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Earnings call: Lyft reports growth and focuses on AV integration

EditorLina Guerrero
Published 07/11/2024, 21:04
© Reuters.
LYFT
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Lyft Inc. (NASDAQ:LYFT) has reported a solid performance in its third-quarter earnings call for 2024, with CEO David Risher and CFO Erin Brewer highlighting a year-over-year gross bookings increase of 16%, exceeding $4.1 billion. The company's active riders grew by 9%, and ride frequency went up by 6%. Revenue saw a significant jump, surpassing $1.5 billion, marking a 32% increase from the previous year. Despite these positive results, Lyft reported a GAAP net loss of $12.4 million, which included restructuring charges. The company remains committed to an asset-light model and is preparing for the integration of autonomous vehicles (AVs) into its service offerings.

Key Takeaways

  • Lyft's gross bookings surpassed $4.1 billion, a 16% increase year-over-year.
  • Active riders grew by 9%, with ride frequency up by 6%.
  • Revenue exceeded $1.5 billion, a 32% year-over-year increase.
  • The company introduced 33 new products and features in 2024.
  • Partnerships with Mobileye, Nexar, and May Mobility aim to enhance Lyft's AV offerings.
  • The company reported a GAAP net loss of $12.4 million but generated $243 million in free cash flow during Q3.
  • Lyft plans to transition to net share settlement for stock-based compensation to manage shareholder dilution.

Company Outlook

  • Lyft anticipates gross bookings growth of 15% to 17% year-over-year for Q4.
  • Adjusted EBITDA is projected to be approximately $100 million to $105 million for Q4.
  • A revised full-year outlook expects free cash flow to exceed $650 million.
  • The company is focusing on liquidity, profitable growth, and shareholder returns.

Bearish Highlights

  • GAAP net loss for Q3 was reported at $12.4 million, including restructuring charges.
  • A $50 million increase in insurance costs is expected for Q4.

Bullish Highlights

  • Lyft's Price Lock feature saw over 200,000 active passes, leading to increased ride frequency.
  • Lyft Media platform reported a nearly 3x increase in in-app ads year-over-year.
  • Driver hours reached an all-time high, with preference for Lyft surpassing competitors by 12 percentage points.
  • Lyft's Canadian operations are thriving, with Toronto emerging as a key market.

Misses

  • The third quarter saw a decrease in gross bookings per ride due to seasonal shifts and a decline in prime time pricing.
  • Total (EPA:TTEF) incentive costs were at $274 million, the lowest percentage in six quarters.

Q&A Highlights

  • CEO David Risher emphasized the asset-light model, with 1.4 million drivers owning their own vehicles.
  • The company is focused on increasing ride frequency among users, with an average of three rides per month.
  • Lyft is looking forward to increased investor outreach in 2025, with events planned in major cities.

Lyft remains optimistic about its future, particularly with the integration of AVs into its platform and the partnership with DoorDash (NASDAQ:DASH), which is expected to drive rider acquisition. The company's strategy continues to focus on providing exceptional service to increase ride frequency among existing users and leveraging first-party data for targeted advertising. With a strong foundation in place, Lyft is poised to expand its market share and deliver on its promises to shareholders.

InvestingPro Insights

Lyft's recent financial performance aligns with several key metrics and insights from InvestingPro. The company's revenue growth of 32% year-over-year to over $1.5 billion in Q3 2024 is consistent with InvestingPro data showing a robust revenue growth of 25.41% over the last twelve months. This growth trajectory is further supported by an InvestingPro Tip indicating that analysts anticipate continued sales growth in the current year.

Despite reporting a GAAP net loss in Q3, Lyft's financial outlook appears to be improving. An InvestingPro Tip suggests that net income is expected to grow this year, and analysts predict the company will be profitable this year. This aligns with Lyft's projection of an adjusted EBITDA of $100 million to $105 million for Q4.

The company's focus on liquidity is reflected in another InvestingPro Tip, which notes that Lyft holds more cash than debt on its balance sheet. This financial stability is crucial as the company continues to invest in new products and partnerships, particularly in the autonomous vehicle space.

Lyft's stock performance has been noteworthy, with InvestingPro data showing a significant 58.59% price total return over the last three months. This aligns with the company's positive Q3 results and optimistic outlook for Q4 and beyond.

For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Lyft, providing a deeper understanding of the company's financial health and market position.

Full transcript - LYFT Inc (LYFT) Q3 2024:

Operator: Good afternoon and welcome to the Lyft Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode to prevent any background noise. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to turn the conference over to Aurelien Nolf, Vice President, FP&A and Investor Relations. You may begin.

