Lyft, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (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. The financial information for the three and nine months ended September 30, 2021 included herein has been restated as more fully described in Notes 1 and 15 to the financial statements included in Item 1 of this Quarterly Report on Form 10-Q. 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 ends December 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 in the
United States and Canada.
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
the Lyft mobile application (the "Lyft App") in cities across the United States
and in select cities in Canada. 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.
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 and
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 through
Express 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 our Concierge 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
revenues from the sale of bikes and bike-share systems through our acquisition
of PBSC 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 the Lyft 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.
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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 make sure people have access to affordable,
reliable transportation to get where they need to go - no matter their income or
zip code. We've also made the commitment to reach 100% electric vehicles ("EVs")
on the Lyft network by the end of 2030. We believe many users are loyal to Lyft
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 using Lyft.
Impact of COVID-19 on our business
Beginning in the middle of March 2020, the COVID-19 pandemic and related responses caused decreased demand for our platform leading to decreased revenues as well as decreased earning opportunities for drivers on our platform. We also experienced volatility in the overall marketplace health on our platform during this period, including fluctuations in driver supply and service levels. 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. Revenue for the three months ended September 30, 2022 reached $1.1 billion the highest since our inception, reflecting growth in demand and overall marketplace health since the start of the year. Additionally, in the three months ended September 30, 2022, we also saw improvements to overall marketplace health on our platform as driver supply benefited from organic growth with driver supply incentives recorded as a reduction to revenue decreasing by $135.1 million and $109.0 million as compared to the three months ended September 30, 2021 and June 30, 2022. Although we have seen signs of an improvement in demand and marketplace health, the exact timing, pace and sustainability of the recovery remain uncertain. 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 about the risks associated with the COVID-19 pandemic and our litigation matters, please see the section entitled “Risk Factors” in Part II, Item 1A.
recent developments
acquisition PBSC Urban Solutions Corporation (“PBSC”)
On May 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.
Relief from reinsurance agreements
On June 21, 2022, PVIC and DARAG 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 ended June 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.
Restructuring Activities
On November 3, 2022, we committed to a plan of termination as part of our
efforts to reduce operating expenses in anticipation of continued macroeconomic
headwinds and to help offset insurance cost pressures in the fourth quarter and
after. The plan involves the termination of approximately 683 employees,
representing 13% of our employees. In connection with the plan of termination,
we estimate that we will incur approximately $27 million to $32 million of
restructuring and related charges related to employee severance and benefits
costs, which we expect to incur in the fourth quarter of 2022. As part of the
restructuring charges for this plan of termination, in the fourth quarter of
2022 and first quarter of 2023, we expect to record a stock-based compensation
charge and corresponding payroll tax expense related to equity compensation for
employees who were terminated and restructuring charges related to the exit and
sublease or cease use of certain facilities.
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Financial results for the three months ended September 30, 2022
• Total revenue is $1.1 billionan increase of 22% year-on-year.
• Gross profit, or revenue less cost of revenue, is $483.1 million. Gross margin or gross profit divided by revenue is 45.8%.
• Total costs and fees are $1.3 billionincluding stock-based compensation $221 million.
• Operating loss is $290.4 million.
• Other charges, net $126.2 millionincluding a $135.7 million After the investee announced its termination, the non-tradable equity investment and other assets were impaired.
• The net loss is $422.2 million.
• Adjusted EBITDA was $66.2 million.
• Cash used in operating activities is $26.2 million.
• Total unrestricted cash and cash equivalents and short-term investments $1.8 billion as September 30, 2022.
Active drivers and revenue per active driver
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 20,312 18,942 7.2% $51.88 $45.63 13.7%
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 ended
September 30, 2022 as compared to the three months ended September 30, 2021 was
due primarily to improvements to demand on our platform as we continue to
recover from the impacts of COVID-19. The increase in Revenue per Active Rider
in the three months ended September 30, 2022 as compared to the three months
ended September 30, 2021 primarily reflects the improvement in demand on our
platform, 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,
and revenue from the bikes and bike station hardware and software sales. Active
Riders and Revenue per Active Rider, which were negatively impacted by COVID-19
at the start of the year, increased sequentially each quarter in 2022,
reflecting improvements to demand and overall marketplace health.
