Insights

Breaking down Lyft, Inc.’s huge IPO

Lyft, Inc., the ridesharing company, unveiled their prospectus for an IPO on March 1st.

Highlights


  • Lyft gained $8 billion in ridesharing services revenue in 2018. The take rate, which represents how much they earned, was 26.8%.

  • Number of active users was 18.6 million. Average revenue per active user increased by 30% from the previous year.
  • Lyft raised $5.1 billion through redeemable convertible preferred stock and acquired the largest bike-sharing company in the U.S.
  • Lyft now has 39% of the ridesharing market which Uber used to dominate.

Lyft was founded in 2007 as Zimride, Inc. which provided ridesharing services and started its on-demand ridesharing app Lyft in 2012. The company changed its name to Lyft, Inc. in 2013.

When Lyft started its on-demand ridesharing app, Uber had already started its services since 2010 and Lyft lagged behind, however since then Lyft has grown its business significantly across the U.S. and Canada.

Revenue and key metrics

Lyft recorded $2.1 billion in revenue in 2018 but still posted an operating loss of $977 million. The number of rides in 2018 was more than 600 million (+65% year-over-year).

In the last quarter, 178 million rides were made (increased by 235% compared to 4Q16); which equals to 59 million rides per month and 1.9 million rides per day.

Drivers

A study shows that Uber and Lyft drivers earn less than the minimum wage in the state where they operate and are exploited by the companies.

However, Lyft explains that they focus on being a driver-centric company and providing drivers with a best in class experience.

Over 1.9 million drivers provided rides at the end of 2018:

  • 91% drive fewer than 20 hours per week
  • 34% are over the age of 45
  • 9% are veterans of the armed forces

Bookings that reflect the total dollar value of transportation payment (excluding tips for drivers, fees and taxes) were over $8 billion and take rate of bookings was 26.8%. (Take rate is calculated by dividing total revenue by bookings which reflects how much the company earned through its services.) Remaining 73.2%, approximately $5.9 billion, is the drivers’ earnings. Considering that there are 1.9 million drivers, average annual earnings of one driver would be $3,101. It is presumable that many of the drivers are working Lyft on the side.

Based on the number of rides in 2018 (619 million) and annual bookings ($8 billion), average bookings per one rider is $13. If the driver would earn 73.2% of it, it would be $9.5 per one ride. To earn $3,101 in a year, the driver needs to offer rides about 326 times; if the driver offers 3 rides in a day, he/she would be working 2-3 days per week.

Riders

Some interesting stats on Lyft’s customer base:

  • 46% use their cars less because of Lyft
  • 35% do not own or lease a personal vehicle
  • 52% use Lyft to commute to work

Number of active riders (who take at least one ride through the Lyft app during a quarter) reached 18 million at the end of 4Q18.

Average revenue from active riders is $36 in a quarter ($12 per month). Considering the total amount that is paid to drivers, it would be $134 in three months ($45 per month).

Other financial data

Cost of revenue ratio went down to 57.7% in 2018 from 81.3% in 2016. Cost of revenue primarily consists of insurance costs that are generally required under Transportation Network Company (TNC) and city regulations for ridesharing and bike and scooter rentals. Sales and marketing cost is also on the decrease.

Lyft raised $5.1 billion through redeemable convertible preferred stock in 2018. Insurance reserve which was valued at $810 million is also a unique factor.

Cash and cash equivalents was valued at $704 million at the end of 2018 which decreased by $474 million from the previous year, while investments asset increased by $739 million to $2.3 billion. Intangible asset, which includes goodwill, was valued at $269 million. This is primary due to the acquisition of Motivate, the largest bike sharing platform in the U.S. in November 2018.

Motivate provides a bike sharing program with sponsor companies; such as Citi Bike in New York and Ford GoBike in San Francisco.

Cash flow from operating activities was still negative in 2018 (-$280 million) but it is getting closer to positive. As the company post insurance reserve in liabilities, cash flow looks better than the actual numbers shown in operating loss. The company uses its large funded money for investing activities. ($1.0 billion)

Uber and Lyft dominate the ridesharing market in the U.S. with over 97%. The market used to be monopolized by Uber, but Lyft has grown and grabbed 39% of the share in the past 4 years.

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The original article was published by Stockclip, Inc. on 03/03/2019.

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