Lyft Announces Q1 Earnings | Hacker News Reader

Lyft Announces Q1 Earnings

investor.lyft.com

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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)

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?

How do these numbers look over time?

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!).

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.

It could be massively profitable tomorrow.

For values of "could" that include "definitely will not be."

"Tomorrow" was facetious, I apologize. But based on existing 50% contribution margins it's quite clear it could achieve earnings in the near term.

But of course with such contribution margins and growth rates it would be silly to hang on to cash.

The idea that Lyft will not close the gap of its administrative expenses is unlikely. Especially if Uber is operating at a lower administrative cost.

Hi Mike!

Since we're all being pedantic here... stock prices are based on the value in which investors place bids on the equity value per share of the company. Investors typically value that number on the present value of expected future profits, but like all complex systems, it's never that simple.

pbreit is also potentially correct - software companies have the capability of producing massive windfall cashflows (and therefore profits) and hence why the market cap is so high.

What isn't being talked about is that a path to profitability isn't clear. All of us armchair financial analysts don't have any insight into:

- What are the unit economics of a car ride and what elasticity of pricing is there in the market?

- Is the fundamental thesis of future value all based on self-driving cars?

- Once particular markets mature, what operating expenses can effectively be "turned off"? Has the company already proven this in their mature markets?

Personally I think uber and lyft are doomed as companies and will go the way of Groupon, but deriving that analysis by reading quarterly financial statements on net income is a fool's errand.

PS - And yes the parent commenter clearly lacks basic public market equity acumen as $775M was a quarterly revenue...smh

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.

What tweet are you referring to?

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.

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.

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.

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

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

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.

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

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.

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

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.

Nominal wages have risen enough over the past 1, 2, 3, 4, and 5 decades such that real wages have remained roughly flat across that time (and in last 2 decades real wages have risen in general).

https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

The wage part is incorrect. Wages have been growing the past years

Prime age (25-54) labor participation has been climbing steadily since 2015, and while not 100% recovered, it is quite close to pre-08 numbers. https://fred.stlouisfed.org/series/LNS11300060

The graph people like to cite when they say nothing has gotten better, the "plain" one: https://fred.stlouisfed.org/series/CIVPART , is fairly misleading without context. That one is calculated simply based on the non-instutionalized (prison/hospital) population over age 16.

There's a number of major contributors to that one that make it unlikely to ever recover in my view. Some notable points:

- Aging. The US might be aging slower than many other developed countries, but median age is climbing, there are more retirees as a % of the over 16 population each year. Each one of those counts against the labor participation rate.

- Employment in the 16-19 age bracket has plummeted, down ~15% since the 90s. College attendance, societal changes, etc.

Do we have the raw data to calculate the participation rate of 24-60 year olds over time?

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

The ones I've talked to are generally quite happy with their gigs with Uber and Lyft. (That should not be surprising, given how easy it is to drop out if they are unhappy with the deal, conditions, or other aspects of the task.)

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

> 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.

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.

> throttle driver recruitment

maybe they could have uber drivers buy shiny medallions at a moderate cost, but then limit the supply of those medallions per market? drivers could sell their medallions for market value.

Underrated comment.

Sometimes, we disrupt a business, but fail to disrupt the underlying market forces that shaped the business in the first place.

I suspect that until we have robo-taxis, uber and Lyft can displace the existing taxi companies by being new and high-tech, but in the end they have the same market forces acting on their availability and pricing that act on taxi companies.

So they will wind up being the new taxi companies.

Taxi medallions weren't imposed by market forces.

This ^. Taxi medallions were the opposite of letting market forces do their work.

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

Precisely. It's all about scale

Scale of what? Most of their costs are per-unit.

SWEs don't get paid on a per-ride basis.

Uber doesn't count their R&D costs in their (dodgy and unquantified) claims to be profitable in this or that market.

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.

NYC has already enacted legislation capping new licenses for PHVs

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.

> 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?

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.

Sorry I'm not following your math here. Which numbers allow you to back into $85mm and $80mm?

> Which numbers allow you to back into $85mm and $80mm?

Scroll down to their cash flow statement.

Out of the three GAAP financial statements, cash flows are the easiest to interpret at a glance. (Fewer ways to screw around.)

> Lyft have half a billion dollars in cash on hand, however, which will only last another 6 quarters at this rate.

I don't believe the balance sheet they're showing for Mar 31, 2019 includes the ~$2.2b in cash they just raised from the IPO. I can't get the figures to add up if it does. From the Q4 balance + the IPO cash, they'd have ~$4.2b in cash, then subtract what they burned in the latest quarter (they obviously didn't burn $3.6b in cash in Q1).

Besides that, the Q1 balance sheet is showing $1.03b in cash on hand, not half a billion dollars (I'm not sure where you're coming up with that figure). I believe their actual cash position was closer to $3.2b as of the end of Q1, including the IPO cash.

