By Tim Higgins and Parmy Olson
Uber Technologies Inc. and smaller rival Lyft Inc. are bracing
for a new reality in ride-hailing: fewer passengers for the
foreseeable future.
Uber said Wednesday it is cutting about 14% of its workforce and
smaller rival Lyft, which cut about 17% of its staff last week, is
responding to the coronavirus pandemic with aggressive cost cutting
to ride out the exceptional challenge to their businesses.
Lyft reported first-quarter earnings Wednesday that seemed
resilient to the worst of the pandemic, but they only incorporated
a couple of weeks of the impact, through the end of March. In
April, as global travel ground to a halt and local governments
ordered people to shelter in place, ridership plunged 75%, the
company said.
"Even as shelter-in-place orders and travel restrictions are
modified or lifted, we anticipate that continued social distancing,
altered consumer behavior and expected corporate cost cutting will
be significant headwinds for Lyft," Chief Executive Logan Green
said during a conference call with analysts. "Rider demand on our
platform will be down for the foreseeable future."
The pandemic has challenged the very business model that
supercharged Uber and Lyft into some of the world's most valuable
startups. The San Francisco-based ride-sharing companies face
questions about consumers' willingness to use their services at a
time when health experts and government officials are recommending
sheltering in place and avoiding contact.
Lyft on Wednesday posted its first sequential drop in quarterly
ridership since becoming a public company last year. The business
threat comes as both companies, before the pandemic, had been
trying to improve their profitability to appease investors that had
grown increasingly worried about the hefty losses they were
incurring in their rush to grow.
Wednesday, Uber said it was cutting about 3,700 workers and that
Chief Executive Dara Khosrowshahi agreed to waive his base salary
for the rest of the year. Last week, Lyft said it was cutting more
than 900 jobs and putting some employees on unpaid furloughs as
well as trimming salaries.
Mr. Khosrowshahi, in a memo to employees, hinted at more cuts to
come, telling workers that Wednesday's job reductions were part of
a broader exercise to adjust the company's cost structure and that
he expected a further and final update on that effort within the
next two weeks.
"We are looking at many scenarios and at each and every cost,
both variable and fixed, across the company," he said in the memo.
"We want to be smart, to move fast, to retain as many of our great
people as we can, and treat everyone with dignity, support and
respect."
The CEO acknowledged the pain of the action in his Wednesday
memo: "Days like this are brutal." Uber reports its earnings
Thursday.
Lyft on Wednesday posted a loss of $398.1 million on sales of
$955.7 million. The better-than-expected sales figure helped to
lift beaten-down Lyft shares in after-hours trading. The stock,
down 39% in 2020 before the results, rose 19% to $31.10 in late
trading.
Lyft ridership grew 3% in the three months through March 31 from
the year-ago period, but the number of active riders taking a Lyft
trip declined to 21.2 million in the first quarter from 22.9
million in the October through December period.
The company has suspended its full-year guidance because of
uncertainty about the business effects from the pandemic and
shelved a commitment to post its first profitable quarter on an
adjusted basis by the end of next year. Lyft reported a loss before
interest, taxes, depreciation and amortization on an adjusted basis
of $85.2 million, compared with a loss of $216 million on that
basis in the year-earlier period.
"We are responding to the pandemic with an aggressive
cost-reduction plan that will give us an even leaner expense
structure and allow us to emerge stronger," Mr. Green said.
The company said cost savings, including the layoffs and
overhead-expense reductions, will reduce annualized expenses by
about $300 million by the fourth quarter of this year compared with
previous projections. The company also said it slashed
capital-expenditure plans for the year to $150 million from $400
million.
Lyft ended the quarter with $2.7 billion of cash and other funds
it can quickly tap.
Uber's share price, off 6.5% in 2020, has held up better than
Lyft's, in part because of its food-delivery operations. Online
ordering from grocery stores and restaurants has surged since the
U.S. declared a national emergency in March.
Analysts will be looking closely at Uber's results to better
understand what an increase of its Eats food-delivery business
means to the bottom line. Pressure on fees from restaurants and
local governments could offset any increase in demand because of
Covid-19, Wedbush Securities analyst Daniel Ives said.
Before the pandemic, Uber was spending heavily to grow Eats as
it faced heavy competition from DoorDash Inc. and Postmates Inc. In
the fourth quarter, Uber said Eats' adjusted loss from operations
widened by 66% to $461 million from the year-earlier quarter.
Lyft said Wednesday that it has no plans to enter the
food-delivery business.
Uber and Lyft have faced pressure from regulators and lawmakers
over how their drivers are classified, and on Tuesday California
sued the companies, citing the state's gig-economy law that became
effective Jan. 1. The state said the ride-hailers' decision to
classify drivers as contractors rather than employees has deprived
them of rights such as paid sick leave and unemployment insurance
-- two issues made more visible during the pandemic.
Lyft Chief Financial Officer Brian Roberts says cost-cutting
measures the ride-hailing company is implementing could ease the
path to profitability. Mr. Roberts says measures taken now mean
Lyft can be profitable at a ride volume 15% to 20% below what it
initially thought. "The actual timing," he said, "will depend on
the speed of the recovery. It could be earlier or later."
Write to Tim Higgins at Tim.Higgins@WSJ.com and Parmy Olson at
parmy.olson@wsj.com
(END) Dow Jones Newswires
May 06, 2020 19:02 ET (23:02 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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