"At the Robin Hood Investors Conference in New York on Tuesday, Lyft said it expected to generate about $1 billion in annualized gross revenue next year, a figure that does not account for the cut of money the drivers take from each transaction."
Maybe I'm missing something, but isn't the driver's "cut" like 80%+? This seems pretty misleading
He's right. You can't double count the revenue of your partners. That would be like eBay posting revenue of $300 billion. Or the NYSE posting revenue as all trades executed rather than their commission.
Lyft is still under $200 million and is raising at 25x revenue or so.
It doesn't sound particularly misleading to me. That's just what "gross" means. Gross is always way, way higher than net. You wouldn't subtract the wholesale cost from the gross income of a retail chain, you wouldn't subtract employee wages from the gross income of a software firm, and you wouldn't subtract contractor payments from Lyft.
Under generally accepted accounting principles (GAAP), and their European equivalent, IFRS, a company generally cannot include in income payments it receives on behalf of others.
Lyft, and Uber, rely on the fiction that they are merely booking apps for drivers, so the fares belong to the driver, and Lyft and Uber are merely entitled to a portion of the fare for providing the booking service. At no time are they/were they entitled to the entire fare, so booking the entire fare as income flies in the face of good accounting--and, for publicly traded companies, the law.
The only reason startups do this is to artificially inflate their valuations. It's really not much different from cooking the books.
This. See Sam Altman's blog post earlier this year[1] - using the word revenue to mean gross merchandise volume is grossly (ahem) misleading and arguably a felony.
Do Lyft/Uber get to float the money before paying it to drivers? If they get a week of float then it's maybe(?) gross income that they can make quite a lot of money off of before paying out drivers.
From what I remember from an Uber driver, they get paid every Thursday. So I guess the money could float around for a bit before finally reaching the driver.
That's not quite true. You normally wouldn't refer to Lyft's total proceeds as "revenue", gross or otherwise. Retail stores hold inventory which runs the risk of going unsold. Not true of Lyft. Ebay calls it "gross merchandise sales". PayPal calls it "total payment volume". Google subtracts "TAC" out of its network revenue. Etc. I've seen Uber refer to it as "gross bookings".
Sure, but I'd argue even using gross in a situation where you aren't the primary provider is misleading. Financial processors such as Visa (or Square for that matter), pretty much only talk about net revenue (Square's S-1 uses "Gross Payment Volume" to talk about gross, and never uses the phrase "gross revenue" once). We are certainly in the weeds of semantics, but I do find the phrasing of that misleading.
When you order a ride with Lyft, a contract is established between you and Lyft. You pay Lyft $10. Payment to the driver is a cost incurred by Lyft in providing services to you.
When you order something on eBay, a contract is established between you and the seller. You pay the seller $10. The seller gives eBay a cut. eBay's cut is a cost incurred by the seller in providing goods to you.
I would argue Lyft is merely providing the service of matching me with the driver (who is a 3rd party, specifically not an employee), for which it takes a fixed cut. The driver is the primary provider of the service, and as such Lyft is merely an agent, and should follow net revenue reporting.
Really Lyft (and Uber) fall on both sides of EITF 99-19, but I suspect when Uber IPOs you wont find "gross revenue" anywhere in their S-1
Tarsnap's revenue is all the picodollars users spend, even though I pass quadrillions of them over to Amazon to pay for the storage I'm reselling. But Amazon is definitely not my employee.
I'm not trying to answer the "contractor vs. employee" question. There are many factors which go into that determination and I don't know enough about Lyft to offer an informed opinion about that.
My point is just that a contract between you and Lyft which states that Lyft will get someone to drive you somewhere does not imply that Lyft's drivers are employees, because the presence of a contract between Lyft and its customers is entirely consistent with Lyft's drivers being contractors.
It's incorrect to do that, and no leading accounting firm would sign-off those statements. The service provided by Lyft is not the taxi ride, but the arrangement of the taxi ride. Lyft is acting as an agent, not the principle, and consequently they can only recognise the booking fee, not the entire service.
"The service provided by Lyft is not the taxi ride, but the arrangement of the taxi ride."
You are right. I was wrong about how Lyft's customer agreement works. I looked up the Lyft T&Cs[0] and they specifically say:
"In exchange for permitting you to offer your Services through the Lyft Platform and marketplace as a Driver, you agree to pay Lyft (and permit Lyft to retain) a fee of up to 20% (the “Administrative Fee”) of the Ride Fees paid by Riders for such Services."
This makes it clear that Lyft is acting as an agent (like eBay) not as a principal (like Tarsnap).
Does VISA or AMEX add all the transactions they handle in their networks as revenue? or the fees? Does Apple Pay add all the transactions they do as gross revenue? There you go... pretty misleading.
Gross revenue = income to which the company is entitled for the sale of goods or services.
Gross profit = gross revenue less expenses (salaries, etc.)
Lyft and Uber are not being paid by the passenger; they are being paid by the driver out of the fare paid to the driver for the service of booking the fare for the driver. Consequently, their gross revenue should only include their % of the fare, not the entire fare.
Importantly, this is one of the reasons that both companies are having trouble with the classification of their drivers. Booking the entire fare as gross income strongly refutes their claims that drivers are independent contractors and not employees.
Indeed, but when the net is 20% of that it feels pretty misleading (at least to me). "Cut of money the drivers take" being 80%? The wording feels very off
Lyft doesn't take inventory risk, has a fixed fee structure and doesn't perform most of the actual service (the drivers do). If you want to geek out, there are actually some standards for reporting gross vs net, see EITF 99-19 http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=121...
Look at Square's S-1 for example, you won't find the phrase "gross revenue" once in the entire document - revenue = net, and they use "Gross Payment Volume" instead.
You're a supermarket, you sell stuff from vendors you buy from. You have gross income minus cost of goods sold.
You're a mall, you lease space to vendors. You have gross income minus expenses.
You're not a logistics provider but merely a platform that connects third party service providers to the customer. You tell everyone how much money you hold on to for the third party service providers as... gross income?
Lyft and Uber et all are more like PayPal, also playing the game of claiming to not be a bank and for awhile not wanting to be a licensed money transmitter.
Last PayPal quarterly earning report they reported $69.74B in payment volume, $2.26B net revenue, $377MM net profit.
That makes sense.
Here Lyft is saying their gross revenue is $2B. Kind of like how Groupon count all the eggs in their basket before paying out their merchant partners.
Maybe a better way to put it is total booking volume $2B, net revenue $400MM, then whatever net profit after expenses.
Valuing the business at 10x on $400MM can make sense. The bet is that Lyft can make more money within ten years by sustaining and increasing the dispatch volume or by increasing efficiency and decreasing costs.
$1 billion next year. Assume 60% YoY growth -> doing about $600mm this year? Say average $12 a ride...that's 50m rides this year -> 137k rides a day/65 cities served -> 2100 rides/city/day.
Uber started showing up in Google Maps on my phone when I installed the Uber app on my phone. I just assumed there was an interface whereby apps could tell Google Maps "I can get people places".
I don't have any ride-sharing apps installed. Uber just showed up as an option in the directions section below car, walking and public transport, along with an estimated fare cost and 'first ride is free' offer.
I can't find the details now, but I'm sure I once saw an API provided by Maps on Android which allows any app to register itself as capable of providing directions or transit information.
Maybe I'm missing something, but isn't the driver's "cut" like 80%+? This seems pretty misleading