Critical 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 to the key accounting policies and estimates described in our annual report on Form 10-K/A
December 31, 2021except as described below.
Recent Accounting Announcements
Please refer to Note 2 to the Condensed Consolidated Financial Statements included elsewhere in this quarterly report on Form 10-Q for the most recent accounting announcements that have not 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 in March 2020. While we have seen 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. 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.
cost of revenue
Cost of revenue primarily 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 in California. 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. On July 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 rider incentives, personnel-related compensation costs, driver incentives for referring new drivers or riders, advertising expenses, rider refunds and marketing partnerships with third parties. Selling 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 legal accruals and settlements, insurance claims administrative fees,
policy spend, depreciation, facility costs and other corporate costs. General
and administrative expenses are expensed as incurred.
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interest expense
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 an impairment charge related to a non-marketable equity investment and other assets in 2022, a pre-tax gain as a result of the transaction with Woven Planet in 2021, interest earned on our cash and cash equivalents, sublease income and restricted and unrestricted short-term investments.
Income tax provision
Our provision for income taxes consists of federal and state taxes in the U.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 the U.S. and foreign taxation of such activities may increase our overall provision for income taxes in the future.
We have a valuation allowance us Deferred tax assets, including federal and state net operating loss carry-forwards, or NOLs. We expect to maintain this valuation allowance until the benefits of our federal and state tax-deferred assets are more likely to materialize.
Business results
The following table summarizes our historical condensed consolidated statements
of operations data:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(As Restated) (As Restated)
(in thousands)
Revenue $ 1,053,820 $ 864,405 $ 2,920,143 $ 2,238,390
Costs and expenses
Cost of revenue 570,703 392,207 1,661,353 1,151,136
Operations and support 119,223 109,679 323,137 292,375
Research and development 227,678 226,693 622,200 716,950
Sales and marketing 133,722 108,955 400,805 287,502
General and administrative 292,870 231,907 775,542 652,023
Total costs and expenses 1,344,196 1,069,441 3,783,037 3,099,986
Loss from operations (290,376) (205,036) (862,894) (861,596)
Interest expense (5,022) (13,093) (14,531) (38,510)
Other income (expense), net (126,155) 125,042 (115,439) 130,388
Loss before income taxes (421,553) (93,087) (992,864) (769,718)
Provision for income taxes 648 6,627 3,515 9,253
Net loss $ (422,201) $ (99,714) $ (996,379) $ (778,971)
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The following table sets forth the components of our condensed consolidated operating statement data as a percentage of revenue:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(As Restated) (As Restated)
Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses
Cost of revenue 54.2 45.4 56.9 51.4
Operations and support 11.3 12.7 11.1 13.1
Research and development 21.6 26.2 21.3 32.0
Sales and marketing 12.7 12.6 13.7 12.8
General and administrative 27.8 26.8 26.6 29.1
Total costs and expenses 127.6 123.7 129.5 138.5
Loss from operations (27.6) (23.7) (29.5) (38.5)
Interest expense (0.5) (1.5) (0.5) (1.7)
Other income (expense), net (12.0) 14.5 (4.0) 5.8
Loss before income taxes (40.0) (10.8) (34.0) (34.4)
Provision for income taxes 0.1 0.8 0.1 0.4
Net loss (40.1) % (11.5) % (34.1) % (34.8) %
Three-month and nine-month comparison ends September 30, 2022 By the end of three and nine months September 30, 2021
Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(in thousands, except for percentages)
Revenue $ 1,053,820 $ 864,405 22 % $ 2,920,143 $ 2,238,390 30 %
Revenue increased $189.4 million, or 22%, in the three months ended
September 30, 2022, as compared to the three months ended September 30, 2021,
driven primarily by an increase in the number of Active Riders as compared to
the three months ended September 30, 2021, as we recovered from the impacts of
COVID-19. Active Riders increased 31.9%, 15.9%, and 7.2% for the quarters ended
March 31, 2022, June 30, 2022, and September 30, 2022 respectively, as compared
to the same quarters in the prior year and Revenue per Active Rider increased
9.0%, 11.8%, and 13.7% for the quarters ended March 31, 2022, June 30, 2022 and
September 30, 2022 respectively, as compared to the same quarters in the prior
year. These increases to Active Riders and Revenue per Active Rider reflect the
improvement in demand on the Company's platform and improving marketplace health
in 2022 as compared to the same periods in 2021 during which the COVID-19
pandemic had a stronger impact. Driver supply incentives recorded as a reduction
to revenue also decreased by $135.1 million in the three months ended September
30, 2022, as compared to the three months ended September 30, 2021 as driver
supply on the platform benefited from organic growth in the third quarter of
2022.
