Neutron Holdings, Inc. (LIME) Q3 2026 Earnings Call Transcript

Operator: Hello, everyone, and welcome to Lime's Third Quarter 2026 Earnings Call. [Operator Instructions] Today's call is being recorded and may not be reproduced in whole or in part without written permission from the company. This conference call is being broadcast live, and a replay will be accessible on Lime's investor relations website at investors.li.me. I will now turn the call over to Mark May, Head of Investor Relations. Please go ahead.

Mark May: Thank you, operator, and thank you all for joining us today. Welcome to Lime's Q3 2026 earnings presentation. On the call today, we have Wayne Ting, Lime's CEO; and Ann Gugino, CFO; and this is Mark May, Head of Investor Relations. Before we begin, I would like to remind everyone that today's discussion may contain forward-looking statements based on our current expectations, assumptions and forecasts about future events. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today, except as required by law. Please refer to our latest filings with the SEC for more information about factors that may cause actual results to differ materially from forward-looking statements. During today's call, we will refer to certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings press release, supplemental slides and filings with the SEC. Each of which is posted to our Investor Relations website at investors.li.me. Today's call is being webcast, and a replay will be available on our Investor Relations website following the call. After the prepared remarks, we will open the call to questions. With that, let me hand it over to Wayne.

Hsing-Yuan Ting: Thanks, Mark. Lime delivered solid results in the third quarter, with revenue of $361 million, growing 20% year-over-year. We also hit an important milestone this quarter, exceeding $1 billion in revenue on a trailing 12-month basis for the first time in company history. We're also proud that Lime continued to deliver results as a Rule of 40-plus company. In Q3, we delivered adjusted EBITDA of $118 million, representing a 33% margin. Our top line results were driven by strong fleet growth and positive rider retention trends. Our growth algorithm is anchored by fleet. And in Q3, our average operational fleet grew 26% year-over-year to 447,000 vehicles. This represents an acceleration from Q2 year-over-year growth and reflects the runway we have to expand our fleet in existing markets and also the opportunities ahead to scale into many new markets that can benefit from line service. Revenue per vehicle per day, or RVD, which is our primary utilization metric, was $8.77 in the quarter. This represented a 4.8% year-over-year decline. RVD was impacted by 3 main factors. First is the continued scaling of our fleet in newer mega markets like Australia. In our experience, when we enter new markets, we first need to build fleet reliability before demand can come. This means in the early days of any market entry, the RVD has typically been lower. But usually, we have seen demand catch up over time. Second, we continue to see stronger adoption of LimePrime relative to expectations. This new recurring monthly subscription program provided unlimited vehicle unlocks, flat rate pricing and extended vehicle reservations. The flat rate pricing is lower than the pay-as-you-go pricing that nonsubscribers typically pay, which means our average price point is falling as more riders sign up for the LimePrime offering. The great thing is the higher adoption means more users see the value of LimePrime, and we know from experience that when we invest in our subscription products, over time, it will drive more engagement, higher retention rates and greater lifetime value of our riders. Finally, we see RVD pressures related to recent competitive behavior in targeted markets, primarily in Europe. Historically, the micro mobility sector has occasionally been defined by short-term players chasing volume at the expense of unit economics. This quarter, we made a strategic decision in these instances to not chase short-term growth and to remain disciplined around unit economics. While this impacted RVD in the quarter, our experience indicates