In an effort to entice more drivers, Lyft Inc. estimated operating profits of less than a fourth of Wall Street expectations on Tuesday, which included the additional expenses.
In an interview with Reuters, Lyft President John Zimmer noted that the recovery of driver supply from epidemic lows was taking longer than expected.
Investors in competitor Uber Technologies Inc. were similarly alarmed by Lyft’s quarterly report, which caused after-hours trading to drop by 11%. When Uber pushed its quarterly results release to Wednesday morning from Wednesday afternoon, the company recouped some of its losses and saw a 4% decline in its stock price.
Davidson analyst Tom White claimed that Lyft’s stock losses might be attributed to the company’s struggles to attract and retain drivers.
To keep up with expected growth this year, executives said driver incentives were essential, especially on the West Coast of America, which has lagged behind other areas in terms of economic recovery.
In the second quarter, Lyft expects adjusted EBITDA to be between $10 million and $20 million, excluding stock-based compensation and other expenditures. Compared to the $54.8 million announced on Tuesday, this is a huge decrease. According to Refinitiv’s IBES statistics, analysts were expecting $82.5 million.
After-hours trading saw the value of Lyft’s stock fall by nearly $2.8 billion. At the time of the IPO in 2019, the stock had already fallen by nearly 60%.
Wedbush analyst Dan Ives said in a report that Lyft’s spending on drivers “crushed” the profit forecast.
According to experts, Lyft officials refused to disclose the cost of driver bonuses on a conference call after its results. An official at Lyft said that the company plans to fund part of its driver expenses by raising fares.
According to Zimmer, the number of drivers, many of whom departed during the pandemic as demand decreased, remained below pre-pandemic levels.
Recent quarters have seen an increase in incentives offered by Lyft and Uber to entice drivers to return.
According to Refinitiv’s IBES data, Lyft anticipated second-quarter revenue of $950 million to $1 billion, which is below the average analyst expectation of $1.02 billion.
In the first three months of the year, active ridership on the subway dropped by 4.8% over the previous quarter.
It was down from 18.7 million active riders in the previous quarter and an increase from 13.5 million a year ago that brought the total to 17.8 million riders. During the colder months, demand for ride-hail, bike, and scooter journeys decreases, making the first quarter a less popular time to travel.
Zimmer told Reuters that post-pandemic customers were unfazed by rising pricing.
Inflation has less of an effect on Zimmer’s company than the tailwind from the epidemic does.
Russia’s invasion of Ukraine has also led to a rise in fuel prices, which has prompted some people to stop driving or drive less.
In an attempt to assist drivers, Lyft and Uber have implemented a temporary fuel levy.
FIRST QUARTER ATTACK
According to Refinitiv data, Lyft’s first-quarter revenue was $875.6 million, exceeding analysts’ average expectations of $846 million.
The company’s adjusted EBITDA was $54.8 million, much above both its own estimates and those of analysts. Adjusted EBITDA was estimated to be $17.8 million by analysts after Lyft provided guidance for a maximum revenue range of $15 million.
While customers are seeing higher prices throughout the economy, Lyft officials have spoken often about the company’s pricing power, a trend Zimmer expects to continue.
According to Lyft CFO Elaine Paul, the company’s revenue projection is unaffected by inflationary fears.
According to YipitData, average per-ride pricing for Lyft and Uber in the United States were 37% more in March than they were in the same month last year.
In the fourth quarter of 2019, demand was 30% lower than it was before the epidemic, according to Zimmer, providing the firm “quite a bit of space.”
By Tina Bellon, Tina Bellon in Austin, Texas; Peter Henderson, Bernard Orr, and Richard Pullin editing