Lyft is on track to shell out $1 billion in incentives to lure drivers
Lyft (LYFT) is opening its checkbook wide to secure drivers in a very competitive labor market and satisfy the resurgence in demand amid the COVID-19 pandemic.
Second quarter driver incentives more than doubled to $376 million from $196 million in the first quarter, Lyft executives told analysts on an earnings call Tuesday evening. Incentives for drivers — which include various bonuses for real-time performance on the network — is seen hitting $400 million in the third quarter.
"If Q3 hits $400 million and Q4 spend is minimal, FY21 incentive spend will exceed $1 billion, which would be well above pre-pandemic levels of ~$560 million in FY18 and FY19. Driver supply has improved (Q2 drivers up 60% year over year, July new drivers up 11% month over month) but still falls short of demand," pointed out Jefferies analyst Brent Thill.
Despite the pickup in driver incentives, Lyft was able to achieve adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) profitability for the first time in the second quarter. The company guided to third quarter adjusted EBITDA of $25 million to $35 million.
Lyft investors took profits on the positive results, as the stock fell 8% in Wednesday trading.
Thill is among those analysts sticking with an upbeat view on Lyft's stock.
"Lyft is well positioned to benefit in coming quarters as a pure-play story on U.S. ride-hailing. Current valuation 3.9x CY22 enterprise value/sales remains attractive vs. marketplace peer median 3.8x and broader comparable group median 5.8x," Thill explained.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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