that staying disciplined is the better move for driving long-term shareholder value. On the rider side, we continue to see strong adoption of LimePrime and early subscriber retention and user engagement data points for LimePrime are quite encouraging. However, the competitive behavior in certain markets impacted MAU growth in the quarter. In Q3, we were able to generate positive net income of $44 million and positive free cash flow of $91 million despite the RVD impact on gross margins and EBITDA. This reflects the underlying strength of our operating model, our ability to execute in a variety of market conditions, our focus on maintaining strong underlying unit economics and our disciplined approach to balancing growth with profitability. There were a number of other noteworthy highlights during the quarter that I'd like to share. First is LimePrime. In Q3, we continue to see strong momentum in LimePrime, which is already on pace to exceed LimePass in terms of trip volume this year. We're also pleased to see that LimePrime is resonating across all of our rider segments from commuters and recreational users to new users and to riders in a wide variety of geographic markets across the globe. Importantly, we are seeing positive engagement from LimePrime riders. In fact, in Q3, we observed that the average LimePrime riders takes 8x as many trips as pay-as-you-go riders and 16% more than LimePass riders. Importantly, retention is also stronger. Retention rates for LimePrime riders not only improved sequentially, but are also averaging 3x higher than nonsubscribers in Q3. LimePrime riders are not only our most engaged writers, they are also the writers with the highest retention rates. As a reminder, LimePrime is still a new product that we only launched earlier this year. So it's exciting to see the product already driving both higher engagement and retention, similar to the impact that subscription products have for rideshare and food delivery over the long run. Another call out from Q3 relates to our sustainability mission. As you may know, Lime's mission is to build a future where transportation is shared, affordable and carbon-free. We take this commitment seriously. During the quarter, we released our latest carbon inventory report covering 2025, which show the tangible results of our efforts and ability to run a more carbon-efficient business. Since our 2019 baseline, we've reduced our total carbon emission intensity by 81%, even as the total miles traveled online increased 250% in the measurement period. We accomplished this because of everything that happens behind the scenes, including building more durable and repairable vehicles, strengthening our supply chain and operating more efficiently, which all contributes to reducing our emissions while making our business stronger. We believe there is a path to do good while doing well, which is why sustainability and decarbonization are deeply woven into how we run our business. And we believe it's also why many city partners and consumers consistently prefer the Lime platform. As Ann will discuss, we have recently made a strategic decision to address recent heightened competition in a few markets in Europe by not chasing short-term growth, but instead by stepping up our investments where we believe we have the opportunity to build a reliability and quality advantage. This may impact our near-term margins and growth, but we are confident that remaining disciplined on unit economics and making these investments is the right move to help drive long-term shareholder value. We have successfully navigated these cycles before by staying disciplined, and this is how we build Lime into the global market leader. In closing, we believe our strength in this sector is driven by our commitment to sustainable, profitable growth. This is the strategy we have consistently outlined and we continue to execute against it because the results show that it works. We remain fully focused on the disciplined execution that got us here, and we are confident this approach will continue to help us drive long-term value for our shareholders. With that, I'll hand over to Ann, who will walk through the financial results in more detail.