Revenue increased $681.8 million, or 30%, in the nine months ended September 30,
2022 as compared to the nine months ended September 30, 2021, driven primarily
by the significant increase in the number of Active Riders as compared to the
same period in 2021, as we recovered from the impacts of COVID-19. Revenue also
benefited from revenues from licensing and data access agreements, beginning in
the second quarter of 2021. Driver supply incentives recorded as a reduction to
revenue increased by $39.7 million as compared to the nine months ended
September 30, 2021, primarily due to the decline in ride frequency due to the
COVID-19 pandemic in early 2021 and was partially offset by organic growth in
driver supply on our platform which we experienced in the third quarter of 2022.
We expect to see continued recovery in overall demand for our platform and the
resulting positive impacts on revenue, Active Riders and Revenue per Active
Rider as we recover from the impacts of COVID-19. However, we cannot predict the
impact of COVID variants, the longer term impact of the pandemic, or the impact
of a deteriorating macroeconomic environment will have on consumer behavior, and
these factors may slow such recovery.
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Cost of Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(As Restated) (As Restated)
(in thousands, except for percentages)
Cost of revenue $ 570,703 $ 392,207 46 % $ 1,661,353 $ 1,151,136 44 %
Cost of revenue increased $178.5 million, or 46%, in the three months ended
September 30, 2022 as compared to the three months ended September 30, 2021. The
increase was due primarily to a $153.9 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. This increase in insurance
costs included an increase in changes in estimates to historical liabilities for
insurance required by regulatory agencies of $92.9 million. Cost of revenue also
increased due to increases of $16.8 million in transaction fees, $12.8 million
in Light Vehicle related costs and $2.8 million in web hosting fees.
Cost of revenue increased $510.2 million, or 44.3%, in the nine months ended
September 30, 2022 as compared to the nine months ended September 30, 2021. The
increase was due primarily to a $462.3 million net 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. This net increase in insurance
costs included an increase in changes in estimates to historical liabilities for
insurance required by regulatory agencies of $240.3 million. The net increase in
insurance costs also included an offset related to 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 increased due to increases of
$64.5 million in transaction fees and $9.7 million in web hosting fees. These
increases were offset by a $25.9 million decrease in Flexdrive related costs
inclusive of gains on sale of vehicles.
We expect the cost of revenue to increase in the near term due to higher insurance costs due to recent economic factors, including a high inflation environment.
Operations and Support
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(in thousands, except for percentages)
Operations and support $ 119,223 $ 109,679 9 % 323,137 $ 292,375 11 %
Increased operating and support expenses $9.5 millionor 9%, within three months of closing September 30, 2022 compared to the three months ending
September 30, 2021. The main reason for the increase is $6.7 million Increased light vehicle fleet operational support costs and $3.8 million Staff-related costs increase.
Operations and support expenses increased $30.8 million, or 11%, in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The increase was primarily due to a $17.2 million increase in Light Vehicle fleet operations support costs, a $11.9 million increase in driver onboarding costs and rider and driver support costs and a $6.8 million increase in personnel-related costs.
Research and Development
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(in thousands, except for percentages)
Research and development $ 227,678 $ 226,693 0 % 622,200 $ 716,950 (13) %
R&D expenses were relatively flat through the three months
September 30, 2022 and 2021, as both periods reflect post-transaction fees with Woven Planet, which occurred in the early third quarter of 2021. The small increase was primarily due to the net impact of stock-based compensation and personnel-related costs. There are no other significant fluctuations or offsets in research and development expenses.
