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"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 figu
by jcdavis 11y ago
"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
- davidandgoliath 11y agoMisleading in what way? It's gross revenue, not profit.
- jcdavis 11y agoIndeed, 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
- seattle_spring 11y agoIsn't Amazon's profit margins on sales something like 5% or worse? This doesn't seem any more disingenuous than most other businesses.
- jcdavis 11y agoLyft 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=1218220143525&acceptedDisclaimer=true 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.
- deleted 11y ago[deleted]
- robzyb 11y agoSome would argue that "gross revenue" should only include the amount that Lyft gets paid, not the amount that they hold in escrow for their drivers. This is more a question of semantics than anything else.
- pbreit 11y agoAlso, accounting. When/if it goes public, it almost certainly will not refer to its total proceeds as "gross revenue".
- gamblor956 11y agoGross 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.
- dietrichepp 11y agoIt 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.
- pbreit 11y agoThat'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".
- deleted 11y ago[deleted]
- jcdavis 11y agoSure, 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.
- gamblor956 11y agoUnder 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.
- gregoryw 11y agoHe'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.
- mkagenius 11y ago> is raising at 25x revenue or so. valuation is not equal to annual revenue..its more like the value over the lifetime.
- Zombieball 11y agoSo 25 years at current annual revenue? :)
- buzzdenver 11y agoEven worse than that, because revenue != earnings if Lyft has other costs than to pay its drivers.
- rahimnathwani 11y agoWhen 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.
- jcdavis 11y agoWe can argue this one all day :). 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
- rahimnathwani 11y ago"We can argue this one all day :)." Actually, we don't need to :) It's clear as day in Lyft's T&Cs. You are correct. Lyft is an agent, not a principal to the transaction.
- jcdavis 11y agoIt makes sense - As soon as they claim they are a principal the lawsuits from their drivers about employement status become more legitimate.
- antr 11y agoIt'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.
- 11y ago
- heyimmanel 11y agoDoes 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.