Ann Gugino: Thank you, Wayne, and good afternoon or evening, everyone. Lime delivered Q3 revenue of $361 million, which is at the high end of our guidance range and represents 20% year-over-year growth. Our top line growth during the quarter was driven by strong fleet growth, positive rider retention trends and continued adoption of LimePrime. As Wayne mentioned, we are particularly encouraged by what we are seeing with LimePrime. The combination of incremental engagement and positive retention is resulting in LimePrime riders generating 2x the adjusted gross profit relative to our non-subscription riders. While LimePrime is still early, this adds to our belief that it will not only drive greater overall rider loyalty and stickier revenue over time, but also potentially generate higher gross profit and EBITDA. Turning to our key operating metrics. Average operational fleet in the quarter was 447,000 vehicles, which represents 26% year-over-year and an acceleration from Q2 year-over-year growth. We continue to expand our fleet in existing markets and as well in newer markets like Australia that are still reaching density, which drives reliability. As density increases, this drives reliability and ultimately higher utilization. Revenue per vehicle per day, or RVD, was $8.77, down 4.8% year-over-year. This decline was driven by 2 distinct factors: our planned geographic expansion and localized market dynamics. First, we continue to make deliberate investments to scale newer markets like Australia to build density and service reliability. Because fleets in these markets are in their ramp phase, they temporarily dilute our average RVD. When you look at RVD growth on a same market basis to normalize for this impact, we are seeing year-over-year RVD growth in the single digits. Second, we experienced heightened competitive intensity in a few European markets. We chose not to match these unsustainable short-term volume-focused dynamics instead prioritizing durable growth and long-term profitability. This decision naturally resulted in lower fleet utilization in those markets, which drove the remaining decline in RVD. Monthly active users grew 15.9% year-over-year to 5.5 million in Q3. While the competitive dynamics I just described moderated our overall user growth rate, we are seeing highly encouraging trends with our LimePrime subscriber base. Specifically, our LimePrime cohort continues to drive deep engagement. In Q3, the average LimePrime rider took 8x as many trips as pay-as-you-go riders and 16% more than LimePass riders. Retention is also a key strength with LimePrime subscriber retention improving quarter-over-quarter and averaging 3x higher than nonsubscribers. These metrics reinforce our strategic thesis, investing to build long-term habits and drive deeper rider engagement and loyalty is the right play for our business. Gross profit in Q3 was $161 million, representing a 45% margin and adjusted gross profit was $195 million or 54% margin. We achieved a 220-basis point sequential expansion in adjusted gross margin, reflecting solid underlying operational efficiency. However, our overall financial performance for the quarter fell short of our guidance range. The shortfall was primarily driven by lower fleet utilization we experienced in Europe. Because our fleet carries some operating costs, this lower utilization impacts near-term margins. Turning to expenses. Total operating expenses were $96 million, up 31% year-over-year and came in slightly better than expected. Adjusted EBITDA was $118 million, representing a 33% margin compared with 35% in the prior year period. Sequentially, our EBITDA margin expanded nearly 600 basis points, which is greater than we've produced in recent years. However, adjusted EBITDA was below expectations for the quarter. This was driven by the lower fleet utilization experienced in Europe. This lower utilization impacted gross margins and flowed through to adjusted EBITDA. Net income in the quarter was $44 million and diluted earnings per share were $0.63. Turning to the balance sheet. Our balance sheet remains strong, and we ended Q3 with $453 million in cash and cash equivalents and no long-term debt. Our balance sheet provides us with the financial flexibility to continue investing in our growth priorities, while maintaining discipline in our capital allocation decisions. CapEx in the quarter was $24 million, reflecting investments in fleet expansion and fleet maintenance. Free cash flow was $91 million, reflecting the impact of certain working capital items. We remain focused on maximizing free cash flow and our capital allocation priorities remain unchanged. We invest in the fleet where we see attractive returns, invest in the technology platform to improve efficiency and strengthen competitive advantages, pursue selective strategic acquisitions or partnerships when they meet our return thresholds and maintain financial flexibility and a strong balance sheet. Now turning to our Q4 outlook. As has been the case in recent quarters, we expect our growth to be driven by continued expansion of our operating fleet and continued growth in LimePrime, which is experiencing strong adoption and positive underlying metrics. Looking ahead, we expect the short-term competitive pressure in Europe to continue through the remainder of FY '26. At the same time, we are stepping up our investments in Q4 to build out our reliability and quality advantage in key strategic markets. This includes investments in our local fleet management and an upgraded technology in areas such as sidewalk riding and parking verification. Accordingly, Q4 guidance reflects these factors. While this impacts near-term margins, we believe remaining disciplined on unit economics and making these investments is the right move for driving long-term shareholder value. We have a strong track record of navigating these cycles by staying disciplined, which is how we built Lime into the market leader. For Q4, we expect revenue to be between $240 million and $250 million, representing approximately 17% year-over-year growth at the midpoint. Growth is expected to continue to be driven primarily by increases in our operating fleet. We expect adjusted EBITDA in Q4 of $43 million to $45 million, representing a margin of approximately 18% at the midpoint, which is above year ago levels despite our growth-related and other investments. For full year 2026, we are reiterating our top line guidance. Revenue is expected to be in the range of $1.04 billion to $1.1 billion, representing 21% year-over-year growth at the midpoint. We now expect adjusted EBITDA of $253 million to $255 representing a 24% margin at the midpoint. This reflects our continued investments in LimePrime and newer markets such as Australia, as well as our strategic investments in select markets that we have shown is the right move for driving long-term shareholder value. Our full year CapEx guidance is now between $172 million and $177 million, reflecting again our focus on unit economics and free cash flow. And we expect the business will continue to generate meaningful free cash flow. With that, I'll hand it back to the operator to take your questions.