Aurelien Nolf: Thank you. Welcome to the Lyft earnings Call for the third quarter of 2024. On the call today, we have our CEO, David Risher, and our CFO, Erin Brewer. We'll make forward-looking statements on today's call relating to our business strategy and performance, partnerships, future financial results, and guidance. These statements are subject to risk and uncertainties that could cause our actual results to differ materially from those projected or implied during this call. These factors and risks are described in our earnings materials and our recent SEC filings. All of the forward-looking statements that we make on today's call are based on our beliefs as of today, and we disclaim any obligation to update any forward-looking statements except as required by law. Additionally, today we are going to discuss customers. For rideshare, there are two customers in every car. The driver is the Lyft customer and the rider is the driver's customer. We care about both. Our discussion today will also include non-GAAP financial measures which are not a substitute for GAAP results. Reconciliation of our historical GAAP to non-GAAP results can be found in our earning materials, which are available on our IR website. And with that, I'll pass the call to David.

David Risher: Thank you, Aurelien. Good afternoon and thanks for joining us. Once again, our team executed on all parts of our strategic plan, resulting in a spectacular third quarter with progress on what matters most to riders and drivers more than 2 million times a day. Erin will get into the details about our performance this quarter, but a driver from North Carolina put it well when they called Lyft superior to the other guys because of better transparency and overall better pay per ride. As we outlined at our Investor Day, our customer obsession engine was fueled by several product innovations, progress with Lyft Media, and some big partnership announcements. First, we said we would differentiate with product innovation. Our strategy is simple but effective, obsess over our customers. That's what we did for commuters when we introduced Price Lock. Commute rides make up nearly half of rides Monday (NASDAQ:MNDY) to Friday, so it's no wonder Price Lock is performing beyond our expectations. By the end of September, we already had more than 200,000 active passes, and this number keeps growing. We see that Price Lock riders take on average four more rides per month than they previously did before purchasing the pass. Not only is Price Lock helping commuters, but also drivers by creating more predictability on when and where to drive. It's a win-win. We're pleased with how Price Lock is performing and we're taking feedback from early users to further enhance the product. Related to this, we're always thinking about and providing more value to our riders. So here's an update on that can of whoopass I mentioned last time on prime time, which our team is -- which is our term for surge pricing. Prime time continues to decrease and is now down more than 40% year-over-year and 20% quarter-on-quarter on a per ride basis. In the regions where prime time declines fast, inversion goes up along with rides and market share. Chicago is a great example where we saw prime time decline very fast in Q3, resulting in conversion improvements, ride growth acceleration, and share gains. I've said before that our strategy was to take rideshare's most hated feature and turn it into a reason to choose Lyft, and again this quarter we're seeing the proof that that's the right strategy. More recently we launched a new set of improvements for drivers to better ensure that every ride and every minute they spend on the road is worthwhile. Imagine driving with Lyft and you accept a ride for a given amount of pay, but you end up sitting in unexpected traffic. The ride takes longer, and on an hourly basis, you earn less than you expected. Not a great experience. So we addressed it. Now, drivers can count on their earnings being increased anytime a ride takes five minutes longer than estimated. Drivers now also see the estimated dollar per hour rate for every ride on the accept screen to help them decide if a ride is worth their time. And if you drive an EV, you can choose to only match with rides that fall within your battery range, a really important change that takes care of range anxiety. All told, just this year we've launched 33 new products and features, a true testament to our team listening to drivers and riders and delivering on the innovations they want. As a result, we're seeing all-time highs across both driver and rider metrics. Drivers are spending more time with Lyft than they ever have, as driver hours in Q3 reached yet another all-time high. According to interviews, driver preference for Lyft is now 12 percentage points higher than our main competitor. At Investor Day back in June, we said we expect driver hour growth in line with business growth, and