Ride sharing service Lyft (NASDAQ: LYFT) reported Q1 FY2023 results beating Wall St's expectations, with revenue up 14.3% year on year to $1 billion. However, guidance for the next quarter was less impressive, coming in at $1.01 billion at the midpoint, being 6.57% below analyst estimates. Lyft made a GAAP loss of $187.6 million, improving on its loss of $196.9 million, in the same quarter last year.
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Lyft (LYFT) Q1 FY2023 Highlights:
- Revenue: $1 billion vs analyst estimates of $982 million (1.89% beat)
- EPS: -$0.50 vs analyst estimates of -$0.54 (6.73% beat)
- Revenue guidance for Q2 2023 is $1.01 billion at the midpoint, below analyst estimates of $1.08 billion
- Free cash flow was negative $120.8 million, compared to negative free cash flow of $66.1 million in previous quarter
- Gross Margin (GAAP): 45.1%, up from 38.5% same quarter last year
- Active Riders: 19.6 million, up 1.75 million year on year
“We’re improving our rideshare service and are thrilled with the early results. Riders are taking more rides and drivers have the power to earn more,” said David Risher, chief executive officer of Lyft.
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
The iPhone changed the world, ushering in the era of the “always-on” internet and “on-demand” services - anything someone could want is just a few taps away. Likewise, the gig economy sprang up in a similar fashion, with a proliferation of tech-enabled freelance labor marketplaces, which work hand and hand with many on demand services. Individuals can now work on demand too. What began with tech enabled platforms that aggregated riders and drivers has expanded over the past decade to include food delivery, groceries, and now even a plumber or graphic designer are all just a few taps away.
Lyft's revenue growth over the last three years has been mediocre, averaging 17.5% annually. This quarter, Lyft reported a mediocre 14.3% year on year revenue growth, roughly in line with what analysts expected.
Guidance for the next quarter indicates Lyft is expecting revenue to grow 1.94% year on year to $1.01 billion, slowing down from the 29.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 9.34% over the next twelve months.
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As a gig economy marketplace, Lyft generates revenue growth by the volume of services its users order (e.g. rides, deliveries, freelance jobs) and how much commission it earns from each service unit provided.
Over the last two years the number of Lyft's paying users, a key usage metric for the company, grew 33.9% annually to 19.6 million. This is among the fastest growth of any consumer internet company, indicating that users are excited about the offering.
In Q1 the company added 1.75 million paying users, translating to a 9.82% growth year on year.
Key Takeaways from Lyft's Q1 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Lyft’s balance sheet, but we note that with a market capitalization of $4.12 billion and more than $1.75 billion in cash, the company has the capacity to continue to prioritise growth over profitability.
Lyft topped analysts’ revenue expectations this quarter, even if just narrowly, and active riders was in-line while revenue per rider beat slightly. And we were also glad to see the user growth. On the other hand, it was unfortunate to see that both revenue and adjusted EBITDA guidance for the next quarter missed analysts' expectations and the revenue growth was quite weak. The guidance is what is weighing on the stock. The company is down 10.8% on the results and currently trades at $9.52 per share.
Lyft may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.