Ride-hailing company Lyft lost $135.7 million in the third quarter due to the shutdown of autonomous vehicle company Argo AI, in which Lyft had a small stake.
Late last month, Argo AI closed its doors as its main backers, Ford and Volkswagen, pulled their investments in order to focus on more near-term goals like advanced driver assistance systems in passenger vehicles.
Lyft and Argo were working together to test autonomous ride-hailing using Argo’s tech on the Lyft platform. The two companies had launched public robotaxi services in Austin, Texas in September and Miami, Florida in December of last year. Both of those services have now been discontinued, a Lyft spokesperson told Bobbys Brane.
Lyft did not say how it will adjust its AV strategy in the future, but the company has also partnered with Motional, another AV tech company, to launch robotaxis in Las Vegas in August.
Lyft’s losses incurred by the Argo shutdown only account for about a third of the company’s total losses for the quarter. In Q2, Lyft lost $422.2 million, which is a larger cost than the $99.7 million in the same period of 2021 and a net loss of $377.2 million in the second quarter of this year.
A bigger portion of Lyft’s losses are attributable to $224.1 million in stock-based compensation and related payroll expenses, an increase from $179.1 million in the second quarter. The uptick is related to the top-up that Lyft issued to employees when its stock price declined earlier in the year, according to a Lyft spokesperson.
Lyft said the increase isn’t yet related to the rounds of layoffs from the company, the first of which occurred in July and the second just last week as Lyft tries to cut down on operating expenses.
In regards to that reduction in workforce, Lyft expects to “incur a charge of between $27 million and $32 million” in Q4, as well as “a stock-based compensation charge and corresponding payroll tax expense related to affected team members, as well as restructuring charges related to a decision to exit and sublease, or cease use, of certain facilities,” said Elaine Paul, Lyft’s chief financial officer, during Monday’s earnings call. “However, we aren’t able to estimate these charges at this time because they depend in part on our future stock price.”
Paul also said Lyft has been working to reduce stock-based compensation next quarter by ceasing new hires in the U.S. and shifting the nexus of hiring away from the U.S. and toward international markets like Canada and Eastern Europe where “there’s a different compensation model with low or no equity.”
Lyft misses Q3 estimates
For the third quarter, Lyft reported revenue of $1.05 billion, which is slightly less than Wall Street expectations of $1.06 billion. The company’s earnings per share hit -$1.18 versus the $0.09 that was expected. Even active riders, which saw an improvement quarter over quarter, only topped 20.3 million, and the Street had hoped for 21.1 million. That said, Lyft’s revenue per active rider beat expectations of $49.94 at $51.88.
Lyft’s stock, which had started to climb after Uber reported strong earnings last week, fell 14.36% Monday in after-hours trading. The company’s shares have slid 69.29% since the start of the year.
Lyft closed the quarter with $143.7 million in cash.
Looking forward, Lyft expects revenue to be between $1.145 billion and $1.165 billion in the fourth quarter, with revenue growth reaching between 9% and 11% quarter over quarter and 18% to 20% year over year. Part of that growth will come from increased revenue per rider, which is backed by Lyft’s recent decision to increase service fees for riders. Paul said Lyft intends to cut its operating expenses by roughly $20 million in Q4 versus Q3, which is in part due to the reduction in force.
John Zimmer, Lyft’s president, said he was confident that Lyft would be able to achieve its Q4 goals regardless of the macro environment.
“We’ve been using internally two main cases. One is the growth case, which assumes market bookings grow in the low to mid 20% year over year, and that the labor market stays as tight as it currently is,” said Zimmer during the Q3 earnings call. “And then, internally what we call a recession case where the market growth slows and we see operating leverage through lower driver engagement and acquisition costs if unemployment rises. So in both cases, we have a very confident path to the billion dollars, and in both cases, we’ll continue to focus our R&D spend on marketplace innovation that helps improve the cost basis of the business.”