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Rideshare rebound: Breaking down Uber’s and Lyft’s big Q3

Both companies post adjusted EBITDA-profitable quarters as drivers return

The companies' rider and driver numbers are retuning to pre-pandemic levels (Photo: Jim Allen/FreightWaves)

In 2019, a pair of financially unproven but promising rideshare companies debuted two of the largest public offerings of the decade, just two weeks apart from each other –– and they let just about everyone down.

At the time, assessments of Uber’s and Lyft’s IPOs ranged from “modest” to outright “bleak” as the rivals failed to live up to the lofty expectations they had set for themselves. People had questions about the companies, and rightfully so. In the calendar year leading up to its IPO, Uber lost $3.7 billion while its revenue growth stagnated; Lyft, meanwhile, pulled in twice as much revenue in 2018 as it did the year prior, yet it still posted $911 million in losses.

Lack of profitability on the adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) line has been a thorn in the side of Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) since the companies went public, with each quarter in the red casting more doubt on the viability of rideshare as a business. But the tides finally appear to be shifting. In Q3 2021, Uber posted its first-ever adjusted EBITDA profit, and Lyft posted a second consecutive adjusted EBITDA profit after reaching the milestone in Q2.

Uber’s Q3 was buoyed by a strong three months for its mobility segment, which “delivered margins consistent with 2019 highs,” said CEO Dara Khosrowshahi on the company’s earnings call. That segment’s adjusted EBITDA margin for the quarter was 5.5% of gross bookings, compared to 4.1% a year ago. Uber’s other main segments, delivery and freight, had solid quarters but still posted adjusted-EBITDA losses.

Despite the profit milestone, Uber’s stock dipped, owing to losses from its stake in struggling Chinese rideshare company Didi. But the small pullback on its stock price had nothing to do with its rideshare business, which is now as strong as it was before the pandemic hit.

Lyft’s rideshare business, being its only segment, recorded numbers in line with its total revenue figures, and it too had a firecracker of a quarter. Revenue in Q3 2021 improved by 73% year-over-year while net loss margin was 8.3%, a massive improvement over Q3 2020’s staggering 92%.

Drivers are driving profits

For both companies, the return of drivers was instrumental in reaching adjusted EBITDA-profitability. According to Lyft CEO Logan Green, “driver supply has materially improved and retention has been strong. In Q3, Active Drivers increased by roughly 45% versus last year. New driver growth was robust, up 60% year-over-year.

“Keep in mind, in September, the enhanced federal unemployment benefits sunset, and we had the highest level of new driver activations since COVID began,” Green added.

Those drivers are also completing more trips. Drivers in Q3 2021 gave 20% more rides on average than they did in Q3 2019, topping pre-pandemic efficiency.

Throughout Q3, Lyft invested in onboarding drivers, and those efforts have evidently paid off –– so much so that CFO Brian Roberts said on the company’s earnings call that it plans to taper those investments.

Uber enacted a similar campaign to attract drivers, finding similar success: “When we first saw demand beginning to outstrip supply in Q2,” Khosrowshahi explained, “we made a conscious decision to invest fast — and to invest aggressively — in attracting drivers back to Uber, with a focus on the U.S.

“The results are clear,” he continued. “We’ve seen 10 consecutive weeks of active driver growth in the U.S., resulting in a far better rider experience. The number of active drivers is up more than 65% since January and more than 20% since June.”

But drivers aren’t the only ones returning to the companies –– so are riders. After some August doldrums in the wake of the COVID-19 delta variant, Uber’s mobility gross bookings grew by 18% over September and October as customers returned to the service.

Read: Uber posts first-ever adjusted profit as drivers return

Read: Lyft turns in 2nd consecutive EBITDA-profitable quarter

“In fact,” Khosrowshahi shared on the earnings call, “this year’s Halloween weekend eclipsed 2019, demonstrating consumers’ excitement to get out and move again.”

Lyft experienced a similar reunion with its customer base. It grew active riders by 2 million over Q2 2021 and set pandemic records for rideshare rides in each month of the quarter. Year-over-year, active riders have ballooned by over 50%, while new rider activations were up 47%.

The company is also taking in more revenue from each rider: “Revenue per Active Rider increased by 14% year-over-year to an all-time record of $45.63,” said Roberts. “Revenue per Active Rider benefited from a 6% sequential increase in ride frequency, which we partially attribute to improving service levels.”

Looking ahead to Q4, both companies figure to see some easing headwinds, as well as some new ones.

The revival of their driver fleets should help fatten Uber’s and Lyft’s wallets. Both companies mentioned that they will cut spending on driver incentives for Q4 2021, as the incentives are no longer needed.

But at the same time, as Roberts points out, “in North America, rideshare faces seasonal headwinds in November and December given the impact of holidays on demand. In both 2019 and 2020 to pre-COVID as well as during COVID, October was the peak month of the fourth quarter in terms of rideshare rides. We expect the same trend this year.”

As demand begins to diminish heading into the winter months, one might expect slightly more conservative Q4 2021 guidance from Uber and Lyft. The companies disagree. Lyft is forecasting an adjusted-EBITDA profit of $70 million to $75 million, while Uber projects an adjusted-EBITDA profit between $25 million and $75 million. Those are massive jumps over the $49 million and $8 million figures, respectively, that the companies recorded in Q3.

“As we look forward, we continue to see a very long runway to both add riders and capture more of their individual spend on transportation,” said John Zimmer, Lyft’s president, co-founder and vice chair, on the company’s earnings call. “Our work in addressing the $1 trillion transportation market opportunity is just getting started, and the critical profitability and product milestones we hit this year set us up well for the quarters and years ahead.”

“Now the real work begins,” said Khosrowshahi on Uber’s earnings call. “Looking ahead, and as we’ve done in the past, we will continue to make investments that will set us up to succeed in the next frontiers of opportunity, and to deliver exceptional value for all of our stakeholders.”

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Jack Daleo

Jack is a staff writer for FreightWaves and Modern Shipper covering topics like last mile delivery and e-commerce fulfillment. He studied at Northwestern University, majoring in journalism with a certificate in integrated marketing communications. Previously, Jack has written for Backpacker Magazine and enjoys travel, the outdoors, and all things basketball.