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Research and development expenses decreased $94.8 million, or 13%, in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The decrease was primarily due to a $36.8 million decrease in stock-based compensation and a $32.1 million decrease in personnel-related costs, which were primarily driven by reduced headcount following the transaction with Woven Planet in the third quarter of 2021. There were also reduced Level 5 costs partially driven by the transaction with Woven Planet, including decreases of $11.1 million in web hosting fees and $7.5 million in autonomous vehicle research costs. There was also a decrease of $7.2 million in consulting and advisory costs.
Sales and Marketing
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(in thousands, except for percentages)
Sales and marketing $ 133,722 $ 108,955 23 % $ 400,805 $ 287,502 39 %
Sales and marketing expenses increased $24.8 million, or 23%, in the three
months ended September 30, 2022 as compared to the three months ended
September 30, 2021. The increase was primarily due to a $12.5 million increase
in costs related to incentive programs, a $5.1 million increase in stock-based
compensation and a $3.6 million increase in personnel-related costs.
Sales and marketing expenses increased $113.3 million, or 39%, in the nine
months ended September 30, 2022 as compared to the nine months ended
September 30, 2021. The increase was primarily due to a $46.7 million increase
in costs related to incentive programs and a $45.0 million increase in costs
associated with driver and rider programs.
General and Administrative
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(in thousands, except for percentages)
General and administrative $ 292,870 $ 231,907 26 % $ 775,542 $ 652,023 19
%
General and administrative expenses increased $61.0 million, or 26%, in the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. The increase was primarily due to a $13.1 million increase in certain loss contingencies including legal accruals and settlement, a $12.8 million increase in an accrual for self-retained general business liabilities and a $12.1 million increase in personnel-related costs. There were also increases of $8.9 million in stock-based compensation, $3.7 million in consultant and advisory costs and $3.1 million in depreciation and amortization. These increases were partially offset by a $4.8 million decrease in claims administration costs. We also continued our contributions toward policy, which saw an increase of $2.3 million in 2022 as compared to the prior year. General and administrative expenses increased $123.5 million, or 19%, in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The increase was primarily due to a $36.0 million increase in an accrual for self-retained general business liabilities, a $24.0 million increase in personnel-related costs, office-related costs, and other employee-related expenses and a $16.6 million increase in consultant and advisory costs. There were also increases of $10.3 million in stock-based compensation, $9.7 million in bad debt expense and $7.2 million in depreciation and amortization. These increases were partially offset by a $15.5 million decrease in claims administration costs and a $1.6 million decrease in certain loss contingencies including legal accruals and settlements. We also continued our contributions toward policy, which saw an increase of $15.1 million in 2022 as compared to the prior year.
interest expense
Three Months Ended September
30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(in thousands, except for percentages)
Interest expense $ (5,022) $ (13,093) (62) % $ (14,531) $ (38,510) (62) %
Interest expense decreased $8.1 million, or 62%, and $24.0 million, or 62%, in
the three and nine months ended September 30, 2022 as compared to the three
months ended September 30, 2021, respectively. Interest expense was lower in the
three and nine months ended September 30, 2022 due to a decrease in amortization
of debt discount related to the 2025 Notes following the adoption of ASU 2020-06
on January 1, 2022.
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Other Income (Expense), Net
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(in thousands, except for percentages)
Other income (expense), net $ (126,155) $ 125,042 (201) % $ (115,439) $ 130,388
(189) %
Other income (expense), net decreased $251.2 million, or 201%, and $245.8
million, or 189%, in the three and nine months ended September 30, 2022 as
compared to the three and nine months ended September 30, 2021, respectively.
The decrease was primarily due to a $135.7 million impairment charge related to
a non-marketable equity investment in a privately held company and other assets
in the third quarter of 2022 and a pre-tax gain of $119.3 million as a result of
the transaction with Woven Planet in the third quarter of 2021.
