So, I'd say in Boston, 1) taxis are still somehow charging above competitive prices and getting customers, and 2) silicon valley/Saudi Arabia are still subsidizing my rides. The "fair price" probably lies in between the two.
Also, as an aside, it's surprising that given this extensive competition from all types of drive share services for the last few years, the taxi industry haven't found ways to reduce prices. Instead, it seems to be spending resources on figuring out ways to block the competition. For example, the new Logan airport rules seem ridiculous and just reinforces the notion that the taxi industry is surviving only by rent collecting through lobbying. [1]
[1]:https://boston.cbslocal.com/2019/04/25/uber-lyft-logan-airpo...
That subsidy is structural, IMO. That we see a lot of full time AirBnBs and full time Uber/Lyft drivers may mean it’s sustainable even outside of VC support. (I have no inside information, but I suspect that ride-sharing is economically profitable long-term at current end-user prices in all established markets.)
I could be reading this entirely wrong, but doesn't this suggest that the primary issue during this quarter was administrative and one-off costs that won't be recurring far into the future?
Lyft have half a billion dollars in cash on hand, however, which will only last another 6 quarters at this rate. At its core, that balance between unit profitability, growth and access to cash is the game.
I don't believe the balance sheet they're showing for Mar 31, 2019 includes the ~$2.2b in cash they just raised from the IPO. I can't get the figures to add up if it does. From the Q4 balance + the IPO cash, they'd have ~$4.2b in cash, then subtract what they burned in the latest quarter (they obviously didn't burn $3.6b in cash in Q1).
Besides that, the Q1 balance sheet is showing $1.03b in cash on hand, not half a billion dollars (I'm not sure where you're coming up with that figure). I believe their actual cash position was closer to $3.2b as of the end of Q1, including the IPO cash.
It will be on page 21 of the following document: https://investor.lyft.com/static-files/19f2bd14-9b3c-4b85-9f...
Scroll down to their cash flow statement.
Out of the three GAAP financial statements, cash flows are the easiest to interpret at a glance. (Fewer ways to screw around.)
Shouldn't one-off costs be amortized? Meaning they only show up as one-off costs in the cashflow but not in the revenue/expenses operations.
Only city centres. Uber, at least, is healthily unit profitable in New York and San Francisco (the last time I checked). Given ARPU is growing at both companies, the boundaries within which they can be possible would conceivably grow.
maybe they could have uber drivers buy shiny medallions at a moderate cost, but then limit the supply of those medallions per market? drivers could sell their medallions for market value.
Sometimes, we disrupt a business, but fail to disrupt the underlying market forces that shaped the business in the first place.
I suspect that until we have robo-taxis, uber and Lyft can displace the existing taxi companies by being new and high-tech, but in the end they have the same market forces acting on their availability and pricing that act on taxi companies.
So they will wind up being the new taxi companies.
I imagine it looks like what the traditional cab companies have been doing forever in every city for the last whatever many years.
I am spitballing here, but here is my vision. Please feel free to correct anything deemed infeasible. Decentralize the platform and open Lyft hubs in every major city as their own business unit. Use the same model of contract drivers/use of their vehicle. Pay them better wages which is now possible through greatly reduced operational costs to increase driver loyalty and keep them on the road. I just don’t think this business model works at this scale. There are two major players with an insane amount of capital who both are failing every single metric of a going concern.
How would this work?
No seriously, I don't understand. Explain to me. I grew up in and around small businesses, I legit don't understand how this bulls* flies. It's all being propped up for god knows what reason, and ultimately your average citizen is going to have to pay for it when it all comes crashing down, like always. I don't care if a group of "visionary VCs" "see value" in it. We've replaced a sustainable industry (taxis) with Uber and Lyft, which only were able to because they were able to skirt by regulation, and now if and when they vanish because again, they have proven to be unable to actually make profit to date, we will now have a crumbled public transit mode left to rebuild. Irrational investments that negatively affect the public should be faced with this intense scrutiny.
I am honestly obviously ignorant to whatever is going on here, so I am allowing myself to be educated here.
"sustainable industry" is not the term I would use to describe taxis. Their dispatch systems badly needed replacing.
Things I saw in taxis pre-uber:
- Calling a dispatcher and giving an intersection, to receive a "we don't pick up at intersections, you need a valid street address" message. This was in the city without a lot of taxis. Gee, wonder why.
