Ride sharing service Lyft (NASDAQ: LYFT) reported Q4 FY2022 results topping analyst expectations, with revenue up 21.1% year on year to $1.18 billion. However, guidance for the next quarter was less impressive, coming in at $975 million at the midpoint, being 11.5% below analyst estimates. Lyft made a GAAP loss of $588.1 million, down on its loss of $258.6 million, in the same quarter last year.
Lyft (LYFT) Q4 FY2022 Highlights:
- Revenue: $1.18 billion vs analyst estimates of $1.15 billion (1.77% beat)
- EPS: -$1.12 vs analyst estimates of -$0.48 (-$0.64 miss)
- Revenue guidance for Q1 2023 is $975 million at the midpoint, below analyst estimates of $1.1 billion
- Free cash flow was negative $66.1 million, compared to negative free cash flow of $55.3 million in previous quarter
- Gross Margin (GAAP): 166%, up from 34.4% same quarter last year
- Active Riders: 20.4 million, up 1.63 million year on year
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.
Uber created the first ride hailing app, allowing users to summon black limousines via their mobile devices, an innovation that disrupted modern transportation. Lyft followed and expanded the service to the mass market, positioning it as a casual, friendly carpool experience that aimed to appeal to younger generations. Initially, Lyft’s drivers had a pink mustache affixed to the grill of their car, which has since been replaced by an “Amp” device, which lights up the car’s dashboard to help riders easily find their car.
The company’s value propositions are multiple. For individuals, Lyft effectively lowered the cost per mile for taxi transportation vs. legacy cabs, while providing ease of use and convenience. For drivers, it has provided flexible earning opportunities.
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 (NASDAQ: LYFT) main competitor in ride hailing is Uber (NYSE:UBER).
Sales Growth
Lyft's revenue growth over the last three years has been solid, averaging 18.3% annually. The initial impact of the pandemic was positive for Lyft's revenue, but growth rates subsequently normalized.

This quarter, Lyft reported a decent 21.1% year on year revenue growth, roughly in line with what analysts expected.
Guidance for the next quarter indicates Lyft is expecting revenue to grow 11.4% year on year to $975 million, slowing down from the 43.8% year-over-year increase in revenue the company had recorded in the same quarter last year.
Usage Growth
As a gig economy marketplace, Lyft generates revenue growth by a combination of the volume of services users order and how much commission it earns.
Over the last two years the number of Lyft's paying users, a key usage metric for the company, grew 28.2% annually to 20.4 million users. This is among the fastest growth post-pandemic of any consumer internet company, indicating that users were excited about the offering.

In Q4 the company added 1.63 million paying users, translating to a 8.7% growth year on year.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for every consumer internet product and for Lyft it measures how much it earns off each transaction on its platform, a measure of the pricing leverage Lyft has with both its users and providers of services.
Lyft’s ARPU growth has been decent over the last two years, averaging 11.1%. The ability to increase price while still growing its user base shows the value of Lyft’s platform. This quarter, ARPU grew 11.4% year on year, reaching $57.72 for each of the paying users.
User Acquisition Efficiency
Consumer internet businesses like Lyft grow by a combination of product virality, paid advertisement and occasional incentives, unlike enterprise products that are typically sold by sales teams.
It is relatively expensive for Lyft to acquire new users, with the company spending 44.7% of its gross profit on marketing over the last year. This level of sales and marketing spend efficiency indicates Lyft has to compete for users and points to Lyft likely having to continue to invest to maintain growth.
Earnings & Free Cash Flow
Investors typically look at a company’s operating income to get a sense of how profitable a core business is. Adjusted EBITDA is the most common profitability metric for consumer internet companies, similar to operating profit, but removes various one time or non-cash expenses to give a more normalized measure of profitability.
Lyft's EBITDA came in at negative $416.5 million this quarter, which translated to a -35.4% margin. Over the last twelve months Lyft has shown a rather mediocre profitability for a consumer internet business with LTM EBITDA margins of -3.73%.

If you follow StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Lyft burned through $66.1 million in Q4, increasing the cash burn by 35.7% year on year.

Lyft has burned through $352.3 million in cash over the last twelve months, resulting in a mediocre -8.6% free cash flow margin. This below average FCF margin is a result of Lyft's need to heavily invest in the business to continue to penetrate its market.
Key Takeaways from Lyft's Q4 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 $6.05 billion and more than $1.8 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 we were also glad to see the user growth. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results were not the best we've seen from Lyft. The company is down 24% on the results and currently trades at $12.33 per share.
Is Now The Time?
Lyft may have had a bad quarter, but investors should also consider its valuation and business qualities, when assessing the investment opportunity. Although Lyft is not a bad business, it probably wouldn't be one of our picks. Its revenue growth has been a little slower, and analysts expect growth rates to deteriorate from there. And while its user growth has been strong, the downside is that its operations are coming at a cost of a not an insignificant cash burn and its EBITDA margins indicate the core business isn't reaching accounting profitability .
At the moment Lyft trades at next twelve months EV/EBITDA 11.3x. We don't really see a big opportunity in the stock at the moment, but in the end beauty is in the eye of the beholder. And if you like the company, it seems that Lyft doesn't trade at a completely unreasonable price point.
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