Lyft’s S-1 breakdown

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I dug into Lyft’s S-1 — the no.2 US based ridesharing company, after Uber, has filled to IPO. This IPO is significant, not only as the first big venture backed IPO of 2019 but also the first company from the first wave of smartphone enabled shared transportation networks. The company is raising upwards of $100m at a $20bn to $25bn valuation, on gross bookings of $8bn and revenues of $2bn in 2018. The S-1 itself is available here, summary:

• Lyft are lasered on shared transportation (cars, bikes, scooters) and the North America. Autonomous Vehicles are being positioned as moderately important though long-term, with Lyft mentioning Open Platform, their two-sided marketplace for AVs. There is no mention of food delivery, freight or global ambitions as yet, unlike Uber (note: I don’t read S1 risk factors so apols if its buried in there)

• Revenue growth has increased from $343m, $1bn, to $2.1bn from 2016 to 2018. The companies seems to have found some operating leverage as they’ve scaled — COGS (as per below) is an increasingly lower percentage of revenues

• Though net losses have been widening on an absolute basis from $682m in 2016 to $911m in 2018 — when looked at on a comparative basis 2016 net losses shrank considerably as a percentage of revenues from -198% in 2016 to -43% in 2018

• Take rate (revenue the company books once its paid drivers) is not likely to be moving much higher, unless there are more growth in rides, efficiencies found on driver routing and utilisation side or price increases

• Impressively, whilst number of riders increases, so do revenue cohorts. This means not only are the absolute number of people using Lyft increasing but people tend to use the service more through time. Lyft’s ASP over the last couple years has risen 38% — this is true pricing power = increase prices + increased consumer usage

• Co-founders John Zimmer and Logan Green own about 7% of the company — which speaks to how much capital they’ve raised and dilution they’ve taken on. Two important things to note: 1. the company will IPO at $20-something billion, so dont get the violins out for them 2. they retain control of the company through a dual class stock structure popularised by Google
• Page one holders of stock (>5%) are indicative of a new type of venture investing. Many early venture funds such as Floodgate, K9 and Founders Fund are not listed, likely causes*: 1. extended runway to IPO with large subsequent financing rounds dilutes early investors to near oblivion 2. bifurcation of early and late stage venture investing, this now allows early (seed to series B) investors to partially liquidate their investment in advance of a liquidity event to much later stage investor

% ownership on the right

Conclusion: Lyft are putting up some pretty solid numbers; growth of gross bookings, revenues, users and revenue cohorts. They’ve benefited from strategically setting their message around replacing car ownership in North America and they’ve nearly doubled down their market share from 22% to 39%, from 2016 to 2018.

Having said this the unit economics remain challenged, with take rates likely at or near peak, it seems the company will need to find savings and/or leverage in bringing down sales and marketing as a total of revenues, which was at 37% in 2018. Incidentally, I suspect with such strong topline growth, public market investors will still price this with a relatively high multiple, likely setting a precendent for Uber’s IPO later on in the year.