Lyft Loses $600 Million in 2016 as Revenue Surges

(Bloomberg) -- Lyft Inc., the second-largest ride-hailing startup in the U.S. behind Uber Technologies Inc., lost about $600 million last year while increasing revenue 250 percent, according to people familiar with the matter.

In 2016, Lyft generated about $700 million in sales, said the people, who asked not to be identified because the financials are private. The San Francisco company's revenue growth far exceeded its 46 percent increase in losses.

Lyft appears to have kept a promise it made to investors last year that monthly losses wouldn't exceed $50 million. The company aims to become profitable by 2018, the people said.

“Lyft does not publicly disclose our financials, but we have never been more optimistic about our future,” Adrian Durbin, a spokesman for Lyft, wrote in an e-mail. The Information, a technology news site, reported Lyft's 2016 financial data earlier Thursday.

Uber was on track to lose $3 billion or so globally last year based on its performance from the first three quarters. The ride-hailing giant lost at least $2 billion globally in 2015. A spokesman for Uber declined to comment.

Lyft was born out of its founders' previous venture Zimride, which was geared toward sharing rides over long hauls. They launched the ride-hailing service Lyft in 2012, about three years after Uber was founded. The two startups have been fierce competitors in the U.S. ever since. The pair and their respective backers tend to see themselves as competing in a zero-sum game, where the gains of one detract from the other's ability to turn a profit.

Both companies spend heavily on discounts for riders and bonuses for drivers. These subsidies account for a large portion of the companies' losses. Lyft has said it enabled 160 million rides in 2016, which implies a loss of $3.75 a ride. That's a significant improvement over 2015, when Lyft effectively lost $7.77 a ride.

"I've always felt that Lyft's lower valuation gives them a lot more options than Uber; they can lose money for a longer period of time," said Arun Sundararajan, a professor at New York University's business school. "Lyft has held its own and grown dramatically in the face of the Uber onslaught. So I think raising another round is probably easier for Lyft than it was in the last round, whereas for Uber, it's likely harder."

Uber has tried to fend off Lyft at home, while expanding all over the world. Uber's busiest markets are Sao Paulo and Mexico City. While Lyft has said it intends to expand to other countries, it only operates in the U.S. for now.

Lyft's growing U.S. presence has frustrated Uber. In the first quarter of 2016, Uber said it turned a profit in the U.S. and Canada for the first time. Lyft saw an opening and, with the help of aggressive subsidies, took away some market share. Uber increased its spending at home during the remainder of the year, losing more than $100 million in the U.S. for each of the following quarters. That spending has helped Uber recoup some of its market share losses in the U.S., according to research firm Second Measure.

Both companies, which are privately held, don't disclose their financials publicly. Lyft, which was last valued at $5.5 billion by investors, considered selling itself last year and held preliminary discussions with General Motors Co., Alphabet Inc., Uber and others. Lyft President John Zimmer recently told the Wall Street Journal that the company plans to eventually go public.

Lyft has more than $1 billion in cash on hand, said the people familiar with the financials. Unless it can cut its spending—as Zimmer has suggested it will—the company will need to raise more money in the next 20 months.

To contact the author of this story: Eric Newcomer in San Francisco at enewcomer@bloomberg.net.

To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net, Andrew Pollack