Lyft, Inc. 2019 Form 10-K Summary
Business context and reporting period
Lyft operates a multimodal transportation platform in the United States and Canada, connecting riders with drivers and offering ridesharing, shared bikes and scooters, public-transit information, autonomous-vehicle partnerships, and vehicle rentals. This Form 10-K covers the fiscal year ended December 31, 2019; fourth-quarter figures refer to the three months ended December 31, 2019.
- Fourth-quarter Active Riders were 22.9 million, up 23% year over year.
- Fourth-quarter revenue per Active Rider was $44.40, up 23% year over year.
- Lyft operated in more than 300 markets and had 5,683 employees at year-end.
Financial performance and key metrics
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | $3.616 billion | $2.157 billion | Up 68% |
| Cost of revenue | $2.176 billion | $1.243 billion | Up 75% |
| Total costs and expenses | $6.318 billion | $3.134 billion | Up 102% |
| Loss from operations | $2.702 billion | $977.7 million | Worsened |
| Net loss | $2.602 billion | $911.3 million | Worsened |
| Net loss per share | $11.44 | $43.04 | Improved on a per-share basis after IPO share issuance |
| Adjusted EBITDA | $(678.9) million | $(943.5) million | Improved 28% |
| Adjusted EBITDA margin | (18.8%) | (43.7%) | Improved |
| Contribution | $1.813 billion | $920.8 million | Up 97% |
| Contribution margin | 50.1% | 42.7% | Improved |
Revenue increased primarily because of higher Active Rider counts, increased revenue per rider, improved Shared Ride efficiency, driver-incentive efficiency, and growth in the Flexdrive program. Fourth-quarter revenue was $1.017 billion, compared with $669.6 million in the fourth quarter of 2018. Fourth-quarter net loss was $356.1 million, compared with $248.9 million in the prior-year quarter.
- Stock-based compensation was $1.599 billion in 2019, compared with $8.6 million in 2018, largely due to accelerated recognition of RSUs following the IPO.
- Insurance costs were approximately $1.2 billion, including approximately $219.2 million of adverse development related to historical periods; the non-GAAP reconciliation excluded $270.3 million of historical insurance reserve changes.
- Cash used in operating activities was $105.7 million, an improvement from $280.7 million in 2018 but still negative.
- Cash used in investing activities was $1.611 billion, while financing activities provided $1.574 billion.
- Capital expenditures for property, equipment, and the scooter fleet were $178.1 million.
Liquidity, capital structure, and obligations
- At December 31, 2019, cash and cash equivalents were $358.3 million, unrestricted short-term investments were $2.492 billion, and restricted cash, cash equivalents, and investments were approximately $1.6 billion.
- Total cash, cash equivalents, and restricted cash and cash equivalents were $564.5 million; this measure excludes short-term investments.
- Lyft received approximately $2.5 billion of net IPO proceeds in April 2019 and used part of the proceeds for RSU-related tax withholding, investments, working capital, operating expenses, and capital expenditures.
- Total liabilities were $2.837 billion, including $1.378 billion of insurance reserves and $476.3 million of operating lease liabilities.
- The filing does not present a separate material corporate debt balance as of December 31, 2019. Subsequent to year-end, the Flexdrive acquisition added assumed indebtedness; as of February 7, 2020, Flexdrive had approximately $104 million outstanding under a $300 million line of credit.
- Contractual commitments included $591.8 million of operating lease payments and $292.3 million of noncancelable purchase commitments. The AWS agreement requires at least $300 million of spending from 2019 through 2021, including at least $80 million in each year.
Material changes versus the prior comparable period
- Revenue growth remained strong, but total expenses grew faster than revenue, increasing the GAAP operating loss and net loss.
- Research and development expense increased 400% to $1.506 billion, primarily because of $967.8 million of additional stock-based compensation and higher personnel costs.
- General and administrative expense increased 165% to $1.186 billion, driven by stock-based compensation, public-company costs, corporate insurance, legal accruals and settlements, and advisory expenses.
- Cost of revenue increased 75%, primarily because of insurance, bikes and scooters, payment processing, hosting, stock-based compensation, and Flexdrive costs.
- Sales and marketing expense was broadly stable at $814.1 million, as lower acquisition and brand-marketing spending offset higher incentives and stock-based compensation.
- Contribution margin improved to 50.1% from 42.7%, and Adjusted EBITDA loss narrowed, but Lyft remained substantially unprofitable under GAAP.
- Lyft adopted the new lease accounting standard in 2019, recognizing $441.3 million of operating lease right-of-use assets and $476.3 million of operating lease liabilities at year-end; prior periods were not recast.
- The IPO converted $5.152 billion of redeemable convertible preferred stock into common stock and increased stockholders’ equity to $2.854 billion from a $2.871 billion deficit at December 31, 2018.
Guidance, outlook, commentary, risks, and unusual items
- Management expects Active Rider percentage growth to moderate while focusing on profitable growth, higher revenue per rider, rider retention, and more valuable use cases.
- Management expects Adjusted EBITDA and its margin to improve over the long term as the platform scales, although no specific financial guidance is provided in the filing.
- Management expects continued spending on platform development, autonomous technology, marketing, operations, compliance, and new transportation modes. Expenses are expected to increase in absolute dollars in several categories.
- Lyft has incurred net losses every year since inception and states that it may not achieve or sustain profitability or positive operating cash flow.
- Independent-contractor classification is a major risk. Lyft faced numerous class actions, arbitrations, administrative audits, and regulatory inquiries, particularly following California Assembly Bill 5. A change in driver classification could materially increase labor, tax, insurance, litigation, and operating costs.
- Insurance reserves are subject to significant estimation risk. Actual claims may exceed reserves, coverage limits, or available insurance.
- Other material risks include intense competition, pricing and incentive pressure, regulatory restrictions, privacy and cybersecurity incidents, platform outages, payment-processing dependency, AWS concentration, safety and personal-injury claims, intellectual-property litigation, and the uncertain economics of bikes, scooters, autonomous vehicles, and rentals.
- Subsequent events included a January 2020 workforce reduction of 90 employees and the February 2020 acquisition of Flexdrive for approximately $20 million, together with assumed indebtedness.
- The filing discusses the emerging coronavirus outbreak as a potential source of supply-chain disruption, reduced travel, and business interruption, but does not quantify its financial impact.
Investor verification checklist
- Verify whether insurance reserve development, claims severity, and insurance costs continue to pressure gross margins and cash flow.
- Assess the sustainability of the 50.1% contribution margin and the path from negative Adjusted EBITDA to GAAP profitability.
- Review the effect of stock-based compensation, remaining unrecognized RSU expense of approximately $1.1 billion, and future equity dilution.
- Monitor driver-classification litigation, California AB 5 developments, related regulatory audits, and potential changes to the operating model.
- Reconcile unrestricted liquidity with restricted insurance assets, lease obligations, purchase commitments, AWS commitments, and Flexdrive debt.
- Evaluate utilization and profitability of asset-intensive offerings, including bikes, scooters, Express Drive, Lyft Rentals, and autonomous-vehicle initiatives.
- Review subsequent filings for the Flexdrive purchase-accounting allocation, assumed debt, coronavirus effects, and any changes in legal reserves or guidance.