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Non-GAAP Financial Measures
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
(As Restated) (As Restated)
(in millions, except for percentages)
GAAP Financial Measures
Gross profit(1) 483.1 472.2 2.3 % 1,258.7 1,087.3 15.8 %
Gross profit margin(2) 45.8% 54.6% 43.1% 48.6%
Net loss $ (422.2) $ (99.7) 323.5 % $ (996.4) $ (779.0) 27.9 %
Net loss as a % of revenue (40.1) % (11.5) % (34.1) % (34.8) %
Non-GAAP Financial Measures
Contribution(3) $ 590.4 $ 513.6 15.0 % $ 1,683.4 $ 1,302.8 29.2 %
Contribution Margin(3) 56.0 % 59.4 % 57.6 % 58.2 %
Adjusted EBITDA(3) $ 66.2 $ 67.3 1.6 % $ 200.1 $ 18.2 999.5 %
Adjusted EBITDA Margin(3) 6.3 % 7.8 % 6.9 % 0.8 %
_______________
(1)Gross profit is defined as revenue less cost of revenue.
(2)Gross profit margin is defined as gross profit divided by revenue.
(3)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 Deposit
Contribution and Contribution Margin are measures used by our management to understand and evaluate our operating performance and trends. Gross profit is the most directly comparable financial measure to Contribution and gross profit margin is similarly comparable to Contribution Margin. 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 time as revenue has increased at a faster rate than the costs included in the calculation of Contribution.
We define contribution as gross profit, or revenue minus cost of revenue, adjusted to exclude the following items from cost of revenue:
• Amortization of intangible assets;
• stock-based compensation expense;
• Payroll tax charges associated with stock-based compensation;
• Changes in insurance liabilities required by regulators over the historical period;
• Net claims ceded under reinsurance agreements;
• transaction costs, if any, associated with certain legacy auto insurance liabilities; and
• Restructuring fees, if any.
For more information on cost of revenue, see the section titled “Components of Operating Results – Cost of Revenue”.
Contribution margin is calculated by dividing the contribution for a period by the income for the same period.
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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.
During the second quarter of 2021, we entered into a Quota Share Reinsurance
Agreement for the reinsurance of legacy auto insurance liabilities between
October 1, 2018 to October 1, 2020, based on the reserves in place as of March
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, resulted in the recognition of a
deferred gain liability. The deferral of gains had a negative impact in the
respective period to cost of revenue as the losses on direct liabilities were
not offset by gains from excess benefits under the Reinsurance Agreement. The
amortization of these deferred gains provided a benefit to cost of revenue over
multiple 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 of September 30, 2022, we have $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 gross profit to Contribution, see the section
titled "Reconciliation of Non-GAAP Financial Measures".
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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 the following factors:
• Interest expense;
• Other income (expenses), net;
• provide (benefit from) income tax;
• Depreciation and amortization;
• stock-based compensation;
• Payroll tax charges associated with stock-based compensation;
• Changes in insurance liabilities required by regulators over the historical period;
• Net claims ceded under reinsurance agreements;
• Sublease income;
• costs associated with acquisitions and divestitures, if any;
• transaction costs, if any, associated with certain legacy auto insurance liabilities; and
• Restructuring fees, if any.
Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by revenue 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 on Adjusted EBITDA and Adjusted EBITDA Margin limits and reconciliation of Net Loss to Adjusted EBITDA, please 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 reconcile these limitations by reconciling contribution and adjusted EBITDA to the relevant GAAP financial measures, revenue and net loss, respectively. We encourage investors and others to review our financial information comprehensively, not to rely on any single financial measure, and to view Contribution, Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin in conjunction with their respective relevant GAAP financial measures.
The following table provides a reconciliation of gross profit or revenue less cost of revenue and contribution (in millions):
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Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(As Restated) (As Restated)
Revenue $ 1,053.8 $ 864.4 $ 2,920.1 $ 2,238.4
Less cost of revenue (570.7) (392.2) (1,661.4) (1,151.1)
Gross profit 483.1 472.2 1,258.7 1,087.3
Gross profit margin 45.8% 54.6% 43.1% 48.6%
Adjusted to exclude the following (related to cost of revenue): Amortization of intangible assets
1.2 2.8 3.7
8.7
Stock-based compensation expense 13.0 10.2 33.0
28.8
Payroll tax expense related to stock-based compensation 0.2 0.2 1.1
1.6
Changes to the liabilities for insurance required by regulatory agencies attributable to historical periods(1) 92.9 - 368.3
128.0
Net amount from claims ceded under the Reinsurance Agreement(2)(3) - 28.2 18.5
28.2
Transactions related to certain legacy auto
insurance liabilities(4) - - - 20.2
Contribution(5) $ 590.4 $ 513.6 $ 1,683.4 $ 1,302.8
Contribution Margin 56.0% 59.4% 57.6% 58.2%
_______________
(1)$92.9 million and $368.3 million of insurance expense recorded during the
three and nine months ended September 30, 2022, respectively, reflect changes to
reserves estimates of claims from the second quarter of 2022 and earlier
periods. $128.0 million of insurance expense recorded during the nine months
ended September 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 nine months ended September 30, 2021.