right now we're ahead of that target. On the rider side, we see the same. Active riders hit an all-time high, growing at a pace ahead of the long-term target we shared at our Investor Day. We had record rides again this quarter, with commute rides surpassing their all-time highs from 2019. Ride frequency, the average number of rides taken by each active rider, increased for the seventh consecutive quarter. It is also in line with our long-term target. Riders are taking more bike and scooter rides too. Our bikes and scooters mode had strong performance in Q3, breaking another record in quarterly rides. Bottom line, Lyft is still growing. Up next is more expansion in Canada, where right now we're onboarding drivers in Winnipeg. At this point, roughly 12% of all Canadians have taken a ride with Lyft and we look forward to riders in Winnipeg joining us soon. So now on to Lyft Media. We've been building Lyft Media into a highly performant platform. And we continue to improve it for our ad partners. Last month, we expanded how we measure campaign performance. Brands like Foursquare are now helping us measure foot traffic to brick and mortar stores. NCSolutions provides insights on brand loyalty for consumer packaged goods companies. And Kochava is measuring digital outcomes like app installs and purchases. Overall Lyft Media continues to gain great traction with in-app ads growing nearly 3x year-over year in Q3. Now I want to take a look at two partnership focused initiatives that will help strengthen Lyft’s position going forward. We are very proud of the best of what we do in rideshare. We are the pure play in on-demand mobility, and that allows us to be 100% focused on getting it right for drivers and riders every time. As we said at Investor Day, that approach includes deeply partnering with other companies for the best of what they do. For food delivery, that's DoorDash. DashPass has millions of subscribers and with last week's partnership announcement, we're giving every one of them a reason to prefer Lyft. So I encourage each and every one of you to link your accounts immediately so you can save the next time you go out with friends and then on that late night snack when you get home. Second, today we announced our next step in helping bring autonomous vehicles to millions of people. And again, we're doing that in partnership, beginning with Mobileye, Nexar, and May Mobility. Let me talk about each of these briefly. With Mobileye, our partnership makes our rideshare platform available to all vehicles with Mobileye Drive level for self-driving technology. These vehicles will be Lyft ready, giving small and large fleet operators seamless access to Lyft's platform network of riders. With Nexar, our partnership combines Lyft's vast network with Nexar's intelligent video telematics with the goal of accelerating how AVs learn. And finally we're very excited to partner with May Mobility to make their autonomous vehicles available to Lyft riders in Atlanta next year. Each of these partnerships plays a different role, but collectively, they help Lyft become the best option for AV stakeholders and asset holders to go to market. At Lyft, we envision a robust future that brings together human drivers and autonomous vehicles in an always-on transportation network. Adding AVs is a huge opportunity and we look forward to partnering with even more leaders in the industry to shape this future. Stay tuned because this is just the beginning. Before I finish up, I want to share something with you that is foundational to the way we lead our company, and that's our purpose. The team at Lyft has always been passionate about having an impact. It's often cited as the reason people love our brand and why people choose us. It's one of the reasons I came here too. And it's good for business in ways beyond brand love. Research shows that the purpose-driven organizations have returns that significantly outperform the S&P 500. Lyft's purpose is to serve and connect. Let me say that again, because it's new. Our purpose is to serve and connect. On service, we want to reset the bar, serving drivers and riders better than they have ever experienced before. And on connection, in an increasingly virtual but physically disconnected world, we're going to fight hard to keep bringing people together in person. Lyft is moving ahead. Quarter after quarter, we're winning riders and drivers over -- winning drivers and riders over with our service. As a result, people are choosing rideshare more, and when they choose rideshare, they're increasingly choosing Lyft. Sure, we're competing against the other guy that are more than holding our own, but increasingly, you'll find that we're playing a different game. We're competing with your car, even with your couch. Every day, over 2 million times we serve and connect and I hope you see how early we are in that journey and just how important that purpose is. Over to you, Erin.

