LYFT, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our 2021 Annual Report on Form 10-K/A. As discussed in the section titled "Note About Forward-Looking Statements," the following discussion contains forward-looking statements that involve risks and uncertainties. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled "Risk Factors" and other parts of this Quarterly Report on Form 10-Q and in our 2021 Annual Report on Form 10-K/A. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Our fiscal year endsDecember 31 . Our Business
Our mission is to improve people’s lives with the best transportation in the world.
Lyft, Inc. (the "Company" or "Lyft") started a movement to revolutionize transportation. In 2012, we launched our peer-to-peer marketplace for on-demand ridesharing and have continued to pioneer innovations aligned with our mission. Today,Lyft is one of the largest multimodal transportation networks inthe United States andCanada . We believe that the world is at the beginning of a shift to Transportation-as-a-Service ("TaaS").Lyft is at the forefront of this massive societal change. Our ridesharing marketplace connects drivers with riders via theLyft mobile application (the "Lyft App") in cities acrossthe United States and in select cities inCanada . We believe that our ridesharing marketplace allows riders to use their cars less and offers a viable alternative to car ownership while providing drivers using our platform the freedom and independence to choose when, where, how long and on what platforms they work. As this evolution continues, we believe there is a massive opportunity for us to improve the lives of riders by connecting them to more affordable and convenient transportation options. We are laser-focused on revolutionizing transportation. We have established a scaled network of users brought together by our robust technology platform (the "Lyft Platform") that powers rides and connections every day. We leverage our technology platform, the scale and density of our user network and insights from a significant number of rides to continuously improve our ridesharing marketplace efficiency and develop new offerings. We've also taken steps to ensure our network is well positioned to benefit from technological innovation in mobility. Today, our offerings include an expanded set of transportation modes in select cities, such as access to a network of shared bikes and scooters ("Light Vehicles") for shorter rides and first-mile and last-mile legs of multimodal trips, information about nearby public transit routes, and Lyft Rentals, an offering for renters who want to rent a car for a fixed period of time for personal use. We believe our transportation network offers a viable alternative to car ownership. We generate substantially all of our revenue from our ridesharing marketplace that connects drivers and riders. We collect service fees and commissions from drivers for their use of our ridesharing marketplace. As drivers accept more rider leads and complete more rides, we earn more revenue. We also generate revenue from riders renting Light Vehicles, drivers renting vehicles throughExpress Drive , Lyft Rentals renters, Lyft Driver Center and Lyft Auto Care users, and by making our ridesharing marketplace available to organizations through our Lyft Business offerings, such as ourConcierge and Corporate Business Travel programs. In the second quarter of 2021, we began generating revenues from licensing and data access agreements, primarily with third-party autonomous vehicle companies. In the second quarter of 2022, we began generating revenue from the sale of bikes and bike-share systems through our acquisition ofPBSC Urban Solutions Inc. We have made focused and substantial investments in support of our mission. For example, to continually launch new innovations on our platform, we have invested heavily in research and development and have completed multiple strategic acquisitions. We have also invested in sales and marketing to grow our community, cultivate a differentiated brand that resonates with drivers and riders and promote further brand awareness. Together, these investments have enabled us to create a powerful multimodal platform and scaled user network. Notwithstanding the impact of COVID-19, we are continuing to invest in the future, both organically and through acquisitions of complementary businesses. We also continue to invest in the expansion of our network of Light Vehicles and Lyft Autonomous, which focuses on the deployment and scaling of third-party self-driving technology on theLyft network. Our strategy is to always be at the forefront of transportation innovation, and we believe that through these investments, we will continue to be well positioned as a leader in TaaS. Even as we invest in the business, we also remain focused on finding ways to operate more efficiently. To advance our mission, we aim to build the defining brand of our generation and to advocate through our commitment to social and environmental responsibility. We believe that our brand represents freedom at your fingertips: freedom from the stresses of car ownership and freedom to do and see more. Through our LyftUp initiative, we're working to 40
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make sure people have access to affordable, reliable transportation to get where they need to go - no matter their income or zip code. We are also proud to be leaders in the fight against climate change. We've made the commitment to reach 100% electric vehicles ("EVs") on theLyft network by the end of 2030. We believe many users are loyal toLyft because of our values, brand and commitment to social and environmental responsibility. Our values, brand and focus on customer experience are key differentiators for our business. We continue to believe that users are increasingly choosing services, including a transportation network, based on brand affinity and value alignment. As we progress through the COVID-19 recovery, we remain confident the demand for our offerings will continue to grow as more and more people discover and rely on the convenience, experience and affordability of usingLyft .
Impact of COVID-19 on our business
The ongoing COVID-19 pandemic continues to impact communities inthe United States ,Canada and globally. Since the pandemic began inMarch 2020 , governments and private businesses - at the recommendation of public health officials - have enacted precautions to mitigate the spread of the virus. Beginning in the middle ofMarch 2020 , the pandemic and these related responses caused decreased demand for our platform leading to decreased revenues as well as decreased earning opportunities for drivers on our platform. Our business continues to be impacted by the COVID-19 pandemic. We are confident in our ability to continue to navigate this challenging period. In 2021, we saw continued recovery from the onset of the COVID-19 pandemic as vaccines were more widely distributed and more communities fully reopened, which resulted in improvements in revenue, Active Riders, net loss, and Adjusted EBITDA, compared to 2020. In 2022, we saw decreased demand for our platform in January resulting from an increase in cases due to variants of the virus, but that demand rebounded in the following months as COVID-19 variant cases decreased and communities continued to reopen. We remain focused on our long-term growth opportunities. We believe we have sufficient liquidity to continue business operations and to take action we determine to be in the best interests of our employees, stockholders, stakeholders and of drivers and riders on the Lyft Platform. Although we have seen some signs of demand improving, the exact timing and pace of the recovery remain uncertain and there remains significant variation among our markets. The extent to which our operations will continue to be impacted by the pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge.
