Lyft's stock had a bonkers after-hours rally. Was it due to a typo in its earnings release?

By Bill Peters

Results come as rival Uber tries to 'keep a lid' on prices, potentially posing stiffer competition

When Lyft Inc. put out its earnings release Tuesday afternoon, the ride-hailing platform forecast a gain this year in an adjusted profit metric. But during the company's earnings call later in the day, management issued a correction, saying that increase was, in fact, smaller than what it said the first time around.

Shares, in the process, ballooned in value after hours - rocketing upwards of 60% higher at one point - then quickly contracted before settling to still-solid gains of around 16%.

Lyft (LYFT), in its earnings release, forecast adjusted Ebitda margin expansion - or earnings before interest, taxes, depreciation and amortization - of around 500 basis points this year, or around 5%.

But during the call, Chief Financial Officer Erin Brewer said the company was expecting a 50 basis-point expansion. When asked by an analyst to reconcile the two figures, she said the correct figure was, in fact, 50.

"This is actually a correction for the press release," she said during the call, "You're correct in my prepared remarks, I referenced 50 basis points of margin expansion."

A little less than two hours after Lyft first published its earnings release, it issued a corrected one. A representative for Lyft attributed the mistake to a "clerical error." She said the company has corrected its financial materials, and that a related disclosure to the SEC was forthcoming.

Brad Foster, a securities litigation partner at the law firm Haynes Boone, said that the situation, as it stood now, likely wouldn't represent a legal risk.

"The reality is that people make mistakes, and mistakes are not securities fraud. Stock drop lawsuits typically require proof of 'scienter" or 'intent to defraud,'" he said. "A typographical error, quickly corrected by the company, does not meet this standard."

Also read: Opinion: Lyft's gargantuan earnings error proves Wall Street should cut the jargon

Prior to the stratospheric after-hours gain - and whatever actually caused it - Lyft on Tuesday said that it still expected two key demand metrics to come in above Wall Street's expectations for the year ahead, and that it expected to turn out positive free cash flow for the first time over that period.

The company made the forecasts after carrying out big staff cuts over the past two years, and as it tries to keep insurance and other costs in line. More people used Lyft more often during last year's holiday quarter, as travel picked up and workers sought out the service for their commutes. But the benefits of the broader rebound in the ride-sharing industry also flowed through to its larger rival, Uber Technologies Inc. (UBER).

Lyft (LYFT) said it expected percentage growth in rides in the mid-teens this year. That was better than FactSet forecasts for around 11%.

It also forecast an increase in gross bookings - or what customers get charged for rides, scooter rentals and services like subscriptions that offer extra perks - that slightly outpaced the growth in rides. FactSet called for bookings growth of around 12%.

For the first quarter, Lyft forecast gross bookings of around $3.5 billion to $3.6 billion. That was above FactSet forecasts for $3.46 billion.

Chief Executive David Risher, in an interview, said that commute rides jumped 27% during the quarter. He also said that the segment that handles those commute rides - for employees at companies like Starbucks Corp., (SBUX) FedEx Corp. (FDX) and Delta Air Lines Inc. (DAL) - accounts for more than 20% of its rides per year overall.

That segment can help employees get to and from work during off-hours - when public transit might not be available - or when parking space is tight. Risher declined to say how big he thought that segment could get. But he noted that Lyft recently reorganized to put more focus on its bigger corporate customers.

"It's definitely an area where we're doubling down, we really are," he said.

Lyft's quarterly financials came after its larger rival, Uber, reported fourth-quarter results last week that topped expectations. Analysts praised that platform's profitability, as well as growth in subscribers who pay for extra benefits and in its ad business, which allows outside businesses to pay for ads that appear in the Uber app.

However, BofA analysts noted on Tuesday that Uber, during its earnings call, said it was hoping to "keep a lid" on prices - potentially heightening competition with Lyft - and warned of higher costs for the insurance it provides to drivers.

Risher said that, similarly, Lyft was contending with higher insurance costs. But he said the company hadn't changed its strategy on pricing in response to any moves from Uber.

For the fourth quarter, Lyft reported a net loss of $26.3 million, or 7 cents a share, far narrower than the loss of $588.1 million, or 1.61 a share, in the same quarter of the prior year.

Lyft's adjusted earnings per share came in at 18 cents, above FactSet forecasts for 8 cents. Sales rose 4% year over year to $1.22 billion, roughly in line with estimates for $1.22 billion. Gross bookings rose 17% to $3.72 billion, above expectations for $3.69 billion.

Shares of Lyft are up 12.4% over the past 12 months. By comparison, the S&P 500 index SPX is up 19.1% over that period.

-Bill Peters

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02-13-24 2316ET

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