Erin Brewer: Thanks, David. Good afternoon everyone and thanks for joining us today. I'm excited to share an update on our results for the third quarter as well as the outcome of our recent insurance renewals, the next steps regarding our capital allocation plans, and our increased outlook for the full year 2024. Now let's get into the details of the quarter. I'll start with my usual reminder that unless otherwise indicated, all income statement measures are non-GAAP and exclude select items that are detailed in our earnings materials. For the third quarter, gross bookings exceeded $4.1 billion, up 16% year-over-year, with double-digit rides growth in both rideshare as well as our bikes and scooters mode. Q3 saw strong demand with active riders growth of 9% and frequency up 6% driven by growth in Canada, our back-to-school activations and the success of new products, all underpinned by our focus on operational excellence. While demand exceeded our expectations in the quarter, gross bookings per ride and the continued reduction in prime time were in line with our expectations. As we discussed last quarter, reducing the variability from prime time addresses a significant concern for our riders, ultimately drives preference for Lyft and makes our platform healthier. Revenue exceeded $1.5 billion, up 32% year-over-year. During the quarter, we delivered revenue margin expansion, both year-over-year and sequentially, reflecting efficiency in the deployment of incentives. Consistent with the framework we outlined at our Investor Day in June, our focus is on generating efficiencies on a per ride basis across total incentive spend. During the quarter, incentive expenses in contra revenue and sales and marketing combined declined 17% on a per ride basis year-over-year, well ahead of the annual multi-year target of 10% we outlined at Investor Day as we continue to improve the balance of our marketplace. Operating expenses were $602 million or 14.7% of gross bookings, including planned investment in rider engagement and higher legal and insurance expenses, some of which are accrued on a per ride basis. In the third quarter adjusted EBITDA was $107 million, which as a percentage of gross bookings was 2.6%. Third quarter adjusted EBITDA included the benefit of a onetime $14 million tax accrual release. GAAP net loss in the third quarter was $12.4 million, which includes restructuring charges of $36 million related to the previously announced restructuring plans in our bikes and scooters division, now known as Lyft Urban Solutions. We ended the third quarter with a strong cash position with unrestricted cash, cash equivalents, and short-term investments of approximately $1.9 billion, and we generated $243 million of free cash flow. As a reminder, our free cash flow trends will vary quarterly due to the timing of insurance payments. So I'd encourage you to focus on a 12 month view. At quarter-end for the trailing 12 months, we've delivered more than $641 million in free cashflow. This outpaced our previous target, driven primarily by higher insurance reserves directly related to higher ride volume, coupled with lower cash payments related to our legacy book. Moving to capital allocation, I want to reiterate our current strategy, which focuses on three main areas. First, it's crucial for our scaled marketplace to maintain ample liquidity for operations and to comply with our existing covenants. Next (LON:NXT), we're prioritizing investing in profitable growth. We have plans to invest in initiatives like building partnerships and enhancing our ad tech platform, which are important to our long-term growth strategy. And third, we're focused on shareholder returns, starting with dilution management. After restructuring last year, we've seen improvements in stock-based compensation dilution and remain on track to our commitment for 2024 stock-based compensation of approximately $340 million. Building on that progress, starting later this month, we will leverage our improving cash position to transition to net share settlement to address the tax withholding obligation for all employer restricted stock units. This will reduce the number of shares that would otherwise be issued into the market upon vesting. In 2025 we expect to use approximately $100 million of our cash balance which will reduce dilution by approximately 2 percentage points compared to our prior tax withholding method. The use of cash will be reflected in the financing section of our statement of cash flows beginning in the fourth quarter of 2024. Now, on to guidance. Our Q4 outlook includes both the impact of the DoorDash partnership as well as the renewal of our third-party insurance agreements. As we laid out at our Investor Day, partnerships are a key component of our profitable growth strategy and we're very excited about the opportunity to partner with another category leader. In the fourth quarter, we're investing in the launch, and we're excited about bringing the benefits of Lyft and DoorDash to riders and DashPass members throughout the US. Our experience with large-scale partnerships tells us that achieving broad consumer adoption happens with time, and we look forward to sharing more updates in the coming months. Next, the renewal of our third-party insurance agreements reflects our success in continuing to bend the insurance cost curve through product and safety initiatives. We expect our fourth quarter cost of revenue will increase by approximately $50 million quarter-over-quarter, reflecting the impact of our [10/1] (ph) third party renewals. That's significant progress versus last year's increase driven by the multi-year strategy we outlined at investor day. Additionally, I'll remind you that last year we moved some agreements to a biannual cycle, creating less disruptive impacts throughout the year. As such, we're comfortable that we can manage the insurance cost increase within our operating and financial plans. For the fourth quarter of 2024, we expect gross bookings growth of approximately 15% to 17% year-over-year, or approximately $4.28 billion to $4.35 billion. We expect adjusted EBITDA of approximately $100 million to $105 million and an adjusted EBITDA margin as a percentage of gross bookings of approximately 2.3% to 2.4%. For the full year 2024, we are raising our outlook and now expect rides growth in the mid-teens year-over-year, gross bookings to grow approximately 17% year-over-year, adjusted EBITDA margin as a percentage of gross bookings to be approximately 2.3%, up from the prior outlook of 2.1% and free cash flow to exceed $650 million. 2024 is the first year of our multi-year plan laid out at our Investor Day in June. Through customer obsession and operational excellence, we're delivering on all our commitments and are on pace to achieve our long-term targets. With that, I'll bring our prepared remarks to a close. Operator, we're ready to take questions.

