LYFT, INC.

LYFT
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LYFT, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/10/2022 | 04:08pm


The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes thereto included elsewhere in this
Quarterly Report on Form 10-Q and our audited consolidated financial statements
included in our 2021 Annual Report on Form 10-K/A. As discussed in the section
titled "Note About Forward-Looking Statements," the following discussion
contains forward-looking statements that involve risks and uncertainties.
Factors that could cause or contribute to such differences include those
identified below and those discussed in the section titled "Risk Factors" and
other parts of this Quarterly Report on Form 10-Q and in our 2021 Annual Report
on Form 10-K/A. Our historical results are not necessarily indicative of the
results that may be expected for any period in the future. Our fiscal year ends
December 31.

Our Business



Our mission is to improve people's lives with the world's best transportation.




Lyft, Inc (the "Company" or "Lyft") started a movement to revolutionize
transportation. In 2012, we launched our peer-to-peer marketplace for on-demand
ridesharing and have continued to pioneer innovations aligned with our mission.
Today, Lyft is one of the largest multimodal transportation networks in the
United States
and Canada.

We believe that the world is at the beginning of a shift to
Transportation-as-a-Service ("TaaS"). Lyft is at the forefront of this massive
societal change. Our ridesharing marketplace connects drivers with riders via
the Lyft mobile application (the "Lyft App") in cities across the United States
and in select cities in Canada. We believe that our ridesharing marketplace
allows riders to use their cars less and offers a viable alternative to car
ownership while providing drivers using our platform the freedom and
independence to choose when, where, how long and on what platforms they work. As
this evolution continues, we believe there is a massive opportunity for us to
improve the lives of riders by connecting them to more affordable and convenient
transportation options.

We are laser-focused on revolutionizing transportation. We have established a
scaled network of users brought together by our robust technology platform (the
"Lyft Platform") that powers rides and connections every day. We leverage our
technology platform, the scale and density of our user network and insights from
a significant number of rides to continuously improve our ridesharing
marketplace efficiency and develop new offerings. We've also taken steps to
ensure our network is well positioned to benefit from technological innovation
in mobility.

Today, our offerings include an expanded set of transportation modes in select
cities, such as access to a network of shared bikes and scooters ("Light
Vehicles") for shorter rides and first-mile and last-mile legs of multimodal
trips, information about nearby public transit routes, and Lyft Rentals, an
offering for renters who want to rent a car for a fixed period of time for
personal use. We believe our transportation network offers a viable alternative
to car ownership.

We generate substantially all of our revenue from our ridesharing marketplace
that connects drivers and riders. We collect service fees and commissions from
drivers for their use of our ridesharing marketplace. As drivers accept more
rider leads and complete more rides, we earn more revenue. We also generate
revenue from riders renting Light Vehicles, drivers renting vehicles through
Express Drive, Lyft Rentals renters, Lyft Driver Center and Lyft Auto Care
users, and by making our ridesharing marketplace available to organizations
through our Lyft Business offerings, such as our Concierge and Corporate
Business Travel
programs. In the second quarter of 2021, we began generating
revenues from licensing and data access agreements, primarily with third-party
autonomous vehicle companies.

We have made focused and substantial investments in support of our mission. For
example, to continually launch new innovations on our platform, we have invested
heavily in research and development and have completed multiple strategic
acquisitions. We have also invested in sales and marketing to grow our
community, cultivate a differentiated brand that resonates with drivers and
riders and promote further brand awareness. Together, these investments have
enabled us to create a powerful multimodal platform and scaled user network.

Notwithstanding the impact of COVID-19, we are continuing to invest in the
future, both organically and through acquisitions of complementary businesses.
We also continue to invest in the expansion of our network of Light Vehicles and
Lyft Autonomous, which focuses on the deployment and scaling of third-party
self-driving technology on the Lyft network. Our strategy is to always be at the
forefront of transportation innovation, and we believe that through these
investments, we will continue to be well positioned as a leader in TaaS. Even as
we invest in the business, we also remain focused on finding ways to operate
more efficiently.

To advance our mission, we aim to build the defining brand of our generation and
to advocate through our commitment to social and environmental responsibility.
We believe that our brand represents freedom at your fingertips: freedom from
the stresses of car ownership and freedom to do and see more. Through our LyftUp
initiative, we're working to make sure people have access to affordable,
reliable transportation to get where they need to go - no matter their income or
zip
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code. We are also proud to be leaders in the fight against climate change. We've
made the commitment to reach 100% electric vehicles ("EVs") on the Lyft network
by the end of 2030. We believe many users are loyal to Lyft because of our
values, brand and commitment to social and environmental responsibility.

Our values, brand and focus on customer experience are key differentiators for
our business. We continue to believe that users are increasingly choosing
services, including a transportation network, based on brand affinity and value
alignment. As we progress through the COVID-19 recovery, we remain confident the
demand for our offerings will continue to grow as more and more people discover
and rely on the convenience, experience and affordability of using Lyft.


Impact of COVID-19 to our Business




The ongoing COVID-19 pandemic continues to impact communities in the United
States
, Canada and globally. Since the pandemic began in March 2020, governments
and private businesses - at the recommendation of public health officials - have
enacted precautions to mitigate the spread of the virus. Beginning in the middle
of March 2020, the pandemic and these related responses caused decreased demand
for our platform leading to decreased revenues as well as decreased earning
opportunities for drivers on our platform. Our business continues to be impacted
by the COVID-19 pandemic.