For more information on the risks associated with the COVID-19 pandemic and our litigation, see the section entitled “Risk Factors” in point 1A of Part II.
RECENT DEVELOPMENTS
The acquisition of
OnMay 17, 2022 , we completed our acquisition of PBSC, a global leader in bikeshare which supplies stations and bikes to markets internationally, for a total purchase price of$163.5 million inclusive of$14.1 million in estimated fair value of contingent consideration. The acquisition was treated as a business combination and increases our scale in micromobility by leveraging PBSC's deep sales experience and customer relationships. Refer to Note 3 "Acquisitions" to the condensed consolidated financial statements for information regarding this transaction.
Commutation of reinsurance agreement
OnJune 21, 2022 , PVIC andDARAG completed the Commutation Transaction, which effectively commuted and settled the previous Reinsurance Agreement. As a result of the Commutation Transaction, the Company recognized a$36.8 million gain in cost of revenue in the three months endedJune 30, 2022 , including amortization of a portion of the previously recognized deferred gain. Refer to Note 5 "Supplemental Financial Statement Information - Commutation of the Reinsurance Agreement" to the condensed consolidated financial statements for information regarding this transaction. 41
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Financial results for the three months ended
• Total turnover was
• The total costs and expenses have been
• The operating loss was
• The net loss was
• Adjusted EBITDA was
• Cash used in operating activities has been
• Unrestricted cash and cash equivalents and short-term investments totaled
Active passengers and revenue per active passenger
Active Riders Revenue per Active Rider 2022 2021 Growth Rate 2022 2021 Growth Rate (in thousands, except for dollar amounts and percentages) Three Months Ended March 31 17,804 13,494 31.9%$49.18 $45.13 9.0% Three Months Ended June 30 19,860 17,142 15.9%$49.89 $44.63 11.8% Three Months Ended September 30 18,942$45.63 Three Months Ended December 31 18,728$51.79 We define Active Riders as all riders who take at least one ride during a quarter where the Lyft Platform processes the transaction. An Active Rider is identified by a unique phone number. If a rider has two mobile phone numbers or changed their phone number and such rider took rides using both phone numbers during the quarter, that person would count as two Active Riders. If a rider has a personal and business profile tied to the same mobile phone number, that person would be considered a single Active Rider. If a ride has been requested by an organization using our Concierge offering for the benefit of a rider, we exclude this rider in the calculation of Active Riders unless the ride is accessible in the Lyft App. Revenue per Active Rider is calculated by dividing revenue for a period by Active Riders for the same period. The increase in the number of Active Riders in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 was due primarily to an increase in new rider activations as a result of the easing of travel restrictions and social distancing measures in certain regions. However, local recovery trends continue to vary significantly and these restrictions continue to have an ongoing impact on people's mobility. The increase in Revenue per Active Rider in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 primarily reflects the improvement in demand on our platform compared to earlier periods during the COVID-19 pandemic, which had materially limited people's mobility and severely reduced Active Riders. Revenue per Active Rider also benefited from revenues from licensing and data access agreements, beginning in the second quarter of 2021. Revenue per Active Rider slightly increased in the three months endedJune 30, 2022 compared to the three months endedMarch 31, 2022 primarily due to an increase in demand compared to the first three months of 2022 which were impacted by an increase in cases due to variants of the virus.
Significant Accounting Policies and Estimates
Our condensed consolidated financial statements and the related notes thereto are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
There have been no material changes in our critical accounting policies and estimates as described in our Annual Report on Form 10-K/A for the year ended
Recent accounting pronouncements
See Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements that have not yet been adopted as of the date of this report.
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Components of operating results
As noted above, we expect to see decreased levels of demand for our platform, decreased numbers of new rider activations, and negative impacts on revenue when compared to levels prior to the onset of the COVID-19 pandemic inMarch 2020 for so long as responsive measures to COVID-19 remain in place. While we have expected some recovery in levels of demand due to the availability of vaccines and reopening of communities, we cannot be certain when conditions will return to pre-pandemic levels. We have adopted multiple measures in response to the COVID-19 pandemic. We cannot be certain that these actions will mitigate some or all of the negative effects of the pandemic on our business. In light of the evolving and unpredictable effects of COVID-19, we are not currently in a position to forecast the expected impact of COVID-19 on our financial and operating results in the future periods.
Revenue recognition
Revenue consists of revenue recognized from fees paid by drivers for use of our Lyft Platform offerings, Concierge platform fees from organizations that use our Concierge offering, subscription fees paid by riders to access transportation options through the Lyft Platform, revenue from our vehicle service centers, revenue from the bikes and bike station hardware and software sales and revenue from licensing and data access agreements. Revenue derived from these offerings are recognized in accordance with ASC 606 as described in the Critical Accounting Policies and Estimates above and in Note 2 of the notes to our condensed consolidated financial statements. Revenue also consists of rental revenues recognized through leases or subleases primarily from Flexdrive, Lyft Rentals, and our network of Light Vehicles, which includes revenue generated from single-use ride fees paid by riders of Light Vehicles. Revenue derived from these offerings are recognized in accordance with ASC 842 as described in the Critical Accounting Policies and Estimates above and in Note 2 of the notes to our condensed consolidated financial statements. We offer various incentive programs to drivers that are recorded as reduction to revenue if we do not receive a distinct good or service in consideration or if we cannot reasonably estimate the fair value of goods or services received.
