Lyft Inc. said Tuesday it was working on a new service to take a slice of the burgeoning food-delivery market as it works to make up for a 48 percent drop in quarterly revenue and a slow recovery of ride-hail demand.
While much of Lyft's recovery depends on the containment of the novel coronavirus, executives said stringent budgeting and cost cuts meant Lyft would still achieve profitability on an adjusted basis by the end of 2021. They said it would hit the profitability goal even if ride bookings remained 5 percent to 10 percent below pre-pandemic levels.
Unlike larger rival Uber Technologies Inc., Lyft has no food-delivery business to fall back on. That means that while Lyft is largely unable to offset the decline in trips, it also avoids Uber's added costs in scaling the Eats business.
But Lyft President John Zimmer on Tuesday said the company was looking to enter what it considered an untapped market by offering delivery services for restaurants without launching a full-fledged, consumer-facing platform for food delivery.
"What we're hearing from restaurants is they're looking for a partner who will not charge 30 percent commission, but still offer delivery service," Zimmer told Reuters in an interview ahead of the earnings release, adding the service would offer new income opportunities to drivers.
While Lyft said it was in the "early days" of building such a business, the offer is aimed at undercutting the prices Uber, GrubHub Inc. and other food-delivery services charge restaurants for every order -- a method that has drawn opposition from some restaurants and lawmakers.
"The company has the infrastructure and tech capabilities to become a powerful player in the food delivery space, so expect them to mount a serious challenge to the likes of Uber Eats in the near future," investing.com analyst Haris Anwar said.
Lyft in October announced a partnership with GrubHub that allows Lyft's loyalty-program members free restaurant delivery from GrubHub restaurants.
Lyft's third-quarter revenue fell to $499.7 million, surpassing average analyst expectations of $486.5 million, according to Refinitiv data.
The company reported a third-quarter adjusted EBITDA loss of $239.7 million, narrower than the $254.1 million loss expected by analysts. Lyft said the quarterly adjusted EBITDA loss was $25 million narrower than its recent forecast, reflecting progress in reducing costs.
Though Lyft shares have surged this week thanks to hopes for a coronavirus vaccine, the stock has overall lost more than 15 percent this year and now trades more than 50 percent below the price of the company's 2019 public debut.
Shares of Lyft closed Wednesday's trading up 1 percent to $36.41.
Lyft on Tuesday said demand for rides continued to increase in the months from July to September, despite varying significantly between U.S. cities. Active ridership remained down 44 percent on a yearly basis.
Besides its core ride-hail business, Lyft offers bike, electric scooter and car rentals in several cities, but does not break out financial details of those units. Lyft on Tuesday said performance improved at those units.
Third-quarter active riders stood at 12.5 million -- a significant increase from the 8.69 million in the second quarter but a far cry from the 22.3 million riders who used Lyft during the third quarter of last year.
Lyft on Tuesday said it expected ridership in the fourth quarter to increase by 800,000 to 1 million and revenue growth of 11 percent to 15 percent.
Unlike Uber, Lyft operates only in some Canadian cities and the United States, where Uber last week said demand for ride-hail trips recovered the slowest compared with other regions around the world.
Uber last week reported $3.13 billion in third-quarter revenue, nearly half of which came from its food-delivery unit. Uber said it could become profitable on an adjusted EBITDA basis by the end of 2021 even if rides continue to remain 10 percent to 20 percent below pre-pandemic levels.
Uber and Lyft recently scored a significant win in their California home market, where voters passed a company-sponsored ballot measure that cements the status of app-based, food-delivery and ride-hail drivers as independent contractors, not employees entitled to unemployment pay, health insurance and other costly benefits.
Gig workers in California will now receive limited benefits, including minimum pay rates and accident insurance and the companies hope to turn the California decision into a model for the nation.
Lyft's president, Zimmer, on Tuesday said the company was talking to lawmakers in other states and on the federal level and added he was optimistic that the model would be implemented more widely.
"Politicians in other states were surprised how successful this measure was in a very progressive state," Zimmer said, referring to California.