Lyft Drives to Full Year Free Cash Flow Positivity, CEO Stresses Driver Focus

Updates to add CEO quotes from interview, context on drivers

Class A shares of Lyft (NASDAQ:LYFT) blasted off in after-hours trading on Tuesday after the ride-hailing firm revealed plans to generate positive free cash flow for an entire year for the first time.

LYFT stock skyrocketed by 66.9% after hours, and surged 15.8% to $13.70. Notably, LYFT has a 13.74% short interest – 47.71M shares out of a public float of 332.63M shares.

The company’s forecast comes a week after its larger competitor, Uber (UBER), reported its first profitable year. The robust performance of these industry leaders underscores the resilient appetite for ride-sharing, despite mounting regulatory scrutiny and heightened demands from drivers for better remuneration.

In Q4 2023, Lyft’s (LYFT) net loss narrowed to $26.3M from $588.1M in the previous year. Its revenue ascended 4% year-over-year to $1.2B, bolstered by a 17% surge in gross bookings to $3.7B.

The company completed 191M rides in Q4, marking its fourth consecutive quarter of growth, while its active riders reached 22.4M. Throughout 2023, Lyft clocked 709M rides, reflecting an 18% increase year-over-year.

Lyft’s (LYFT) results precede a planned strike by drivers represented by Justice for App Workers, a coalition of over 130K ride-share drivers and delivery personnel. The strike involves a refusal to take rides to and from any airport in 10 major cities, as drivers advocate for equitable wages and enhanced safety measures.

Coincidentally, Lyft (LYFT) recently addressed concerns about pay transparency by vowing that its drivers would receive at least 70% of rider fares each week after deducting external fees.

“(The Valentine’s Day strike) has been scheduled now for many many weeks. The reason I say that is because it actually came out before (our) earnings guarantee, and if you look at that earnings guarantee … we’re actually responding to a lot of what they’re asking for ourselves. So, you know, we’ll kind of see where that goes, hard to predict,” LYFT top boss David Risher told Seeking Alpha in an interview.

“There are really two things that I hear about from (drivers) all the time … one is I want more transparency, I want to understand what the breakdown is and (two) I really don’t like it when riders get in the car and they say I’ve paid 50 bucks and I feel like Lyft (LYFT) is taking too big a share,” Risher added.

According to the CEO, the company paid its drivers $30.68 gross per hour for engaged time in the latter half of last year.

Regarding Lyft’s (LYFT) guidance, the company anticipates Q1 2024 gross bookings of about $3.5B to $3.6B and adjusted EBITDA of $50M to $55M.

Nevertheless, it was the full-year guidance that turned heads. With a projected mid-teens growth in rides and a slightly faster growth than gross bookings, along with an anticipated 50-basis-point expansion in adjusted EBITDA margin, Lyft (LYFT) expects to achieve positive free cash flow for the entire year of 2024, a first for the company.

When asked about Lyft (LYFT) achieving profitability, chief executive Risher remarked: “I can’t give you a timeline on that, it’s just not something we’re discussing, but I can absolutely say it is in the plan, it’s our focus for sure. And the fact that we’re going to be free cash flow positive across all of 2024 is another really good indication that financially we are really strengthening our business quite a lot.”

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Correction from source: LYFT has corrected its press release to say “50 basis points” as part of its full year adjusted EBITDA margin guidance instead of “500 basis points.” This story has been amended to reflect that correction.