We are confident in our ability to continue to navigate this challenging period.
In 2021, we saw continued recovery from the onset of the COVID-19 pandemic as
vaccines were more widely distributed and more communities fully reopened, which
resulted in improvements in revenue, Active Riders, net loss, and Adjusted
EBITDA, compared to 2020. In the first quarter of 2022, we saw decreased demand
for our platform in January resulting from an increase in cases due to variants
of the virus, but that demand rebounded in February and March as COVID-19
variant cases decreased and communities continued to reopen.

We remain focused on our long-term growth opportunities. We believe we have
sufficient liquidity to continue business operations and to take action we
determine to be in the best interests of our employees, stockholders,
stakeholders and of drivers and riders on the Lyft Platform. Although we have
seen some signs of demand improving, the exact timing and pace of the recovery
remain uncertain and there remains significant variation among our markets. The
extent to which our operations will continue to be impacted by the pandemic will
depend largely on future developments, which are highly uncertain and cannot be
accurately predicted, including new information which may emerge.


For more information on risks associated with the COVID-19 pandemic and our
litigation matters, see the section titled "Risk Factors" in Item 1A of Part II.



Recent Developments



Acquisition of PBSC Urban Solutions ("PBSC")




On April 19, 2022, we signed an agreement to acquire PBSC, a global leader in
bikeshare which supplies stations and bikes to many markets internationally, for
approximately $130 million in cash and up to $15 million in earn-out incentives,
subject to customary closing and other adjustments. We are currently in the
process of valuing the assets acquired and liabilities assumed in the
transaction and will provide all required disclosures in the second quarter
ending June 30, 2022. The acquisition is expected to close in the second quarter
ending June 30, 2022.



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Financial Results for the Three Months Ended March 31, 2022



•Total revenue was $875.6 million, an increase of 44% year-over-year.



•Total costs and expenses were $1.1 billion, including stock-based compensation
expense of $153.7 million.



•Loss from operations was $199.3 million.



•Net loss was $196.9 million, a decrease of 54% year-over-year.



•Adjusted EBITDA was $54.8 million.



•Cash used in operating activities was $152.3 million.



•Unrestricted cash and cash equivalents and short-term investments totaled $2.2
billion
as of March 31, 2022.



Active Riders and Revenue per Active Rider




Active Riders Revenue per Active Rider
2022 2021 Growth Rate 2022 2021 Growth Rate
(in thousands, except for dollar amounts and percentages)
Three Months Ended March 31 17,804 13,494 31.9% $49.18 $45.13 9.0%
Three Months Ended June 30 17,142 $44.63
Three Months Ended September
30 18,942 $45.63
Three Months Ended December
31 18,728 $51.79


We define Active Riders as all riders who take at least one ride during a
quarter where the Lyft Platform processes the transaction. An Active Rider is
identified by a unique phone number. If a rider has two mobile phone numbers or
changed their phone number and such rider took rides using both phone numbers
during the quarter, that person would count as two Active Riders. If a rider has
a personal and business profile tied to the same mobile phone number, that
person would be considered a single Active Rider. If a ride has been requested
by an organization using our Concierge offering for the benefit of a rider, we
exclude this rider in the calculation of Active Riders unless the ride is
accessible in the Lyft App. Revenue per Active Rider is calculated by dividing
revenue for a period by Active Riders for the same period.

The increase in the number of Active Riders in the three months ended March 31,
2022
as compared to the three months ended March 31, 2021 was due primarily to
an increase in new rider activations as a result of the easing of travel
restrictions and social distancing measures in certain regions. However, local
recovery trends continue to vary significantly and these restrictions continue
to have an ongoing impact on people's mobility and we expect seasonality in the
winter months may impact the number of Active Riders.

The increase in Revenue per Active Rider in the three months ended March 31,
2022
as compared to the three months ended March 31, 2021 primarily reflects the
improvement in demand on our platform compared to earlier periods during the
COVID-19 pandemic, which had materially limited people's mobility and severely
reduced Active Riders. Revenue per Active Rider also benefited from revenues
from licensing and data access agreements, beginning in the second quarter of
2021. Revenue per Active Rider slightly decreased in the three months ended
March 31, 2022 compared to the three months ended December 31, 2021 primarily
due to a decrease in demand in January 2022 resulting from an increase in cases
due to variants of the virus. This was offset by a rebound in demand in February
and March as COVID-19 variant cases decreased and communities continued to
reopen. Additions to our Active Rider base at the end of any quarter are
generally dilutive to Revenue per Active Rider for the quarter as there is less
time to generate revenue.


Critical Accounting Policies and Estimates




Our condensed consolidated financial statements and the related notes thereto
are prepared in accordance with GAAP. The preparation of condensed consolidated
financial statements also requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, costs and expenses
and related disclosures. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances. Actual results could differ significantly from our estimates. To
the extent that there are differences between our estimates and actual results,
our future financial statement presentation, financial condition, results of
operations and cash flows will be affected.


