By Tina Bellon and Nivedita Balu
(Reuters) - Lyft Inc shares soared more than 13% in extended trading on Tuesday after the company reported an adjusted profit for the third quarter and outlined a path to sustained profitability on the back of drastic cost cuts and a return of riders and drivers.
Lyft's leaner cost structure allowed it to increase ridership without incurring rising expenses and executives said they targeted even higher adjusted profit in the fourth quarter, outlining their conviction for a continued recovery from a bruising pandemic.
Rides to airports, which are among the most profitable routes, nearly tripled from a year ago, executives said on an earnings call with analysts, in a sign of a broader U.S. economic recovery.
Shares of larger rival Uber Technologies Inc, which will report results on Thursday after the bell, rose 7% in after-market trading following Lyft's release. Uber has said it expects to break even on an adjusted EBITDA basis for the first time.
Overall, Lyft's active riders increased 11% to 18.9 million in the quarter ended Sept. 30. But ridership remains 35% below peak levels before the pandemic, with Lyft executives saying many consumers were waiting for COVID-19 vaccine booster shots or were hesitant to travel with unvaccinated children.
The company also said business travel to offices had not yet resumed, with workers particularly on the U.S. West Coast continuing to work from home. But executives said they were hopeful office workers would return in the first half of 2022.
"It's a matter of when, not if," Chief Financial Officer Brian Roberts said.
According to the California-based company's own measure, Lyft was profitable for the second consecutive time in its nine-year history.
Lyft reported adjusted earnings before interest, taxes, depreciation and amortization, a measure that excludes one-time costs, primarily stock-based compensation, of $67.3 million. The metric came in significantly ahead of a Wall Street estimate for $30.7 million, according to Refinitiv data.
Lyft said it expected adjusted EBITDA of between $70 million and $75 million in the fourth quarter.
Overall, Lyft's third-quarter revenue rose about 73% on a yearly basis to $864.4 million, beating the Wall Street estimate of $862.68 million, according to Refinitiv IBES data.
Revenue increased around 13% from last quarter, while total costs and expenses grew only 4% from the second quarter in a sign that Lyft is making do on its promise to cut both fixed and variable costs. Lyft's contribution margin, indicating the company's profitability excluding variable costs, rose to a record 59.4%.
Lyft's net loss narrowed to $71.5 million, or 21 cents per share, from $459.5 million, or $1.46 per share last year, but President John Zimmer declined to say whether or when the company would target net profit.
The company posted surprise adjusted earnings per share of 5 cents in the quarter compared with a loss of 3 cents expected by Wall Street.
Lyft said driver supply was up 45% compared with last year, but did not share how far off driver numbers remained from pre-pandemic levels.
Zimmer said in an interview with Reuters that drivers were feeling safer thanks to the availability of COVID-19 vaccines and were returning to the road in greater numbers after enhanced federal unemployment payments ended in September.
"We're seeing the right things happening in the market and will begin to taper incentives in the quarter ahead," he said.
Lyft and Uber have been spending heavily to lure drivers with big incentives as the pandemic opened up new jobs at Amazon.com Inc's warehouses, Instacart's grocery services and restaurant deliveries.
But Zimmer said most ride-hail drivers worked on the platform part-time as a way to supplement income from other jobs, enjoying the flexibility provided by gig work.
"I feel very good about the supply conditions, and our ability to compete in the marketplace for talent, given the type of work and earnings that we offer," he said.
(Reporting by Tina Bellon in Austin, Texas, and Nivedita Balu in Bangaluru; Editing by Matthew Lewis)