LYFT Ridership and Revenue increases despite Coronavirus Crisis in Q1 2020

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LYFT Ridership and Revenue increases despite Coronavirus Crisis in Q1 2020

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What happened

LYFT (NASDAQ: LYFT) announced its Q1 2020 result on 6th May 2020. Impact of COVID-19 started affecting all the businesses from March 2020, but company still managed to outperform in terms of revenue and ridership.

So What

Financial Highlight from the press release are:

  1. Company claims that it has generated a revenue of $ 955.7 million in Q1 2020, revenue of the company has increased by 23% compared to $ 776 million generated in Q1 2019.
  2. Ridership of the company has also increased by 3%, total ridership of company was 21,211 in Q1 2020 compared to 20,503 in Q1 2019.
  3. Revenue per rider was $ 45. 06, which increased by 19% compared to $ 37.86 earned in previous year.
  4. LYFT contribution was $ 547.4 million, which increased by 42%, compared to $ 216 million in same period of 2019. Contribution margin in Q1 2020 has increased to 57.3 % from 49.6 % in Q1 2019.

Impact of Coronavirus started hitting the nation from March, so Q1 result does not provide any detail information about the impact of COVID-19 on the performance of the company.  Ridership started declining from Mid-March and declined by 75% in April 2020 compared to previous year.

After the results were announced, Logan Green, co-founder and chief executive officer of LYFT said “While the COVID-19 pandemic poses a formidable challenge to our business, we are prepared to weather this crisis. We are responding to the pandemic with an aggressive cost reduction plan that will give us an even leaner expense structure and allow us to emerge stronger. Our competitive resilience and commitment to our culture and values will put LYFT in the best position to deliver on our mission of improving people’s lives with the world’s best transportation.”

In SEC filling on 29th April 2020, company had layoff 982 employees, which represented 17% of total workforce and furlough has been given to additional 288 people. Company has also cut the salaries of executives by 30%, salary of vice president by 20%, salaries of all the other employees by 10% for 12 weeks. Company has discontinued all coupons provided to the riders and incentives offered to the drivers.

Now What

To help the drivers earn money in this crisis, company in the month of April started an on demand delivery service where meals, grocery and other essential items are delivered by the drivers to government agencies, businesses, nonprofit and health care organization. Press release and call transcript does not mention any details for expanding this business.

Company has $ 2.7 billion cash and has almost zero debt, so even if ridership is low, it can utilize its free cash to re-invest. Brian Roberts, Chief financial officer of LYFT while having conference call with media said While we continue to make investments that will fuel our long-term growth and margin expansion, it is impossible to accurately predict the duration and depth of the economic downturn we face. Our business may be impacted for an extended period so we must be prepared to adapt accordingly. we expect we can manage to keep our Q2 adjusted EBITDA loss to under $360 million”.

All the ride-haling business has been hit by the crises. Barclays report which was released on 20th April 2020, claims that passenger volume is all the major cities has been declined by 85%, but it is still possible to bounce back after people start going out and work. Barclays analyst Ross Sandler claims it is possible for LFTY to recover quickly compared to its competitor because of west coast orientation and west coast cities that have opened a few days ago.

In this year, LFTY is planning to reduce its capital expenditure by 63% from $ 400 million to $ 150 Million. Variable costs represents two- third of the total expenditure, for fixed cost company plans to reduce it by $ 300 Million by fourth quarter of 2020.

Last year LYFT had generated annual revenue of $ 3.6 billion. In February, company claimed, it will turn profitable by Q4 of 2021 and will earn $ 6 billion as its annual revenue but now its result in Q2 2020 will define its road map to profitability. Looking at the fundamentals and competitive advantages of the company, investors may consider the stock, a good option to invest.

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