Uber and Lyft have seen their rides businesses plummet over the last several months, largely because of the coronavirus pandemic. And based on the companies' third-quarter earnings, it doesn't look like that's changing. But with Uber and Lyft maintaining an optimistic tone and promising profitability in the not-so-distant future, stock prices have shown only modest drops, ranging from decreases of 2% to 5%.
"It's hard to believe that it's been eight months since I first spoke with you about the coronavirus pandemic," Uber CEO Dara Khosrowshahi said during the company's earnings call last week. "Without question, its impact on the world has been one of the most significant events of our lifetimes. And we moved quickly as a company to respond."
Lyft's executives expressed a similar sentiment in their company's earnings call Tuesday and said they're seeing Lyft's rides business pick up in many cities across the US, along with growth in its scooter and bike rental businesses.
Both Uber and Lyft also touted their big political win in California. Along with several other gig economy companies, they sponsored a state ballot measure, Proposition 22, to ensure they could classify drivers as independent contractors, rather than employees. After those pushing the measure spent $205 million on the campaign, the proposition passed with 58% of the vote.
"We believe the outcome in California is a win, win, win," Lyft CEO Logan Green said during the company's earnings call. "Beyond California, we're continuing to engage with policy makers across the country."
Here are five takeaways from the two ride-hailing companies' third-quarter earnings:
Falling revenue and lots of loss
Both Uber and Lyft saw big drops in revenue. Uber's revenue fell by 18% compared with the same period last year, and Lyft's decreased by 48%. Both companies also saw big net losses, with Uber reporting a $1.1 billion loss from July to September and Lyft announcing a $459.5 million loss in the same period.
Proposition 22 win
Despite the losses, both companies spent big over the last few months in California. Uber contributed about $59 million to the Proposition 22 battle and Lyft threw in about $49 million. It all started last fall, when the state passed law AB5, which required the companies to reclassify drivers as employees and provide those workers with labor protections. Both companies said such a reclassification and added costs could decimate their businesses. So, Uber and Lyft took the issue to voters. Their Proposition 22 campaign, which blanketed the state in ads, text messages and mailers, was the most expensive ballot measure campaign in California history.
"It's a distinct, clear and decisive win that's a turning point in the conversation," John Zimmer, Lyft's president, said in the third-quarter earnings call. "I believe strongly that other states, as well as policy makers, will see this as a watershed moment."
Not a lot of riders
Along with falling revenue, both Uber and Lyft have seen a significant decrease in riders on their platforms over the past few months. The companies attribute that to the coronavirus pandemic, with people still sheltering in place and not traveling around like they used to. Uber's active monthly riders fell by 24% compared with the same time last year and Lyft's dropped by 44%. Though those numbers appear significant, both companies reported an uptick in passengers using their service over the previous quarter. Lyft, for example, reported a 44% increase in active riders from the second quarter to the third quarter.
"The Gig Economy has been in the eye of the dark COVID-19 storm with ridesharing stalwarts Uber and Lyft seeing consumer demand coming to a screeching halt as the global lockdown went into effect in early March," Daniel Ives, Wedbush analyst, said in a statement. "However, since then we have seen ridesharing pick up modestly and slightly quicker than Street expectations."
Food delivery on the rise
As folks hunkered down at home this year and used ride-hailing services less, some people started ordering more meals and groceries from Uber's food delivery business, Uber Eats. The company reported that Uber Eats gross bookings grew by 135% compared with the same period last year. During its earnings call, Uber said customers still continued to use Uber Eats even in places where coronavirus restrictions had eased.
Lyft doesn't have a distinct food delivery service on its platform, but it has branched out from its core transportation business during the pandemic. In October, it partnered with food delivery service Grubhub to bring restaurant meal deliveries to people who belong to Lyft's membership program, Lyft Pink. The company's vice president of marketing, Heather Freeland, said at the time, "We heard from our riders that food delivery was a benefit they wanted, so we went to work to make it happen."
Still not profitable
Despite an emphasis on food delivery, neither Uber nor Lyft is profitable. Even Uber Eats as a stand-alone business isn't yet profitable. And neither company has ever been fully profitable, (although Uber's rides business has been profitable on an adjusted basis). However, during their third-quarter earnings calls, both Uber and Lyft told investors they were on track to reach their target goal of full profitability (on an adjusted basis) before the end of 2021.