Uber and Lyft are getting less unprofitable, but COVID-19 is still a drag on their business

Uber and Lyft reported their quarterly earnings this week, and whereas each firms are exhibiting indicators of enchancment, the COVID-19 pandemic continues to forged a protracted shadow over the general ride-hailing enterprise.

It raises the query of how each firms, neither of which have ever turned a revenue, can hope to claw their method out of the deeper monetary pit wherein they’ve been forged by COVID.

Uber misplaced $968 million over the past three months, with its adjusted internet revenues down 16 p.c in comparison with the fourth quarter of 2019. Over all the yr, the corporate reported a internet lack of $6.7 billion, down barely from the $8.5 billion it misplaced in 2019. It introduced in much less income in comparison with 2019 — $11.1 billion versus $13 billion — doubtless as a result of facilitating fewer journeys, 5 billion in 2020 versus 7 billion in 2019.

On the flip aspect, Lyft misplaced $458.2 million over this previous quarter, with its adjusted internet revenues down a staggering 44 p.c yr over yr. It misplaced $1.8 billion over all the yr, in comparison with $2.6 billion misplaced in 2019. (Each Uber and Lyft think about stock-based compensation and payroll tax bills into its internet losses.)

As coronavirus instances spiked in a lot of the nation over the winter, Uber and Lyft began to lose a good portion of their buyer base. Folks stayed at house, or once they did exit, they opted to not use ride-hailing apps. Uber stated it had 93 million “month-to-month energetic platform shoppers,” its time period for customers who take a minimum of one journey on Uber or purchase a minimum of one meal on Uber Eats — a 16 p.c lower yr over yr. In the meantime, Lyft reported a drop in month-to-month energetic customers of 45 p.c, from 22 million within the fourth quarter of 2019 to 12.5 million in 2020.

They could provide almost equivalent providers, however Uber and Lyft have very totally different methods for stabilizing their companies. Uber’s plans contain rising the components of its enterprise that it perceives as doing effectively, akin to meals and grocery supply, whereas shedding these line gadgets that aren’t producing any income and certain would proceed to be a monetary drain for years to return. It acquired two supply startups, Cornershop and Postmates, and bought off its micromobility, autonomous car, and aerial taxi divisions.

Uber is predicting that its supply enterprise will probably be worthwhile in 2021. It’s actually wanting higher than the corporate’s different line gadgets: supply gross bookings was $10.05 billion this yr, up 130 p.c from 2019. “Whereas the exterior surroundings stays unsure, I’m extra optimistic than ever about Uber’s future,” CEO Dara Khosrowshahi stated in an earnings name this week.

Supply isn’t any slam dunk for Uber; if something, it may find yourself proving as dangerous as ride-hailing. Third-party supply apps have come under fire in recent months for imposing exorbitant charges on already-struggling eating places. Client pushback towards UberEats and its opponents DoorDash and GrubHub is rising, whereas the businesses are spending billions of {dollars} to develop their buyer bases. However state legislatures are cautious of the potential for meals supply to metastasize into one thing as problematic as ride-hailing and are already eyeing laws to rein in onerous charges.

Lyft, then again, has no supply service of its personal, so as a substitute, it’s specializing in decreasing prices, and in some instances, decreasing provide to assist mitigate these prices — which means stopping new drivers from becoming a member of the app whereas decreasing its spending on advertising and marketing and different incentives. “Given the impact on demand, we have been in a position to cut back driver acquisition and incentive spend, which had a optimistic influence on our monetary outcomes,” Lyft CEO Logan Inexperienced stated in an earnings name.

Uber has the assets to develop (and shrink) its method out of the pandemic, whereas Lyft doesn’t. It must deal with staying small, however not too small that it might’t compete with its a lot bigger rival.

Regardless of a brutal yr, the market has been variety to each Uber and Lyft. Lyft’s shares moved 14 p.c greater in 2020, and the inventory enters this buying and selling week 23 p.c greater than the place it was at first of final yr. Uber’s shares shrank barely after its earnings report, however the firm nonetheless trades at a a lot greater income a number of than Lyft.

In the meantime, Uber and Lyft drivers are pushing forward with their legal challenges against Prop 22, the poll measure that enables the businesses to proceed treating their employees like impartial contractors. President Joe Biden, who opposed Prop 22, fired a Trump-appointed member of the National Labor Relations Board who authored a number of opinions affirming Uber and Lyft’s refusal to categorise drivers as workers. And Democrats in Congress are hoping to push a invoice that will echo California’s failed effort to make it more durable for firms to deal with employees as impartial contractors.

The victory lap might be short-lived. Regulatory hurdles dot the street forward for these ride-hailing firms. Profitability often is the least of their considerations.

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