Lyft's second-quarter earnings show losses, but company is optimistic

The company's COO left, its e-bikes exploded and drivers protested. But revenue is up.

Dara Kerr Former senior reporter
Dara Kerr was a senior reporter for CNET covering the on-demand economy and tech culture. She grew up in Colorado, went to school in New York City and can never remember how to pronounce gif.
Dara Kerr
3 min read
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Lyft's second spin around the block has been slightly smoother than its first. The ride-hailing company said that its revenue rose 72 percent year-over-year in its second-quarter earnings. It still had losses of $644.2 million, however.

Lyft debuted on Wall Street on March 29 with a strong first day of trading and its share price rising nearly 9%. But it's struggled ever since. Shares have faltered, two sets of shareholders sued the company for misrepresenting the strength of its business and its chief operating officer stepped down last week. A handful of its electric bicycles also went up in flames from reportedly faulty batteries.

On Wednesday, the situation looked a bit brighter for Lyft. The company said revenue for this year should be higher than expected, which would ease its losses. After this announcement, Lyft's shares jumped more than 10% in after-hours trading.

"We anticipate 2019 losses to be better than previously expected and we are pleased to have updated our outlook," Logan Green, Lyft's CEO, said in a statement.

However, for the three-month period that ended June 30, Lyft posted a greater-than-expected loss of $2.23 per share. That's more than the $1.58 per share that analysts surveyed by Yahoo forecast the company would lose. Lyft attributed nearly half of those losses to expenses related to stock compensation and payroll taxes paid to employees.

Lyft's reported revenue came in higher than expected. Revenue totaled $867.3 million, which is more than the average of $809.27 million analysts forecast. For the quarter ending in September, Lyft forecast revenue of between $900 million and $915 million, higher than the average analyst forecast of $840.92 million.

Lyft's active riders also grew from 15,454 to 21,807 since the same time last year. The company didn't say how its active rider growth was affected by discounts it's been offering users.

Uber, Lyft's ride-hailing rival, has also experienced a rough past few months. It went public in May and has seen its stock stagnate. Uber's share price hasn't risen much above its $45 IPO price. Since going public, Uber has seen three board members step down, along with its COO and chief marketing officer, and it laid off 400 employees. Uber is scheduled to announce its second-quarter earnings on Thursday.

As Uber and Lyft have struggled as public companies, some analysts are questioning whether ride-hailing is a viable business model. Both companies said in filings that they have never been profitable and don't foresee that happening anytime soon.

What could dig into their profits even further is drivers. The two companies have been criticized as not paying drivers fairly or giving them benefits. This is mainly due to Uber and Lyft's classification of drivers as independent contractors, rather than employees, which means the drivers don't get Social Security, health insurance, paid sick days and overtime.

Drivers across the country have been protesting this classification. In California, things could change if a state bill that's working its way through the legislature passes. Other states, like Massachusetts, are also looking at driver classification. And New York passed minimum wage laws for drivers earlier this year.

In an earnings call following the markets' close on Wednesday, Lyft's President John Zimmer said the company aims to make driver earnings more consistent. It's doing this by giving drivers discounts on car insurance and maintenance, along with support for other costs.

"We're excited to unlock earning opportunities for our drivers across the country," Zimmer said.

Originally published August 7, 1:39 p.m. PT.
Update, 3:40 p.m.: Adds information from earnings call.