There have been no material changes to our critical accounting policies and
estimates as described in our Annual Report on Form 10-K/A for the year ended
December 31, 2021, except as described below.



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Recent Accounting Pronouncements



See Note 2 to our condensed consolidated financial statements included elsewhere
in this Quarterly Report on Form 10-Q for recently issued accounting
pronouncements not yet adopted as of the date of this report.



Components of Results of Operations




As noted above, we expect to see decreased levels of demand for our platform,
decreased numbers of new rider activations, and negative impacts on revenue when
compared to levels prior to the onset of the COVID-19 pandemic in March 2020 for
so long as responsive measures to COVID-19 remain in place. While we have
expected some recovery in levels of demand due to the availability of vaccines
and reopening of communities, we cannot be certain when conditions will return
to pre-pandemic levels. We have adopted multiple measures in response to the
COVID-19 pandemic. We cannot be certain that these actions will mitigate some or
all of the negative effects of the pandemic on our business. In light of the
evolving and unpredictable effects of COVID-19, we are not currently in a
position to forecast the expected impact of COVID-19 on our financial and
operating results in the future periods.


Revenue Recognition




Revenue consists of revenue recognized from fees paid by drivers for use of our
Lyft Platform offerings, Concierge platform fees from organizations that use our
Concierge offering, subscription fees paid by riders to access transportation
options through the Lyft Platform, revenue from our vehicle service centers and
revenue from licensing and data access agreements. Revenue derived from these
offerings are recognized in accordance with ASC 606 as described in the Critical
Accounting Policies and Estimates above and in Note 2 of the notes to our
condensed consolidated financial statements.

Revenue also consists of rental revenues recognized through leases or subleases
primarily from Flexdrive, Lyft Rentals, and our network of Light Vehicles, which
includes revenue generated from single-use ride fees paid by riders of Light
Vehicles. Revenue derived from these offerings are recognized in accordance with
ASC 842 as described in the Critical Accounting Policies and Estimates above and
in Note 2 of the notes to our condensed consolidated financial statements.

We offer various incentive programs to drivers that are recorded as reduction to
revenue if we do not receive a distinct good or service in consideration or if
we cannot reasonably estimate the fair value of goods or services received.


Cost of Revenue




Cost of revenue consists of costs directly related to revenue generating
transactions through our multimodal platform which primarily includes insurance
costs, payment processing charges, and other costs. Insurance costs consist of
insurance generally required under TNC and city regulations for ridesharing and
bike and scooter rentals and also includes occupational hazard insurance for
drivers in California. Payment processing charges include merchant fees,
chargebacks and failed charges. Other costs included in cost of revenue are
hosting and platform-related technology costs, personnel-related compensation
costs, depreciation, amortization of technology-related intangible assets, asset
write-off charges and costs related to Flexdrive, which include vehicle lease
expenses and remarketing gains and losses related to the sale of vehicles.


Operations and Support




Operations and support expenses primarily consist of personnel-related
compensation costs of local operations teams and teams who provide phone, email
and chat support to users, Light Vehicle fleet operations support costs, driver
background checks and onboarding costs, fees paid to third-parties providing
operations support, facility costs and certain car rental fleet support costs.
Light Vehicle fleet operations support costs include general repairs and
maintenance, and other customer support activities related to repositioning
bikes and scooters for rider convenience, cleaning and safety checks.


Research and Development




Research and development expenses primarily consist of personnel-related
compensation costs and facilities costs. Such expenses include costs related to
autonomous vehicle technology initiatives. Research and development costs are
expensed as incurred.

On July 13, 2021, we completed a transaction with Woven Planet, a subsidiary of
Toyota Motor Corporation, for the divestiture of certain assets related to our
self-driving vehicle division, Level 5, and as a result, certain costs related
to our prior initiative to develop self-driving systems were eliminated
beginning in the third quarter of 2021.


Sales and Marketing



Sales and marketing expenses primarily consist of rider incentives,
personnel-related compensation costs, driver incentives for referring new
drivers or riders, advertising expenses, rider refunds and marketing
partnerships with third parties. Sales and marketing costs are expensed as
incurred.



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General and Administrative




General and administrative expenses primarily consist of personnel-related
compensation costs, professional services fees, certain insurance costs that are
generally not required under TNC regulations, certain loss contingency expenses
including legal accruals and settlements, insurance claims administrative fees,
policy spend, depreciation, facility costs and other corporate costs. General
and administrative expenses are expensed as incurred.


Interest Expense




Interest expense consists primarily of interest incurred on our 2025 Notes, as
well as the related amortization of deferred debt issuance costs and debt
discount. Interest expense also includes interest incurred on our Non-Revolving
Loan and our Master Vehicle Loan.


Other Income (Expense), Net



Other income (expense), net consists primarily of a pre-tax gain as a result of
the transaction with Woven Planet, interest earned on our cash and cash
equivalents, sublease income and restricted and unrestricted short-term
investments.



Provision for Income Taxes




Our provision for income taxes consists primarily of income taxes in foreign
jurisdictions and U.S. state income taxes. As we expand the scale of our
international business activities, any changes in the U.S. and foreign taxation
of such activities may increase our overall provision for income taxes in the
future.