Operator: [Operator Instructions] Our first question comes from the line of Bernie McTernan of Needham & Company.

Bernard McTernan: I wanted to start on competition. Just any additional details you could provide in terms of when it started. Obviously, you said in the guidance that you contemplated going on through the end of the year. And I wanted to see if it was in markets where LimePrime is active. So I wanted to see if it was almost a response from the competitors as a result of LimePrime. And then I have a follow-up.

Hsing-Yuan Ting: Great. Thanks, Bernie. Happy to share a bit more. So we are seeing the competitive pressures primarily in Western European markets and the U.K. outside of the big cities. And if I take a step back, I think that what we've seen change is that since Lime's IPO and because of Lime's success in the public markets, some of the smaller competitors have been able to access debt financing in recent months, and that's allowed them to increase the promotional activity that they can put out as well as, in some cases, overpromising on what they can deliver in the RFP process. I would say this is that we've seen this movie before. And while players can sustain economically irrational moves for some period of time, they can't do it forever. And what we have learned is that by being financially disciplined, by focusing on our own unit economics, by ensuring that we can deliver great value to cities and riders over the long run, this is how we win, and we intend to continue that discipline regardless of what anybody else does.

Ann Gugino: I think maybe one point I might add on to build on to what Wayne was saying, Bernie, is, as Wayne mentioned, we know this is not sustainable, and that's because if your unit economics are too low, eventually, you're not going to be able to service the business and meet the city obligations. And we're actually already hearing about this from city officials in certain cities where competitors have overpromised and underdelivered. In fact, you can read this in the press. We've been in 2/3 of our cities for more than 4 years. And as a result of our relationships with cities, we win a disproportionate share of our fleet increases. And that's how we were able to grow our fleet by 26% in Q3. And that is just a couple of proof points, Bernie, on why we believe our strategy is the right one for the long term.

Bernard McTernan: That's really helpful. And just a clarification. Ann, you mentioned that LimePrime users are doing 8x as many trips as nonsubscribers. What's the breakeven point for when it crosses over and becomes revenue accretive versus the pay-as-you-go?

Ann Gugino: It's far lower than the 8x. I'm not exactly sure what the exact number is, but it's definitely far lower than the 8x. At 8x, they're generating twice the gross profit as nonsubscribers.

Operator: Our next question comes from the line of Andrew Boone of Citizens.

Andrew Boone: I'd like to double-click on RVD and just try to better understand that. It sounds like it's single-digit growth within the U.S. But is there any way that you guys can help us unpack that and give us a little bit more clarity what that would look like maybe ex-Australia? And then as we think about 2027, as you guys have probably gone through the planning process, is there any thoughts that you guys can share about competition and whether you think this is something that's going to be a multi-quarter headwind or whether there's any other factors that we should consider as we start to set up next year?

Ann Gugino: Sure. I can start with the RVD. So RVD, to unpack that a bit for you, was impacted by 2 factors. The first was competition and the second was the megacity expansion. And as Wayne just talked about, over the last 90 days, we've seen increased competitive pressure from smaller players that are pursuing a growth at all cost strategy. We thoughtfully chose not to match those actions, but that did impact fleet utilization in the quarter. And to size it for you, that was really the miss in the quarter is really the RVD that we didn't anticipate losing because of that competitive pressure. So I think we had forecasted RVD to be closer to flat. So that should give you some idea. And then when you look at the impact of Australia, we did continue scaling in those megacities like Sydney. And if you look at that, I mentioned in my script, if you look at excluding market mix, so just what's the same market growth, that was mid-single digits. Now as you think about the future, which was the second part of your question, when you look at the underlying metrics that we talked through online Prime with the higher retention rates and the higher engagement and how the megacities are performing this year, we do expect to return to mid-single-digit RVD growth over time.

Operator: Our next question comes from the line of Doug Anmuth of JPMorgan.

Douglas Anmuth: You made it very clear that you're not matching and chasing the competition down. But just curious, what are some of the ways that you are kind of pushing back here more? I think you mentioned a couple in 4Q. Just hoping you could elaborate there. And then also just on the operational fleet came in ahead of expectations, but you also reduced your overall CapEx for the fiscal year... for the full year. So just hoping you can clarify what's going on there as well.

