Highlights from Lyft’s S1 Filing
Ride-sharing company Lyft filed its IPO and S1 on Friday, beating rival Uber to the public markets. The offering is one of potentially many in 2019 and has created high anticipation among the investing community.
An S1 is the initial registration document all public U.S. stocks need to file with the SEC. The documents can be very interesting, as they force the company to disclose many things including their overall business plan, competition, and planned capital allocation.
Anyone interested in investing in Lyft should read their S1 filing. Nevertheless, I thought it would be prudent to go over my favorite quotes and tidbits from the report, as they can be excruciatingly long documents to read.
Uber and Lyft are the two big ride-sharing giants in the U.S.
“Vehicles are only in use 5% of the time.”*
This is the core reason why companies like Uber and Lyft were able to grow so quickly. Most of the vehicles we own sit idly, wasting time, money, and space. Lyft allows people to profit off of this downtime.
“In the United States alone, consumer expenditures on transportation were approximately $1.2 trillion in 2017.”
The Total-Addressable-Market (TAM) for these transportation apps is huge, and the main reason why investors are bullish on the market. If successful, the gig economy could upend one of the largest industries in the world.
“Our revenue was $343.3, $1.1 billion, and $2.2 billion, in 2016, 2017, 2018, respectively…”
Sales doubled last year, an impressive number, and a faster rate than Uber. As for the bottom line, well…
“We have a history of net losses and we may not be able to achieve or maintain profitability in the future”
One of the great things about an S1 is companies have to be completely honest with all the risks associated with their business. For Lyft, one of the biggest fears is that ride-sharing will never be a profitable industry.
“The ridesharing market and the market for our other offerings, such as our network of shared bikes and scooters, are still in relatively early stages of growth”
Lyft only started its core business in 2012. We are still in the early stages of this business, and while we don’t know whether it will work out, the potential is quite large.
“If the contractor classification of drivers that use our platform is challenged, there may be adverse business, financial, tax, legal and other consequences”
The second largest issue with Lyft and Uber is the fact their drivers are considered contractors and not full-time employees. If regulations change with this, they could be in for a world of hurt.
Drivers with 10,000 or more rides eligible for stock-based compensation.
A unique offering and something I think can work out for both parties. It will incentivize current drivers to go on more and will keep them from revolting for not getting typical employee benefits.
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Cost of revenue at $1.2 billion right now, significant spending on R & D ($300 mil) Marketing ($800 mil) and admin ($447 mil) contributing to the net loss.
These are notes I took from the section on annual operating expenses. $800 million on marketing is quite high but expected in this highly competitive market. Administrative expenses are large which hopefully won’t continue. Cost of revenue of $1.2 billion means they had a $1 billion in gross profit in 2018.
Revenue per active rider of $36.04 at end of the year 2018, up from $15.88 in March of 2016.
I’m not extremely bullish on Lyft, but these are great growth numbers. Revenue per active rider is basically their ARPU, and to more than double that in two years is extraordinary.
“Our mission is to improve people’s lives with the world’s best transportation.”
They repeated this a few times throughout the S1, and it shows how broad their business goals are. Executives feel they have a huge opportunity on their hands with this new “Transportation-as-a-Service” industry.
Revenue as a Percentage of Bookings is how much of the payment volume Lyft keeps for themselves. It will be key to continue to increase this metric as they continue on the road to profitability.
Overall, I was fairly impressed with Lyft’s S1, and would definitely consider investing in the stock. I don’t see their growth slowing down anytime soon, and think ride-sharing is here to stay. However, I will probably wait a year or so before I consider purchasing shares since investing in IPOs can be risky.
*All quotes are directly from the S1 filing.
Disclosure: The author is not a financial adviser, and may have an interest in the companies discussed.