We have a valuation allowance for our U.S. deferred tax assets, including
federal and state net operating loss carryforwards, or NOLs. We expect to
maintain this valuation allowance until it becomes more likely than not that the
benefit of our federal and state deferred tax assets will be realized.



Results of Operations




The following table summarizes our historical condensed consolidated statements
of operations data:

Three Months Ended March 31,
2022 2021
(in thousands)
Revenue $ 875,575 $ 608,960
Costs and expenses
Cost of revenue 440,294 412,039
Operations and support 98,600 88,931
Research and development 192,754 238,218
Sales and marketing 126,329 78,620
General and administrative 216,941 207,594
Total costs and expenses 1,074,918 1,025,402
Loss from operations (199,343) (416,442)
Interest expense (4,549) (12,568)
Other income, net 9,763 3,605
Loss before income taxes (194,129) (425,405)
Provision for income taxes 2,803 1,934
Net loss $ (196,932) $ (427,339)


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The following table sets forth the components of our condensed consolidated
statements of operations data as a percentage of revenue:




Three Months Ended March 31,
2022 2021
Revenue 100.0 % 100.0 %
Costs and expenses
Cost of revenue 50.3 67.7
Operations and support 11.3 14.6
Research and development 22.0 39.1
Sales and marketing 14.4 12.9
General and administrative 24.8 34.1
Total costs and expenses 122.8 168.4
Loss from operations (22.8) (68.4)
Interest expense (0.5) (2.1)
Other income, net 1.1 0.6
Loss before income taxes (22.2) (69.9)
Provision for income taxes 0.3 0.3
Net loss (22.5) % (70.2) %


Comparison of the three months ended March 31, 2022 to the three months ended
March 31, 2021

Revenue

Three Months Ended March 31,
2022 2021 % Change
(in thousands, except for percentages)
Revenue $ 875,575 $ 608,960 44 %


Revenue increased $266.6 million, or 44%, in the three months ended March 31,
2022
, as compared to the three months ended March 31, 2021, driven primarily by
an increase in the number of Active Riders as compared to the three months ended
March 31, 2021, as vaccines became more widely distributed and more communities
fully reopened. Revenue also benefited from revenues from licensing and data
access agreements, beginning in the second quarter of 2021. These increases were
offset by an increase of $153.7 million in driver supply incentives recorded as
a reduction to revenue as compared to the three months ended March 31, 2021.

We expect to see continued recovery in demand for our platform and the resulting
positive impacts on revenue as vaccines are more widely distributed, more
communities fully reopen and other restrictive travel and social distancing
measures in response to COVID-19 continue to be eased. However, we cannot
predict the impact of COVID variants and the longer term impact of the pandemic
on consumer behavior.

Cost of Revenue

Three Months Ended March 31,
2022 2021 % Change
(in thousands, except for percentages)
Cost of revenue $ 440,294 $ 412,039 7 %



Cost of revenue increased $28.3 million, or 7%, in the three months ended
March 31, 2022 as compared to the three months ended March 31, 2021. The
increase was due primarily to a $24.9 million increase in transaction fees and a
$9.5 million increase in insurance costs. These increases were offset by a
$12.0 million decrease in costs related to Flexdrive.



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Operations and Support

Three Months Ended March 31,
2022 2021 % Change
(in thousands, except for percentages)
Operations and support $ 98,600 $ 88,931 11 %


Operations and support expenses increased $9.7 million, or 11%, in the three
months ended March 31, 2022 as compared to the three months ended March 31,
2021
. The increase was primarily due to a $3.8 million increase in driver
onboarding costs and rider and driver support costs and a $3.5 million increase
in Light Vehicle fleet operations support costs.

Research and Development

Three Months Ended March 31,
2022 2021 % Change
(in thousands, except for percentages)
Research and development $ 192,754 $ 238,218 (19) %


Research and development expenses decreased $45.5 million, or 19%, in the three
months ended March 31, 2022 as compared to the three months ended March 31,
2021
. The decrease was primarily due to a $18.6 million decrease in
personnel-related costs and a $14.8 million decrease in stock-based
compensation, which were partially driven by reduced headcount following the
transaction with Woven Planet in the third quarter of 2021. There were also
decreases of $3.9 million in web hosting fees and $3.5 million in consulting and
advisory costs.

Sales and Marketing

Three Months Ended March 31,
2022 2021 % Change
(in thousands, except for percentages)
Sales and marketing $ 126,329 $ 78,620 61 %


Sales and marketing expenses increased $47.7 million, or 61%, in the three
months ended March 31, 2022 as compared to the three months ended March 31,
2021
. The increase was primarily due to an increase of $31.7 million in costs
associated with driver and rider programs and an increase of $11.8 million in
costs related to incentive programs.

