Lyft Announces Q1 Earnings

https://investor.lyft.com/news-releases/news-release-details/lyft-announces-record-first-quarter-results

by derwiki • 7 years ago

120 129 7 years ago

investor.lyft.com

data_spy• 7 years ago

If that R&D doesn't pan out they essentially will go bankrupt quickly as their R&D spending was 81% of their revenue.

deanmoriarty• 7 years ago

Why couldn't they issue bonds and get access to cheap debt like Netflix or Tesla?

b_tterc_p• 7 years ago

They can issue bonds. Although they’ll probably pay a much bigger risk premium than Netflix or Tesla. It would likely tank the stock price further though. They’ll need non trivial bonds to merit additional quarters of operations- and in the event of bankruptcy creditors get preference over shareholders

YjSe2GMQ• 7 years ago

Uber issued bonds: https://www.bloomberg.com/news/articles/2018-10-16/uber-is-s...

Rated by Moody's as B3 and by S&P as B-, which is the bottom of "Highly speculative": https://en.wikipedia.org/wiki/Bond_credit_rating#Credit_rati...

For comparison, Uber bonds are one grade lower than Argentinian bonds: https://tradingeconomics.com/argentina/rating

Such credit ain't cheap, especially now that interest rates are no longer zero.

nwah12• 7 years ago

What is included in that R&D category? If it is mainly just maintaining their infrastructure, then there isn't much research happening, and thus nothing to even hope for in terms of breakthroughs.

adamson• 7 years ago

It grew by 10x, but I doubt Lyft's infrastructure or day-to-day engineering costs have grown anywhere near that much. That said, I have no idea what Lyft could spend $600MM on researching.

cozzyd• 7 years ago

They're experimenting with new ways to lose money, apparently.

tzhenghao• 7 years ago

Probably their Level 5 AV initiatives. Even that domain has long tails that might take more time to iron out than expected. I'm curious if they even have that long of a runway to make it happen.

toomuchtodo2• 7 years ago

Their runway is about six quarters. You decide.

mlinsey• 7 years ago

I believe it's common for tech companies to consider all engineering / product payroll as R&D, even if we might consider some eng work as maintenance. In this case a lot of it is stock-base compensation being recognized post IPO. In any case, this isn't just far-out tech stuff like self-driving cars.

muckrakerz• 7 years ago

The net loss that they are running against revenue is staggering. It is also telling that they bury that in the text and don't move it to the summary infographic. What does a profitable Lyft/Uber look like? We haven't seen it yet.

This also proves a bit of the lie that the drivers are getting screwed out of earnings. The company as a whole isn't profitable and those drivers should be carefully considering their future when, not if, the market losses patience over these losses.

toomuchtodo2• 7 years ago

Unemployment hasn’t been this low in 40 years. Those drivers are gonna get sucked right up into the economy lickety-split.

mevile• 7 years ago

Unemployment is low, but workforce participation is also low. There are plenty of people not working, and those who are aren't being much more than they were ten years ago, despite inflation.

darawk• 7 years ago

If that were true, and they were unhappy with their situation, they'd already have left.

Shivetya• 7 years ago

there are lots of people who take Uber/Lyft as second jobs to fill otherwise unproductive evenings.

JumpCrisscross4• 7 years ago

What does a profitable Lyft/Uber look like?

Only city centres. Uber, at least, is healthily unit profitable in New York and San Francisco (the last time I checked). Given ARPU is growing at both companies, the boundaries within which they can be possible would conceivably grow.

ghaff• 7 years ago

No need to limit it to city centers. Raise prices, throttle driver recruitment, and the market will adjust accordingly. More locations will naturally lack the density of a healthy driver and passenger network.

nerdponx• 7 years ago

How come Uber is profitable in these areas and Lyft isn't? Market share?

Tiktaalik• 7 years ago

Problem with this is that city centres don't want the traffic and will look to cap ride hailing and shift people to public and active transportation options.

rajacombinator• 7 years ago

Out of curiosity, and having done no research myself, where do you get those numbers about NY and SF? I’m assuming they’re not public info published by Uber.

Shank• 7 years ago

Net loss for Q1 includes $894 million of stock-based compensation and related payroll tax expenses, primarily due to RSU expense recognition in connection with our initial public offering.

I could be reading this entirely wrong, but doesn't this suggest that the primary issue during this quarter was administrative and one-off costs that won't be recurring far into the future?

JumpCrisscross4• 7 years ago

Operations burned $85mm in Q1 ‘19 versus $80mm last year. Given revenues grew 95%, that’s a step in the right direction.

