Any industry remotely connected to travel has been utterly demolished by the COVID-19 pandemic, including the duopolistic ridesharing industry. No. 2 player Lyft (NASDAQ:LYFT) confirmed in a regulatory filing this week that it will lay off 982 employees, representing 17% of Lyft's total head count, in an effort to cut costs as it grapples with the novel coronavirus outbreak and the economic impacts.
Note that these cuts apply to full-time employees, not Lyft's army of drivers; the latter are classified as independent contractors.
The last cut is the deepest
In addition to those job reductions, Lyft said it has already furloughed 288 employees while cutting salaries across numerous tiers of employees. Executive leadership took a 30% pay cut, vice presidents are taking a 20% hit, and all other exempt employees will see salaries fall by 10%. Those haircuts will be effective for approximately three months starting in May.
Lyft's board of directors also agreed to take a 30% cut to their cash compensation, although directors are primarily compensated with equity. For example, roughly 75% of Chairman of the Board Sean Aggarwal's total 2019 compensation ($342,000) was stock awards, according to the proxy statement that Lyft just filed this week.
In connection with the restructuring, Lyft expects to incur about $28 million to $36 million in related charges, such as severance and other benefit costs. The bulk of those costs will be recognized in the second quarter. The layoffs are occurring at a much larger scale than any other recent round of cuts. Lyft laid off 20 employees late last year as it pulled back from scooter rentals, followed by another 90 workers in January.
There could be more where that came from
Larger rival Uber (NYSE:UBER) is also considering cutting around 20% of its employees, according to The Information. Additionally, Uber confirmed this week that Chief Technology Officer Thuan Pham has submitted his resignation, effective May 16. Pham has been with Uber since 2013 and was one of the last executive vestiges of the Travis Kalanick era.
Ride-hailing tech platforms are scrambling to pivot toward offering alternative services as core ridesharing demand dissolves. Lyft recently announced a new program where drivers would help deliver essential items to specific organizations, although the scope of that initiative is quite limited for now, so it won't help provide work for drivers at scale. Lyft has now withdrawn its guidance for 2020 due to the novel coronavirus crisis.
Uber is in a stronger financial position because it has more cash on the balance sheet, as well as a revolver it can tap for cash. Lyft intends to provide investors with more details when it reports first-quarter earnings results on May 6. "This update will include detailed actions the Company is taking to strengthen its financial position, improve its cost structure, and support drivers and riders on the Lyft platform," the company said earlier this month. Investors now know at least one of those cost-cutting moves.