Today Lyft, an American ride-hailing company, disclosed its first quarter financial performance. The results, coming from a public company, would normally fall outside our mission of covering the private markets. However, as Uber’s IPO is later this week, they matter to this publication as well.
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So let’s do two things. First, let’s get an understanding of how Lyft performed in Q1 (check its extended results here). And second, let’s explore what those results might mean for Uber, whose IPO is just days away.
Lyft’s Q1 included sharp growth — both on a year-over-year basis, and compared to the sequentially preceding quarter — and sharp losses. The firm’s unadjusted results include a host of IPO related costs, meaning that Lyft’s formal profit metrics in the quarter look abysmal.
What matters for our purposes, however, are Lyft’s revenue growth, margins, and adjusted losses. The latter will help us get rid of those pesky one-time costs so we can better grok where Lyft stands on an operating basis.
Starting with growth, Lyft’s revenue expanded from $397 million in the year-ago quarter, to $776 million in Q1 2019. That’s 95 percent growth, a high pace of growth for a company of Lyft’s size. Compared to Q4 2018, the sequentially-preceding quarter, Lyft grew just a smidge under 16 percent. Those are solid numbers for a growth-oriented company at scale.
Turning to margins, Lyft managed some improvements. In the year-ago quarter, Lyft’s adjusted net loss margin came to 58 percent. In Q1 2019 that fell to 27 percent. That’s material improvement.
However, when we narrow-down to merely its adjusted net loss (recall that we want to get rid of one-time IPO-related costs), the firm only improved from -$228.4 million in the year-ago quarter to -$211.5 million in Q1 2019. That’s somewhat slack.
On that theme, Lyft’s operating cash burn of $84.8 million in the first quarter was up from its year-ago result, though down from its Q4 2018 result. Happily, with post-IPO cash of around $3.5 billion, the company can afford to torch that much cash for some time.
The Uber Portent
Lyft shares were initially up a bit after reporting but had fallen during the day. In effect, the Lyft earnings report was a wash. I suspect that’s more because the market doesn’t know how to price Lyft than it having priced it correctly before.
Two things stand out as we relate the above to Uber. First, Lyft’s revenue multiple is as high as it is due to the company’s rapid growth; that’s to say that the company is worth $16 billion against $2.54 billion in trailing revenue (the firm expects between $3.275 and $3.3 billion in its current year) because it has expanded as quickly as it has.
Uber won’t be able to match Lyft’s growth. Its growth rates have been single-digit percentage gains in recent quarters (measured sequentially), far under Lyft’s nearly 16 percent result. Thus, for Uber to retain a similar revenue multiple it will need to be either more profitable (less unprofitable, really), or report strong figures from its stakes in other ride-hailing companies.
Second, that Lyft remains about 50 percent away from its long-term adjusted profit goal. With an adjusted EBITDA result of -28 percent of revenue in the first quarter, and Lyft targeting an eventual +20 percent result of the same metric in time, the firm is 48 percentage points from done.
For Uber, that’s good news. It’s targeting a 25 percent result of the same metric. And it’s going to be far away for some time at least. Lyft’s earnings show that that can, at least in one particular circumstance, be just fine with investors. For now, at least.
Get hype for the Uber IPO. It’s nearly here.
Illustration Credit: Li-Anne Dias