyft had a net loss of $459.5 million versus a $463.5 million loss in the same period of 2019.
All-Inclusive Transportation Network
Lyft reported 12.5 million active riders and expects 800,000 to 1 million more in quarter four. As expected, whenever cities open after lockdown restrictions are lifted, they see an increase in demand for Lyft’s services. When the city closes down again for Covid, there is a correlated decrease in passenger requests on Lyft.
To gain more passengers, Lyft has grown its healthcare industry partnerships such as Epic. This allows healthcare professionals to schedule rides for their patients right from the Epic portal.
Bikes and scooters have also been a huge contributor to Lyft’s revenue in quarter three. Part of that is the Lyft Pink membership program, which allows people to use bikes or scooters for free for 30 minutes, 3 times a month.
A concern mentioned on the call was that entering the winter months will affect those using bikes and scooters. Some places, such as Florida, will get use of those year-round. However, in the dead of winter, the idea of using a scooter or bike sounds horrible.
What does all this mean for drivers?
First, those who are using bikes and scooters, those riders will still need to get to work. They’ll want to do so in a heated vehicle rather than walking – at least some of them will. Of course, they’ll use the same service they’ve been using rather than switching to a new one.
Second, think about the times those who can’t drive would need a ride to doctors’ offices, or when they would be getting done with the doctors’ office. Drive during those times, and near doctors’ offices to make sure you get those rides.
Lyft’s Food Delivery Progress
With Lyft Pink, you qualify to get Grubhub+ at no charge. This allows you to get free delivery from any of Grubhub’s restaurants. This alone is worth half the price of Lyft Pink.
Lyft did talk about their own food delivery service as well. Rather than just start the service and charge restaurants large fees, they want to work with restaurants. Most services charge between 20% and 30%, but Lyft’s goal is to create a service that helps their customers as well as the restaurant.
Restaurants are hurting right now, and Lyft wants to be a way they can make more money, without them worrying about losing too much. I’m personally really excited to see what this service looks like.
On the other hand, it looks like Lyft may be competing in an already crowded, and potentially already much more efficient, market. According to hedge fund analyst Charlie Zvibleman, this decision doesn’t seem to make a lot of sense for Lyft:
Spent half the day debating whether the logistics part of food delivery worked as a means to win the profitable mktplace business.
Now Lyft talking about launching logistics-only food delivery and undercutting on rate
— Charlie Zvibleman (@CharlieZvible) November 11, 2020
As Harry notes, Lyft may be getting desperate here. DoorDash and Postmates already offer driver-only integration if restaurants don’t want the lead generation for a per mile fee. Additionally, Lyft’s drivers won’t be as profitable or potentially as good as those DoorDash and Postmates drivers who have experience. Read more about DoorDash’s white label service here.
For drivers, keep an eye out for your area. As Lyft rolls this out in more areas, it will be a good opportunity for you to make more money. More restaurants will use it because they keep more of their money, and in turn, more people will request from it. Definitely something to look forward to.
Proposition 22 And Autonomous Cars
It’s undeniable the passage of Proposition 22 in California is seen as a major win by Lyft. According to Pymnts.com, Co-Founder and CEO of Lyft Logan Green stated “We believe the outcome in California is a win-win-win,” Green said, noting that the measure is good for drivers, riders and the state’s economic recovery.”
It’s also worthwhile to note that, in California, Proposition 22 will take effect on December 16 – make sure to subscribe to the Rideshare Guy to stay up to date on the latest!
Drivers continue to get the flexibility they want, and passengers continue to get rides. It was even mentioned that other states as well as the federal level will see this as a watershed, and a turning point in the rideshare industry. You can read our full Proposition 22 coverage here.
Another turning point for Lyft will be autonomous cars. When asked about them, Lyft said autonomous vehicles will be the biggest thing to hit the industry; it’s a matter of when.
Lyft has invested in programs to grow this part of their company, but Lyft said even when autonomous vehicles arrive, Lyft will still need drivers.
As mentioned on the call, autonomous cars will not be able to be in all areas, and they won’t be able to service everyone, so they will still need some human drivers even when the time comes. We still have time before we need to be worried about losing our jobs to machines, but the day is (potentially) coming.
Our Analysis and the Future for Lyft
The most exciting thing that was mentioned several times is that Lyft will be profitable by quarter four of 2021. This, despite the pandemic. Lyft’s solution is not to get more passengers or grow their business, which they absolutely are doing, but to decrease operating expenses.
Lyft has already taken great steps this year in cutting costs, decreasing spending in some departments, such as marketing, by more than 50%. In fact with their current plan, instead of needing more passengers, Lyft thinks they could get 30% fewer passengers and still be profitable by the end of 2021.
Lyft’s focus is to be the best all-inclusive transportation network. They prove this by continuing to grow their passengers, bike and scooters business. Lyft is also working with rental companies, allowing customers to look at a car, pay for it, and never stop at the counter.
Of course, the negatives for Lyft here are substantial, and the pandemic makes a hole that is hard to climb out of. As TechCrunch points out, “Lyft, which is focused on the U.S. market and lacks a delivery program like Uber, has been more impacted by the domestic market.”
While Lyft seems to be trying to get around this lack of delivery problem by creating their own delivery service, as Harry mentioned above, this may backfire. Lyft is not, and has not traditionally been, in the delivery space. With other companies (like DoorDash and Postmates, for example, to say nothing of Uber Eats) as competition, can Lyft quickly and efficiently scale up and be profitable? It remains to be seen.
The future looks good for Lyft, which means it looks good for drivers. As areas open up passengers are coming back, and are spending more money with Lyft. So turn that app on, stay safe, and make some money.
Readers, did you listen to or read Lyft’s earnings report? What do you think of their news?
-Tyler @ RSG