Lyft Inc. slumped 26% after it gave a forecast for the current quarter that missed analysts’ estimates as the company plans to ramp up spending on incentives for drivers to address a persistent shortage in supply.
The San Francisco-based company expects revenue of as much as $1 billion in the second quarter, and sees earnings before interest, tax, depreciation and amortization of $10 million to $20 million in the period. Both were lower than analysts expected.
The disappointing outlook shows how Lyft is struggling to claw its way out of the pandemic. Even as it and rival Uber Technologies Inc. have found resurgent customer demand, they have struggled to attract drivers and the imbalance has led to longer wait times and high fares for riders. The companies have doled out bonuses and other incentives to lure drivers back.
At issue is a spike in gas prices that has squeezed workers’ take-home earnings, and cast doubt on rideshare platforms’ ability to retain them. In response, both Lyft and Uber introduced a gas surcharge to rides in a bid to help drivers. Chief Financial Officer Elaine Paul said on an analyst call the company will invest more on driver supply in the second quarter.
The number of drivers grew 40% in the first quarter from the previous year, Lyft said in a presentation accompanying results published Tuesday. The average rideshare trip in the U.S. cost approximately $20 in the first quarter, up approximately 45% versus the same period in 2019, according to market research firm YipitData. President John Zimmer said in an interview the company “has room to improve” service levels, or wait times, which came down by about 30% in the first quarter.
Lyft reported first-quarter revenue of $875.6 million on Tuesday, up 44% from a year earlier. That was more than the $844.5 million analysts were expecting, according to data compiled by Bloomberg. Lyft’s adjusted earnings before interest, tax, depreciation and amortization were $54.8 million in the quarter, far surpassing the $14.4 million analysts were expecting.
The boost in profits is attributed to strong ride volumes but also from the increase in revenue Lyft extracted from each passenger. Lyft generated $49.18 per active rider in the first quarter, the second-highest on record and 9% higher than the same period last year, partly due to higher fares.
“The first quarter had a lot of disruptive factors,” CFRA Research analyst Angelo Zino said before the numbers were released. “While a high revenue per rider helps profitability, longer-term we want to see that figure come down to reflect a sustainable rideshare pricing model. Maintaining a growing rider base is key.”
Unlike Uber, which pivoted into food delivery during the pandemic with Uber Eats, Lyft’s core business is ride sharing. The company has expanded into other forms of transportation like bikes and scooters in some of its biggest markets such as New York City, San Francisco and Chicago. Still, Lyft’s ability to grow its rider base could be challenged by Uber’s partnerships with New York City and San Francisco taxi-hailing apps that would migrate cabbies to Uber’s platform.
Lyft reported a net loss of $196.9 million, or 57 cents a share, narrower than the loss of $198.4 million, or 60 cents a share, analysts forecast.
