Lyft(US:LYFT)2023-05-07 16:00PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) Lyft's unaudited financial statements for Q1 2023 show a 14% revenue increase to $1.0 billion, a narrowed net loss, and improved operating cash flow, with total assets at $4.53 billion Condensed Consolidated Balance Sheets As of March 31, 2023, total assets were $4.53 billion, with cash and equivalents at $509.6 million, and total liabilities at $4.15 billion, including $1.35 billion in insurance reserves Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $509,576 | $281,090 | | Short-term investments | $1,245,220 | $1,515,702 | | Total current assets | $2,547,504 | $2,582,859 | | Total assets | $4,529,466 | $4,556,431 | | Liabilities and Stockholders' Equity | | | | Insurance reserves | $1,353,703 | $1,417,350 | | Total current liabilities | $3,135,424 | $3,132,563 | | Long-term debt, net | $793,422 | $803,207 | | Total liabilities | $4,147,470 | $4,167,763 | | Total stockholders' equity | $381,996 | $388,668 | Condensed Consolidated Statements of Operations Q1 2023 revenue increased 14% to $1.0 billion, while net loss slightly narrowed to $187.6 million, despite a widening loss from operations to $216.8 million due to a 25% rise in cost of revenue Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Revenue | $1,000,548 | $875,575 | | Cost of revenue | $548,992 | $440,294 | | Total costs and expenses | $1,217,303 | $1,074,918 | | Loss from operations | $(216,755) | $(199,343) | | Net loss | $(187,649) | $(196,932) | | Net loss per share, basic and diluted | $(0.50) | $(0.57) | - Stock-based compensation for Q1 2023 totaled $180.4 million, with the largest portion ($93.5 million) allocated to Research and Development20 Condensed Consolidated Statements of Cash Flows Q1 2023 saw a significant improvement in net cash used in operating activities to $74.0 million, a reversal to $449.4 million in cash provided by investing activities, and a net increase of $347.6 million in cash and equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(74,040) | $(152,343) | | Net cash provided by (used in) investing activities | $449,371 | $(74,242) | | Net cash used in financing activities | $(27,743) | $(22,014) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $347,605 | $(248,510) | | Cash, cash equivalents and restricted cash at end of period | $739,427 | $282,683 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, including net revenue recognition for ridesharing, the PBSC Urban Solutions acquisition, debt instruments, AWS commitments, extensive legal proceedings on driver classification, and recent restructuring activities - The company's revenue is primarily from ridesharing, recognized on a net basis as fees from drivers, with $952.7 million from contracts with customers and $47.9 million from rental revenue in Q1 20234546 - In May 2022, Lyft acquired PBSC Urban Solutions for a total purchase price of $163.5 million, including $14.1 million in contingent consideration, to expand micromobility88 - Numerous legal proceedings challenge the classification of drivers as independent contractors, including lawsuits from the California and Massachusetts Attorney Generals, with uncertain outcomes that could have a material impact147148 - A restructuring plan initiated in November 2022 incurred $120.3 million in charges in 2022, with an additional $24.4 million in Q1 2023212214 - Subsequent to quarter-end, on April 26, 2023, Lyft announced a new restructuring plan terminating approximately 1,072 employees (26% of workforce), with estimated severance costs of $41 million to $47 million for Q2 2023218 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights 14% YoY revenue growth driven by 10% Active Rider increase, impacted by macroeconomic conditions and competition, alongside CEO transition and restructuring plans, with non-GAAP Adjusted EBITDA declining to $22.7 million Business Overview and Recent Developments Lyft operates a major multimodal transportation network in the US and Canada, with recent developments including David Risher's appointment as CEO and significant restructuring activities in November 2022 and April 2023 to reduce operating costs - David Risher was appointed CEO, effective April 17, 2023, succeeding co-founder Logan Green, with co-founder John Zimmer also transitioning from President232 - An April 2023 restructuring plan involved terminating approximately 1,072 employees (26% of workforce) with estimated severance costs of $41 million to $47 million for Q2 2023235 Key Metrics Q1 2023 Active Riders increased 9.8% YoY to 19.55 million, and Revenue per Active Rider grew 4.0% to $51.17, though both metrics saw sequential decreases due to seasonality and pricing Key Metrics Comparison | Metric | Q1 2023 | Q1 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Active Riders (thousands) | 19,552 | 17,804 | 9.8% | | Revenue per Active Rider | $51.17 | $49.18 | 4.0% | Results of Operations Q1 2023 revenue increased 14% to $1.0 billion driven by Active Rider growth, while cost of revenue rose 25% to $549.0 million due to insurance costs, and General and Administrative expenses increased 18% from legal accruals - Revenue increased by $125.0 million (14%) YoY, driven by a 9.8% increase in Active Riders and a 4.0% increase in Revenue per Active Rider263 - Cost of revenue increased by $108.7 million (25%) YoY, largely due to a $73.5 million rise in insurance costs attributed to inflation, increased litigation, and higher paid losses265 - General and administrative expenses increased by $39.6 million (18%) YoY, primarily due to a $33.4 million increase in legal accruals and settlements271 Non-GAAP Financial Measures Lyft's non-GAAP measures show declining profitability, with Contribution decreasing 7.4% to $465.1 million and Adjusted EBITDA dropping 58.6% to $22.7 million, reflecting higher insurance costs and competitive pricing Non-GAAP Financial Measures (in millions) | Measure | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Contribution | $465.1 | $502.5 | (7.4)% | | Contribution Margin | 46.5% | 57.4% | N/A | | Adjusted EBITDA | $22.7 | $54.8 | (58.6)% | | Adjusted EBITDA Margin | 2.3% | 6.3% | N/A | Liquidity and Capital Resources As of March 31, 2023, Lyft held $1.8 billion in unrestricted liquid assets, including $509.6 million in cash and $1.2 billion in short-term investments, supplemented by an undrawn $420 million revolving