Lyft co-founder talks earnings, layoffs, and competition with Uber

Lyft Co-Founder John Zimmer joins Yahoo Finance Live to discuss the company’s latest quarterly earnings, the sell-off in the stock, the outlook for profitability and growth, recent mass layoffs, competing for market share with Uber, and the future of autonomous vehicles.

Video Transcript


– Lyft stock is downshifting after the company posted slowing revenue growth in its latest quarter and missed on rider expectations. Let’s get to all things on this quarter and the outlook for the company with Lyft President John Zimmer. John, always nice to get some time with you. Your message to investors this morning?

JOHN ZIMMER: My message is that we just had record revenue. We got it to an even larger revenue in Q4. We got it to an adjusted EBITDA record in Q4.

The hardest part of our challengers over the last couple of years is behind us. We just overtook a really large increase in insurance that was driven by inflation. And so now we have our feet underneath us and ready to execute towards a billion dollars of adjusted EBITDA, which would– once the Street gets more confident in our ability to execute against that should really take note in the stock.

– The Street not confident this morning. And perhaps they’re looking through what the rest of the economic and even corporate environment is looking at right now. And I believe it was addressed on your call last night, too, even a recession case and the likelihood, the probability of that happening. How are you recession proofing the business over at Lyft right now?

JOHN ZIMMER: Yeah, I think you’re right. I think there’s a lot of questions broadly in the economy given the potential or likelihood of heading into a recession. For us specifically, we took the tough decision last week to do a reduction in force. That sets us up for that billion dollars in adjusted EBITDA independent of there being a recession, meaning in a recession case, if demand was to slow, we would likely see the marketplace equilibrium actually get healthier in certain ways as more people look for earning opportunities on the driver side and still have a very strong path with high confidence to hit that billion dollars in adjusted EBITDA.

– John, I imagine you come at this from a different perspective, given you are the cofounder at Lyft. But when you part ways with that many people that helped build the company, how do you think that’s going to change the culture and change what you can do at Lyft over the next 18 months?

JOHN ZIMMER: It’s very tough. It’s painful as a founder. It’s painful for those team members most of all. And it’s painful for the team members that are here.

As a manager, as a leader, as a founder, you never want to have to part ways with that many people. That said, it’s our job, it’s my responsibility to make those decisions, to be accountable to those decisions and anything that could have avoided it going forward. And we’re constantly balancing taking care of the team and building a strong business. So that’s part of the job. That’s something that I own.

Culturally, we have a very strong culture. We’ve been through tough times. And we’re going to bring the team together, talk through the future, and use it as a moment to come together.

– John, we’ve talked to you a lot in recent years or since the IPO. And I’m starting to see more notes now on the Street calling out that Lyft is losing market share to your biggest competitor. Do you see that? Have you diagnosed why that might be happening?

JOHN ZIMMER: Look, over the last decade, people have always said, had a narrative about Lyft versus Uber. And we’ve always pushed against those odds. Specific to market share, if you look quarter over quarter, I think there was about 1% movement in market share tied to what we believe were temporary driver incentives or what we saw were temporary driver incentives that Uber put into the market that are no longer there. Since those went away, we have recovered about the same amount of share.

So I think narratives can be very potent right now in the current market environment. It’s something we’ve faced, again, for many years. And we have to put up the numbers to push back against them.

– When we think about the operating costs per mile for Lyft and how there’s been so much investment towards autonomous technology, self-driving, to make sure that those operating costs per mile are actually coming down in the future, too, and perhaps being one of the biggest recession resiliency measures that at any point for the business could really provide a better margin. When you think about some of those investments and the innovation there for Lyft, what does that timeline look like at scale as you continue to ramp that up? And then even with some of the midterm elections taking place today, does that change that timeline at all when you see any changeover in Congress and the people that are going to be approving that regulatory framework as well for autonomous vehicles?

JOHN ZIMMER: So on margin, again, we guided in Q4 to our top EBITDA that we’ve ever had. And so we don’t need to wait for an autonomous future to get good margin for the business and for our investors. That said, of course, we are extremely well set up for an autonomous future. It’s incredibly difficult to predict. Everyone, including myself, has gotten the exact timing of autonomous wrong.

But it’s not a matter of if it will come. It is a matter of when it will come. And when it does come, autonomous vehicles will be rolled out first and commercialized on an existing network because people expect to get a ride 100% of the time. And they can only do that in a network that has both drivers and autonomous vehicles because autonomous vehicles, when they first come out, will not have all the capabilities.

So I see that playing out in a real way over the next three years. Again, that’s hard to predict exact timing and what percent of rides would be covered by AVs. But we’re well positioned for that future.

In terms of politics and, obviously, can’t predict the full outcome of the elections. But we’ll continue to work with policymakers on the right policies for autonomous vehicles.

– John, within that $1 billion adjusted EBITDA target you called out for 2024, what does Lyft’s business look like? Are you in any other services besides ride hailing?

JOHN ZIMMER: The billion dollars of adjusted EBITDA accounts for the current businesses that we have today. It doesn’t necessitate any new businesses. The primary driver of that billion dollars in adjusted EBITDA is our North American rideshare business.

– I want to talk about drivers for a second. What are the mechanisms that you’re employing right now to really continue to engage drivers?

JOHN ZIMMER: Yeah, so quarter over quarter, we saw the largest increase in active drivers over the last year. So we are seeing drivers come back strongly. It’s an incredible earning opportunity. On average drivers are earning over $30 an hour. And so I think it’s really the independents, where they get to turn on and off work whenever they want. It’s the high earnings potential during those hours.

And then we’re providing more and more transparency. So we launch now upfront information and upfront earnings in over 70% of our rides or markets, which gives the driver information on the price, as well as the distance and which route the ride is going on before they even accept that ride.

– John, before we let you go, have you seen any reacceleration in active riders this quarter?

JOHN ZIMMER: We did say in the earnings call in October we saw all-times booking high for the company. And then on the ride side, which speaks to more what you’re asking, 6% month-over-month growth, which is higher than the month-over-month growth for that same period in 2019. So in that sense, yes. And we got more of the quarter to go for us to execute.

– All right, important point there, indeed. Lyft Cofounder and President John Zimmer, always great to get some time with you. We’ll talk to you soon.

JOHN ZIMMER: Thank you.


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