Ann Gugino: Sure. I can start on the ways that we're pushing back. You kind of led me there with the investments in Q4. So we are definitely making the strategic decision to invest more in Q4 in reliability, compliance and operational quality. And I think we mentioned in the script, things like incremental labor and parts for retrofits to improve sidewalk riding detection and parking verification. And really, we believe investing now during our low season in Q4 is a really great setup and positions us well for growth in 2027. I think LimePrime is the other way that we are really competing and punching back, and we like that program because it's about driving loyalty to our platform, not just one-off discounts. And what makes me really excited is that we now have enough data to frame the financial performance. And as we turn to Q4, I do believe that LimePrime will be a tailwind to Q4 because of the 2x the gross profit benefit that we're seeing with the cohorts that have been in Prime longer and the continued adoption rate. And then the last question that you had was on CapEx versus fleet growth. You're right, we're bringing the guide down for the year, and we are seeing overperformance on fleet growth. Part of that is we continue to win our disproportionate share of fleet increases. And we are constantly working not just we grow fleet, not just by adding CapEx, but by using our technology to improve uptime and to improve fleet availability. So I think you're really seeing improvements in our underlying operational performance around fleet, and it's kind of the same thing on the underspend in CapEx. It's really in the maintenance that we're performing, which is allowing us to spend a little less.

Operator: Our next question comes from the line of Eric Sheridan of Goldman Sachs.

Eric Sheridan: Maybe 2, if I could. First, as we look out beyond 2026, any update in where there are pockets of opportunities for either geographic expansion or fleet expansion that you're getting more or less confident in that could potentially be anchors for growth as we move out over the next 12 to 18 months? And then second, any update on some of the efficiencies that you continue to be able to drive into fleet management and how we should think about some of those as a key priority over the next 12-plus months?

Hsing-Yuan Ting: Thanks, Eric. I would say when I look out to the next year, I am incredibly excited about the investments we're already making in places like Australia and Canada and that playing out over the long run. Australia over the last quarter grew by over 100% year-over-year. And it's showing the same pattern that we see in other markets, which is we first invest in reliability, great operations. And then over time, we can drive user adoption and engagement. And I see the same kind of early green shoots out of our Canadian investments as well. I do think the final thing I'll point out on growth is that the majority of our fleet growth continues to come from existing markets. We still have a lot of opportunities to grow in the markets we're already in, and you're going to see us continue to invest in new fleet and CAP to achieve that. Eric, I forgot your second part of your question. You're talking about fleet management.

Eric Sheridan: Yes, fleet management efficiencies. What are you learning scalability going forward?

Hsing-Yuan Ting: Yes, Eric, I would say that is a forever process. I don't think there's ever an end state to us improving our operations. This is a true game of interest, and we are constantly looking for that 1%, 2% improvement to our operations. And one example of this is continue to look at ways to improve the durability of our vehicles. So whenever our vehicles, because Lime has proprietary hardware, we track any time it breaks or has or needs a new spare parts. And then we try to think about how do we avoid that in the future. And we look at the cost of serving every single trip and trying to find new ways to reduce the cost to serve. I'm very excited by some of the efforts we're making around our battery efficiency. So this year, we introduced a bigger battery pack. And the bigger battery pack is going to allow us over time to reduce the number of swaps, the swap cost per trip. And we are investing in other ways, looking at we engage with a courier or a rider to help us do the battery swapping. But those are examples of the game of ventures we are doing, but there are hundreds of other little things like that, that we're going to be constantly testing to improve margins. So I'm certainly, -- it is certainly not the totality of everything we're working on, but we're going to constantly push to lower the cost to serve.

Operator: Our next question comes from the line of John Colantuoni of Jefferies.

Unknown Analyst: This is [ Vincent ] on for John at Jefferies. In light of recent reports that the city of Lisbon voted to ban shared e-scooters last week, could you please touch on your exposure there and any other major cities that may be deliberating similar measures? And then I think it would also be helpful if you could discuss how Lime as the largest global shared micromobility operator can sort of take up the mantle here on helping to ensure that these sorts of bands don't become a broader trend. Any specific color on your efforts there would be appreciated.