Operator: [Operator Instructions] Your first question comes from the line of Doug Anmuth with JPMorgan. Please go ahead.

Doug Anmuth: Thanks for taking the questions. I have two, one for David, one for Erin. David, I was hoping you could talk about the benefits that you're seeing of less prime time and surge on the platform and just how that's showing up in terms of ride volume via frequency and retention. I know you mentioned higher conversion. Just wondering if there's any way you can quantify the benefits there. And then Erin, can you talk about the $650 million in free cash flow in 2024? I just want to make sure that we understand the drivers of the significantly higher outlook is that all function of more shift to 1P and captive, and then how do we think about that trend in ‘25 in sustainability? Thanks.

David Risher: Sure. Doug, I'll start and then I'll pass it over to Erin. So first, so prime time. Yeah, prime time sucks. And so we're really trying to focus on bringing it down. And as you heard, we're down 40% year-on-year, which is awesome. And so what we find when we look market by market is the areas where we get it down the fastest is where we see incursion and ride growth -- inversion and ride growth increase nicely. So I think we mentioned Chicago in the prepared remarks. Boston's actually another city where we're seeing that work out super well. So it's great, it's great. And it's -- maybe I liken it a little bit to Starbucks (NASDAQ:SBUX) move last week of getting rid of the stupid surcharge on oat milk and stuff. Like, it's just nobody likes it. Nobody likes that kind of variability, particularly when you're being charged for something that you didn't expect. I put it in a slightly broader frame too to say, as we look at frequency, which continues to increase, frequency is driven primarily by great service. Right? The better service you have the more likely you are to take another ride. And that's just, I mean, tautological. But then there's certain things we can do, like price lock and some other things that will actually increase frequency even more than that. So, and in prime time, it falls right in the middle of that, right? That's providing great service and also providing consistency. So sort of put it all together, really liking what we see. I think our conversions actually increased, numbers gotten better by about 0.1 percentage point. So, we're seeing good increase there. But of course, that averages all kinds of different things. So that's sort of the big picture on that. And then, Erin?

Erin Brewer: Yeah, sure, Doug. On cash flow, I'll kind of start hovering up a little bit here. First of all, we're incredibly proud of the performance that this team has been able to drive across the business, obviously strengthening our operating efficiency and improving our margins. And then given that we're a relatively low kind of CapEx profile business, from a modeling perspective, you can assume that a significant portion of that adjusted EBITDA converts to cash. And that is of course, before considering the impacts of insurance. So let me kind of talk about the dynamics that we're seeing this year and some of the dynamics that I mentioned here in the third quarter. So, first is the function of our insurance accruals, and those are a bit higher because our growth is a bit higher than expectations. So that's one part. The second part is lower cash payout. So let me spend just a second here, chatting through that. When we accrue for these expenses in period, we expect the total payout from any particular cohort to take approximately seven years to resolve, with the peak of that usually happening in year three and the majority of those claims paying out sort of year one through three if you think about that overall horizon. So, today for example, it's fair to assume that the majority of claims that we're paying out are from the 2021 to 2023 time period where of course our rides volume were lower therefore fewer claims, therefore a reduction in those cash outflows. You asked a little bit about what does that mean longer term? So, looking further ahead, if you think about the near term phase of our LRP, I think it's fair to assume that that conversion and that near term, say 2025 part, would be a bit higher than 90%, but likely not as high as we're seeing here in 2024. And then as we move into the outer years of that LRP, we would expect that dynamic to normalize as insurance-related accruals and cash payments would be a little bit more balanced. So, longer term we believe that 90% plus adjusted EBITDA conversion target is appropriate.

Doug Anmuth: Great. Thank you both.

Operator: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Eric Sheridan: Thanks so much for taking the question. Really just a two-parter. When you think about some of these new partnerships you're announcing with DoorDash and on the supply side with autonomous vehicle companies, I think for DoorDash, how should we think about that driving demand on the rider and ride side in terms of an underlying assumption of what that might contribute to incremental growth? And in terms of autonomous, maybe just refresh us on your view about how adding autonomous supply and partnering across the autonomous vehicle industry landscape might alter some of what you see in terms of the growth prospects and the margin prospects going forward. Thanks so much.

