Just a week after ridesharing leader Uber (UBER 2.64%) withdrew its guidance, Lyft (LYFT 1.14%) has followed suit in suspending its forecast due to ongoing uncertainty surrounding the COVID-19 pandemic. The crisis has all but obliterated demand in the ride-hailing industry as people stay home, which has caused both companies to introduce alternative services that primarily transport physical goods instead of people.
Here's what investors need to know.
COVID-19 is destroying the travel industry, including ridesharing. Image source: Lyft.
Lyft's high hopes fall
Lyft had initially forecast that 2020 would see revenue of around $4.6 billion, compared to the $3.6 billion it generated in 2019. Adjusted EBITDA was expected to be negative $450 million to $490 million. At the onset of the outbreak, Lyft spoke too soon when CFO Brian Roberts underestimated the potential impacts and even touted that the ridesharing platform recently enjoyed the "single biggest week in our history."
This week, The Information reported that Lyft has seen gross bookings plunge by 75% in recent weeks, an improvement from an 80% decline. Uber's gross bookings have fallen by 80%, according to the report. "The pandemic began to have a negative impact on business trends, including ride volumes, in mid-March, which has continued into April," Lyft says.
The company plans to give investors more detailed information when it reports first-quarter results on May 6, including what efforts it plans to make in order to prop up the balance sheet while improving its cost structure and still supporting contract drivers. Lyft recently committed $6.5 million to COVID-19 relief efforts, which will include $1.5 million for protective equipment and sanitizing products, $1.5 million in ride credits, and funds for drivers unable to work.
Lyft is withdrawing its full-year 2020 guidance for revenue and adjusted EBITDA but didn't mention any changes to its first-quarter outlook. Roberts had reaffirmed Lyft's Q1 guidance in early March, just days before the coronavirus pandemic started to hurt the business.
Although the outbreak is evolving rapidly, it seems inconceivable for Lyft to become profitable (on an adjusted EBITDA basis) by the end of 2021, which is the timeline that CEO Logan Green had laid out last year. The unprecedented crisis is putting financial strain on almost all companies regardless of sector, and there is a looming risk of a recession on the horizon.
Lyft is also much smaller than Uber. Lyft finished 2019 with around $2.8 billion in unrestricted cash, cash equivalents, and short-term investments; Uber had around $10 billion at the end of February, plus access to a $2 billion revolver. Lyft has no similar credit facility currently, but entering into a revolving credit agreement would probably be prudent and provide more financial flexibility.