Hsing-Yuan Ting: Yes. Thanks, Sean. I'll say because Lime is the global leader in our space, we're in hundreds of markets around the world. Any given quarter, you're going to see some markets maybe come online, some markets maybe go a different direction. You also see often that different cities prefer different types of form factors. And what's great is that one of the strengths that Lime has is we are not only the world's largest operator of shared scooters, we're also the world's largest operator of e-bikes. And an example of this is like Paris had a so-called e-scooter ban several years back. And within the same year, Paris invited Lime back into the city to operate our e-bikes. And in every year since, we have grown the Paris business. And we certainly, regardless of what's happening in any market, we are continuing the conversation with them about how to best serve their residents. And the need for affordable shared micromobility is going to exist regardless if any one city wants scooters or not. And we are actively working with all these cities to bring alternatives if scooters is no longer the mode of transportation that they prefer.

Operator: Our final question comes from the line of Ralph Schackart of William Blair.

Ralph Schackart: Two, if I could. Just in terms of some of the commentary on navigating cycles before and the thesis of the strategy to stay disciplined. How different or comparable is the competition that you're seeing today that you've been talking about versus prior competitive cycles that you may have gone through? And maybe switching gears to LimePrime subscription growth. Can you just walk through the drivers, what's driving that growth? Maybe just as simple as more time to market? How is that awareness growing? And would you consider putting perhaps like a marketing campaign behind that going forward to drive further adoption?

Hsing-Yuan Ting: Yes. Thanks, Ralph. Let me start. I'll say there's lots of similarities between what we're seeing now and what's happened before, which is that when you are small and unprofitable and not free cash flow positive, your incentive maybe to chase growth, even unprofitable growth as a way to open up new capital to fund your losses. I think the difference this time maybe that there is more debt capital available versus 10 years ago, it was mostly venture capital. But anybody who's providing capital wants a sufficient return, and they're not going to be able to be fooled forever. So what's similar is that chasing unprofitable growth at all costs is not a sustainable or wise strategy. And what I know is that when we are disciplined and Lime is by far the world's largest operator. We are more than 3x bigger than our nearest competitor. And by being disciplined on unit economics, we're the only free cash flow positive operator in our industry that I know of. It will allow us to weather any short-term ups and downs. And in the long run, what cities want is operators that can actually deliver on what they say that doesn't overpromise, that is a long-term reliable partner. I also think if I can touch on Prime. I think Prime is a great example of that long-term strategy, which is that we want customers who are going to be loyal and committed to the platform. And for that loyalty, we will provide them our best products, our lowest price point products through our membership programs. It's a very different strategy than short-term promotions that doesn't drive long-term behavior change. And so I actually feel very good that by shifting more of our customer base on to membership, we are building a moat around our user base. And Ralph, your last question was like how do we acquire customers so far? So far, we have acquired our customers almost entirely through our owned channels, so organic growth by advertising in our apps, by advertising on our receipts through rider e-mails, we have not so far used paid advertising. It's certainly something that we could explore in the future. I think what's been amazing is that the word of mouth, the value that riders get is so great that we're seeing fantastic growth while not overspending on CAC, which is when I think sometimes these programs can go upside down. So there's no intention to change the strategy because of the success we've experienced so far. But certainly, if growth starts to slow, we can look at alternative ways to reach customers.

Operator: This concludes our question-and-answer session. I would now like to turn it back to Wayne Ting for closing remarks.

Hsing-Yuan Ting: Thanks, operator. I want to thank everyone for joining today. And I just want to end by reiterating some of the key themes that we've discussed so far. One, we are really happy with the momentum we are seeing in LimePrime. It's a couple of the stats that we talked about, 8x higher engagement, 8x more trips than the pay-as-you-go riders, 3x the retention rates. And we believe LimePrime will be the foundation of Lime's growth for years to come. Second, we remain very confident in our competitive position as the clear global market leader as demonstrated by our 26% fleet growth in the last quarter. And finally, I know that our approach by investing in key strategic areas, like market expansion, City Tech and LimePrime are the right moves to building a durable and profitable business while driving long-term shareholder value. So thank you all so much for the time today. Really appreciate it.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.