credit facility - The company has $1.8 billion in unrestricted cash, cash equivalents, and short-term investments as of March 31, 2023306 - A $420 million revolving credit facility, maturing in 2027, was available and undrawn as of the report date302303 Item 3. Quantitative and Qualitative Disclosures About Market Risk Lyft's primary market risk is interest rate fluctuations, with $1.8 billion in liquid assets and $823.3 million in long-term debt, 90% of which is fixed-rate, limiting material impact from interest rate changes - The primary market risk is interest rate fluctuations affecting the company's investment portfolio and variable-rate debt310 - As of March 31, 2023, 90% of the company's long-term debt consisted of fixed-rate Convertible Senior Notes, mitigating interest rate risk on liabilities311 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level312 - No material changes were made to the internal control over financial reporting during the first quarter of 2023313 PART II OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 7 for detailed legal proceedings, including challenges to driver classification, personal injury claims, and post-IPO securities litigation - The company directs readers to Note 7 of the financial statements for a comprehensive discussion of ongoing legal proceedings315 Item 1A. Risk Factors This section outlines numerous risks, including macroeconomic impacts, intense competition, driver/rider retention, significant regulatory challenges like driver classification, insurance costs, data security, AWS reliance, and stock price volatility from its dual-class structure General Economic Factors Lyft's business is sensitive to general economic factors, including the disruptive impact of COVID-19, and deteriorating macroeconomic conditions like inflation and recession, which could reduce demand and discretionary spending - The COVID-19 pandemic has led to declines in travel, shifts to remote work, and imbalanced driver supply, negatively impacting the business323324 - Deteriorating macroeconomic conditions, including inflation and recession fears, are likely to reduce discretionary spending and demand for Lyft's platform324 Operational Factors Significant operational risks include intense competition from Uber, challenges in attracting and retaining drivers and riders, substantial insurance coverage and reserve adequacy risks, maintaining brand reputation, preventing fraud, managing data security, and reliance on third-party providers like AWS - The company faces intense competition from Uber and other transportation services, which could lead to loss of market share335 - Failure to cost-effectively attract and retain qualified drivers and riders is a primary operational risk that could harm business growth342345 - The business relies heavily on its wholly-owned insurance subsidiary and third-party insurers; insufficient coverage or rising costs could adversely affect financial results346349 - Actual or perceived security breaches could harm the brand, and reliance on Amazon Web Services (AWS) for hosting creates a single point of failure risk384390 Regulatory and Legal Factors Lyft faces evolving regulatory and legal risks, primarily challenges to driver independent contractor classification, which could fundamentally alter its business model and increase costs, alongside risks from privacy laws like CCPA/CPRA, antitrust litigation, and potential additional tax obligations - The classification of drivers as independent contractors is under constant legal and regulatory challenge, and an adverse outcome could fundamentally alter the business model and increase costs445447 - The company is subject to numerous evolving laws regarding privacy and data protection, such as the CCPA and CPRA, and failure to comply could result in significant fines and reputational damage455 - Taxing authorities may assert that Lyft should collect additional sales, use, or other indirect taxes, which could result in substantial past and future liabilities475 Financing and Transactional Risks Lyft may require additional capital for operations and growth, faces significant cash flow demands for its $823.3 million debt, including 2025 Convertible Notes, and is subject to risks from integrating acquisitions like PBSC and counterparty credit risk from capped call transactions - Lyft may need to raise additional capital, and its ability to do so depends on business performance and capital market conditions484 - Servicing the company's $823.3 million of debt (as of March 31, 2023) requires significant cash and is subject to restrictive covenants491 - The company faces risks in successfully integrating acquisitions and is subject to counterparty credit risk related to its capped call transactions487499 Governance and Ownership Risks Lyft's dual-class stock structure concentrates significant voting power with co-founders Logan Green and John Zimmer, limiting Class A stockholder influence and potentially affecting market price by making the stock ineligible for certain indices - The dual-class stock structure gives co-founders Logan Green and John Zimmer significant voting control, holding approximately 20.12% and 11.88% of the voting power, respectively502 - This concentrated control could deter a change-in-control transaction and may adversely affect the stock price502 - The dual-class structure makes the stock ineligible for certain indices, which could reduce demand from passive investment funds504 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable for the reporting period - The company reported no unregistered sales of equity securities for the period513 Item 3. Defaults Upon Senior Securities This section is not applicable for the reporting period - The company reported no defaults upon senior securities514 Item 4. Mine Safety Disclosures This section is not applicable for the reporting period - The company has no mine safety disclosures to report515 Item 5. Other Information This section is not applicable for the reporting period - The company reported no other information required under this item516 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including employment and transition agreements for executives, a lease amendment, and CEO and CFO certifications - Exhibits filed include employment agreements for the new CEO David Risher and transition agreements for co-founders Logan Green and John Zimmer520