Ride sharing service Lyft (NASDAQ: LYFT) reported results in line with analysts’ expectations in Q4 FY2023, with revenue up 4.2% year on year to $1.22 billion. It made a GAAP loss of $0.07 per share, improving from its loss of $0.74 per share in the same quarter last year.
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Lyft (LYFT) Q4 FY2023 Highlights:
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Revenue: $1.22 billion vs analyst estimates of $1.22 billion (small beat)
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EPS: -$0.07 vs analyst estimates of -$0.18 ($0.11 beat)
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Free Cash Flow of $14.94 million is up from -$30.01 million in the previous quarter
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Gross Margin (GAAP): 39.3%, up from 25.6% in the same quarter last year
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Active Riders: 22.4 million, up 2.04 million year on year
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Market Capitalization: $4.87 billion
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.
Gig Economy
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.
Sales Growth
Lyft’s revenue growth over the last three years has been very strong, averaging 31.7% annually. This quarter, Lyft reported lacklustre 4.2% year-on-year revenue growth, in line with analysts’ expectations.
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Usage Growth
As a gig economy marketplace, Lyft generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, Lyft’s users, a key performance metric for the company, grew 12.8% annually to 22.4 million. This is decent growth for a consumer internet company.
In Q4, Lyft added 2.04 million users, translating into 10% year-on-year growth.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Lyft because it measures how much the company earns in transaction fees from each user. This number also informs us about Lyft’s take rate, which represents its pricing leverage over the ecosystem, or “cut” from each transaction.
Lyft’s ARPU growth has been mediocre over the last two years, averaging 4.9%. However, the company’s ability to continue increasing prices while growing its users shows that users still find value in its platform. This quarter, ARPU declined 5.3% year on year to $54.67 per user.
Key Takeaways from Lyft’s Q4 Results
It was good to see Lyft add new users this quarter, enabling it to beat Wall Street’s revenue and EPS estimates. Furthermore, in a potential milestone event, the company stated it expects to generate positive free cash flow for the full year 2024, converting roughly half its forecasted full-year EBITDA of ~$500 million into cash (analysts’ expectations for full-year 2024 called for $317 million). Lyft also announced it will be hosting an Investor Day on June 6th in New York City. Overall, the company’s guidance was encouraging, especially as competition with ride-sharing peer Uber heats up. The stock is up 18.4% after reporting and currently trades at $14.38 per share.
So should you invest in Lyft right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.