- Drivers speeding off once they realized you didn't mean to go to the airport.
- Drivers intentionally using both feet to drive, so they would stay well below the speed limit. If confronted, it was in the name of "safety". Dispatchers couldn't track locations so they had no idea how long the trip should take, and weren't interested in you as a repeat customer enough to do anything to the driver.
- Multiple broken card readers.
- Generally, it was impossible to understand dispatchers. Almost every one I talked to had a thick accent beyond what I would expect from even a newer first-generation immigrant.
I was literally the model customer for taxis. No car, disposable income, goes out drinking a lot. Even so, I actively avoided taxis whenever I could before uber hopped on the scene. It wasn't a question of money - their dispatch services actively left money on the table with their terrible, terrible quality.
Whether Uber/Lyft took out too much money remains to be seen. But the dispatching technology is an immensely profitable business by itself.
It's possible they are wrong, in which case investors will lose money. However, if they are correct, the investors will get good ROI. Depending on the investor's risk profile, this may/may not be an appealing proposition.
In finance, never ascribe to anything that which can be explained by amoral venality.
Also, Chapter 11 allows companies to reorganize their debt. Debt was the main problem that airlines faced (pensions, etc.), not the problem Uber and Lyft face.
I'm not saying it's healthy approach in all cases, but the cold calculation is not irrational.
Re. "replaced a sustainable industry (taxis)" - you mean things like taxi medallions? like unaccountable drivers who can ignore you? drivers who will charge you a made up amount? There were lots of issues with taxis - let's not forgot about those.
Have Uber/Lyft actually killed transit anywhere? Actually, have they even killed taxi companies? It'd be nice if they had, taxis are horrible, abusive, and not public transit either.
Thats a huge leap to say that uber/lyft caused our crumbling public transit.
People act like this is a modern travesty born out of the valley but it's moreso that the local restaurant you frequent isn't unique or intriguing to investors, so of course they don't have a backing allowing them the freedom of making a similar business decision.
If someone gave your restaurant a million dollar investment, do you make sure you're careful to keep your spending under your revenue intake? If so, then that investor just threw a million at you to literally keep it in the bank and to continue doing exactly what you were doing before then. In which case, why did you seek investment? Or do you perchance consider that you could use that investment to improve your business and future revenue?
It's not hard to determine why a company with a billion dollars in the bank might want to utilize that to accelerate growth. Amazon could have been profitable twenty years ago but then they would simply be an online bookstore.
What we know about Lyft suggests it's overfunded and it's growth may be more the consequence of large investor inflows, rather than a successful business model.
People like to cite Amazon as proof that profits aren't necessary for a company's success, but even without arguing it as an obvious outlier, it wasn't worth $1 Billion when it IPOed in 1997. The public had a chance to participate in its growth rather than simply fund VC exuberance.
Markets are not a charity or piggy bank or donation box. You have to prove your worthiness. If you keep on posting losses then stock is going to get slammed.
Now, coming to reason for going public. The reason that you listed is not the only one. Early investors want an exit. For the same reason, Uber's founder was kicked out and Dara was brought in - so that company can prepare for an IPO.
>you see growth opportunities that are worth spending money on instead of returning profits to investors.
I fail to understand why asking a company to return a profit considered wrong?
Sure, growth opportunities but then if that story is strong why weren't they able to sell it a VC for another round of funding?
WISH I WAS THEM!
It is perfectly fine to criticize and sit out an investment that runs counter to the history of the investible universe. It is perfectly fine to miss a rally because of it.
Adjusted net loss was $211.5 million. What profits are you talking about?
The graph people like to cite when they say nothing has gotten better, the "plain" one: https://fred.stlouisfed.org/series/CIVPART , is fairly misleading without context. That one is calculated simply based on the non-instutionalized (prison/hospital) population over age 16.
There's a number of major contributors to that one that make it unlikely to ever recover in my view. Some notable points:
- Aging. The US might be aging slower than many other developed countries, but median age is climbing, there are more retirees as a % of the over 16 population each year. Each one of those counts against the labor participation rate.
- Employment in the 16-19 age bracket has plummeted, down ~15% since the 90s. College attendance, societal changes, etc.
https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
This also proves a bit of the lie that the drivers are getting screwed out of earnings. The company as a whole isn't profitable and those drivers should be carefully considering their future when, not if, the market losses patience over these losses.