Shares of Lyft are riding high, popping more than 7% in after-hours trading today after the American ride-hailing giant reported its Q3 earnings.
Lyft, which competes with Uber for rideshare, reported revenues of $499.7 million in the third-quarter, a 48% drop from the $955.6 million in the same year-ago period. That lackluster result is still a 47% improvement over last quarter when Lyft reported $339.3 million in revenue. That’s good?
Investors were heartened by the improvement and Lyft’s ability to beat analysts revenue expectations of $486.45 million. The company’s net loss of $1.46 per share was worse than expected, but investors appeared more bullish than bearish, buying up Lyft equity and boosting its value after the company’s earnings report.
Lyft’s quarter is a story of year-over-year declines and sequential-quarter gains. On that theme, the company’s active riders fell 44% compared to the year-ago quarter, and rose 44% compared to Q2 2020. Its revenue per active rider fell 7% compared to Q3 2019, but rose 2% from the sequentially preceding period.
Like Uber, Lyft is enjoying patience from investors as it digs its way out from a ride-hailing market pummeled by COVID-19; Uber has enjoyed a delivery business and international operations to buffer its ride revenue declines. Lyft, which is focused on the U.S. market and lacks a delivery program like Uber, has been more impacted by the domestic market.
Rising COVID-19 cases and ratcheting lockdowns could threaten Lyft’s recovery. Still, its core economics are not falling to pieces despite the pandemic. In Q3 2020, Lyft’s contribution margin — a metric that is akin to an adjusted gross margin result — was 49.8%. In the year-ago quarter it was 50.1%.
Lyft will return as long as ride volume recovers. Lyft’s next big hurdle is profitability. The company is still on track to achieve adjusted EBITDA profitability by the fourth quarter of 2021, even with a slower recovery, Logan Green said during the company’s earnings call Tuesday, adding that Lyft is taking an extremely disciplined approach to increase its operating leverage. Lyft is positioned to achieve that profitability goal with about 30% fewer rides than what was required when it originally issued its Q4 2021 profitability target last fall, Green said.
Lyft wrapped Q3 with $2.5 billion in cash and equivalents. Its operations have consumed $1.1 billion in cash so far this year, up around $156 million in the third quarter. At $50 million a month, Lyft has lots of room to get back to more pedestrian losses, and year-over-year growth.
Welcome back to Human Capital and congrats on making it through one of the hardest weeks of the longest year.
Now that the Associated Press has called the election in favor of Joe Biden, it should be good news for DEI practitioners, who expressed some worry they’d be out of a job if Trump was allowed to continue on his path of destruction.
Meanwhile, over in California, the Uber and Lyft -backed gig worker ballot measure, Prop 22, passed. We’ll get into what that all means and the implications moving forward.
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Gig workers will continue being independent contractors in CA
That means gig workers will continue to be classified as independent contractors in the state. It also essentially makes these gig companies exempt from AB-5, the gig worker bill that went into law at the beginning of the year. Lastly, it means we can expect these gig companies, which spent $205 million on the ballot measure, to seek similar legislation in other states.
“To get Prop 22 passed, gig companies — which have yet to turn a profit — spent a historic $205 million on their campaign, effectively creating a political template for future anti-democratic, corporate law-making,” Meredith Whittaker, co-founder of AI Now Institute and Veena Dubal, professor of law at the University of California, Hastings, wrote.
On Uber’s earnings call this week, Uber CEO Dara Khosrowshahi said the company would “more loudly advocate for laws like Prop 22” throughout the U.S. and worldwide.
Meanwhile, labor groups are already planning their next steps forward. Partnerships for Working Families, for example, is considering potentially lobbying the hopeful Biden administration’s Department of Labor for better federal laws for worker classification, according to Cal Matters. Other options entail suing for issues around worker’s compensation requirements or the ⅞ supermajority needed to amend Prop 22.
Below are statements issued over the past couple of days from interested parties.
Uber CEO Dara Khosrowshahi to drivers: “With this vote, drivers and delivery people will get what so many of you have been asking for: access to benefits and protections, while maintaining the flexibility and independence you want and deserve.
The future of independent work is more secure because so many drivers like you spoke up and made your voice heard—and voters across the state listened.”
Lyft Chief Policy Officer Anthony Foxx: “California voters have spoken, and they stood with more than a million drivers who clearly said they want independence plus benefits. Prop 22 is now the first law in the nation requiring health, disability and earnings benefits for gig workers. Lyft stands ready to work with all interested parties, including drivers, labor unions and policymakers, to build a stronger safety net for gig workers in the U.S.”
