Micromobility company Lime says it has moved beyond the financial hardship caused by the COVID-19 pandemic, reaching a milestone that seemed unthinkable earlier this year.
\nIn short, the company is now largely profitable.
\nLime said it was both operating cash flow positive and free cash flow positive in the third quarter \u2014 a first \u2014 and is on pace to be full-year profitable, excluding certain costs (EBIT), in 2021.<\/p>\n
During the WSJ Future of Everything event Thursday, Lime CEO Wayne Ting painted a far rosier picture of the company\u2019s future than one might have expected.
\nThere was a time when Bird and Lime, competing domestic scooter rental companies, were raising capital at a torrid pace, fighting for market share, regulatory breathing room and sidewalk real estate. Then, the pandemic hit and the companies had to take shelter.
\nLime underwent a round of layoffs in April, taking on capital from Uber the next month in a down-round that brought its valuation under the $1 billion mark. As it announced in a blog post that TechCrunch reviewed before publication, it paused most of its operations for a month during the early COVID-19 days.
\n\u201cIt was certainly a very, very tough decision for us earlier this year and I know we weren\u2019t the only company during COVID,\u201d Ting said during the event. \u201cI think it\u2019s been in so many ways helpful to us to realize how hard these choices can be. We\u2019re going to be growing headcount again. We\u2019re going to do so in a careful way so that we\u2019re not going\u00a0have to make hard choices like the ones we made earlier this year.\u201d
\nNow things are better, Lime says. Much better. Indeed, the company claims that it is the \u201cfirst new mobility company to reach cash-flow positive for a full quarter.\u201d
\nCash flow positivity, in general, is an important threshold for a startup to reach as it implies that the company can largely self-fund from that point forward, limiting its dependency on external cash for survival.
\nLime also claims that it \u201creached EBIT positive at the company level over the summer.\u201d The specifics of the phrase \u201cEBIT positive\u201d are important. Was the company employing strict EBIT on its math and not discounting share-based compensation, or was it measuring using adjusted EBIT as many startups do, removing the cost of share-based compensation that shows up in GAAP results? According to the company the number did exclude share-based compensation, making the news slightly smaller.
\nPerhaps the most bullish data point from Lime is that it expects to be full-year profitable in 2021. TechCrunch asked for specifics because again how one measures profitability matters. It turns out, Lime is basing this projection on EBIT, as opposed to more traditional net income. For a startup this is not a surprising decision, but before we declare Lime fully \u201cprofitable,\u201d we\u2019ll want some more GAAP metrics.
\nStill, it appears that Lime is not going to die, and is, importantly, putting capital into developing new products. The company provided the first example of that new product pipeline on Thursday with the launch of the Gen4 scooter in Paris. It also teased a so-called \u201cthird and fourth mode\u201d in the first quarter of 2021 as well as the addition of a swappable battery.
\nThe scooter company wouldn\u2019t give TechCrunch much information about what these third and fourth modes will be. The first two modes are bikes and scooters, which leaves skateboards, cars, flying cars and boats?
\nLime did give TechCrunch a little bit of clarification, stating that \u201cmove beyond,\u201d means the company will be operating an additional mode, accessed through the Lime app, in line with its goal to serve any trips under five miles. These modes will build on the Lime Platform play, but this will be operated by Lime rather than a partner.<\/p>\n
Jump bikes are now on the Lime app and heading to more cities<\/p>\n
Lime has long discussed reaching profitability. Perhaps because it and its competitor Bird were infamous for their losses during their early unicorn period.
\nBy November of 2019, Lime was talking about reaching EBIT positivity in 2020. But the start of 2020 was not kind on the company, with 100 of its staff losing their jobs and 12 markets getting dropped. At the time TechCrunch wrote that \u201cLime is hoping to achieve profitability this year by laying off about 14% of its workforce and ceasing operations in 12 markets,\u201d with the company itself writing at the time that \u201cfinancial independence [was its] goal for 2020, and [that it was] confident that Lime will be the first next-generation mobility company to reach profitability.\u201d
\nDepending on how you measure profitability, that could be true.
\nThings didn\u2019t get easier for Lime later in the year. Its competitor Bird underwent layoffs, and Lime cut more staff in April. At the time, Lime said that it was focused on coming \u201cback stronger than ever when this is over.\u201d
\nThe company is certainly in better shape than it was in April and May. So, how did Lime come back from the brink? In its own estimation, the company took time during its pause to \u201cdrill down on getting the business right, narrowing [its] focus and strengthening [its] fundamentals.\u201d That might sound like corporate babble, but by taking a nearly full stop in its operating business, Lime could probably see a bit more clearly what was working and what was not. And with some cuts to what wasn\u2019t, it could set up a future in which its operations were leaner, and more unit-economically positive.
\nAnd, now, here we are asking niggling questions about just what sort of profit Lime is really making. Instead of, you know, who might buy its leftover office furniture. It\u2019s a nice turnaround.<\/p>\n