Revenue cost
Cost of revenue consists of costs directly related to revenue generating transactions through our multimodal platform which primarily includes insurance costs, payment processing charges, and other costs. Insurance costs consist of insurance generally required under TNC and city regulations for ridesharing and bike and scooter rentals and also includes occupational hazard insurance for drivers inCalifornia . Payment processing charges include merchant fees, chargebacks and failed charges. Other costs included in cost of revenue are hosting and platform-related technology costs, personnel-related compensation costs, depreciation, amortization of technology-related intangible assets, asset write-off charges and costs related to Flexdrive, which include vehicle lease expenses and remarketing gains and losses related to the sale of vehicles.
Operations and Support
Operations and support expenses primarily consist of personnel-related compensation costs of local operations teams and teams who provide phone, email and chat support to users, Light Vehicle fleet operations support costs, driver background checks and onboarding costs, fees paid to third-parties providing operations support, facility costs and certain car rental fleet support costs. Light Vehicle fleet operations support costs include general repairs and maintenance, and other customer support activities related to repositioning bikes and scooters for rider convenience, cleaning and safety checks.
Research and development
Research and development expenses primarily consist of personnel-related compensation costs and facilities costs. Such expenses include costs related to autonomous vehicle technology initiatives. Research and development costs are expensed as incurred. OnJuly 13, 2021 , we completed a transaction with Woven Planet, a subsidiary of Toyota Motor Corporation, for the divestiture of certain assets related to our self-driving vehicle division, Level 5, and as a result, certain costs related to our prior initiative to develop self-driving systems were eliminated beginning in the third quarter of 2021.
Sales and Marketing
Sales and marketing expenses primarily include driver incentives, staff compensation costs, driver incentives to recommend new drivers or drivers, advertising expenses, driver reimbursements and third-party marketing partnerships . Sales and marketing costs are expensed as incurred.
General and administrative
General and administrative expenses primarily consist of personnel-related compensation costs, professional services fees, certain insurance costs that are generally not required under TNC regulations, certain loss contingency expenses including 43
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accrued liabilities and legal settlements, insurance claims administration costs, policy expenses, depreciation, facility costs and other business costs. General and administrative costs are expensed as incurred.
Interest charges
Interest expense consists primarily of interest incurred on our 2025 Notes, as well as the related amortization of deferred debt issuance costs and debt discount. Interest expense also includes interest incurred on our Non-Revolving Loan and our Master Vehicle Loan.
Other income (expenses), net
Other income (expense), net, consists primarily of a pre-tax gain resulting from the transaction with Woven Planet, interest earned on our cash and cash equivalents, sublease income, and restricted and unrestricted short-term investments. restricted.
Provision for income taxes
Our provision for income taxes consists of federal and state taxes in theU.S. and foreign taxes in jurisdictions in which the Company conducts business. As we expand the scale of our international business activities, any changes in theU.S. and foreign taxation of such activities may increase our overall provision for income taxes in the future.
We have a valuation allowance for our
Operating results
The following table summarizes our historical condensed consolidated statements of operations data: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (in thousands) Revenue$ 990,748 $ 765,025 $ 1,866,323 $ 1,373,985 Costs and expenses Cost of revenue 650,356 346,890 1,090,650 758,929 Operations and support 105,314 93,765 203,914 182,696 Research and development 201,768 252,039 394,522 490,257 Sales and marketing 140,754 99,927 267,083 178,547 General and administrative 265,731 212,522 482,672 420,116 Total costs and expenses 1,363,923 1,005,143 2,438,841 2,030,545 Loss from operations (373,175) (240,118) (572,518) (656,560) Interest expense (4,960) (12,849) (9,509) (25,417) Other income, net 953 1,741 10,716 5,346 Loss before income taxes (377,182) (251,226) (571,311) (676,631) Provision for income taxes 64 692 2,867 2,626 Net loss$ (377,246) $ (251,918) $ (574,178) $ (679,257) 44
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The following table shows the components of our condensed consolidated statements of operations as a percentage of revenue:
Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenue 100.0 % 100.0 % 100.0 % 100.0 % Costs and expenses Cost of revenue 65.6 45.3 58.4 55.2 Operations and support 10.6 12.3 10.9 13.3 Research and development 20.4 32.9 21.1 35.7 Sales and marketing 14.2 13.1 14.3 13.0 General and administrative 26.8 27.8 25.9 30.6 Total costs and expenses 137.7 131.4 130.6 147.8 Loss from operations (37.7) (31.4) (30.7) (47.8) Interest expense (0.5) (1.7) (0.5) (1.8) Other income, net 0.1 0.2 0.6 0.4 Loss before income taxes (38.1) (32.8) (30.6) (49.2) Provision for income taxes - 0.1 0.2 0.2 Net loss (38.1) % (32.9) % (30.8) % (49.4) %
Comparison of three and six months ended
Revenue Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except for percentages) Revenue$ 990,748 $ 765,025 30 %$ 1,866,323 $ 1,373,985 36 % Revenue increased$225.7 million , or 30%, in the three months endedJune 30, 2022 , as compared to the three months endedJune 30, 2021 , driven primarily by an increase in the number of Active Riders as compared to the three months endedJune 30, 2021 , as vaccines became more widely distributed and more communities fully reopened. These increases were offset by an increase of$21.1 million in driver supply incentives recorded as a reduction to revenue as compared to the three months endedJune 30, 2021 . Revenue increased$492.3 million , or 36%, in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 , driven primarily by the significant increase in the number of Active Riders as compared to the same period in 2021, as vaccines became more widely distributed and more communities fully reopened. Revenue also benefited from revenues from licensing and data access agreements, beginning in the second quarter of 2021. We expect to