Lyft‘s Revenue Increased by Nearly 50% in Just Three Months

After its announcement of Q3 results, the share price of American ride-hailing giant, Lyft, popping more than 7% in after-hours trade on Tuesday. Lyft, which competes with Uber for its ride-hailing business, reported revenue of USD 499.7 million in Q3, a 48% drop from the USD 955.6 million in Q3 last year. This lackluster result is still a 47% increase compared to USD 339.3 million in Q2.

Investors are excited about this improvement and Lyft’s ability to beat analysts’ revenue expectations of USD 486.45 million. The company's net loss per share is USD 1.46, which is worse than expected, but investors seem to be more bullish rather than bearish, buying up Lyft’s equity and boosting its value after the company's earnings report.

Lyft's performance this quarter is a story of year-on-year decline and quarter-on-quarter growth. On this theme, the company’s active riders fell 44% from the same period last year and rose 44% from Q2 2020. Compared with Q3 2019, its revenue per active rider fell by 7%, but it increased by 2% from the sequentially preceding quarter.

Like Uber, Lyft has also enjoyed the patience of investors because it is digging its way out of the ride-hailing market hit by COVID-19; Uber is benefiting from its dellivery business and international operations to buffer the decline in its ride revenue. Lyft focuses on the US market, lacks delivery projects like Uber, thus it is more impacted by the US domestic market.

Factors such as the increasing number of COVID-19 cases could threaten Lyft's recovery. However, despite the impact of the epidemic, its core economic is not falling to pieces. In Q3 2020, Lyft's contribution margin, a metric similar to the adjusted gross margin, was 49.8%. In Q3 last year, it was 50.1%.

Lyft's next big hurdle is profitability. Logan Green said on the company’s earnings call on Tuesday that the company is still expected to achieve adjusted EBITDA profits in Q4 2021, even with a slower recovery in history, adding that Lyft is taking extremely disciplined approach to increase its operating leverage. Green said that Lyft's positioning is to achieve the profitability goal, with about 30% rides than what was required when it originally announced its Q4 2021 profitability target last fall.

Lyft wrapped Q3 with USD 2.5 billion in cash and equivalents. Cash used in operations has been USD 1.1 billion so far this year, up around USD 156 million in Q3. At USD 50 million per month, Lyft has a lot of room to get back to more pedestrian losses, and year-on-year growth.