LYFT beat estimates for quarterly profit on Tuesday and said it would generate positive free cash flow for the first time in 2024, as it benefits from cost cuts and pushes back against competition from larger rideshare rival Uber.

Lyft’s shares rose 18 per cent in post-market trading. Uber shares rose 2 per cent.

Lyft CEO David Risher, who took over the reins at Lyft less than a year ago, has driven aggressive restructuring, cutting jobs and eliminating management layers.

The efforts impressed investors. The company’s stock climbed 36 per cent in 2023.

“In 2024, we’ll prove that Lyft’s customer obsession will drive profitable growth,” Risher said in a statement.

“As we can drive our scale north and hold our costs flat, we’re going to drop more money to the bottom line,” he told Reuters in an interview.

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Lyft cut total costs last year by 12 per cent, from a year earlier, compared with a 28 per cent surge in expenses in 2022. The company said it expects ridership to grow in the mid-teens this year, following a 26 per cent rise in the December quarter.

Rides to stadiums grew more than 35 per cent last year from 2022, mainly driven by Taylor Swift’s Eras Tour, Beyoncé’s Renaissance World Tour and other sporting events, Lyft said.

“The strong outlook indicates the ride-hailing company may finally be coming out of the woods,” said Jesse Cohen, senior analyst at Investing.com.

Lyft’s stock surged 61 per cent after the bell but then shed gains to trade up 17 per cent after the company’s chief financial officer Erin Brewer said on a conference call that a key margin metric was expected to rise by 50 basis points this year, not 500 basis points like the company had said in a statement earlier.

Driver push

Lyft retained its 29 per cent market share in the fourth quarter, fending off Uber by keeping prices competitive, according to market analysis firm YipitData. Though Uber dominates the industry, analysts believe Lyft will remain a strong second player.

Lyft’s gross bookings grew 17 per cent to US$3.7 billion in the fourth quarter. It expects between US$3.5 billion and US$3.6 billion in gross bookings in the March quarter, above analysts’ estimates of US$3.45 billion.

Earlier this month, Uber posted its first annual net profit as a public company as gross bookings and user retention improved, and it benefited from initiatives like memberships, corporate travel and advertising.

Risher, too, said on Tuesday growth this year would be driven by partnerships with companies including LinkedIn and Starbucks.

Last week, Lyft, which has a strong presence in the West Coast, announced it would pay the difference if drivers made less than 70 per cent of what riders paid after external fees every week.

In the second half of 2023, the median earnings for a Lyft driver using their personal vehicle was US$30.68, including tips and bonuses per engaged hour. For Uber, it was US$33 per hour, in the December quarter.

“Lyft is trying to earn less money from the drivers in order to grow the amount of driver pool that they have and to grow the amount of passengers that they want to drive and Uber is doing the opposite,” said Adam Ballantyne, senior analyst at Cambiar Investors, which holds Uber stock. “This is a huge gamble for Lyft because they make very little money as it is.”

Lyft forecast current-quarter adjusted earnings before interest, taxes, depreciation and amortization of US$50 million to US$55 million, higher than expectations of US$46.3 million.

The company’s adjusted core earnings of US$66.6 million in the fourth quarter beat expectations of US$56.2 million. Revenue rose 4 per cent to US$1.22 billion in the quarter ended Dec 31, in line with analysts’ estimates. REUTERS