DoorDash CEO Tony Xu: Passing Prop 22 is a big win for Dashers, merchants, customers, and communities. Californians sided with drivers, recognizing the importance of flexible work and the critical need to extend new benefits and protections to drivers like Dashers
Gig Workers Rising: “Billionaire corporations just hijacked the ballot measure system in California by spending millions to mislead voters. The victory of Prop 22, the most expensive ballot measure in U.S. history, is a loss for our democracy that could open the door to other attempts by corporations to write their own laws.”
Gig Workers Collective: “Our organizing has always been untraditional since we aren’t classified as employees and don’t have the legal protections to organize or unionize, but we still found a way to build worker power and fight back. We’re disappointed in tonight’s outcome, especially because this campaign’s success is based on lies and fear-mongering. Companies shouldn’t be able to buy elections. But we’re still dedicated to our cause and ready to continue our fight.”
DEI professionals hope for a Biden administration
Uber Chief Diversity Officer Bo Young Lee said on Twitter that for many DEI professionals, “the results of the election will impact how we do our jobs and may even impact if we have jobs in the long term.”
Now that Biden is the presumptive president, the change in the administration will likely mean a change in the executive order banning types of diversity training for federal contractors.
Late last month, three civil rights groups filed a federal class-action lawsuit challenging the Trump administration’s execute order. That suit came after Microsoft disclosed that the U.S. Department of Labor Office of Federal Contract Compliance Programs contacted the company regarding its racial justice and diversity commitments made in June.
Shine app founder talks mental health for Black people and people of color
Shine app co-founders Naomi Hirabayashi and Marah Lidey
On this week’s episode of Mixtape, we spoke with Shine app founder Marah Lidey about mental health. We spoke about the psychological and physiological manifestations of racism, the adverse effects of 2020 and how Black death isn’t new, but it’s finally getting global attention.
“Nothing necessarily new is happening with Black people dying in the streets,” Lidey said. “[Black people] all know that. But when all of your friends and co-workers become aware in this very new way and want to understand and want to share and want to ask you questions and you’re watching this play out at this national level and you’re bombarded at the global level, right I mean, this is in our DNA. Our cells were in the cells of those people who were enslaved.”’
Yelp announced the addition of Tony Wells, chief brand officer at USAA, to its board of directors. Wells also just so now happens to be Yelp’s only Black director on the board.
“Tony is the fifth Board member we’ve welcomed to Yelp over the last couple of years, as we further diversify and refresh the Board’s collective expertise in relevant verticals in order to best serve the company and our shareholders as we embark on our next chapter,” Yelp CEO Jeremy Stoppelman said in a statement. “We welcome Tony’s creativity and perspective, and we are thrilled to have him join our Board.”
Tech stocks shot higher as American voters went to the polls, the gains coming far ahead of results that could indicate who will win the presidency.
American stocks broadly rose, with the S&P 500 index rising just over 2% while the tech-heavy Nasdaq Composite is up just under 2%. SaaS and cloud-focused shares are up a slimmer 1.8% as of the time of writing.
That 2% bump might seem negligible, but consider the past month. The Nasdaq was down just over 8% from all-time highs at the start of trading today. That makes today’s gains worth around a fourth of the gap from its recent declines back to record levels. The Nasdaq fell more than 10% from its recent peak before starting to recover in late-October, making today’s rally part of a developing upward trend.
Depending on how one reads the polling tea leaves, the gains could be read as an endorsement of either candidate’s platform.
Today’s stock market moves come on the back of an uneven technology earnings cycle, with major tech companies swallowing lumps, while some smaller industry players like Five9 rode COVID-19 tailwinds to strong results. Netflix, Intel, Apple, and others struggled to impress investors. Indeed, the domestic stock market’s reaction to earnings beatshas been muted this cycle, in contrast to other areas; it appears that American equities were priced to surpass expectations.
For tech, today’s rebound is welcome, possible helping pave the way for a rash of IPO filings that are expected before the year’s end. Airbnb, DoorDash, and others are still candidates for flotation this year.
Certain share prices, notably those of Uber and Lyft, were already on the rise Monday on investor confidence that California voters will pass Proposition 22. The ballot measure, if approved, will exempt the ride-sharing companies from a new California law that forces gig economy workers to be classified as employees rather than contractors.
