Lyft, Inc. 2021 Q2 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 through its platform. Other offerings include bikes and scooters, vehicle rentals, Express Drive, auto services, delivery pilots, and licensing and data-access arrangements. This unaudited Form 10-Q covers the three and six months ended June 30, 2021, with comparisons to the corresponding 2020 periods.
Key financial metrics
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $765.0 million | $339.3 million | $1.374 billion | $1.295 billion |
| Loss from operations | $(240.1) million | $(487.5) million | $(656.6) million | $(901.6) million |
| Net loss | $(251.9) million | $(437.1) million | $(679.3) million | $(835.2) million |
| Net loss per share | $(0.76) | $(1.41) | $(2.06) | $(2.72) |
| Adjusted EBITDA | $23.8 million | $(280.3) million | $(49.2) million | $(365.5) million |
| Cash used in operating activities | $(37.6) million | Not clearly provided in the filing text | $(117.0) million | $(958.6) million |
Q2 revenue increased 125% year over year, while six-month revenue increased 6%. Active Riders increased 97.3% year over year to 17.1 million in Q2 2021, and revenue per Active Rider increased 14.3% to $44.63. Adjusted EBITDA margin was 3.1% in Q2, compared with negative 82.6% in the prior-year quarter; the six-month margin was negative 3.6%.
Q2 GAAP cost of revenue was $346.9 million, or 45.3% of revenue, compared with 74.1% in Q2 2020. Total costs and expenses were $1.005 billion, or 131.4% of revenue, versus 243.7% in the prior-year quarter. Stock-based compensation was $201.0 million in Q2 and $365.2 million for the first six months.
At June 30, 2021, Lyft held $484.2 million of cash and cash equivalents and $1.761 billion of short-term investments. Restricted cash and investments totaled approximately $1.1 billion. Total assets were $4.571 billion and total liabilities were $3.207 billion.
Total debt, including current maturities, was $700.9 million, consisting primarily of $747.5 million principal amount of 1.50% convertible senior notes due 2025, carried at $586.0 million net, plus Flexdrive-related loans. The 2025 Notes were convertible at the holder’s option during Q3 2021 because the stock-price conversion threshold had been met.
Material changes versus the prior comparable period
- Demand recovered as vaccination increased and restrictions eased. Q2 2020 represented the pandemic-related low point for Active Riders.
- Lyft achieved its first quarterly Adjusted EBITDA profit, although it remained significantly loss-making under GAAP.
- Insurance cost of revenue increased in Q2 2021, including a $20.2 million cost associated with reinsurance of legacy auto liabilities. The six-month period also included $128.0 million of adverse development related to prior-period insurance claims.
- Research and development increased 24% in Q2, primarily because of higher stock-based compensation and the absence of prior-year restructuring benefits.
- Sales and marketing increased 93% in Q2 as driver and rider programs and incentives increased with recovering demand, but declined 28% for the six-month period due primarily to lower rider incentives.
- Interest expense increased to $12.8 million in Q2 and $25.4 million for the six months, reflecting a full period of expense on the 2025 Notes and Flexdrive-related debt.
- The company received a $64.0 million non-marketable equity investment in June 2021 as part of licensing and data-access agreements.
Guidance, outlook, commentary, risks and unusual items
Management expressed confidence in continued recovery as communities reopened and vaccines became more widely available, but did not provide a clear quantitative revenue or profitability forecast. Management stated that it was not in a position to forecast the effect of COVID-19 on the remainder of 2021. Recovery remained uncertain because of variants, changing government restrictions, altered travel behavior, corporate cost-cutting and variable driver availability.
Driver supply was below rider demand in certain markets, potentially requiring higher driver incentives or pricing. Lyft relaunched shared rides in limited jurisdictions beginning in July 2021.
On July 13, 2021, after the reporting date, Lyft completed the sale of certain Level 5 self-driving assets to Woven Planet, a Toyota subsidiary. Lyft expects approximately $515 million of total cash consideration, including $165 million upfront and $350 million over five years. Management expects lower costs related to internally developed self-driving systems and additional data-licensing revenue, but the accounting impact was still being assessed.
Material risks include continued COVID-19 disruption, driver classification litigation and regulatory changes, adequacy of insurance reserves, personal injury and safety claims, cybersecurity and privacy incidents, dependence on third-party providers including AWS and payment processors, intense competition, execution of asset-intensive rental and micromobility offerings, debt service, and the company’s continuing history of GAAP losses.
Lyft reported an insurance reserve liability of $1.036 billion at June 30, 2021. Management noted that actual claims may differ materially from estimates because of limited historical experience, litigation, healthcare costs and changing regulations. Driver-classification proceedings in California and Massachusetts, among other jurisdictions, could result in damages, penalties, increased operating costs or changes to the company’s business model; potential losses were not reasonably estimable.
Most important facts for investors to verify
- Whether the Q2 Adjusted EBITDA profit is sustained after excluding stock-based compensation, historical insurance development, reinsurance costs and other adjustments.
- Whether post-pandemic demand and Active Rider growth continue, particularly if COVID-19 variants or restrictions affect travel.
- Whether driver supply improves without materially higher incentives, pricing or reductions in service levels.
- The adequacy and subsequent development of the $1.036 billion insurance reserve and the effect of future reinsurance transactions.
- The financial and legal outcome of driver-classification litigation, including challenges to California Proposition 22.
- The cash timing, accounting treatment and strategic impact of the Woven Planet transaction.
- The scale and timing of the $1.0 billion of unrecognized stock-based compensation expected to be recognized over approximately 1.9 years.
- Liquidity relative to continuing operating cash burn, debt maturities, restricted insurance funds and potential future capital requirements.