You are correct that the March 31 figures do not include the IPO proceeds. If you take a look at the Q1'19 supplemental deck that Lyft released with their earnings, you will find a cash reconciliation as if their IPO had occurred on the last day of the quarter.

It will be on page 21 of the following document: https://investor.lyft.com/static-files/19f2bd14-9b3c-4b85-9f...

> 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.

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.

"instead of returning profits to investors"

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

"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.

I don't think you're ignorant, you've described the situation well. It sounds like you are the one doing the educating here.

It sounds like they're either completely downplaying the idea that a company can temporarily forgo profitability for increased growth or they're ignorant of the fact that this is what they're doing.

People act like this is a modern travesty born out of the valley but it's moreso that the local restaurant you frequent isn't unique or intriguing to investors, so of course they don't have a backing allowing them the freedom of making a similar business decision.

If someone gave your restaurant a million dollar investment, do you make sure you're careful to keep your spending under your revenue intake? If so, then that investor just threw a million at you to literally keep it in the bank and to continue doing exactly what you were doing before then. In which case, why did you seek investment? Or do you perchance consider that you could use that investment to improve your business and future revenue?

It's not hard to determine why a company with a billion dollars in the bank might want to utilize that to accelerate growth. Amazon could have been profitable twenty years ago but then they would simply be an online bookstore.

I believe "see value" in this case means - they can start making profit by stopping growth. But since there's more expansion possible, they'd rather invest that money into themselves as "we can start making money now, but we'd rather make more money later".

I'm not saying it's healthy approach in all cases, but the cold calculation is not irrational.

Re. "replaced a sustainable industry (taxis)" - you mean things like taxi medallions? like unaccountable drivers who can ignore you? drivers who will charge you a made up amount? There were lots of issues with taxis - let's not forgot about those.

As someone who did not have a car for the better part of a decade, living in one city known for a good taxi system and one without a good taxi system:

"sustainable industry" is not the term I would use to describe taxis. Their dispatch systems badly needed replacing.

Things I saw in taxis pre-uber:

- Calling a dispatcher and giving an intersection, to receive a "we don't pick up at intersections, you need a valid street address" message. This was in the city without a lot of taxis. Gee, wonder why.

- Drivers speeding off once they realized you didn't mean to go to the airport.

- Drivers intentionally using both feet to drive, so they would stay well below the speed limit. If confronted, it was in the name of "safety". Dispatchers couldn't track locations so they had no idea how long the trip should take, and weren't interested in you as a repeat customer enough to do anything to the driver.

- Multiple broken card readers.

- Generally, it was impossible to understand dispatchers. Almost every one I talked to had a thick accent beyond what I would expect from even a newer first-generation immigrant.

sure, taxis were horrible and expensive. however, they made enough money to sustain themselves with their high prices, low margins, and crummy service. I guess the question is, what would Uber/Lyft have to charge to break even? 10% more? 50% more? What would they have to charge to justify their share price? Do they make sense as businesses?

Given the strides they've made in automated dispatching and the increased demand for taxis that has come about as a response, I'm guessing the model makes sense at a higher price than they currently charge.

I was literally the model customer for taxis. No car, disposable income, goes out drinking a lot. Even so, I actively avoided taxis whenever I could before uber hopped on the scene. It wasn't a question of money - their dispatch services actively left money on the table with their terrible, terrible quality.

Whether Uber/Lyft took out too much money remains to be seen. But the dispatching technology is an immensely profitable business by itself.

Assuming this post is ernest, it's pretty simple. Companies defer profit now because they see growth opportunity ahead. They are betting that if they lose $1B this year, over the next 20 years they'll make up this years loss and more. So Lyft thinks that by losing $1B this year, they can make, say, an extra $1.5B over the next 20 years.

It's possible they are wrong, in which case investors will lose money. However, if they are correct, the investors will get good ROI. Depending on the investor's risk profile, this may/may not be an appealing proposition.

Or, VCs and management are betting that they can sell you this story long enough for them to cash out.

In finance, never ascribe to anything that which can be explained by amoral venality.

> we will now have a crumbled public transit mode left to rebuild.

Thats a huge leap to say that uber/lyft caused our crumbling public transit.

Public transit isn't run for a profit either, so moving demanding people off of it should actually make it more sustainable. (of course we'd rather have them using it to encourage better city design)

Have Uber/Lyft actually killed transit anywhere? Actually, have they even killed taxi companies? It'd be nice if they had, taxis are horrible, abusive, and not public transit either.

If Lyft and (particularly) Uber can’t achieve profitability, they won’t just vanish. They’ll reorganize under Chapter 11 and shareholders will be mostly wiped out and creditors will become the new shareholders. Sure some people will lose money, but it’s not the disaster you’re making it out to be.