Pulling back for a moment, Uber’s share price is still down about 3.87% from one month ago. But it’s been recovering, with a pop in the past two days. Uber’s share price closed 2% higher Monday and is now up about 2.7% in trading today. Lyft has experienced an even larger bump with share prices rising 5.67% on Monday. Lyft shares are up 6.39% in midday trading today.
The stakes are high for Uber and Lyft this Election Day. If Proposition 22 fails, the companies say they will have to change their business models. Both companies have threatened temporary shutdowns in the state if forced to comply with the new California law. For now it seems, investors believe Uber and Lyft will be able to continue to operate as they always have.
A California court weighs in as Prop. 22 looms, Google removes popular apps over data collection practices and the Senate subpoenas Jack Dorsey and Mark Zuckerberg. This is your Daily Crunch for October 23, 2020.
The big story: Uber and Lyft defeated again in court
A California appeals court ruled that yes, a new state law applies to Uber and Lyft drivers, meaning that they must be classified as employees, rather than independent contractors. The judge ruled that contrary to the rideshare companies’ arguments, any financial harm does not “rise to the level of irreparable harm.”
However, the decision will not take effect for 30 days — suggesting that the real determining factor will be Proposition 22, a statewide ballot measure backed by Uber and Lyft that would keep drivers as contractors while guaranteeing things like minimum compensation and healthcare subsidies.
“This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” a Lyft spokesperson told TechCrunch.
Uber and Lyft must classify their drivers as employees, an appellate court ruled yesterday evening. However, the decision will be stayed for 30 days after the court issues the remittitur, which has not happened yet. That means depending on how ballot measure Proposition 22 goes, this case may not end up being the deciding factor in how Lyft and Uber classify their drivers in California.
Throughout the case, Uber and Lyft have argued that reclassifying their drivers as employees would cause irreparable harm to the companies. In the ruling today, the judge said neither company would suffer any “grave or irreparable harm by being prohibited from violating the law” and that their respective financial burdens “do not rise to the level of irreparable harm.”
Additionally, there is nothing in the preliminary injunction, according to the judge, that would prevent Uber and Lyft from offering flexibility and independence to their drivers. Lastly, the judge said Uber and Lyft have had plenty of time to transition their drivers from independent contractors to employees, given that the key case in passing AB 5, the gig worker bill that spurred this lawsuit, was decided in 2018.
“This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” Lyft spokesperson Julie Wood said in a statement to TechCrunch.
Prop 22 is a ballot measure in California that seeks to keep rideshare drivers and delivery workers classified as independent contractors. The measure, if passed, would make drivers and delivery workers for said companies exempt from a new state law that classifies them as W-2 employees. If passed, app-based transportation and delivery workers would be entitled to things like minimum compensation and healthcare subsidies based on engaged driving time.
Meanwhile, Lyft says it’s exploring all of its legal options, which may include appealing to the California Supreme Court. Uber, similarly, is considering its appeal options.
“Today’s ruling means that if the voters don’t say Yes on Proposition 22, rideshare drivers will be prevented from continuing to work as independent contractors, putting hundreds of thousands of Californians out of work and likely shutting down ridesharing throughout much of the state,” an Uber spokesperson told TechCrunch. “We’re considering our appeal options, but the stakes couldn’t be higher for drivers—72% of whom support Prop 22—and for the California economy, where millions of people are jobless and another 158,000 just sought unemployment support this week.”
The judge’s decision comes after California Superior Court Judge Ethan Schulman granted a preliminary injunction in August to force Uber and Lyft to reclassify its drivers as employees. Uber and Lyft appealed the decision, but the appeals court has now affirmed the decision from the lower court.
The lawsuit was brought forth by California Attorney General Xavier Becerra, along with city attorneys from Los Angeles, San Diego and San Francisco in May. They argued Uber and Lyft gain an unfair and unlawful competitive advantage by misclassifying workers as independent contractors. Then, in June, the plaintiffs filed a preliminary injunction seeking the court to force Uber and Lyft to reclassify their drivers. In August, Judge Schulman granted it.
“While this legal victory today is directed at two companies, this fight is far broader,” Gig Workers Rising said in a statement. “This is about the future of work in this country. This is about securing good jobs with real benefits for generations to come. If Uber and Lyft are successful in passing Prop. 22 and undo the will of the people, they will inspire countless other corporations to adapt their business models and misclassify workers in order to further enrich the wealthy few at the expense of their workforce.”