(5)Due to rounding, numbers presented may not add up precisely to the totals
provided.
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Net loss is the most directly comparable financial measure to Adjusted EBITDA.
The following table provides a reconciliation of net loss to Adjusted EBITDA (in
millions):
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(As Restated) (As Restated)
Net loss $ (422.2) $ (99.7) $ (996.4) $ (779.0)
Adjusted to exclude the following:
Interest expense(1) 5.3 13.4 15.2 39.3
Other (income) expense, net 126.2 (125.0) 115.4 (130.4)
Provision for (benefit from) income taxes 0.6 6.6 3.5 9.3
Depreciation and amortization 35.9 37.0 96.8 106.1
Stock-based compensation 221.0 198.4 551.4 563.7
Payroll tax expense related to stock-based
compensation 3.1 4.9 15.1 28.2
Changes to the liabilities for insurance
required by regulatory agencies attributable to
historical periods(2) 92.9 - 368.3 128.0
Net amount from claims ceded under the
Reinsurance Agreement(3)(4) - 28.2 18.5 28.2
Sublease income(5) 2.6 2.9 10.1 2.9
Costs related to acquisitions and
divestitures(6) 0.9 0.6 2.3 1.5
Transaction costs related to certain legacy auto
insurance liabilities(7) - - - 20.4
Adjusted EBITDA(8) $ 66.2 $ 67.3 $ 200.1 $ 18.2
_______________
(1)Includes $0.3 million and $0.7 million related to the interest component of
vehicle-related finance leases in the three and nine months ended September 30,
2022, respectively. $0.3 million and $0.9 million was related to the interest
component of vehicle-related finance leases in the three and nine months ended
September 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)$92.9 million and $368.3 million of insurance expense recorded during the
three and nine months ended September 30, 2022, respectively, reflects changes
to reserves estimates of claims from the second quarter of 2022 and earlier
periods. $128.0 million of insurance expense recorded during the nine months
ended September 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. In the third quarter of 2022, this includes adjustments to the
contingent consideration related to our acquisition of PBSC.
(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 $20.4
million, with $20.2 million in cost of revenue and $0.2 million in general and
administrative expense in the three and nine months ended September 30, 2021.
(8)Due to rounding, numbers presented may not add up precisely to the totals
provided.
Liquidity and Capital Resources
As of September 30, 2022, our principal sources of liquidity were cash and cash
equivalents of approximately $143.7 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
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Investments consist primarily of amounts held in separate trust accounts and restricted bank accounts as collateral for insurance, as well as commitments to obtain certain letters of credit.
In November 3, 2022, we entered into a revolving credit agreement with certain
lenders which provides for a $420 million revolving secured credit facility
maturing on the earlier of (i) November 3, 2027 and (ii) February 13, 2025, if,
as of such date, the Company's Liquidity (as defined in the revolving credit
agreement) minus the aggregate principal amount of the Company's 2025 Notes
outstanding on such date is less than $1.25 billion. We are obligated to pay
interest on loans under the credit facility and other customary fees for a
credit facility of this size and type, including an upfront fee and an unused
commitment fee. The interest rate for the credit facility is determined based on
calculations using certain market rates as set forth in the credit agreement. In
addition, the credit facility contains restrictions on payments including cash
payments of dividends. As of the date of this Quarterly Report on Form 10-Q, no
amounts had been drawn under the credit facility.
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 of September 30, 2022 and December 31, 2021 were $1.0 billion and
$1.0 billion, respectively.