Lyft have half a billion dollars in cash on hand, however, which will only last another 6 quarters at this rate. At its core, that balance between unit profitability, growth and access to cash is the game.

csomar• 7 years ago

was administrative and one-off costs that won't be recurring far into the future?

Shouldn't one-off costs be amortized? Meaning they only show up as one-off costs in the cashflow but not in the revenue/expenses operations.

wavesounds• 7 years ago

This is literally the top comment on every recently IPO'd companies earnings. "Why are they spending so much money, why aren't they profitable yet." It's like HN doesn't understand the purpose of going public is to raise money, and the reason you raise money is because you see growth opportunities that are worth spending money on instead of returning profits to investors.

tyingq• 7 years ago

"instead of returning profits to investors"

Adjusted net loss was $211.5 million. What profits are you talking about?

icxa• 7 years ago

"It's like HN doesn't understand of raising money on an existing valueless proposition!"

No seriously, I don't understand. Explain to me. I grew up in and around small businesses, I legit don't understand how this bulls* flies. It's all being propped up for god knows what reason, and ultimately your average citizen is going to have to pay for it when it all comes crashing down, like always. I don't care if a group of "visionary VCs" "see value" in it. We've replaced a sustainable industry (taxis) with Uber and Lyft, which only were able to because they were able to skirt by regulation, and now if and when they vanish because again, they have proven to be unable to actually make profit to date, we will now have a crumbled public transit mode left to rebuild. Irrational investments that negatively affect the public should be faced with this intense scrutiny.

I am honestly obviously ignorant to whatever is going on here, so I am allowing myself to be educated here.

mandeepj• 7 years ago

purpose of going public is to raise money

Markets are not a charity or piggy bank or donation box. You have to prove your worthiness. If you keep on posting losses then stock is going to get slammed.

Now, coming to reason for going public. The reason that you listed is not the only one. Early investors want an exit. For the same reason, Uber's founder was kicked out and Dara was brought in - so that company can prepare for an IPO.

boh• 7 years ago

The major problem with Lyft and the other unicorns is the growth already happened. The amount of additional growth necessary to sustain their supposed valuation is staggering and unlikely to occur, leaving the public markets paying for the exits of private investors(like Carl Icahn for instance). It would literally have to surpass Google-like growth to make it a worthwhile investment at the IPO price.

What we know about Lyft suggests it's overfunded and it's growth may be more the consequence of large investor inflows, rather than a successful business model.

People like to cite Amazon as proof that profits aren't necessary for a company's success, but even without arguing it as an obvious outlier, it wasn't worth $1 Billion when it IPOed in 1997. The public had a chance to participate in its growth rather than simply fund VC exuberance.

caprese• 7 years ago

I am HN and I see a growth opportunity at a 100 million valuation, just like the Series C investors did

WISH I WAS THEM!

It is perfectly fine to criticize and sit out an investment that runs counter to the history of the investible universe. It is perfectly fine to miss a rally because of it.

thisisit3• 7 years ago

There has also been a rise of

you see growth opportunities that are worth spending money on instead of returning profits to investors.

I fail to understand why asking a company to return a profit considered wrong?

Sure, growth opportunities but then if that story is strong why weren't they able to sell it a VC for another round of funding?

dralley• 7 years ago

The fact that ride sharing companies aren't making money does not mean that drivers are not getting screwed. They are. Fundamentally, the service is being sold below market value in hopes of pricing the competition out of the market.

sokoloff7• 7 years ago

I'm not so sure about that. Lyft and Uber in the Boston area seem priced at a "fair price" (one which encourages substantial use and one which pays a substantial multiple of the marginal cost of operating a motor vehicle).

adventured2• 7 years ago

It's very likely that by the time the pricing competition is concluded (with Uber as the obvious winner), the drivers will be coming under competitive threat from autonomous tech (which will severely limit their leverage for higher wages). I don't expect there will be an outcome where being an Uber or Lyft driver is, on average, going to ever be a good job.

pbreit5• 7 years ago

$211m loss on $776m in sales is not staggering. The company is decreasing losses and still doubling sales!

gypsypunk2• 7 years ago

What does a profitable Lyft/Uber look like.

I imagine it looks like what the traditional cab companies have been doing forever in every city for the last whatever many years.

I am spitballing here, but here is my vision. Please feel free to correct anything deemed infeasible. Decentralize the platform and open Lyft hubs in every major city as their own business unit. Use the same model of contract drivers/use of their vehicle. Pay them better wages which is now possible through greatly reduced operational costs to increase driver loyalty and keep them on the road. I just don’t think this business model works at this scale. There are two major players with an insane amount of capital who both are failing every single metric of a going concern.

icebraining4• 7 years ago

greatly reduced operational costs

How would this work?

acchow2• 7 years ago

Stunning.

