Lyft (NASDAQ: LYFT) got a big lift last quarter, reaching a crucial profitability milestone sooner than expected, thanks to a rebound in rideshares. Strong demand and cost savings helped Lyft to double revenues last quarter to $765 million. Ridership was also up 97% on a quarterly basis, reaching 17.1 million, close to the 22.9 million Lyft served prior to the pandemic.
"People said we wouldn't survive the pandemic. People said we wouldn't be profitable. Lyft has defied the odds," John Zimmer, president of Lyft, told the Wall Street Journal. He added that while the pandemic was a massive disruption, "these results validate the business model."
However, Zimmer cautioned about the swirling uncertainty surrounding the emerging Delta variant but said he was optimistic that Lyft wouldn't reverse course on its path to profitability.
Zimmer credited improved dispatching and routing algorithms, among other innovations at the company, as part of the reason for last quarter's success.
Lyft and its rival Uber (NYSE: UBER) have never turned an actual profit from their operations alone. Instead, both companies report earnings in terms of adjusted EBITDA (earnings before interest, taxes, depreciation, or amortization). This pared-back metric gives a sense of a startup's momentum without reflecting the massive costs of bringing a company to profit.
Pared-back or not, Lyft's results are impressive. The company raked in $23.8 million in adjusted EBITDA. The street had expected a loss of $44 million, according to survey data from FactSet. Year to date, Lyft also managed to cut its losses in half to $251.9 million compared with $437 million just a year ago.
Lyft managed this feat by phasing out rider discounts and selling off its capital-intensive self-driving division to Toyota earlier this year, among other things. Phasing out rider discounts meant Lyft boosted revenue per rider from $39.77 last year to $44.63 last quarter. While, thanks to the sale of its self-driving division, Lyft was able to move its profitability milestone ahead to the third quarter.
Given the second quarters results however, it seems that Lyft managed to surpass even its own expectations.
Zimmer also told WSJ that 50% more drivers signed up in the second quarter than they did the first, despite Lyft paring back incentives by 24%.
Analysts are waiting to see if Lyft can sustain its stripped-back business model. More riders have returned to the back seat than drivers have to the front, which means it's more profitable than ever to be a Lyft driver regardless of incentives. In the meantime, consumers are starved for choice, so Lyft has little need for discounts or deals to lure them in. But as more drivers sign up for both Uber and Lyft, this situation will no doubt change.
But for now, "It was a great quarter. There are no 'ifs,' 'ands,' or 'buts' about it," Ronald Josey told the WSJ.