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Ride-hailing giant Lyft reported strong second-quarter earnings on Thursday. Earlier this year, investors had been skeptical that Lyft could offset the cost of increased investment to attract and retain drivers. However, Lyft was able to take advantage of stringent internal cost-cutting measures and a post-COVID travel boom that helped it deliver its best quarterly results to date.

Lyft only Beating Wall Street’s revenue estimates, second-quarter revenue came in at $990.7 million, up from $765 million a year earlier. Compared to Lyft’s first-quarter revenue of $875.6 million, it was up 13% sequentially.

Second-quarter net losses soared year-on-year, quarter-on-quarter. Lyft lost $377.2 million in the quarter, compared to $251.9 million in the second quarter of 2021 and $196.9 million in the first quarter of this year. Additional weighting was attributed to stock-based compensation and related payroll tax charges of $179.1 million.

While Lyft posted an unprofitable quarter, on an adjusted basis, it improved from last year. The company’s adjusted EBITDA for the second quarter was $79.1 million, an increase of $55.3 million from the second quarter of 2021 and an increase of $24.3 million from the prior quarter.

The company ended the quarter with $1.8 billion in cash.

While Lyft’s shares were largely flat last month, they rose 16% after rival Uber posted a good quarter. At the time of writing, Lyft was trading at $17.39, up 4.07% after hours.

The effect of tightening the belt

During the second quarter, Lyft restructured and re-prioritized in response to inflation and rising economic pressures. While it won’t be on the balance sheet in the second quarter, this tightening can be seen in Lyft’s recent decision to shut down its in-house car rental business and consolidate some of its vehicle driver support locations, which resulted in layoffs of nearly 60 employees .

Lyft has revised its operating plan, scaled back discretionary spending and significantly slowed hiring, Lyft Chief Financial Officer Elaine Paul said on a conference call Thursday. Instead, Lyft will prioritize research and development initiatives and restructure teams to focus on driving profitable growth.

After a brief and somewhat vague foray into the shared electric scooter industry, Lyft also decided to exit its San Diego scooter business, suggesting it may exit other cities in the future. Similar to Lyft’s decision to keep its third-party car rental program, Lyft has partnered with third-party micromobility company Spin to continue to be vigilant in the choppy waters of scooter share.

Lyft’s goal

One of the main reasons investors were unhappy with Lyft’s performance last quarter, despite revenue growth following the COVID trough quarter-on-quarter Revenue per passenger and number of active passengers fell. From the first quarter to the second quarter, the number of active passengers increased from 17.8 million to 19.7 million. However, revenue per passenger was relatively flat at $49.89 compared to $49.18 in the first quarter of 2022.

That said, even that tiny gain is an all-time high for Lyft. Part of the increase in revenue per passenger can be attributed to increased airport rides as travel resumes post-COVID. In fact, Lyft says its airport use case is at an all-time high, accounting for 10.2% of total rides. The company also said bike and scooter rides more than doubled in the second quarter compared to the first.

Lyft’s ride-sharing service is still at pre-COVID levels, but the company has been steadily rolling out cheaper services to more cities and will continue to do so to increase ride frequency and loyalty.

Night out represents another growth opportunity for Lyft as people begin to leave their isolated caves and rejoin society. Not only does this increase demand for riders, but it should also help organic driver acquisition, Lyft said. In fact, the total number of active drivers is the highest in two years, according to the company. Granted, two years ago was the peak of the pandemic, so that doesn’t say much, but it does suggest a recovery.

To attract and retain more drivers, Lyft has been experimenting with new features, such as prepaid fees — which allow drivers to see where passengers pick up, route details and expected earnings before accepting a ride request. It’s unclear whether Lyft will impose any kind of punishment on drivers who still don’t accept rides, but Lyft says providing drivers with these knowledge points could increase the number of drivers who use Lyft and the time they spend driving.

Lyft’s update guide

While Lyft did see a 4% increase in rides in July, and the company expects that to remain steady through the summer and into September, the company tempered its view on the pace of the recovery, leading to third-quarter and full-year revenue The guidelines down-regulate growth.

“us expected the third quater income of between $1.040 billion and $1.060 billion, which hint grow of between 5% and 7% relatively In the second quarter, and grow of 20% and twenty three% relatively Q3Last years,” Paul said.

Lyft expects full-year 2022 revenue growth to be lower than the 36% achieved in 2021. The company also expects operating expenses, which are below cost of revenue, to decline slightly in the third quarter. As a result, Lyft expects adjusted EBITDA of $55 million to $65 million in the third quarter and $1 billion in adjusted EBITDA in 2024.

In explaining the updated guidance, Lyft pointed to some macro headwinds, such as higher insurance costs due to inflationary pressures. The company expects this to impact its third-quarter contribution margin.

“We believe that over time, we can offset higher insurance costs through pricing and product and engineering efforts to provide better single-ride unit economics and continue to improve the security of our network,” Paul said. Say.

Lyft, for example, is further leveraging its mapping technology to provide safer, more cost-optimized routes that save on insurance premiums, as well as leveraging its internal risk model to assess behavioral and environmental risk factors, Paul continued.

Lyft will also continue to scrutinize its corporate overhead by scaling back hiring, cutting travel and expense budgets, and scrutinizing every cost item as rigorously as possible. In other words, gone are the days of total overruns and moonshots, and the days of operating like a Lean Startup are back.

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