David Risher: Sure. Let me take -- those are two chunky ones. And so I will -- I'll talk to partnerships and AVs, and then maybe Erin can talk a little bit about the unit economics of AVs as well. We can both kind of tag team a little bit on this. Yeah, maybe not. We'll see. We’ll see, we cover. So on partnerships, so DoorDash super interesting, right? So they've got about 18 million DashPass holders worldwide or 18 million customers worldwide. I think it's DashPass holders, is that right? Anyway, so that's a big number. And some of them obviously are Lyft users, but maybe a smaller number than you might expect. And so I think you're absolutely right, Eric, to sort of target the top line on this. This is about effectively rider acquisition, right? How can we acquire riders in a way that's super customer friendly? Because we know that people like to take rides when they go out, and then when they come home, they'll get something delivered. So it's off to a great start. I won't give you too many details. And I will say that all these partnerships tend to, they sort of take time to build. So let's not get ahead of ourselves. But we certainly like what we see so far. And we can see that riders are responding to it. Signing up to link their accounts and then maybe ordering something or maybe taking a ride that they wouldn't have taken otherwise. So yep, great to think about as a top line driver and something that's going to unfold over time but we like what we see so far for sure. On AVs, that one, if you don't mind, I'm going to sort of zoom out for a second. I mean, you asked specifically about additional supply, but I actually want to give a little bit of context because this isn't something we've talked too much about so far. So the first thing I should say about AVs is, AVs are great. They're great, right? It's a good experience. You can see them on the streets of San Francisco. To be clear, it's a very bespoke experience right now. It's a very expensive car. All kinds of things are going on behind the scenes to make sure that it works super well. And the scale is quite small in the grand scheme of things. But it's a really interesting experience. And so we absolutely see it as being a TAM expander for us, right, because it'll bring additional supply and it'll bring a new experience for riders on that some riders will like, maybe others don't choose so much. And so the idea of having a hybrid between the two of them, between human-driven cars and robot-driven cars is super exciting to us. Our strategy is to become the partner of choice to any AV stakeholder. That might be an OEM, equipment manufacturer, any number of things. And for one basic reason, we want to be the best way to keep your AV utilized and therefore making money. And that's sort of the thing. Like, these are expensive assets, they're going to be expensive for a long time. And so they got to be moving around, right? Just like an airplane or a restaurant's got to have people in the seats or airplanes got to be in the sky, like, these things have to be utilized. And so I'm going to break that down a little bit and again sorry for the long answer but it's a -- it's kind of a chunky area. So the first is demand generation. So three big pillars, I’m going to think about. First is demand gen, right. So you know this. I mean we're one of two big scaled platforms of North America, 40 million active riders, two main rides a day. So that I think sort of stands to reason. The second place is marketplace management So, 1.4 million drivers today are on our platform every year. That's a lot of individuals. And what do they do? What do they rely on us today for? And then you can sort of fast forward and think what are AVs going to rely on us tomorrow for? Well, they got to be onboarded, they got to be insured, they got to get paid, they got to get matched, right? 24 hours a day, seven days a week. Cars get matched with riders, which means that you have to estimate the ETA, that's pickup time, you got to price it right, you got to do customer care when things are left in the car. All of this marketplace, you got to manage pickup and drop off, and that sounds easy, but it's not because it's such an address on Fifth Avenue, it's secretly around the corner, all these sorts of things. So this marketplace management is quite complicated, and it's something that we do at massive scale every single day. And it's the second piece, the second big pillar that any AV asset vendor is going to want to plug into. And then the third is fleet utilization. Okay, so this is actually a little bit subtle. And it sounds straightforward, but it's actually quite complex. Again, of course, it's onboarding, but then it's things like maintenance. Again, think of a car as an asset. Again, for some reason, at least I find it actually easy to think of airplanes as very expensive assets that you just have to make sure you are flying around and not sitting in maintenance stocks and so forth. And so, if you think about what a car needs and answer is maintenance, right, they need to be recharged. They need to get paid for their time, may be insured all these policy issues, all these customer care issues all this for stock So we've been doing for about the past four years with our Flexdrive subsidiary a ton of this, just a ton of this. Flexdrive acquires, it leases, it manages, it maintains, it repairs, it resells, it does this over tens of thousands of cars every single year and we are the only rideshare company that has this capability in-house, I will just say that again. We're the only rideshare company that has this ability in the house. And by the way, we're good at it and I'm going to brag on behalf of the Flexdrive folks. We achieve about 90% utilization over the course of the year, which is industry-leading. Okay, so you put all that together and I think you can see why AVs are so exciting for us. They're a new form of supply, you can say it sort of tactically like that. They blend very nicely with driver-driven cars, right? You don't have to choose between one or the other, you can do both. And we have the capabilities to put them to use. And by putting them to use, that makes all the stakeholders more money, which is great. And that's why they're going to choose us again and again and again. So I think it's more than just sort of the -- the sort of any one of those pieces. I think sort of the whole is great in some of the parts. And that is probably more than enough for AVs right now. And, Erin, did you want to add anything to any of that?

Erin Brewer: No, you nailed it in terms of just -- I think there's a lot of great work being done out there about how this will fold over some period of time. The cost of the asset, how the regulatory and insurance environment, et cetera. But the bottom line, as you just said, is asset utilization is going to be incredibly important for unit economics.

David Risher: Thanks, Eric.