This is a vast oversimplification because these companies don’t exist in a vacuum. In my city, bus ridership is being crushed by Uber/Lyft (trains have been hurt less, but still impacted). In response the city has invested less in this infrastructure and lowered service levels. If these companies go belly-up today, they can’t make that change before tomorrow’s commute.

The point of Chapter 11 is the company continues operating. To use a transportation example, all three of the largest airlines in the US went through Chapter 11 and never stopped flying during the process.

Yes, and all of those airlines have generated profits at some point, proving at least some viability. Uber and Lyft have yet to prove that.

Also, Chapter 11 allows companies to reorganize their debt. Debt was the main problem that airlines faced (pensions, etc.), not the problem Uber and Lyft face.

A lot of people were saying this in January 1998 as well, and the Nasdaq more than tripled in price after that (before going even lower).

If you can invest $1 to make $2 you should then invest that $2 immediately, not put it in the bank.

> 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.

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.

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.

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?

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.

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).

In boston. A few months ago, my phone died on me when I was just about to call an Uber. While debating walking instead, I checked with a passing taxi to see if he could take me to Central and asked how much it might cost around and quoted him the Uber rate (which had some surge baked in) that I had seen as a comparison. He laughed at me and said, "that's really cheap. This isn't an Uber!"

So, I'd say in Boston, 1) taxis are still somehow charging above competitive prices and getting customers, and 2) silicon valley/Saudi Arabia are still subsidizing my rides. The "fair price" probably lies in between the two.

Also, as an aside, it's surprising that given this extensive competition from all types of drive share services for the last few years, the taxi industry haven't found ways to reduce prices. Instead, it seems to be spending resources on figuring out ways to block the competition. For example, the new Logan airport rules seem ridiculous and just reinforces the notion that the taxi industry is surviving only by rent collecting through lobbying. [1]

[1]:https://boston.cbslocal.com/2019/04/25/uber-lyft-logan-airpo...

Remember that that price also included commission from UBER, so you were already offering him 25-35% extra.

Taxi drivers in Boston have a commission too, they have to rent or lease a medallion for hundreds of dollars a week (and it's much cheaper now - thanks to Uber & etc).

In large US cities they also have to "tip-out" the hotel doorman and the dispatcher so they can get the high value riders.

Depends on the city. This is far from being the standard, even in the US.

Typical taxi company has serious overheads. They must pay for medalian/licensing. They own vehicles and bear fuel, maintainence, insurance. They drivers are paid fixed wages regardless of rides. They maintain on-call service center. Many Uber/Lyft drivers are in affect work for “extra income”. That means they may have other jobs and driving can be lower paying job on the side. It’s like high school kid can decide to be nanny for $5/hr while putting real nanny out of the job who may charge $15/hr.

That's because the high school kid's expenses are heavily subsidized by VC fund of mom & dad. At some point, they'll likely get sick of footing that bill. The same goes for Uber and friends.

Uber and Lyft (and AirBnB, VRBO, and Homeaway) are also subsidized in many cases by “I already own an expensive asset and carry all the fixed costs already, so I just need to make a profit over marginal costs”, which is largely the same as people who take a second or hobby job (including teenagers babysitting).

That subsidy is structural, IMO. That we see a lot of full time AirBnBs and full time Uber/Lyft drivers may mean it’s sustainable even outside of VC support. (I have no inside information, but I suspect that ride-sharing is economically profitable long-term at current end-user prices in all established markets.)

A lot of Uber drivers I know or had the chance to speak with actually leased/bought a car just for that, whereas Airbnb is a different capital investment.

Right. I typed unclearly. The fact that some Ubers are full time and carrying the full cost of a dedicated car suggests that it’s even more sustainable than just covering marginal costs with a profit margin but covering full costs with profit.

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.

Why would a job that nearly anyone can do, that has no significant barrier to entry, and where the demand at any given price is finite ever "be a good job"?

Shouldn't all jobs be good?

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

>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.

> greatly reduced operational costs

How would this work?

Much easier for management at that level to know they need to, for example, reduce staff from 15 to 12 or 10 than it is to know they need to reduce 1500 people to 1200.

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...

> 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.

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.

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.

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

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.

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.

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.

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.

> 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.

> 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?

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.

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

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

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

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.

They sold $2billion in 8 year bonds at 8% yield. i think their cost of capital will go down now that their contribution margin is positive (9%)

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.

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.

Self-driving cars would be the only thing that makes sense, but it is a longshot and spending 80% of your revenue on that seems nuts.

$600MM/yr @ $200k/yr == ~3000 engineers?

Lyft has 2000 people in their tech org (maybe 1500 engineers)

and the lowest paid engineers at Lyft are probably ~300 total comp.

It includes $500m in stock based compensation this quarter under R&D. IDK if this is a one time thing or what though.

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

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.

Their runway is about six quarters. You decide.

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.

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.

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

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

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

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?

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.

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?

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

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

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