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(Reuters) -Lyft Inc will spend more to increase the supply of drivers, signaling higher costs of getting cars back on the road, and declined on Tuesday to predict when the ride hailing company would hit pre-pandemic levels of business, sending its shares plummeting.
Lyft (NASDAQ:LYFT) forecast second-quarter revenue below Wall Street expectations and shares fell 26% in after-hours trade. Shares of rival Uber Technologies (NYSE:UBER) Inc, which reports its own results on Wednesday, fell 11%.
Lyft executives also declined to provide cost details for driver incentives in response to multiple questions from analysts on a call following publication of quarterly results. One executive said Lyft would use higher prices to help finance some spending on drivers.
The number of drivers, many of whom left as demand dwindled during the pandemic, remained below pre-pandemic levels and a full recovery of driver supply was taking longer than Lyft had hoped, President John Zimmer said in an interview with Reuters.
Lyft and Uber have tried to lure back drivers with added incentives in recent quarters.
Lyft forecast second-quarter revenue of $950 million to $1 billion, shy of the average analyst estimate of $1.02 billion, according to IBES data from Refinitiv.
First-quarter active ridership dropped 4.8% from the previous quarter in the first three months of the year.
Active riders were 17.8 million, down from 18.7 million in the previous quarter and up from 13.5 million a year earlier. Ridership is typically lower in the first quarter with demand for ride-hail, bike and scooter trips declining during the colder months.
But consumers eager for post-pandemic normalcy shrugged off higher prices, Zimmer told Reuters.
“That tailwind coming out of the pandemic is much more impactful to our business … than is the impact of inflation,” Zimmer said.
Drivers have also been burdened with surging fuel costs brought on by Russia’s invasion of Ukraine, prompting some to stop driving or drive less.
Lyft and Uber have instituted a temporary fuel surcharge in an effort to help drivers.
FIRST-QUARTER BEAT
Lyft reported first-quarter revenue of $875.6 million, beating average analysts’ expectations for $846 million, according to Refinitiv data.
At $54.8 million, the company’s operating earnings, a metric known as adjusted EBITDA that excludes stock-based compensation and some other costs, significantly surpassed its own guidance and analyst expectations. Analysts had expected $17.8 million in adjusted EBITDA after Lyft guided for a top range of $15 million.
Lyft executives have repeatedly talked about the company’s pricing power, a trend Zimmer expects to continue even as consumers face wider price increases for goods and services across the economy.
“We’ll keep an eye on it, but we’re very confident in our ability to balance supply and demand,” Zimmer said.
Average U.S. per-ride prices for Lyft and Uber were 37% higher in March than during the same month in 2019, according to research company YipitData.
Zimmer said demand overall still remained 30% below pre-pandemic levels in the fourth quarter of 2019, giving the company “quite a bit of headroom.”