General and Administrative

Three Months Ended March 31,
2022 2021 % Change
(in thousands, except for percentages)
General and administrative $ 216,941 $ 207,594 5 %


General and administrative expenses increased $9.3 million, or 5%, in the three
months ended March 31, 2022 as compared to the three months ended March 31,
2021
. The increase was primarily due to a $10.5 million increase in an accrual
for self-retained general business liabilities, a $4.2 million increase in
consultant and advisory costs and a $3.2 million increase in personnel-related
costs, office-related costs, and other employee-related expenses. These
increases were partially offset by a $11.1 million decrease in certain loss
contingencies including legal accruals and settlements and a $3.6 million
decrease in claims administration costs.
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Interest Expense

Three Months Ended March 31,
2022 2021 % Change
(in thousands, except for percentages)
Interest expense $ (4,549) $ (12,568) (64) %


Interest expense decreased $8.0 million, or 64% in the three months ended
March 31, 2022 as compared to the three months ended March 31, 2021. Interest
expense was lower in the three months ended March 31, 2022 due to a decrease in
amortization of debt discount related to the 2025 Notes following the adoption
of ASU 2020-06 on January 1, 2022.

Other Income, Net

Three Months Ended March 31,
2022 2021 % Change
(in thousands, except for percentages)
Other income, net $ 9,763 $ 3,605 171 %


Other income, net increased $6.2 million, or 171% in the three months ended
March 31, 2022 as compared to the three months ended March 31, 2021. The
increase was primarily due to a $3.7 million increase in sublease income for
certain subleased offices as part of the transaction with Woven Planet in the
third quarter of 2021.


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Non-GAAP Financial Measures




Three Months Ended March 31,
2022 2021 % Change
(in millions, except for percentages)
Contribution(1) $ 502.5 $ 337.3 49.0 %
Contribution Margin(1) 57.4 % 55.4 %
Adjusted EBITDA(1) $ 54.8 $ (73.0) 175.1 %
Adjusted EBITDA Margin(1) 6.3 % (12.0) %


_______________
(1)Contribution, Contribution Margin, Adjusted EBITDA, and Adjusted EBITDA
Margin are non-GAAP financial measures and metrics. For more information
regarding our use of these measures and a reconciliation of these measures to
the most comparable GAAP measures, see "Reconciliation of Non-GAAP Financial
Measures."


Contribution and Contribution Margin




Contribution and Contribution Margin are measures used by our management to
understand and evaluate our operating performance and trends. We believe
Contribution and Contribution Margin are key measures of our ability to achieve
profitability and increase it over time. Contribution Margin has generally
increased over the periods presented as revenue has increased at a faster rate
than the costs included in the calculation of Contribution.


We define Contribution as revenue less cost of revenue, adjusted to exclude the
following items from cost of revenue:



•amortization of intangible assets;



•stock-based compensation expense;



•payroll tax expense related to stock-based compensation;



•changes to the liabilities for insurance required by regulatory agencies
attributable to historical periods;



•net amount from claims ceded under the Reinsurance Agreement;



•transaction costs related to certain legacy auto insurance liabilities, if any;
and



•restructuring charges, if any.



For more information about cost of revenue, see the section titled "Components
of Results of Operations-Cost of Revenue."



Contribution Margin is calculated by dividing Contribution for a period by
revenue for the same period.




We record changes to historical liabilities for insurance required by regulatory
agencies for financial reporting purposes in the quarter of positive or adverse
development even though such development may be related to claims that occurred
in prior periods. For example, if in the first quarter of a given year, the cost
of claims grew by $1 million for claims related to the prior fiscal year or
earlier, the expense would be recorded for GAAP purposes within the first
quarter instead of in the results of the prior period. We believe these prior
period changes to insurance liabilities do not illustrate the current period
performance of our ongoing operations since these prior period changes relate to
claims that could potentially date back years. We have limited ability to
influence the ultimate development of historical claims. Accordingly, including
the prior period changes would not illustrate the performance of our ongoing
operations or how the business is run or managed by us. For consistency, we do
not adjust the calculation of Contribution for any prior period based on any
positive or adverse development that occurs subsequent to the quarter end.
Annual Contribution is calculated by adding Contribution of the last four
quarters. We believe the adjustment to exclude changes to the historical
liabilities for insurance required by regulatory agencies from Contribution and
Adjusted EBITDA is useful to investors by enabling them to better assess our
operating performance in the context of current period results.
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During the second quarter of 2021, we entered into a Quota Share Reinsurance
Agreement for the reinsurance of legacy auto insurance liabilities between
October 1, 2018 to October 1, 2020, based on the reserves in place as of March
31, 2021
. Refer to Note 4 "Supplemental Financial Statement Information" to the
condensed consolidated financial statements for information regarding these
transactions. We believe the costs associated with these transactions related to
certain legacy auto insurance liabilities do not illustrate the current period
performance of our ongoing operations despite this transaction occurring in the
current period because the impacted insurance liabilities relate to claims that
date back years. We believe the adjustment to exclude these costs associated
with transactions related to legacy insurance liabilities from Contribution and
Adjusted EBITDA is useful to investors by enabling them to better assess our
operating performance in the context of current period results and provide for
better comparability with our historically disclosed Contribution and Adjusted
EBITDA amounts.