Lyft is valued at $17bn on $776M revenue. Expenses for this revenue...

Cost of revenue: $462M Operations: $187M S&M: $275M Administrative: $376M

Total expenses: $1.3bn, i.e. 167% of revenue.

This is not a healthy company.

Uber's breakdown for quarter-ended March 31 isn't out yet. But looking at Dec 31 figures:

Revenue: $3.0bn Cost of revenue: $1.6bn Operations: $408M S&M: $974M Administrative: $555M

Total expenses: $3.53bn, i.e. 118% of revenue.

(note: the above excludes R&D and interest, depreciation, amortization expenses)

JumpCrisscross4• 7 years ago

Uber's administrative expenses are 15% of revenue versus almost 50% for Lyft. Is this a difference in what goes into that bucket between the companies? Or is Lyft emulating the American university experience?

ndesaulniers• 7 years ago

How do these numbers look over time?

pbreit5• 7 years ago

This tweet demonstrates a lack of basic finance knowledge. Stock prices are based on ==future== cash flows, not past. It's already a huge company still growing very fast and printing money on core product (non-pool rides in mature markets)(even overall contribution margin was a whopping 50%! And growing!).

mifeng• 7 years ago

Stock prices are based on the present value of future profits, so pointing out that Lyft is unlikely to be profitable for a long time is spot-on.

acchow2• 7 years ago

I agree, valuation is forward looking.

But I just wanted to point out how risky Lyft is compared to Uber. In some sense, Lyft is selling $1.67 for $1. But Uber is selling $1.18 for $1, which seems way easier to recoup and become profitable quite quickly.

I excluded R&D because I just wanted to focus on "selling $1.67 for $1". I excluded the other expenses because that's just financial structure which isn't relevant to this picture either.

Sujan• 7 years ago

What tweet are you referring to?

sytelus2• 7 years ago

You are not being fair by purposely avoiding to include their growth numbers. Their revenue increased almost twice in a year and number of riders increased by almost 50%. Although loss has increased by 4X so things does remain ugly. This is something I don’t understand. Even if you bought revenues, loss should have increased by only 2X. Why is it 4X? Things are not adding up and I suspect Mr Market is going to be very upset.

NotPaidToPost• 7 years ago

Including growth number makes the whole picture even worse because losses increase faster than revenue. I.e. they're "buying" new revenue on credit for an ever increasing price.

pcl• 7 years ago

That's $776M for the quarter, not for the year. Typically, when doing the "multiples of revenue" valuation comparison, that's done on yearly numbers, not quarterly numbers. I have no idea how constant their revenue figures are quarter-by-quarter, so won't even guess about what a yearly revenue figure might look like. But "$17B on 776M" isn't doing the comparison the way I typically see it.

Nimitz14• 7 years ago

How can one spend so much on administration? Do lawyers go in that column?

cosmie• 7 years ago

Looking at their 8K[1], $215mm (57%) of the expenses in that category are related to stock-based compensation.

In fact, 45% of all of their quarterly expenses are attributed to stock-based compensation. R&D has $506mm in stock-based compensation (80% of all R&D expenses), which both dwarfs the entire size of the G&A expense category and is more than 2x the stock-based compensation component of G&A.

To your question, lawyers do generally go under G&A. But I don't think you can blame the lawyers for the inflated admin costs - all of their cost segments seem to be inflated by the exorbitant amount of stock that's incorporated into the pay structures for tech and SV-based companies.

[1] https://investor.lyft.com/node/6711/html

_Codemonkeyism• 7 years ago

All these expense numbers mean nothing, when in 10y all revenue for Lyft and Uber comes from robo taxis, expenses will be totally different. The current idea is to grow and survive until robo taxis are rolled out.

thatoneuser• 7 years ago

There's your problem right there. The people at the top are costing almost as much as the people who actually provide the service.

koolba• 7 years ago

For FY 2019, we anticipate:
Total revenue to be between $3.275 billion and $3.3 billion
Adjusted EBITDA loss to be between $1.15 billion and $1.175 billion

What’s the size of their war chest? At $1+B/year of net loss this party can’t continue forever.

naveen992• 7 years ago

Contribution margin is 50%. With fixed costs around $3billion / year. They need to double revenue to $6 billion to get to profitability.

