The cost of rewarding drivers falls on Lyft and Uber

- Advertisement -


Lyft shares lost almost a third of their yesterday’s value after the taxi company reported results for the first quarter of 2022despite the fact that the company beat market expectations in terms of revenue.

- Advertisement -

Digging a little deeper, it seems like the market has instead been entirely focused on something else: a slightly lenient second-quarter 2022 revenue growth forecast versus analysts’ expectations, as well as the cost of supply-side driver incentives that affect economic growth. company situation. profile.

- Advertisement -

During Lyft’s call, analysts focused on the cost of incentivizing drivers to participate in the company’s two-sided market, and were not reassured by the responses from its CEO and CFO.

Uber shares also fell after the earnings report. To understand the issue of driver rewards, we’ll first look at Lyft’s situation and then compare it to what Uber said. The two companies are related and have a common competitive territory, but the market reaction to their current state has been harsh and noticeable. Let’s talk about it.

Lyft Warning

- Advertisement -

In his income callLyft CFO Elaine Paul said the company expects $950 million to $1 billion in revenue in the second quarter, in line with current guidance. street expectations about $995 million. (It’s worth noting that before the company’s report was processed by analysts, that figure was $1.02 billion.)

But more disturbing were Paul’s comments about the company’s profitability. According to the transcript above (emphasis added):

In terms of profitability, we expect contribution margin to be around 56% in the second quarter, reflecting the impact of growth investing on our leverage. After omicron, we feel the worst is behind us and the coming quarter is an opportunity to invest in launching the next year of growth. We will do it with a focus on drivers, general market and complementary brand marketing. As a result, we expect adjusted EBITDA to be between $10m and $20m in the second quarter.

Lyft’s adjusted EBITDA was $54.8 million in the first quarter, which means the company is set to cut its capped second-quarter adjusted earnings hard, thanks in part to investments in driver supply.

In its earnings call, Lyft highlighted that while travel demand can change quickly — COVID-19 has made this clear during its various waves — it takes longer for drivers to change supply. CEO Logan Green said “adjusting supply” in his market is “like moving the Titanic.”

Unfortunate metaphor aside, it looks like Lyft is going to spend money on increasing the number of drivers in anticipation of future demand; The company expects it to grow faster this year than the 36% it posted last year, which will require more vehicles to be available to call.


Credit: techcrunch.com /

- Advertisement -

Stay on top - Get the daily news in your inbox

DMCA / Correction Notice

Recent Articles

Related Stories

Stay on top - Get the daily news in your inbox