see continued recovery in demand for our platform and the resulting positive impacts on revenue as vaccines are more widely distributed, more communities fully reopen and other restrictive travel and social distancing measures in response to COVID-19 continue to be eased. However, we cannot predict the impact of COVID variants and the longer term impact of the pandemic on consumer behavior. Cost of Revenue Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except for percentages) Cost of revenue$ 650,356 $ 346,890 87 %$ 1,090,650 $ 758,929 44 % Cost of revenue increased$303.5 million , or 87%, in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . The increase was due primarily to a$298.9 million increase in insurance costs driven by recent economic factors including the high inflationary environment, increased litigation, and higher than expected losses across the commercial auto industry as well as an increase in rider demand. These factors resulted in an increase in changes in estimates to historical liabilities for insurance required by regulatory agencies of$275.4 million . The increase in insurance costs was offset 45
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by a gain of$36.8 million related to the Commutation Transaction, which effectively commuted and settled the Reinsurance Agreement, and a decrease of$20.2 million in transaction costs related to the reinsurance of certain legacy auto insurance liabilities from the second quarter of 2021. Cost of revenue also had increases of$22.8 million in transaction fees and$5.2 million in web hosting fees. These increases were offset by a$12.3 million decrease in Flexdrive related costs inclusive of gains on sale of vehicles and$11.1 million decrease in Light Vehicle related costs. Cost of revenue increased$331.7 million , or 43.7%, in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The increase was due primarily to a$308.4 million increase in insurance costs driven by recent economic factors including the high inflationary environment, increased litigation, and higher than expected losses across the commercial auto industry as well as an increase in rider demand. These factors resulted in an increase in changes in estimates to historical liabilities for insurance required by regulatory agencies of$147.4 million . The increase in insurance costs and was offset by a gain of$36.8 million related to the Commutation Transaction, which effectively commuted and settled the Reinsurance Agreement, and a decrease of$20.2 million in transaction costs related to the reinsurance of certain legacy auto insurance liabilities from the second quarter of 2021. Cost of revenue also had increases of$47.7 million in transaction fees and$6.9 million in web hosting fees. These increases were offset by a$24.3 million decrease in Flexdrive related costs inclusive of gains on sale of vehicles and$11.1 million decrease in Light Vehicle related costs. Operations and Support Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except for percentages) Operations and support$ 105,314 $ 93,765 12 % 203,914$ 182,696 12 % Operations and support expenses increased$11.5 million , or 12%, in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . The increase was primarily due to a$7.1 million increase in Light Vehicle fleet operations support costs and a$5.0 million increase in driver onboarding costs and rider and driver support costs. Operations and support expenses increased$21.2 million , or 12%, in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The increase was primarily due to a$10.6 million increase in Light Vehicle fleet operations support costs and a$8.8 million increase in driver onboarding costs and rider and driver support costs.
Research and development
Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except for percentages) Research and development$ 201,768 $ 252,039 (20) % 394,522$ 490,257 (20) % Research and development expenses decreased$50.3 million , or 20%, in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . The decrease was primarily due to a$26.7 million decrease in stock-based compensation and a$11.8 million decrease in personnel-related costs, which were partially driven by reduced headcount following the transaction with Woven Planet in the third quarter of 2021. There were also decreases of$7.2 million in web hosting fees. Research and development expenses decreased$95.7 million , or 20%, in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The decrease was primarily due to a$41.5 million decrease in stock-based compensation and a$30.4 million decrease in personnel-related costs, which were partially driven by reduced headcount following the transaction with Woven Planet in the third quarter of 2021. There were also decreases of$11.1 million in web hosting fees,$5.9 million in consulting and advisory costs and$5.7 million in autonomous vehicle research costs. 46
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Table of Contents Sales and Marketing Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except for percentages) Sales and marketing$ 140,754 $ 99,927 41 %$ 267,083 $ 178,547 50 % Sales and marketing expenses increased$40.8 million , or 41%, in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . The increase was primarily due to a$22.3 million increase in costs related to incentive programs and a$12.7 million increase in costs associated with driver and rider programs. Sales and marketing expenses increased$88.5 million , or 50%, in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The increase was primarily due to a$44.4 million increase in costs associated with driver and rider programs and a$34.1 million increase in costs related to incentive programs. General and Administrative Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except for percentages) General and administrative$ 265,731 $ 212,522 25 %$ 482,672 $ 420,116 15 % General and administrative expenses increased$53.2 million , or 25%, in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . The increase was primarily due to a$12.6 million increase in an accrual for self-retained general business liabilities, a$9.1 million increase in bad debt expense and a$8.6 million increase in personnel-related costs, office-related costs, and other employee-related expenses. There were also increases of$8.6 million in consultant and advisory costs and$3.0 million in depreciation and amortization. These increases were partially offset by a$7.2 million decrease in claims administration costs and a$3.6 million decrease in certain loss contingencies including legal accruals and settlements. We also continued our contributions toward policy, which saw an increase of$12.6 million in 2022 as compared to the prior year. General and