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Lyft Has Proven It Can Grow, But Not Necessarily Make Money

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The financial world must periodically stand agape at the wonder of “technology” companies as they first reveal their results to the public. Lyft, for example, caused much hoopla by being the first of the expected mega-unicorns to file its IPO papers, as if a first-mover advantage matters in this regard.

So Lyft is speedy. But like its archrival Uber—which has disclosed performance data publicly ahead of its IPO filing—Lyft’s results are atrocious by any objective standards. Yes, it has proven it can grow. It racked up $2.2 billion in revenue last year, about double the year before. But Lyft lost nearly a billion dollars from operations in 2018. Its cash balance declined by $600 million. And while the number of rides it provides continues to tick up, its average revenue per ride is tiny: $3.56 in 2018.

Lyft makes a virtue of its focus. It only provides transportation, primarily through rides in cars but also through bikes and scooters. Revenue from the latter category wasn’t material last year, however. Lyft’s simpler business model will get chewed over by investors as they compare it to Uber’s. The rap on Uber is that the growth in its core business is anemic, while its hoped-for bright spots are its prepared-food delivery and freight forwarding businesses. Lyft has neither of these product lines.

The fine print in Lyft’s offering reveal one tantalizing clue as to just how far away profitability is for Lyft—and likely Uber too. Lyft has more than $3 billion worth of state and federal net operating loss carryforwards (NOLs), an arcane tax-accounting gimmick that gives companies that lose money the opportunity to deduct these losses from income earned in future years. (This trick is available to other investors as well. See here how the current leader of the free world avoided paying taxes in years past.) Lyft says, however, that even though its NOLs don’t begin to expire until 2030 (federal) and 2021 (state), “it is possible that we will not generate taxable income in time to use NOLs before that expiration, or at all.”

In case any of this was a little confusing, let me break it down for you: Lyft is telling prospective investors it might not make money for 11 more years.