Losses ceded under the Reinsurance Agreement that exceed $271.5 million, but are
below the aggregate limit of $434.5 million, result in the recognition of a
deferred gain liability. The deferral of gains has a negative impact in the
current period to cost of revenue as the losses on direct liabilities are not
offset by gains from excess benefits under the Reinsurance Agreement. The
amortization of these deferred gains provides a benefit to cost of revenue in
current and future periods equal to the excess benefits received. We believe
that the net amount recognized on the statement of operations associated with
claims ceded under the Reinsurance Agreement, including any related adverse
development and any benefit recognized for the related deferred gains, should be
excluded to show the ultimate economic benefit of the Reinsurance Agreement.
This adjustment will help investors understand the economic benefit of our
Reinsurance Agreement on future trends in our operations, as they improve over
the settlement period of any deferred gains. Additionally, net amounts
recognized for claims ceded under the Reinsurance Agreement would represent
changes to historical liabilities for insurance required by regulatory agencies.
As stated above, we believe prior period changes to insurance liabilities do not
illustrate the current period performance of our ongoing operations or how the
business is managed. This is because we have limited ability to influence the
ultimate development of these historical claims, which can potentially date back
years. Therefore, in the event that the net amount of any adverse developments
and any benefits from deferred gains related to claims ceded under the
Reinsurance Agreement is recognized on the statement of operations, those
amounts will be excluded from the calculation of Contribution and Adjusted
EBITDA through the exclusion of the "Net amount from claims ceded under the
Reinsurance Agreement". For transparency, to help investors understand the
ultimate economic benefit of the Reinsurance Agreement, we have broken out "Net
amount of claims ceded under the Reinsurance Agreement," which would otherwise
have been captured in "Changes to the liabilities for insurance required by
regulatory agencies attributable to historical periods." As of March 31, 2022,
we have recorded $108.1 million of deferred gain related to losses ceded under
the Reinsurance Agreement, which is included within accrued and other current
liabilities on the consolidated balance sheets.

For more information regarding the limitations of Contribution and Contribution
Margin and a reconciliation of revenue to Contribution, see the section titled
"Reconciliation of Non-GAAP Financial Measures".


Adjusted EBITDA and Adjusted EBITDA Margin




Adjusted EBITDA and Adjusted EBITDA Margin are key performance measures that our
management uses to assess our operating performance and the operating leverage
in our business. Because Adjusted EBITDA and Adjusted EBITDA Margin facilitate
internal comparisons of our historical operating performance on a more
consistent basis, we use these measures for business planning purposes. We
expect Adjusted EBITDA and Adjusted EBITDA Margin will increase over the long
term as we continue to scale our business and achieve greater efficiencies in
our operating expenses.


We calculate Adjusted EBITDA as net loss, adjusted for:



•interest expense;



•other income (expense), net;



•provision for (benefit from) income taxes;



•depreciation and amortization;



•stock-based compensation;



•payroll tax expense related to stock-based compensation;



•changes to the liabilities for insurance required by regulatory agencies
attributable to historical periods;



•net amount from claims ceded under the Reinsurance Agreement;



•sublease income;



•costs related to acquisitions and divestitures, if any;



•transaction costs related to certain legacy auto insurance liability, if any;
and



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•restructuring charges, if any.



Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA for a period by
revenue for the same period.




During the third quarter of 2021, we entered into subleases for certain offices
as part of the transaction with Woven Planet. Sublease income is included within
other income on our condensed consolidated statement of operations, while the
related lease expense is included within our operating expenses and loss from
operations. Sublease income was immaterial prior to the third quarter of 2021.
We believe the adjustment to include sublease income to Adjusted EBITDA is
useful to investors by enabling them to better assess our operating performance,
including the benefits of recent transactions, by presenting sublease income as
a contra-expense to the related lease charges within our operating expenses.


For more information regarding the limitations of Adjusted EBITDA and Adjusted
EBITDA Margin and a reconciliation of net loss to Adjusted EBITDA, see the
section titled "Reconciliation of Non-GAAP Financial Measures".



Reconciliation of Non-GAAP Financial Measures




We use Contribution, Contribution Margin, Adjusted EBITDA and Adjusted EBITDA
Margin in conjunction with GAAP measures as part of our overall assessment of
our performance, including the preparation of our annual operating budget and
quarterly forecasts, to evaluate the effectiveness of our business strategies,
and to communicate with our board of directors concerning our financial
performance. Our definitions may differ from the definitions used by other
companies and therefore comparability may be limited. In addition, other
companies may not publish these or similar metrics. Furthermore, these measures
have certain limitations in that they do not include the impact of certain
expenses that are reflected in our condensed consolidated statements of
operations that are necessary to run our business. Thus, our Contribution,
Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin should be
considered in addition to, not as substitutes for, or in isolation from,
measures prepared in accordance with GAAP.


We compensate for these limitations by providing a reconciliation of
Contribution and Adjusted EBITDA to the related GAAP financial measures, revenue
and net loss, respectively. We encourage investors and others to review our
financial information in its entirety, not to rely on any single financial
measure and to view Contribution, Contribution Margin, Adjusted EBITDA and
Adjusted EBITDA Margin in conjunction with their respective related GAAP
financial measures.