administrative expenses increased$62.6 million , or 15%, in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The increase was primarily due to a$23.2 million increase in an accrual for self-retained general business liabilities, a$12.8 million increase in consultant and advisory costs and a$11.9 million increase in personnel-related costs, office-related costs, and other employee-related expenses. There were also increases of$9.5 million in bad debt expense and$4.2 million in depreciation and amortization. These increases were partially offset by a$14.7 million decrease in certain loss contingencies including legal accruals and settlements and a$10.8 million decrease in claims administration costs. We also continued our contributions toward policy, which saw an increase of$12.8 million in 2022 as compared to the prior year. Interest Expense Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except for percentages) Interest expense$ (4,960) $ (12,849) (61) %$ (9,509) $ (25,417) (63) % Interest expense decreased$7.9 million , or 61%, in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 and decreased$15.9 million , or 63%, in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . Interest expense was lower in the six months endedJune 30, 2022 due to a decrease in amortization of debt discount related to the 2025 Notes following the adoption of ASU 2020-06 onJanuary 1, 2022 . 47
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Table of Contents Other Income, Net Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except for percentages) Other income, net$ 953 $ 1,741 (45) %$ 10,716 $ 5,346 100 % Other income, net decreased$0.8 million , or 45%, in the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 and increased$5.4 million , or 100%, in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The increase for the six months endedJune 30, 2022 was primarily due to sublease income related to certain subleased offices as part of the transaction with Woven Planet in the third quarter of 2021 offset by an unrealized loss on marketable equity securities. 48
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Table of Contents Non-GAAP Financial Measures Three Months Ended June 30, Six Months Ended June 30, 2022 2021 % Change 2022 2021 % Change (in millions, except for percentages) Contribution(1)$ 590.5 $ 452.0 30.6 %$ 1,093.0 $ 789.2 38.5 % Contribution Margin(1) 59.6 % 59.1 % 58.6 % 57.4 % Adjusted EBITDA(1)$ 79.1 $ 23.8 (232.4) %$ 133.9 $ (49.2) 372.2 % Adjusted EBITDA Margin(1) 8.0 % 3.1 % 7.2 % (3.6) % _______________ (1)Contribution, Contribution Margin, Adjusted EBITDA, and Adjusted EBITDA Margin are non-GAAP financial measures and metrics. For more information regarding our use of these measures and a reconciliation of these measures to the most comparable GAAP measures, see "Reconciliation of Non-GAAP Financial Measures."
Contribution and contribution margin
Contribution and Contribution Margin are measures used by our management to understand and evaluate our operating performance and trends. We believe Contribution and Contribution Margin are key measures of our ability to achieve profitability and increase it over time. Contribution Margin has generally increased over the periods presented as revenue has increased at a faster rate than the costs included in the calculation of Contribution.
We define contribution as revenue less cost of revenue, adjusted to exclude the following items from cost of revenue:
•amortization of intangible fixed assets;
•stock-based compensation expense;
•the expense of social contributions linked to compensation in shares;
•changes in insurance liabilities required by regulatory agencies attributable to historical periods;
•net amount of claims ceded under the reinsurance agreement;
•transaction costs related to certain inherited auto insurance liabilities, if any; and
•restructuring charges, if any.
For more information on revenue cost, see the section titled “Components of Operating Results – Revenue Cost”.
Contribution margin is calculated by dividing the contribution for a period by the revenue for the same period.
We record changes to historical liabilities for insurance required by regulatory agencies for financial reporting purposes in the quarter of positive or adverse development even though such development may be related to claims that occurred in prior periods. For example, if in the first quarter of a given year, the cost of claims grew by$1 million for claims related to the prior fiscal year or earlier, the expense would be recorded for GAAP purposes within the first quarter instead of in the results of the prior period. We believe these prior period changes to insurance liabilities do not illustrate the current period performance of our ongoing operations since these prior period changes relate to claims that could potentially date back years. We have limited ability to influence the ultimate development of historical claims. Accordingly, including the prior period changes would not illustrate the performance of our ongoing operations or how the business is run or managed by us. For consistency, we do not adjust the calculation of Contribution for any prior period based on any positive or adverse development that occurs subsequent to the quarter end. Annual Contribution is calculated by adding Contribution of the last four quarters. We believe the adjustment to exclude changes to the historical liabilities for insurance required by regulatory agencies from Contribution and Adjusted EBITDA is useful to investors by enabling them to better assess our operating performance in the context of current period results. 49
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During the second quarter of 2021, we entered into a Quota Share Reinsurance Agreement for the reinsurance of legacy auto insurance liabilities betweenOctober 1, 2018 toOctober 1, 2020 , based on the reserves in place as ofMarch 31, 2021 . Refer to Note 5 "Supplemental Financial Statement Information" to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding these transactions. We believe the costs associated with these transactions related to certain legacy auto insurance liabilities do not illustrate the current period performance of our ongoing operations despite this transaction occurring in the current period because the impacted insurance liabilities relate to claims that date back years. We believe the adjustment to exclude these costs associated with transactions related to legacy insurance liabilities from Contribution and Adjusted EBITDA is useful to investors by enabling them to better assess our operating performance in the context of current period results and provide for better comparability with our historically disclosed Contribution