Operator: Your next question comes from the line of Brian Nowak with Morgan Stanley (NYSE:MS). Please go ahead.

Brian Nowak: Thanks for taking my questions. I have two. The first one on Price Lock, it's a good early signal on adoption and frequency bump. I just wanted to ask you about, can you walk us through sort of the go-to-market strategy you're using on this? Is it available across all markets? Are you rolling it market by market? Are you targeting certain types of users and sort of rolling it that way? Just how do we think about kind of the strategic rollout of that business across the corpus of users is the first one. And then the second one just on autonomous, there's a decent amount of discussion about sort of San Francisco and Waymo, et cetera. So anything you can tell us about sort of San Francisco trends and sort of what you've seen on San Francisco volumes over the last, call it, three months, six months. Thanks.

David Risher: Sure. Let me take them in order. So on Price Lock, it's rolled out nationally. It's rolled out nationally. Every single person in the country, as far as I know, has access to Price Lock. It's targeted at commuters. And so when we do our internal targeting, so again, when we look at our daily volumes, about half of it, Monday to Friday is commute volume, which is a huge, huge deal. And you can imagine how frustrating it is for people to sort of wake up in the morning. And literally people do this. I mean, if you talk to folks, in fact, as a driver, one of the people who got in my car a couple months ago was someone from Sausalito who literally said every morning she wakes up, basically if it costs $20, she'll take a Lyft, if it costs $30 bucks, she'll sort of think about it, but she'll still probably take a Lyft or the other guys if they're cheaper, which doesn't happen because guess what? Anyway, and then if it's $40 bucks, she'll drive herself, which she hates. And it was actually on a Friday morning and she had cupcakes all these sorts of things for a birthday and she was kind of very happy that that Lyft was priced well, so this is all before Price Lock came up. So anyway, the product has really good product market fit because people don't like the variability and it's -- and again it comes at a time which is particularly obnoxious particularly in the morning when you need to get to work. One of the things we like about it is, aside from the four incremental rides that we've talked about, is it also gives drivers some certainty because we can use that as input to certain things we do in the background. And as a result, there's good marketplace management on this as well. And we know it's good because we can see that people who sign up for Price Lock tend to renew. So it's a low churn. Now, again, it's still new, right? We're a couple of months in, but we like the dynamics we're seeing, which brings us back to go to market. You can expect within sort of economic guide rails that we will continue to promote it more and more and more, because once people sign up, they don't tend to leave and they tend to take more rides, which is just obviously great sign all around. So, stay tuned for more, definitely early days and that these features always take time to kind of get to any significant scale. But, but we like what we see and it will be a, certainly a nationwide product. On AVs in San Francisco, we're obviously looking at it quite closely. If you've been in San Francisco, you certainly see a lot of Waymo's around. You'll see Zoox around a little bit as well. They just announced last week, Jesse, the CTO at Zoox just announced that they'll be on the road soon in San Francisco. So, from a sort of density perspective, they're obviously working pretty hard. But when we look at companies like that, we really see them more as partners than as competitors. Of course they're going to do some R&D, of course they're going to want to understand customers directly, it makes all the sense in the world. But when we have discussions with all the partners that you would expect we're having with, it's really more around how can we partner to put these assets which are quite complicated to not just build obvious history, complex, but maintain on the road, keep repaired, keep charted, all these things. How can we play a role there? I'll say one last little thing, which is in San Francisco it's interesting. You see them a lot. What's also interesting to see, I'll just point this out, it's a little bit of a side, is you also see big parking lots with them, right? They have to stay somewhere. This is quite expensive as well. And it's also an interesting thing, this is super just random, but I was just reading this thing about hail and how hail hits cars pretty hard and causes repairs and all these sorts of things. So it's really, my only point there is just the stuff that you're seeing at relatively small scale right now is super interesting and it's a good experience and the companies are doing a good job. But they're also realizing is that they scale up to beyond hundreds to thousands, tens of thousands, hundreds of thousands. Some of the problems are going to change and some of the issues they're going to confront are going to be quite different and we're super excited about partnering super deeply with them to help them with that.

Brian Nowak: Great. Thank you.

David Risher: Sure.

Operator: Your next question comes from the line of Ken Gawrelski with Wells Fargo (NYSE:WFC). Please go ahead.