The following table provides a reconciliation of revenue to Contribution (in
millions):



Three Months Ended March 31,



2022 2021
Revenue $ 875.6 $ 609.0
Less cost of revenue (440.3) (412.0)



Adjusted to exclude the following (as related to cost of revenue):
Amortization of intangible assets


1.2 2.8
Stock-based compensation expense 9.9 8.4
Payroll tax expense related to stock-based compensation 0.8 1.1


Changes to the liabilities for insurance required by regulatory
agencies attributable to historical periods(1)


- 128.0
Net amount from claims ceded under the Reinsurance Agreement(2) 55.3 -

Contribution(3) $ 502.5 $ 337.3


_______________
(1)$128.0 million of insurance expense recorded during the three months ended
March 31, 2021 reflects changes to reserves estimates of claims from 2020 and
earlier periods.
(2)Reflects the net amount recognized on the statement of operations associated
with claims ceded under the Reinsurance Agreement, including any losses related
to the deferral of gains on the statement of operations and any benefit from the
amortization of the deferred gain in the same period. For transparency, to help
investors understand the ultimate economic benefit of the Reinsurance Agreement,
we have broken out "Net amount of claims ceded under the Reinsurance Agreement,"
which would otherwise have been captured in "Changes to the liabilities for
insurance required by regulatory agencies attributable to historical periods."
(3)Due to rounding, numbers presented may not add up precisely to the totals
provided.

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The following table provides a reconciliation of net loss to Adjusted EBITDA (in
millions):



Three Months Ended March 31,



2022 2021
Net loss $ (196.9) $ (427.3)
Adjusted to exclude the following:
Interest expense(1) 4.7 12.9
Other income, net (9.8) (3.6)
Provision for (benefit from) income taxes 2.8 1.9
Depreciation and amortization 31.8 34.4
Stock-based compensation 153.7 164.2
Payroll tax expense related to stock-based compensation 9.5 16.5


Changes to the liabilities for insurance required by regulatory
agencies attributable to historical periods(2)


- 128.0
Net amount from claims ceded under the Reinsurance Agreement(3) 55.3 -
Sublease income(4) 3.7 -

Adjusted EBITDA(5) $ 54.8 $ (73.0)


_______________
(1)Includes $0.2 million and $0.3 million related to the interest component of
vehicle-related finance leases in the three months ended March 31, 2022 and
2021, respectively. Refer to Note 6 "Leases" to the condensed consolidated
financial statements for information regarding the interest component of
vehicle-related finance leases.
(2)$128.0 million of insurance expense recorded during the three months ended
March 31, 2021 reflects changes to reserves estimates of claims from the second
quarter of 2020 and earlier periods.
(3)Reflects the net amount recognized on the statement of operations associated
with claims ceded under the Reinsurance Agreement, including any losses related
to the deferral of gains on the statement of operations and any benefit from the
amortization of the deferred gain in the same period. For transparency, to help
investors understand the ultimate economic benefit of the Reinsurance Agreement,
we have broken out "Net amount of claims ceded under the Reinsurance Agreement,"
which would otherwise have been captured in "Changes to the liabilities for
insurance required by regulatory agencies attributable to historical periods."
(4)Includes sublease income from subleases entered into as part of the
transaction with Woven Planet in the third quarter of 2021. Sublease income
prior to the third quarter of 2021 was immaterial. Refer to Note 3
"Divestitures" to the condensed consolidated financial statements for
information regarding our transaction with Woven Planet for the divestiture of
certain assets related to our self-driving vehicles division, Level 5.
(5)Due to rounding, numbers presented may not add up precisely to the totals
provided.


Liquidity and Capital Resources




As of March 31, 2022, our principal sources of liquidity were cash and cash
equivalents of approximately $214.9 million and short-term investments of
approximately $2.0 billion, exclusive of restricted cash, cash equivalents and
investments of $948.1 million. Cash and cash equivalents consisted of
institutional money market funds, certificates of deposits, commercial paper and
corporate bonds that have an original maturity of less than three months and are
readily convertible into known amounts of cash. Also included in cash and cash
equivalents are certain money market deposit accounts and cash in transit from
payment processors for credit and debit card transactions. Short-term
investments consisted of commercial paper, certificates of deposit, corporate
bonds and term deposits, which mature in 12 months or less. Restricted cash,
cash equivalents and investments consisted primarily of amounts held in separate
trust accounts and restricted bank accounts as collateral for insurance purposes
and amounts pledged to secure certain letters of credit.

We collect the fare and related charges from riders on behalf of drivers at the
time the ride is delivered using the rider's authorized payment method, and we
retain any fees owed to us before making the remaining disbursement to drivers.
Accordingly, we maintain no accounts receivable from drivers. Our contracts with
insurance providers require reinsurance premiums to be deposited into trust
accounts with a third-party financial institution from which the insurance
providers are reimbursed for claims payments. Our restricted reinsurance trust
investments as of March 31, 2022 and December 31, 2021 were $880.9 million and
$1.0 billion, respectively.

We continue to actively monitor the impact of the COVID-19 pandemic. Beginning
in March 2020, the pandemic and responses thereto contributed to a severe
decrease in the number of rides on our platform and revenue which had a
significant effect on our cash flows from operations. While conditions have
improved, these impacts are ongoing. The extent to which our operations,
financial results and financial condition will be impacted in the next few
quarters by the pandemic will depend largely on future developments, which are
highly uncertain and cannot be accurately predicted, including the duration of
the pandemic, new information about additional variants, the availability and
efficacy of vaccine distributions, additional or renewed actions by government
authorities and private businesses to contain the pandemic or respond to its
impact and altered
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consumer behavior, among other things. We have adopted several measures in
response to the COVID-19 pandemic. We also made adjustments to our expenses and
cash flow to correlate with declines in revenues including the transaction with
Woven Planet completed on July 13, 2021. Refer to Note 3 "Divestitures" to the
condensed consolidated financial statements for information regarding the
divestiture of certain assets related to our self-driving vehicles division,
Level 5.