and Adjusted EBITDA amounts. Losses ceded under the Reinsurance Agreement that exceed$271.5 million , but are below the aggregate limit of$434.5 million , result in the recognition of a deferred gain liability. The deferral of gains has a negative impact in the current period to cost of revenue as the losses on direct liabilities are not offset by gains from excess benefits under the Reinsurance Agreement. The amortization of these deferred gains provides a benefit to cost of revenue in current and future periods equal to the excess benefits received. We believe that the net amount recognized on the statement of operations associated with claims ceded under the Reinsurance Agreement, including any related adverse development and any benefit recognized for the related deferred gains, should be excluded to show the ultimate economic benefit of the Reinsurance Agreement. This adjustment will help investors understand the economic benefit of our Reinsurance Agreement on future trends in our operations, as they improve over the settlement period of any deferred gains. Additionally, net amounts recognized for claims ceded under the Reinsurance Agreement would represent changes to historical liabilities for insurance required by regulatory agencies. As stated above, we believe prior period changes to insurance liabilities do not illustrate the current period performance of our ongoing operations or how the business is managed. This is because we have limited ability to influence the ultimate development of these historical claims, which can potentially date back years. Therefore, in the event that the net amount of any adverse developments and any benefits from deferred gains related to claims ceded under the Reinsurance Agreement is recognized on the statement of operations, those amounts will be excluded from the calculation of Contribution and Adjusted EBITDA through the exclusion of the "Net amount from claims ceded under the Reinsurance Agreement". For transparency, to help investors understand the ultimate economic benefit of the Reinsurance Agreement, we have broken out "Net amount of claims ceded under the Reinsurance Agreement," which would otherwise have been captured in "Changes to the liabilities for insurance required by regulatory agencies attributable to historical periods." As ofJune 30, 2022 , we have recorded$2.4 million of deferred gain related to losses ceded under the Reinsurance Agreement, which is included within accrued and other current liabilities on the condensed consolidated balance sheets. During the second quarter of 2022, we completed the Commutation Transaction, which effectively commuted and settled the Reinsurance Agreement. The Commutation Transaction resulted in a$36.8 million gain recorded to cost of revenue on the condensed consolidated statement of operations. Refer to Note 5 "Supplemental Financial Statement Information" to the condensed consolidated financial statements for information regarding these transactions. We believe the adjustment to exclude this gain associated with the commutation of the Reinsurance Agreement from Contribution and Adjusted EBITDA is useful to investors by enabling them to better assess our operating performance in the context of current period results and provide for better comparability with our historically disclosed Contribution and Adjusted EBITDA amounts. The gain associated with this Commutation Agreement. which commutes and settles the Reinsurance Agreement will be excluded from the calculation of Contribution and Adjusted EBITDA through the exclusion of the "Net amount from claims ceded under the Reinsurance Agreement." For more information regarding the limitations of Contribution and Contribution Margin and a reconciliation of revenue to Contribution, see the section titled "Reconciliation of Non-GAAP Financial Measures".
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA and Adjusted EBITDA Margin are key performance measures that our management uses to assess our operating performance and the operating leverage in our business. Because Adjusted EBITDA and Adjusted EBITDA Margin facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes. We expect Adjusted EBITDA and Adjusted EBITDA Margin will increase over the long term as we continue to scale our business and achieve greater efficiencies in our operating expenses.
We calculate Adjusted EBITDA as a net loss, adjusted for:
•interest charges;
•other income (expenses), net;
• provision for (benefit from) income taxes;
•depreciation and amortization;
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•share-based compensation;
•the expense of social contributions linked to compensation in shares;
•changes in insurance liabilities required by regulatory agencies attributable to historical periods;
•net amount of claims ceded under the reinsurance agreement;
• income from subletting;
•costs related to acquisitions and divestments, if any;
• transaction fees related to certain inherited auto insurance liabilities, if any; and
•restructuring charges, if any.
Adjusted EBITDA margin is calculated by dividing adjusted EBITDA for a period by sales for the same period.
During the third quarter of 2021, we entered into subleases for certain offices as part of the transaction with Woven Planet. Sublease income is included within other income on our condensed consolidated statement of operations, while the related lease expense is included within our operating expenses and loss from operations. Sublease income was immaterial prior to the third quarter of 2021. We believe the adjustment to include sublease income to Adjusted EBITDA is useful to investors by enabling them to better assess our operating performance, including the benefits of recent transactions, by presenting sublease income as a contra-expense to the related lease charges within our operating expenses.
For more information regarding the limits of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of net loss to Adjusted EBITDA, see the section entitled “Reconciliation of Non-GAAP Financial Measures”.
Reconciliation of Non-GAAP Financial Measures
We use Contribution, Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Furthermore, these measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations that are necessary to run our business. Thus, our Contribution, Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.
We compensate for these limitations by providing a reconciliation of contribution and adjusted EBITDA to related GAAP financial measures, revenue and net loss, respectively. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to display contribution, contribution margin, Adjusted EBITDA and Adjusted EBITDA margin together with their respective GAAP financial measures.
