Lyft, Inc. 2021 Q3 Form 10-Q Summary
Business context and reporting period
Lyft operates multimodal transportation networks in the United States and Canada, primarily connecting rideshare drivers and riders, with additional offerings including bikes and scooters, vehicle rentals, driver vehicle rentals, auto services, and licensing and data access. The filing covers the quarter and nine months ended September 30, 2021; comparative figures are for the corresponding 2020 periods. The financial statements are unaudited and prepared under U.S. GAAP.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenue | $864.4 million | $499.7 million | $2.238 billion | $1.795 billion |
| Loss from operations | $(176.9) million | $(453.4) million | $(833.4) million | $(1.355) billion |
| Net loss | $(71.5) million | $(459.5) million | $(750.8) million | $(1.295) billion |
| Net loss per share | $(0.21) | $(1.46) | $(2.26) | $(4.18) |
| Adjusted EBITDA | $67.3 million | $(239.7) million | $18.2 million | $(605.2) million |
| Adjusted EBITDA margin | 7.8% | (48.0)% | 0.8% | (33.7)% |
| Cash flow from operations | $41.5 million | Not clearly provided in the filing text | $(75.5) million | $(1.114) billion |
Q3 revenue increased 73% year over year. Active Riders increased 51.4% to 18.942 million, while revenue per Active Rider increased 14.2% to $45.63. Contribution was $513.6 million, or a 59.4% contribution margin, compared with $248.8 million and 49.8% in Q3 2020. Adjusted EBITDA was positive for the second consecutive quarter, but GAAP operating and net losses remained substantial.
Q3 total costs and expenses were $1.041 billion, or 120.5% of revenue, compared with 190.7% in the prior-year quarter. Cost of revenue was 42.1% of revenue versus 52.3%; research and development was 26.2% versus 46.4%; and general and administrative expense was 26.8% versus 51.6%. Stock-based compensation expense was $198.4 million in Q3 and $563.7 million for the nine months.
Liquidity, debt, and balance sheet
- At September 30, 2021, cash and cash equivalents were $728.4 million and unrestricted short-term investments were $1.654 billion, totaling approximately $2.4 billion of unrestricted liquidity.
- Restricted cash, cash equivalents, and investments totaled approximately $1.0 billion, primarily supporting insurance and other obligations.
- Cash, cash equivalents, and restricted cash increased by $434.0 million during the nine months to $872.4 million.
- Total debt, including current maturities, was $712.0 million, consisting primarily of $747.5 million principal amount of 1.50% convertible notes due 2025, plus Flexdrive-related vehicle loans. The balance-sheet carrying value of long-term debt was $662.5 million.
- Insurance reserves were $1.011 billion at September 30, 2021, including a $249.7 million reinsurance recoverable.
- Management stated that unrestricted cash and short-term investments should be sufficient to meet working-capital and capital-expenditure needs for at least the next 12 months, but noted that additional financing may be required in the future.
Material changes versus the prior comparable period
- Revenue growth reflected recovery in mobility demand as vaccination rates increased and communities reopened. Rider demand remained below pre-pandemic levels, and driver supply constraints contributed to elevated pricing and additional incentives.
- Operations and support expense declined 11% in Q3 and 18% for the nine months, while general and administrative expense declined 10% and 9%, respectively.
- Cost of revenue increased 39% in Q3, primarily due to higher insurance costs, transaction fees, and bike and scooter costs associated with higher ride volumes. For the nine months, cost of revenue increased 6%.
- Sales and marketing expense increased 39% in Q3 as driver and rider programs expanded, but declined 12% for the nine months because of lower rider incentives compared with 2020.
- Operating cash use improved materially from $1.114 billion in the first nine months of 2020 to $75.5 million in the first nine months of 2021.
- Revenue included $784.1 million from customer contracts and $80.3 million of rental revenue in Q3 2021. Licensing and data-access revenue began contributing in the second quarter of 2021.
Guidance, outlook, commentary, risks, and unusual items
- Management expressed confidence in continued demand recovery but stated that it was not in a position to forecast the impact of COVID-19 on the remainder of 2021 because of uncertainty regarding variants, government responses, consumer behavior, travel, and driver availability. No clear formal revenue or profitability guidance is provided in the filing text.
- On July 13, 2021, Lyft sold certain Level 5 self-driving assets and entered commercial agreements with Woven Planet, a Toyota subsidiary. The transaction is expected to provide approximately $515 million in cash, including $165 million upfront and $350 million over five years. Lyft recognized a $119.3 million pretax gain in Q3 and recorded $42.5 million of deferred revenue related to commercial obligations.
- Lyft completed a reinsurance transaction for certain legacy auto liabilities. The transaction resulted in approximately $20.4 million of expense in the first nine months, including $20.2 million in cost of revenue; it does not discharge Lyft’s obligations to policyholders.
- Insurance reserves depend on actuarial estimates and limited historical loss experience. Adverse claims development could materially increase future losses and cash requirements.
- Driver classification remains a significant contingency. California litigation challenging Proposition 22 continued after an Alameda County court found the measure unenforceable in August 2021; appeals were pending and Proposition 22 remained in effect. Massachusetts and other jurisdictions also presented classification proceedings. Adverse outcomes could require employee classification, materially increase costs, result in damages or penalties, or affect operations.
- Other principal risks include the continuing effects of COVID-19, intense competition, driver and rider retention, pricing and incentive levels, data security and privacy, dependence on third-party providers including AWS and payment processors, insurance coverage, regulatory compliance, litigation, and the company’s continuing history of GAAP losses.
- As of September 30, 2021, Lyft had $720.7 million of unrecognized stock-based compensation expected to be recognized over a weighted-average period of approximately 1.8 years. No restructuring-related charges were recorded in Q3.
Most important facts for investors to verify
- Whether the post-pandemic recovery in Active Riders, revenue per rider, and driver supply is durable, particularly during seasonal winter weakness or renewed COVID-19 disruptions.
- Whether positive Adjusted EBITDA can be sustained and converted into recurring GAAP profitability and positive operating cash flow after stock-based compensation, insurance developments, and other excluded items.
- The adequacy and future development of insurance reserves, reinsurance recoverables, and restricted investments.
- The outcome and economic impact of driver-classification litigation, Proposition 22 appeals, employment assessments, and related regulatory actions.
- The timing and collectability of the $350 million of deferred Woven Planet consideration and the company’s ongoing obligations under the related commercial agreements.
- Liquidity requirements associated with continued losses, debt maturities, vehicle financing, lease commitments, legal contingencies, and potential future capital raising.
- The extent to which the $119.3 million Woven Planet gain and other nonrecurring or excluded items affected reported Q3 net loss and Adjusted EBITDA.