What happened
Shares of Lyft (LYFT 1.14%) plummeted 30% on Wednesday after the ride-sharing company warned investors that paying up to retain drivers would weigh heavily on its profits.
So what
Lyft's revenue rose 44% year over year to $875.6 million in the first quarter. This growth was driven by a 31.9% jump in active riders, to 17.8 million, and a 9% rise in revenue per active rider, to $49.18. Essentially, more people used Lyft's transportation services more often.
Lyft's losses, in turn, narrowed to $196.9 million compared to a net loss of $427.3 million in the year-ago quarter.
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However, Lyft's revenue was down 10% from 2021's Q4. Additionally, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell nearly 27% to $54.8 million.
The sequential downturn coincided with a surge in gasoline prices. Sharply higher fuel costs dented drivers' net earnings and made it harder for Lyft to retain them. A surge in omicron-related COVID-19 infections early in the quarter also contributed to the shortfall.
Now what
Retaining drivers is likely to be an ongoing challenge. To boost its results in this key area, Lyft is offering hefty incentives and increasing its marketing efforts to attract and retain more drivers. This spending, however, is taking a toll on Lyft's profitability.
Consequently, management guided for adjusted EBITDA of $10 million to $20 million in Q2. That was substantially below Wall Street's expectations, which had called for adjusted EBITDA of $83 million.
