Lyft, Inc. 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 programs, auto services, delivery, and licensing and data-access agreements. This unaudited report covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $875.6 million | $609.0 million | +44% |
| Cost of revenue | $440.3 million | $412.0 million | +7% |
| Total costs and expenses | $1.075 billion | $1.025 billion | +5% |
| Loss from operations | $(199.3) million | $(416.4) million | Improved |
| Net loss | $(196.9) million | $(427.3) million | Improved 54% |
| Net loss per share | $(0.57) | $(1.31) | Improved |
| Adjusted EBITDA | $54.8 million | $(73.0) million | Improved |
| Adjusted EBITDA margin | 6.3% | (12.0)% | Improved |
| Contribution | $502.5 million | $337.3 million | +49% |
| Contribution margin | 57.4% | 55.4% | +2.0 percentage points |
| Active Riders | 17.8 million | 13.5 million | +31.9% |
| Revenue per Active Rider | $49.18 | $45.13 | +9.0% |
GAAP operating margin was negative 22.8%, compared with negative 68.4% in the prior-year quarter. Net loss margin improved to negative 22.5% from negative 70.2%.
Stock-based compensation was $153.7 million, or approximately 17.5% of revenue. The company had $965.7 million of unrecognized restricted-stock-unit compensation expense expected to be recognized over a weighted-average period of approximately 1.7 years.
Cash flow, liquidity, debt, and balance sheet
- Cash used in operating activities was $152.3 million, compared with $79.5 million in Q1 2021.
- Cash used in investing activities was $74.2 million, versus $161.1 million of cash provided in Q1 2021, primarily reflecting purchases of marketable securities.
- Cash used in financing activities was $22.0 million, compared with $24.3 million in the prior-year quarter.
- Cash, cash equivalents, and restricted cash decreased by $248.5 million during the quarter to $282.7 million.
- As of March 31, 2022, unrestricted cash and cash equivalents totaled $214.9 million, short-term investments totaled $2.022 billion, and unrestricted liquidity totaled approximately $2.2 billion.
- Restricted cash, cash equivalents, and investments totaled approximately $948.1 million, primarily supporting insurance arrangements and letters of credit.
- Total debt, including current maturities, was $843.3 million, consisting principally of $747.5 million of 1.50% convertible senior notes due May 2025 and vehicle-related borrowings.
- Management stated that available unrestricted liquidity was sufficient for working capital and capital expenditure needs for at least the next 12 months and beyond.
Material changes versus the prior comparable period
- Revenue growth reflected higher Active Riders as communities reopened and travel restrictions eased, as well as licensing and data-access revenue that began in Q2 2021.
- Driver supply incentives recorded as a reduction of revenue increased by $153.7 million year over year. Total driver, rider, and other incentives reduced revenue by $349.9 million in Q1 2022, compared with $196.2 million in Q1 2021.
- Cost of revenue increased 7%, primarily from higher transaction fees and insurance costs, partly offset by lower Flexdrive costs.
- Research and development expense declined 19%, partly because of reduced personnel and stock-based compensation following the 2021 Woven Planet transaction.
- Sales and marketing expense increased 61%, driven by higher driver and rider programs and incentive-program costs.
- Interest expense declined 64% following adoption of ASU 2020-06, which changed the accounting for the convertible notes and reduced debt-discount amortization.
- The company adopted ASU 2020-06 on January 1, 2022. The adoption increased the carrying value of convertible notes by $133.5 million, reduced additional paid-in capital by $140.0 million, and increased beginning accumulated deficit by $6.5 million, with no impact on the quarterly income statement.
Guidance, outlook, commentary, risks, and unusual items
The filing does not provide a clear formal quarterly revenue or Adjusted EBITDA forecast. Management expects continued demand recovery as communities reopen, but stated that the pace and durability of recovery remain uncertain, particularly because of COVID-19 variants, seasonality, driver supply, consumer behavior, and differences among markets.
- COVID-19: Demand declined in January 2022 as variant cases increased, then rebounded in February and March. Management stated that it could not reliably forecast the pandemic’s future effect on operating and financial results.
- Insurance and reinsurance: Insurance reserves were $1.066 billion at March 31, 2022. The company recorded a $55.3 million net amount related to claims ceded under its reinsurance agreement in the quarter, which was excluded from Adjusted EBITDA. Deferred gains related to the reinsurance transaction were $108.1 million.
- Restatement and controls: Previously issued 2021 and Q3 2021 financial information was restated because of an error related to the accounting for the reinsurance agreement. The previously identified material weakness in internal control over financial reporting remained unremediated at March 31, 2022, and disclosure controls were not effective.
- Legal and regulatory exposure: Lyft faces driver-classification litigation and regulatory proceedings, including matters in California and Massachusetts, as well as personal injury, safety, consumer, securities, intellectual property, tax, and other claims. Potential losses in key driver-classification matters could not be reasonably estimated.
- Commitments: Lyft committed to purchase at least $300 million of AWS services between February 2022 and January 2026, with minimum spending requirements. Letters of credit outstanding were $53.1 million.
- Subsequent acquisition: Lyft agreed in April 2022 to acquire PBSC Urban Solutions for approximately $130 million in cash plus up to $15 million of earn-out incentives, subject to customary adjustments and closing conditions.
- Competition and operating risk: The company continues to face intense competition for riders, drivers, employees, and market share, along with risks from pricing, incentives, insurance costs, supply-chain constraints, cybersecurity, third-party providers, and regulatory changes.
Most important facts for investors to verify
- Whether revenue growth and Active Rider recovery continue after the Q1 2022 rebound, particularly amid renewed COVID-19 or macroeconomic disruption.
- Whether positive Adjusted EBITDA converts into sustained positive operating cash flow; Q1 2022 operating cash flow remained negative at $152.3 million.
- The sustainability of margins after considering substantial driver incentives, stock-based compensation, insurance costs, and reinsurance-related adjustments.
- The adequacy and future development of insurance reserves and the collectability and economic benefit of the DARAG reinsurance arrangement.
- Progress in remediating the material weakness and whether additional restatements, control deficiencies, or related litigation arise.
- Outcomes of driver-classification litigation and related regulatory proceedings, especially in California and Massachusetts.
- Lyft’s ability to service or refinance debt due in 2025 while funding vehicle, technology, EV, AWS, and acquisition commitments.
- The final terms, closing, purchase accounting, and integration costs associated with the planned PBSC acquisition.