Categories Analysis, Technology

Lyft (LYFT) expects revenue growth to face headwinds in Q4 2020

Looking ahead into the fourth quarter, Lyft expects to see a sequential decline in revenue due to seasonality in rental bikes and scooters

The COVID-19 pandemic brought all kinds of travel to a standstill, impacting all companies associated with this industry. Ridesharing company Lyft Inc. (NASDAQ: LYFT) was no exception. For the third quarter of 2020, Lyft reported a 48% drop in revenue year-over-year and an adjusted net loss of $280.4 million.

The company however saw revenues increase by 47% on a sequential basis, driven by a 44% growth in Active Riders. This was driven by a recovery in ridesharing as well as improvements in ride frequency. Lyft remains optimistic about the demand for ridesharing going forward.

Ridesharing

As the restrictions on travel eased, the number of people opting for ridesharing increased. Improvements in ride frequency helped drive a 2% growth in revenue per Active Rider on a sequential basis.

Although rideshare rides are down compared to pre-pandemic levels, they have seen a meaningful pickup from the low point seen last quarter, rising over 130% during the last week of October versus April. Despite the positive sequential trends, rides in October were down over 47% year-over-year.

The company is also seeing an improvement in the balance between rider demand and supply of available drivers as opposed to an imbalance it was witnessing a few months ago. Looking ahead, although there might be some slight bumps, Lyft expects the recovery in ridesharing demand to continue on a positive trajectory.

Deliveries

Lyft rolled out its Essential Deliveries service in order to provide its drivers with alternative sources of income during the pandemic. Through discussions with retailers and local businesses, the company has found that the current delivery model and the overall incentives and commissions structure are not entirely feasible for these businesses.

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Lyft believes there is an opportunity for it to leverage its technology to provide better services for these businesses while also driving growth for itself. The company plans to further explore the growth potential in this area.

Outlook

Looking ahead into the fourth quarter, Lyft expects to see a sequential decline in revenue due to seasonality in rental bikes and scooters. The company’s bike, scooter and fleet offerings are expected to cause a headwind of about $10 million to revenue growth between the third and fourth quarters. These headwinds are expected to put pressure on total company sequential revenue growth in Q4.

Click here to read the full transcript of Lyft’s Q3 2020 earnings conference call

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