Lyft reports gross bookings in line with our expectations at $13.8bn, up 14% YoY in FY23. Gross Bookings were driven by an 18% growth in rides to 709mn (5.6% above our expectations). Gross Bookings reached $3,724mn in 4Q23, up 17% YoY on the back of a 26% rides growth in 4Q. The number of Active Riders grew by 10% YoY to 22.4mn in 4Q, while staying flat QoQ. Lyft demonstrated strong cost control during the year and improved its Adj EBITDA as percentage of Gross Bookings from -7.8% in 4Q22 to 1.8% in 4Q23. Lyft’s initiatives to improve the offering for both drivers and riders generated a positive response despite price competition in the sector throughout 2023. Lyft announced its commitment to drivers to pay at least 70% of rider payments made on the platform after external fees. The feature for women riders and drivers, Women+ Connect, demonstrated a positive response with a 67% of eligible drivers connected to the service. Earlier, Lyft said women drivers provide c.15% of driving hours on the platform. For riders, the company managed On-time pickup promise with 98% of rides delivered to the airport on-time. As a part of its business initiatives, Lyft launched its Video Ads in 4Q, and attracted such partners as Warner Brothers, BetMGM, Universal Pictures, and HubSpot. Apart from business initiatives, Lyft delivered sustainable cost management. The company decreased the cost of revenue as % of revenue to 60.7% in 4Q23 compared to 64.7% a year ago. Operations and support cost in revenue was 8.3% vs 8.1% a year ago, R&D share went down from 8.8% to 7.8%, and G&A reported a major cut from 32.2% in 4Q22 to 17.8% in 4Q23. Sales and marketing expenses went up from 9.7% to 10.3% in 4Q23, but it was an improvement from 11.2% in 2Q23. The company also cut total stock-based compensation to $91.7mn in 4Q23 from $199.3mn a year ago, which was a positive sign for investors. The weighted average number of shares outstanding increased by 8.5% YoY to 396.1mn. The stock-based compensation reached $485mn in FY23, which is below the target $550mn set by the company previously ($350mn promised for 2024). Cash, unrestricted cash, and short-term investments were $1.68 bn while debt was c. $0.84bn as of 31 December 2023.
We update our forecasts based on reported results and the guidance. Lyft released guidance for 1Q24, including Gross Bookings in the range of $3.5-3.6bn, up 15-18% YoY, and Adj EBITDA of $50-55mn. Adj EBITDA margin as a percentage of Gross Bookings is expected at 1.4%-1.5%. The company expects rides growth in the mid-teens YoY in FY2024, while Gross Bookings growth may be at a faster pace than Rides. We remain cautious regarding rides growth and keep a single-digit growth in our forecast model. However, we believe there is a space for revenue per rider growth. Lyft expects to generate a positive Free Cash Flow in 2024 with approximately half of its Adj EBITDA to be converted to FCF. We upgraded our 12-month DCF-based target price from $14.5/share to $18.4/share. Lyft stock looks strong on the back of good results, however, the high interest rate environment pressures the cost of capital estimates. The ability to generate a positive free cash flow and deliver profitability improvements will be the next trigger for the stock. We reiterate our Buy rating for the stock.
14 Feb 2024
Lyft 4Q23: good cost control, rides above expectations
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Lyft 4Q23: good cost control, rides above expectations
- Published:
14 Feb 2024 -
Author:
Marina Alekseenkova -
Pages:
6
Lyft reports gross bookings in line with our expectations at $13.8bn, up 14% YoY in FY23. Gross Bookings were driven by an 18% growth in rides to 709mn (5.6% above our expectations). Gross Bookings reached $3,724mn in 4Q23, up 17% YoY on the back of a 26% rides growth in 4Q. The number of Active Riders grew by 10% YoY to 22.4mn in 4Q, while staying flat QoQ. Lyft demonstrated strong cost control during the year and improved its Adj EBITDA as percentage of Gross Bookings from -7.8% in 4Q22 to 1.8% in 4Q23. Lyft’s initiatives to improve the offering for both drivers and riders generated a positive response despite price competition in the sector throughout 2023. Lyft announced its commitment to drivers to pay at least 70% of rider payments made on the platform after external fees. The feature for women riders and drivers, Women+ Connect, demonstrated a positive response with a 67% of eligible drivers connected to the service. Earlier, Lyft said women drivers provide c.15% of driving hours on the platform. For riders, the company managed On-time pickup promise with 98% of rides delivered to the airport on-time. As a part of its business initiatives, Lyft launched its Video Ads in 4Q, and attracted such partners as Warner Brothers, BetMGM, Universal Pictures, and HubSpot. Apart from business initiatives, Lyft delivered sustainable cost management. The company decreased the cost of revenue as % of revenue to 60.7% in 4Q23 compared to 64.7% a year ago. Operations and support cost in revenue was 8.3% vs 8.1% a year ago, R&D share went down from 8.8% to 7.8%, and G&A reported a major cut from 32.2% in 4Q22 to 17.8% in 4Q23. Sales and marketing expenses went up from 9.7% to 10.3% in 4Q23, but it was an improvement from 11.2% in 2Q23. The company also cut total stock-based compensation to $91.7mn in 4Q23 from $199.3mn a year ago, which was a positive sign for investors. The weighted average number of shares outstanding increased by 8.5% YoY to 396.1mn. The stock-based compensation reached $485mn in FY23, which is below the target $550mn set by the company previously ($350mn promised for 2024). Cash, unrestricted cash, and short-term investments were $1.68 bn while debt was c. $0.84bn as of 31 December 2023.
We update our forecasts based on reported results and the guidance. Lyft released guidance for 1Q24, including Gross Bookings in the range of $3.5-3.6bn, up 15-18% YoY, and Adj EBITDA of $50-55mn. Adj EBITDA margin as a percentage of Gross Bookings is expected at 1.4%-1.5%. The company expects rides growth in the mid-teens YoY in FY2024, while Gross Bookings growth may be at a faster pace than Rides. We remain cautious regarding rides growth and keep a single-digit growth in our forecast model. However, we believe there is a space for revenue per rider growth. Lyft expects to generate a positive Free Cash Flow in 2024 with approximately half of its Adj EBITDA to be converted to FCF. We upgraded our 12-month DCF-based target price from $14.5/share to $18.4/share. Lyft stock looks strong on the back of good results, however, the high interest rate environment pressures the cost of capital estimates. The ability to generate a positive free cash flow and deliver profitability improvements will be the next trigger for the stock. We reiterate our Buy rating for the stock.