Edit: By comparison Uber’s contribution margin is only 9%. With fixed costs around 4 billion , it can probably get to profitability by increasing contribution margin to 40% with the same revenue, or by growing revenue 3x. Probably both contribution margin and revenue will go up 3x eventually.

w8rbt3• 7 years ago

I just recently used Lyft while visiting Atlanta. I'd never used Lyft or Uber before. The app and service were both fantastic. I hope they keep it up. Awesome service at a reasonable price.

gus_massa• 7 years ago

It is cheap because they are loosing money. (Trying to capture the market or something.) Let's wait until they are profitable to see the real price.

w8rbt3• 7 years ago

I did not mean to imply it was cheap, only reasonable. I would have paid more. Nice cars, polite drivers and quick service.

gypsypunk2• 7 years ago

Do you usually just use Uber? I’m surprised you haven’t signed up for Lyft for this long. Pretty commonplace to bump price estimates against each other. I also prefer Lyft over Uber too though.

w8rbt3• 7 years ago

I've never used either. I seldom travel to large cities. I was in Atlanta for GT's commencement. I live in a more rural college town and I don't really need the service routinely, but I can see the value when traveling. It was great.

Reedx• 7 years ago

Lyft's reply re: profitability from the conference call:

"We anticipate 2019 will be our peak loss year as we then move steadily towards profitably on a consolidated basis," CFO Brian Roberts said...

https://www.businessinsider.com/lyft-cfo-says-2019-will-be-p...

trevor-e• 7 years ago

Are developers in San Francisco really worth the cost? According to Paysa data on Lyft the average Software Engineer makes 263k and the average Senior Software Engineer makes 354k (I believe these numbers are total comp). If I'm reading the earnings correctly then $506,206,000 of stock compensation is going towards R&D. Unless you are hiring someone into a highly specialized role I don't see how these numbers make sense. Are these developers really worth multiples of developers in other cities?

https://www.paysa.com/salaries/lyft

closetCS• 7 years ago

This isn't completely on topic but ...

I wonder what happens to a company's culture once the employees see the stock absolutely tanking. The probably aren't fully vested, and so are just watching their payday shrink and shrink.

sokoloff7• 7 years ago

Even if they are vested, they are almost certainly subject to a 180 day "lockup" period where they can't sell for that long post-IPO.

ebg13• 7 years ago

Would they be profitable if they fired all of their engineers and just let the already working product keep working? I mean...it works. It already works. It does everything that it's supposed to do. Millions of people use it happily. Could they just ride it into money?

aetherson5• 7 years ago

It's hard to say. They recorded $630M of expenses into R&D this quarter, but I think they're including a lot of their one time items from the IPO there. Year ago quarter was $60M ish. Hard to believe that they've 10x'd their ongoing expenses on development in one year.

If their ongoing expenses in R&D are only 2x what they were last year, then no, they could cut those expenses to zero and still not be profitable.

alkonaut• 7 years ago

This strikes me as odd also for Uber. I mean I get that they are a large high-tech company, but I don't get how they are developing huge js frameworks and similar. They are a taxi company. Don't they basically just need a reasonably simple web app, a mobile app and some infrastructure that runs on a (relatively) small AWS bill? Why is Uber and Lyft trying to reinvent the web? Is it to attract talent, because good talent really wants to develop cutting edge stuff? That's an argument I can understand. But how can Uber have 2000 developers who make 1000 microservices?

aetherson5• 7 years ago

After hours investors don't seem particularly spooked, they're down about 3% as of this writing.

aetherson5• 7 years ago

(Though now they're down 6% during the day, so that's more material.)

thisisit3• 7 years ago

Lyft reported Q1 revenue of $776.0 million versus $397.2 million in the first quarter of 2018, an increase of 95 percent year-over-year.

95% growth year-over-year? On first reading this sounds incredible. But then on the other hand, if they still had 100% growth left in them, why couldn't they raise another round of funding?

One theory is that they held back some revenue from their IPO documents to show a spurt. So, I really want to see their 10-Q to understand what really is happening here.

zzleeper• 7 years ago

why couldn't they raise another round of funding?

Isn't an IPO just that? A better round of funding that also provides liquidity to shareholders?

thisisit3• 7 years ago

It depends.

If the company uses the proceeds for operations of the company it is another rounding of funding.

There are times when the company IPOs specifically to provide exit to the existing shareholder and not adding any money to operations.

That being said, public offerings get slightly restrictive on how the company can raise future capital.

If Lyft can still grow nearly 100% then I am sure they could have found a VC willing to fund them. And they could have gone public at say 30-50% growth rate.

gigatexal• 7 years ago

Lots of millionaires being minted. Congrats to the early engineers.

bfrog• 7 years ago

Wow, this company is burning cash in a bonfire as fast as they can get it.

Lyft Announces Q1 Earnings

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