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Lyft races past 1 billion in revenue but can't catch up to profitability

Lyft races past 1 billion in revenue but can't catch up to profitability

Fri, 04/17/2020 - 11:49

Lyft Inc. reported its first-quarter earnings this Tuesday and the ride-hailing company can celebrate hitting more than $1 billion in revenue for the first time. But that wasn't enough to save its shares, which slipped in late trading as investors instead look to Uber as the favorite in the race to profitability.

Lyft's fourth-quarter losses totaled $356 million, or $1.19 a share, on revenue of $1.02 billion. That's $121.4 million, or 41 cents a share, after adjusting for stock-based compensation and other factors. In 2020, the pressure to profit is on, and it's basically a two-car race.

Is Lyft lagging behind?

The contenders are Lyft and its great rival, Uber Technologies Inc. Both mobility companies took huge hits to their stock prices after going public last year. Investors picked up confidence in 2020, though, as momentum in the mobility tech sector increased. When Uber announced its fourth-quarter financial results last week, it also moved up its goal for profitability. Both Uber and Lyft targeted 2021 for adjusted profitability, but Uber has confirmed in a recent conference call that its new goal is the coming fourth quarter.

Lyft looks like it could be left in the dust as it holds on to its late 2021 profitability target. And investors reacted accordingly. Even though Lyft shares had increased more than 25% so far, shares fell more than 4% in immediate after-hours trading following Tuesday's report and hover around an 8% drop at the time of writing.

Lyft burned through money last year, reporting losses of $2.25 billion in the first three quarters of 2019. Chief Executive Logan Green said last year that Lyft would cut down on costs so as to be turning a profit by late 2021.

Lyft lays off staff, purchases partner

The cost-cutting at Lyft included layoffs at the company earlier this year, but Lyft has allocated $75 million earmarked to “fund and support key 2020 policy initiatives”. The ride-hailing service is lobbying hard to keep its drivers from being recognized as employees by governments where it operates.

Lyft also disclosed an expansion: it acquired rental-car company Flexdrive for $20 million last week. Flexdrive was already working with Lyft as a part of Lyft’s Express Drive program, which allows Lyft drivers to rent cars from partners and use them to drive on the network.

Don't compare Lyft to Uber, says CFO

When pressed on the issue by an analyst, Chief Financial Officer Brian Roberts said that Lyft was maintaining its Q4 2021 goal for adjusted probability.

“We believe investors trust us to make responsible decisions as we drive towards this profitability,” Roberts said. “And as we move through the year we will continue to share updates on our progress, so stay tuned.”

Roberts also stressed that Lyft and Uber are very different companies, even if they both compete in the mobility tech sector.

“It’s important to keep in mind that we are a single-segment company, and our competitor has five segments,” the CFO explained. “They have five segments and then they have what they call G&A and centralized R&D — that specific cost center is almost five times larger than my total loss.”

Lyft's predictions for 2020 are conservative: it expects to produce revenue of $1.055 billion to $1.06 billion in Q1 this year, and sales of $4.58 billion to $4.65 billion for the full year.

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