Lyft shares plunge on weak earnings outlook

Lyft Inc. said it would invest in the current quarter to ensure adequate driver supply and grow its ride-hailing platform, spooking investors as the spending weighs on operating profit.

The ride-hailing company on Tuesday forecast adjusted earnings before interest, taxes, depreciation and amortization, its preferred metric of financial performance, of $10 million to $20 million. The figure represents a second sequential quarterly decline and missed Wall Street expectations by more than $50 million.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Shares in Lyft fell 2.4% Tuesday and retreated 26% in late trading after it issued the outlook.

"It’s a kick-start quarter in terms of our investment across not only drivers but other things that we’re doing to invest in growth initiatives for the future, the health of the marketplace and our brand," Lyft Chief Financial Officer Elaine Paul said on an analysts call. It is hard to predict when driver supply and booming demand will be more balanced again, she said.

Ms. Paul said some of the costs to offer incentives to drivers—such as bonus payments for rides given—will be passed on to consumers through higher prices. Other costs, she said, would weigh on the company’s profitability.

Lyft is the latest company to feel the sting from investors who have become nervous amid wider economic turmoil and a broader retreat in the stock market. Netflix Inc. fell more than 35% the day after the streaming company said it had lost subscribers. Shares in Robinhood Markets Inc. fell 10% last week after it reported a 43% drop in sales.

LYFT'S SURCHARGE TAKES EFFECT AS GAS PRICES REMAIN ELEVATED

Shares in ride-hailing company Uber Technologies Inc. fell more than 4% in after-hours trading following Lyft’s report. Uber said late Tuesday that it would post first-quarter results before the market opens on Wednesday, rather than after the closing bell as had been planned.

Lyft’s forecast came as it reported a strong rebound in ridership for the first quarter after a surge in Covid-19 cases hurt business in January, helping the company post robust quarterly sales growth.

Demand for rides recovered despite a slight increase in average trip costs, according to YipitData, a firm that tracks average nationwide pricing. Fares have increased because of a combination of higher gas prices and appetite for trips outpacing the addition of drivers, John Zimmer, Lyft’s co-founder and president, said in an interview.

UBER POSTS PROFIT AS RIDE-HAILING SERVICE BOUNCES BACK

"More people wanted to take rides, and it takes weeks if not months to get new drivers onboarded," Mr. Zimmer said. He added that Lyft was pushing to add drivers and was making progress with that effort. The company recorded a 70% year-over-year increase in driver sign-ups for the first three months of the year, he said.

Lyft also added a fuel surcharge to help offset increased costs for drivers. Uber also added a surcharge.

Lyft said its first-quarter revenue rose 44% to $876 million, and it reported $55 million in adjusted earnings before interest, taxes, depreciation and amortization. It projected between $950 million and $1 billion of revenue in the current quarter.

Although the adjusted operating figure improved from the year-earlier period, it declined sequentially because of the surge in Covid-19 cases at the start of the year. Management of the San Francisco-based company had earlier warned about the impact, prompting analysts to slash expectations for the quarter.

Ridership increased 20% in February from January, Mr. Zimmer said. Lyft recorded average revenue per rider of $49.18, second only to the last quarter of 2021. Ridership is still at roughly 70% of the pre-pandemic fourth quarter of 2019, Lyft Chief Executive Logan Green said on a call with analysts. The company wouldn’t project when it expects to return to pre-pandemic ridership levels.

CLICK HERE TO READ MORE ON FOX BUSINESS

Lyft is more than a year into efforts to give priority to profit over growth, after investors in some popular startups tired of persistent losses. The ride-hailing company first made an adjusted operating profit in the second quarter of last year and achieved adjusted profitability for the full year in 2021. Lyft has now had four sequential quarters of operating profit. Ms. Paul said the company would remain in the black on an adjusted earnings level.

Write to Meghan Bobrowsky at Meghan.Bobrowsky@wsj.com