Lyft offers lackluster profit target, sees more driver spend; shares fall 25%

The Lyft Driver Hub is seen in Los Angeles, California, U.S., March 20, 2019. REUTERS/Lucy Nicholson

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May 3 (Reuters) – Lyft Inc (LYFT.O) set lackluster operating profit targets on Tuesday due to its need to spend more to attract drivers to its platform, sending its shares tumbling.

The ride-hailing company forecast second-quarter revenue and adjusted operating profit below Wall Street expectations, sending its shares tumbling 25% after hours.

Shares of rival Uber Technologies Inc (UBER.N) fell 11% after Lyft’s report, but recouped their losses, falling 4.5%, after raising its quarterly earnings release plan to Wednesday morning from Wednesday afternoon.

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DA Davidson analyst Tom White said the stock sale was driven by Lyft’s second-quarter outlook, which has been hurt by high costs of acquiring and marketing drivers.

“It will be very interesting to see if Uber feels the need to increase investment in the same way…or if Lyft is the only one struggling to bring back and retain drivers for whatever reason,” White said.

Lyft said the driver incentives were needed to meet the increase in demand it expects this year, especially on the West Coast of the United States, which has so far lagged other regions. Americans in terms of recovery.

Lyft said it expects adjusted EBITDA, a measure that excludes stock-based compensation and certain other costs, between $10 million and $20 million in the second quarter. This is significantly lower than the $54.8 million announced Tuesday for the first three months of the year.

Lyft executives declined to provide details on driver incentive costs in response to questions from analysts on a call after quarterly results. An executive said Lyft would use higher prices to help fund some driver expenses.

The number of drivers, many of whom left as demand dwindled during the pandemic, remained below pre-pandemic levels and a full recovery in driver supply was taking longer than Lyft had hoped. , Chairman John Zimmer said in an interview with Reuters.

Lyft and Uber have tried to bring drivers back with additional incentives in recent quarters.

Lyft also expects second-quarter revenue of $950 million to $1 billion, lower than analysts’ average estimate of $1.02 billion, according to IBES data from Refinitiv.

Active ridership in the first quarter fell 4.8% from the previous quarter in the first three months of the year.

Active runners were 17.8 million, down from 18.7 million in the prior quarter and 13.5 million a year earlier. Ridership is generally lower in the first quarter, with demand for ride-hailing, bicycles and scooters decreasing during the colder months.

But consumers hungry for post-pandemic normalcy shrugged off rising prices, Zimmer told Reuters.

“This tailwind coming out of the pandemic is having a much bigger impact on our business … than the impact of inflation,” Zimmer said.

Drivers have also been burdened by soaring fuel prices caused by Russia’s invasion of Ukraine, prompting some to stop driving or drive less. Read more

Lyft and Uber have instituted a temporary fuel surcharge in an effort to help drivers. Read more

Lyft reported first-quarter revenue of $875.6 million, beating average analyst expectations of $846 million, according to Refinitiv data.

At $54.8 million, adjusted EBITDA far exceeded its own forecasts and analysts’ expectations. Analysts had expected $17.8 million in adjusted EBITDA after Lyft guided an upper range of $15 million.

Lyft executives have repeatedly spoken about the company’s pricing power, a trend Zimmer expects to continue even as consumers face larger price increases for goods and services across the board. the economy. Read more

Lyft Chief Financial Officer Elaine Paul said Tuesday that concerns about inflation were not impacting the company’s revenue outlook.

Average U.S. ride prices for Lyft and Uber were 37% higher in March than in the same month in 2019, according to research firm YipitData.

Zimmer said overall demand still remained 30% below pre-pandemic levels in the fourth quarter of 2019, giving the company “considerable breathing room.”

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Reporting by Tina Bellon in Austin, Texas Editing by Peter Henderson, Matthew Lewis and Bernard Orr

Our standards: The Thomson Reuters Trust Principles.

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