We continue to actively monitor the impact of the COVID-19 pandemic. Beginning
in March 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 on July 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. On November 3, 2022, we committed to a plan of termination to reduce
operating expenses in anticipation of continued macroeconomic headwinds and to
help offset insurance cost pressures in the fourth quarter of 2022 and after.
The plan involves the termination of approximately 13% of our employees and we
expect to incur approximately $27 million to $32 million of restructuring and
related charges related to employee severance and benefits costs, exclusive of
stock-based compensation charges, which we expect to incur in the fourth quarter
of 2022. We also expect to incur restructuring charges related to the exit and
sublease or cease use of certain facilities to align with our anticipated
operating needs in fourth quarter of 2022 and the first quarter of 2023.
We cannot be certain that our actions will mitigate some or all of the
continuing negative effects of the pandemic on our business. With $1.8 billion
in unrestricted cash and cash equivalents and short-term investments as of
September 30, 2022, as well as our credit facility, we believe we have
sufficient liquidity to meet our working capital and capital expenditures needs
for at least the next 12 months and beyond.
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 in California 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 the Lyft
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.
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cash flow
The following table summarizes our cash flows for the periods indicated (in
thousands):
Nine Months Ended September 30,
2022 2021
(As Restated)
Net cash used in operating activities $ (203,726) $ (75,502)
Net cash provided by (used in) investing activities 52,505 572,732
Net cash used in financing activities (66,871) (63,138)
Effects of foreign exchange on cash, cash equivalents and restricted cash and cash equivalents
(780) (141) Net change in cash, cash equivalents and restricted cash and cash equivalents $ (218,872) $ 433,951 Operating Activities Cash used in operating activities was $203.7 million for the nine months ended September 30, 2022. This consisted primarily of a net loss of $996.4 million and a $135.7 million impairment charge related to a non-marketable equity investment and other assets. This was offset by non-cash stock-based compensation expense of $551.4 million and depreciation and amortization expense of $96.8 million. Cash used in operating activities was $75.5 million for the nine months ended September 30, 2021. This consisted primarily of a net loss of $779.0 million and a $119.3 million pre-tax gain from the transaction with Woven Planet. This was offset by non-cash stock-based compensation expense of $563.7 million and depreciation and amortization expense of $106.1 million.
investment activity
Cash provided by investing activities was $52.5 million for the nine months ended September 30, 2022, which primarily consisted of proceeds from sales and maturities of marketable securities of $2.5 billion and maturities of term deposits of $380.0 million. This was partially offset by purchases of marketable securities of $2.7 billion and cash paid for the acquisition of PBSC of $146.3 million, net of cash acquired. Cash provided by investing activities was $572.7 million for the nine months ended September 30, 2021, which primarily consisted of proceeds from sales and maturities of marketable securities of $2.8 billion, maturities of term deposits of $607.5 million and proceeds of $122.7 million from the transaction with Woven Planet. This was partially offset by purchases of marketable securities of $2.5 billion and term deposits of $441.5 million.
financing activities
Cash used in financing activities was $66.9 million for the nine months ended September 30, 2022, which primarily consisted of our repayment of loans of $52.0 million and principal payments of finance lease obligations of $21.7 million. Cash used in financing activities was $63.1 million for the nine months ended September 30, 2021, which primarily consisted of our repayment of loans of $34.0 million, principal payments of finance lease obligations of $28.7 million and taxes paid related to net share settlement of equity awards of $21.9 million. This was partially offset by proceeds from the exercise of stock options and other common stock issuances of $21.4 million.
Contractual Obligations and Commitments
In February 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 between January 2022
and January 2026, with a minimum amount of $80 million in each of the four
contractual periods, on services with AWS. As of September 30, 2022, we have
made payments of $71.1 million under the amended arrangement.
In May 2022, the Company completed its acquisition of PBSC for a total purchase
price of $163.5 million inclusive of $15.0 million in estimated fair value of
contingent consideration as of September 30, 2022, to be paid over the next
year. Refer to Note 3 "Acquisitions" to the condensed consolidated financial
statements for information regarding this transaction.
As of September 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 ended December 31,
2021.
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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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