The following table provides a reconciliation of revenue to Contribution (in millions): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenue$ 990.7 $
765.0
(650.4) (346.9) (1,090.6) (758.9) Adjusted to exclude the following (as related to cost of revenue): Amortization of intangible assets 1.2 3.2 2.5 5.9 Stock-based compensation expense 10.1 10.2 20.0 18.6 Payroll tax expense related to stock-based compensation 0.2 0.3 0.9 1.4 Changes to the liabilities for insurance required by regulatory agencies attributable to historical periods(1) 275.4 - 275.4 128.0 Net amount from claims ceded under the Reinsurance Agreement(2)(3) (36.8) - 18.5 - Transactions related to certain legacy auto insurance liabilities(4) - 20.2 - 20.2 Contribution(5)$ 590.5 $ 452.0$ 1,093.0 $ 789.2 _______________ 51
-------------------------------------------------------------------------------- Table of Contents (1)$275.4 million of insurance expense recorded during the three and six months endedJune 30, 2022 reflects changes to reserves estimates of claims from the first quarter of 2022 and earlier periods.$128.0 million of insurance expense recorded during the six months endedJune 30, 2021 reflects changes to reserves estimates of claims from 2020 and earlier periods. (2)Reflects the net amount recognized on the statement of operations associated with claims ceded under the Reinsurance Agreement, including any losses related to the deferral of gains on the statement of operations and any benefit from the amortization of the deferred gain in the same period. For transparency, to help investors understand the ultimate economic benefit of the Reinsurance Agreement, we have broken out "Net amount of claims ceded under the Reinsurance Agreement," which would otherwise have been captured in "Changes to the liabilities for insurance required by regulatory agencies attributable to historical periods." (3)Includes a$36.8 million gain recognized in cost of revenue in the second quarter of 2022 on the condensed consolidated statement of operations related to the Commutation Transaction, which effectively commuted and settled the Reinsurance Agreement. Refer to Note 5 "Supplemental Financial Statement Information" to the condensed consolidated financial statements for information regarding the Commutation Transaction. (4)In the second quarter of 2021, we entered into a Reinsurance Agreement under which a third party reinsured certain legacy auto insurance liabilities. The total impact of the transaction to reinsure certain legacy auto insurance liabilities on our condensed consolidated statement of operations was$20.4 million , with$20.2 million in cost of revenue and$0.2 million in general and administrative expense in the three and six months endedJune 30, 2021 . (5)Due to rounding, numbers presented may not add up precisely to the totals provided. The following table provides a reconciliation of net loss to Adjusted EBITDA (in millions): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net loss$ (377.2) $
(251.9)
5.2 13.1 9.9 26.0 Other income, net (1.0) (1.7) (10.7) (5.3) Provision for (benefit from) income taxes 0.1 0.7 2.9 2.6 Depreciation and amortization 29.1 34.5 60.9 69.0 Stock-based compensation 176.6 201.0 330.4 365.2 Payroll tax expense related to stock-based compensation 2.5 6.8 12.0 23.3 Changes to the liabilities for insurance required by regulatory agencies attributable to historical periods(2) 275.4 - 275.4 128.0 Net amount from claims ceded under the Reinsurance Agreement(3)(4) (36.8) - 18.5 - Sublease income(5) 3.8 - 7.5 - Costs related to acquisitions and divestitures(6) 1.4 0.9 1.4 0.9 Transaction costs related to certain legacy auto insurance liabilities(7) - 20.4 - 20.4 Adjusted EBITDA(8)$ 79.1 $ 23.8$ 133.9 $ (49.2) _______________ (1)Includes$0.2 million and$0.4 million related to the interest component of vehicle-related finance leases in the three and six months endedJune 30, 2022 , respectively.$0.3 million and$0.6 million was related to the interest component of vehicle-related finance leases in the three and six months endedJune 30, 2021 , respectively. Refer to Note 7 "Leases" to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding the interest component of vehicle-related finance leases. (2)$275.4 million of insurance expense recorded during the three and six months endedJune 30, 2021 reflects changes to reserves estimates of claims from the first quarter of 2022 and earlier periods.$128.0 million of insurance expense recorded during the six months endedJune 30, 2021 reflects changes to reserves estimates of claims from 2020 and earlier periods. (3)Reflects the net amount recognized on the statement of operations associated with claims ceded under the Reinsurance Agreement, including any losses related to the deferral of gains on the statement of operations and any benefit from the amortization of the deferred gain in the same period. For transparency, to help investors understand the ultimate economic benefit of the Reinsurance Agreement, we have broken out "Net amount of claims ceded under the Reinsurance Agreement," which would otherwise have been captured in "Changes to the liabilities for insurance required by regulatory agencies attributable to historical periods." (4)Includes a$36.8 million gain recognized in cost of revenue in the second quarter of 2022 on the condensed consolidated statement of operations related to the Commutation Transaction, which effectively commuted and settled the Reinsurance Agreement. Refer to Note 5 "Supplemental Financial Statement Information" to the condensed consolidated financial statements for information regarding the Commutation Transaction. (5)Includes sublease income from subleases entered into as part of the transaction with Woven Planet in the third quarter of 2021. Sublease income prior to the third quarter of 2021 was immaterial. Refer to Note 4 "Divestitures" to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our transaction with Woven Planet for the divestiture of certain assets related to our self-driving vehicles division, Level 5. (6)Includes third-party costs incurred related to our acquisition of PBSC in the second quarter of 2022 and our transaction with Woven Planet in the second quarter of 2021. (7)In the second quarter of 2021, we entered into a Reinsurance Agreement under which a third party reinsured certain legacy auto insurance liabilities. The total impact of the transaction to reinsure certain legacy auto insurance liabilities on our condensed consolidated statement of operations was 52 -------------------------------------------------------------------------------- Table of Contents$20.4 million , with$20.2 million in cost of revenue and$0.2 million in general and administrative expense in the three and six months endedJune 30, 2021 . (8)Due to rounding, numbers presented may not add up precisely to the totals provided.