We cannot be certain that our actions will mitigate some or all of the
continuing negative effects of the pandemic on our business. With $2.2 billion
in unrestricted cash and cash equivalents and short-term investments as of
March 31, 2022, we believe we have sufficient liquidity to meet our working
capital and capital expenditures needs for at least the next 12 months and
beyond.




Our future capital requirements will depend on many factors, including, but not
limited to our growth, our ability to maintain profitability on an Adjusted
EBITDA basis, our ability to attract and retain drivers and riders on our
platform, the continuing market acceptance of our offerings, the timing and
extent of spending to support our efforts to develop our platform, actual
insurance payments for which we have made reserves, measures we take in response
to the COVID-19 pandemic, our ability to maintain demand for and confidence in
the safety of our platform during and following the COVID-19 pandemic, and the
expansion of sales and marketing activities. As noted above, we expect to see
continued suppression of demand for our platform and the resultant negative
impacts on revenue for so long as travel restrictions and other social
distancing measures in response to COVID-19 remain in place. Further, we may in
the future enter into arrangements to acquire or invest in businesses, products,
services and technologies. For example, we intend to significantly invest
further into EVs in order to achieve compliance with the California Clean Miles
Standard and Incentive Program which sets the target that 90% of rideshare miles
in California must be in EVs by the end of 2030. Our investment also allows us
to make steps toward our commitment to reach 100% EVs on the Lyft Platform by
the end of 2030. From time to time, we may seek additional equity or debt
financing to fund capital expenditures, strategic initiatives or investments and
our ongoing operations, or to refinance our existing or future indebtedness. In
the event that we decide, or are required, to seek additional financing from
outside sources, we may not be able to raise it on terms acceptable to us or at
all. If we are unable to raise additional capital when desired, our business,
financial condition and results of operations could be adversely affected.


Cash Flows




The following table summarizes our cash flows for the periods indicated (in
thousands):

Three Months Ended March 31,
2022 2021
Net cash used in operating activities $ (152,343) $ (79,464)
Net cash provided by (used in) investing activities (74,242) 161,123
Net cash used in financing activities (22,014) (24,286)


Effect of foreign exchange on cash, cash equivalents and
restricted cash and cash equivalents


89 34
Net change in cash, cash equivalents and restricted cash and cash
equivalents $ (248,510) $ 57,407


Operating Activities

Cash used in operating activities was $152.3 million for the three months ended
March 31, 2022. This consisted primarily of a net loss of $196.9 million. This
was offset by non-cash stock-based compensation expense of $153.7 million and
depreciation and amortization expense of $31.8 million.

Cash used in operating activities was $79.5 million for the three months ended
March 31, 2021. This consisted primarily of a net loss of $427.3 million offset
by non-cash stock-based compensation expense of $164.2 million.


Investing Activities




Cash used in investing activities was $74.2 million for the three months ended
March 31, 2022, which primarily consisted of purchases of marketable securities
of $661.7 million. This was partially offset by proceeds from sales and
maturities of marketable securities of $427.1 million and maturities of term
deposits of $175.0 million.

Cash provided by investing activities was $161.1 million for the three months
ended March 31, 2021, which primarily consisted of proceeds from sales and
maturities of marketable securities of $1.2 billion, partially offset by
purchases of marketable securities of $981.7 million and term deposits of $75.0
million
.

Financing Activities

Cash used in financing activities was $22.0 million for the three months ended
March 31, 2022, which primarily consisted of our repayment of loans of $12.3
million
and principal payments of finance lease obligations of $8.0 million.
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Cash used in financing activities was $24.3 million for the three months ended
March 31, 2021, which primarily consisted of our repayment of loans of $10.0
million
, taxes paid related to net share settlement of equity awards of $7.7
million
and principal payments of finance lease obligations of $9.9 million.


Contractual Obligations and Commitments




In February 2022, we amended our noncancelable arrangement with AWS, a
web-hosting services provider. Under the most recent amended arrangement, we
committed to spend an aggregate of at least $300 million between January 2022
and January 2026, with a minimum amount of $80 million in each of the four
contractual periods, on services with AWS. As of March 31, 2022, we have made
payments of $19.0 million under the amended arrangement.

In April 2022, the Company signed an agreement to acquire PBSC for approximately
$130 million in cash and up to $15 million in earn-out incentives, subject to
customary closing and other adjustments. The acquisition is expected to close in
the second quarter ending June 30, 2022.


As of March 31, 2022, there have been no other material changes from the
contractual obligations and commitments previously disclosed in our Annual
Report on Form 10-K/A for the year ended December 31, 2021.



Off-Balance Sheet Arrangements




We did not have during the periods presented, and we do not currently have, any
off-balance sheet financing arrangements or any relationships with
unconsolidated entities or financial partnerships, including entities sometimes
referred to as structured finance or special purpose entities, that were
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes.

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