Cash and capital resources
As ofJune 30, 2022 , our principal sources of liquidity were cash and cash equivalents of approximately$239.3 million and short-term investments of approximately$1.6 billion , exclusive of restricted cash, cash equivalents and investments of$1.2 billion . Cash and cash equivalents consisted of institutional money market funds, certificates of deposits, commercial paper and corporate bonds that have an original maturity of less than three months and are readily convertible into known amounts of cash. Also included in cash and cash equivalents are certain money market deposit accounts and cash in transit from payment processors for credit and debit card transactions. Short-term investments consisted of commercial paper, certificates of deposit, corporate bonds and term deposits, which mature in 12 months or less. Restricted cash, cash equivalents and investments consisted primarily of amounts held in separate trust accounts and restricted bank accounts as collateral for insurance purposes and amounts pledged to secure certain letters of credit. We collect the fare and related charges from riders on behalf of drivers at the time the ride is delivered using the rider's authorized payment method, and we retain any fees owed to us before making the remaining disbursement to drivers. Accordingly, we maintain no accounts receivable from drivers. Our contracts with insurance providers require reinsurance premiums to be deposited into trust accounts with a third-party financial institution from which the insurance providers are reimbursed for claims payments. Our restricted reinsurance trust investments as ofJune 30, 2022 andDecember 31, 2021 were$1.1 billion and$1.0 billion , respectively. We continue to actively monitor the impact of the COVID-19 pandemic. Beginning inMarch 2020 , the pandemic and responses thereto contributed to a severe decrease in the number of rides on our platform and revenue which had a significant effect on our cash flows from operations. While conditions have improved, these impacts are ongoing. The extent to which our operations, financial results and financial condition will be impacted in the next few quarters by the pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including the duration of the pandemic, new information about additional variants, the availability and efficacy of vaccine distributions, additional or renewed actions by government authorities and private businesses to contain the pandemic or respond to its impact and altered consumer behavior, among other things. We have adopted several measures in response to the COVID-19 pandemic. We also made adjustments to our expenses and cash flow to correlate with declines in revenues including the transaction with Woven Planet completed onJuly 13, 2021 . Refer to Note 4 "Divestitures" to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding the divestiture of certain assets related to our self-driving vehicles division, Level 5.
We cannot be certain that our actions will mitigate some or all of the lingering negative effects of the pandemic on our business. With
unrestricted cash and cash equivalents and short-term investments at
Our future capital requirements will depend on many factors, including, but not limited to our growth, our ability to maintain profitability on an Adjusted EBITDA basis, our ability to attract and retain drivers and riders on our platform, the continuing market acceptance of our offerings, the timing and extent of spending to support our efforts to develop our platform, actual insurance payments for which we have made reserves, measures we take in response to the COVID-19 pandemic, our ability to maintain demand for and confidence in the safety of our platform during and following the COVID-19 pandemic, and the expansion of sales and marketing activities. As noted above, we expect to see continued suppression of demand for our platform and the resultant negative impacts on revenue for so long as the COVID-19 pandemic continues. Further, we may in the future enter into arrangements to acquire or invest in businesses, products, services and technologies. For example, we intend to significantly invest further into EVs in order to achieve compliance with the California Clean Miles Standard and Incentive Program which sets the target that 90% of rideshare miles inCalifornia must be in EVs by the end of 2030. Our investment also allows us to make steps toward our commitment to reach 100% EVs on theLyft Platform by the end of 2030. From time to time, we may seek additional equity or debt financing to fund capital expenditures, strategic initiatives or investments and our ongoing operations, or to refinance our existing or future indebtedness. In the event that we decide, or are required, to seek additional financing from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations could be adversely affected. Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
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Table of Contents Six Months Ended June 30, 2022 2021 Net cash used in operating activities$ (177,531) $ (117,032) Net cash provided by (used in) investing activities 23,123 341,744 Net cash used in financing activities (33,608) (33,997)
Effect of foreign exchange on cash, cash equivalents and restricted cash and cash equivalents
(121) 25 Net change in cash, cash equivalents and restricted cash and cash equivalents$ (188,137) $ 190,740 Operating Activities Cash used in operating activities was$177.5 million for the six months endedJune 30, 2022 . This consisted primarily of a net loss of$574.2 million . This was offset by non-cash stock-based compensation expense of$330.4 million and depreciation and amortization expense of$60.9 million . Cash used in operating activities was$117.0 million for the six months endedJune 30, 2021 . This consisted primarily of a net loss of$679.3 million offset by non-cash stock-based compensation expense of$365.2 million and depreciation and amortization expense of$69.0 million .
Investing activities
Cash used in investing activities was$23.1 million for the six months endedJune 30, 2022 , which primarily consisted of purchases of marketable securities of$1.3 billion , cash paid for the acquisition of PBSC of$146.3 million , net of cash acquired, and purchases of property and equipment and scooter fleet of$53.3 million . This was partially offset by proceeds from sales and maturities of marketable securities of$1.1 billion and maturities of term deposits of$380.0 million .
Cash flows from investing activities were
Fundraising activities
Cash used in financing activities was
Cash used in financing activities was$34.0 million for the six months endedJune 30, 2021 , which primarily consisted of our repayment of loans of$20.0 million , taxes paid related to net share settlement of equity awards of$15.7 million and principal payments of finance lease obligations of$18.7 million .
Contractual obligations and commitments
InFebruary 2022 , we amended our noncancelable arrangement with AWS, a web-hosting services provider. Under the most recent amended arrangement, we committed to spend an aggregate of at least$300 million betweenJanuary 2022 andJanuary 2026 , with a minimum amount of$80 million in each of the four contractual periods, on services with AWS. As ofJune 30, 2022 , we have made payments of$47.8 million under the amended arrangement. InMay 2022 , the Company completed its acquisition of PBSC for a total purchase price of$163.5 million inclusive of$14.1 million in estimated fair value of contingent consideration to be paid over the next year. Refer to Note 3 "Acquisitions" to the condensed consolidated financial statements for information regarding this transaction. As ofJune 30, 2022 , except as described above, there have been no other material changes from the contractual obligations and commitments previously disclosed in our Annual Report on Form 10-K/A for the year endedDecember 31, 2021 .
Off-balance sheet arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
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