Ken Gawrelski: Thanks so much. Two if I may. First one more detailed one on insurance. Thank you for the guidance on the $50 million quarter-over-quarter on the cost of revenue side. Is there -- are there -- I just want to get a sense, are there any other differences in the cost of revenue line that we should be thinking about 3Q to 4Q, other than the routine stuff and the insurance? That's the first question. And the second one is more broad on, as you think about next year in the domestic rideshare market, how do you think about pricing? And specifically what I'm thinking about is, you've got prime time likely continue to come down and you've talked about battling against that prime time and surge pricing and then you also have rider incentives and think about things like Price Lock. How -- should we think about synergy or any upside you get from decreases in kind of prime time be offset by other initiatives or how should we think about just overall your pricing strategy looking into next year? Thank you.

Erin Brewer: Hi, Ken. So on the cost of revenues side, the answer to your question is no, there's nothing other of significance or that you should be considering in that line in terms of the changes I outlined from Q3 to Q4. With respect to pricing, let me kind of start, and I'll hover up just a little bit. Our goal is to operate in a healthy and competitive way. We've talked about that previously, right? Pricing competitive to the market. There's no change to that. No reason to think that there would be any change to that as you think about the future. I think another level set is the price of rider experiences is a combination of many, many factors. That includes mode mix, it includes a distance, it can also obviously include prime time depending on the supply conditions, a certain geography at a certain time. And so our job, And I think our results speak for themselves. We've been doing this really well, is to bring value to riders. And that means having a selection of modes that are going to meet use cases that are important. It means providing reliable pricing. We've talked a bit about Price Lock and then obviously prime time coming down is really, really beneficial to that. So those are some of the, I think, foundational, if you will, theses as I think we would ask you to think about pricing. I won't talk about 2025 because I think it's, I don't have anything specific to say there. Maybe offering a little bit of color as you think about the third quarter, our gross bookings per ride was down Q-on-Q compared to what we saw in the second quarter. And that is influenced by prime time continuing to come down, as we've mentioned. But also seasonally, Q3 tends to be the highest quarter for bikes and scooters, right? Weather related. So that's a pretty natural place for our gross bookings per ride to be lower. Q4, that seasonal mix shifts a bit, right? Q4 and Q1 in bikes and scooters. So all else being equal, it's fair to assume that that gross booking per ride would increase primarily driven by the change of mix. But, hopefully that gives you some beneficial color on just how we think about pricing overall and some of the maybe more near-term dynamics.

Ken Gawrelski: Thank you so much.

Erin Brewer: Yeah.

Operator: Your next question comes from the line of Benjamin Black with Deutsche Bank (ETR:DBKGn). Please go ahead.

Benjamin Black: Great. Thank you for taking the questions. So, Erin, I guess contra revenue and consumer incentives, they were down 17% year-on-year. Can you just help us understand what the drivers of the outperformance were and how should those trend as we look ahead? And then I guess it's either for David or Erin, but can you just touch on the returns you are seeing on your consumer incentive investments? Are you generally seeing growing competition for active riders in the US and Canada? And how should we think about the durability of the current active rider growth? Thank you.

Erin Brewer: Yeah, sure. Thanks for the question. So as a reminder, when we think about the deployment of incentives, it's really aligned with our broader strategy as a company. We make those investment trade-offs to keep the marketplace balanced, incredibly important. I'll also remind you that in 2024, we're running ahead of our Investor Day targets for 10% efficiencies on a combined basis. And at the same time, we've made really, really strong progress. David mentioned this in his prepared remarks, focusing on drivers, innovations like earnings commitment or recent fall release that was just full of features that drivers love and attracts more drivers to our platform. And this allows us to invest. So, you mentioned what are we seeing? I think if you look at our really strong progress, we've been talking about it now pretty much consistently each quarter in 2024, growing active riders, the growth in frequency, riders taking more rides on the Lyft platform, coming to the platform and having a really, really good experience. So those are some of the results for the year and sort of foundations about how we think about it, just to give you the specific data, because I know some of you get curious about this, that total incentive spend and contra revenue and sales and marketing was about $274 million in the third quarter. That's about 6.7% of gross bookings and that's down sequentially from about 7% in the second quarter and is also in the third quarter really the lowest mark as a percentage of gross bookings in the last six quarters. So, absolutely driving efficiency there and as we continue to build on the great momentum we've seen with drivers, it allows us to invest. So, you asked a little bit about maybe how we think about investing, et cetera, and what we're seeing in terms of outcomes. I'll do the how first, because I think I've already talked about the outcomes in terms of growth in riders and frequency, et cetera. But we monitor that impact as we make those investments, whether it's a particular initiative around incremental rides or new riders or retention rates. It really depends on the nature of the incentive. But we monitor the efficiency of that incentive deployment. And we've been really leaning in because we're seeing great efficiency and really good outcomes in the way that those are deployed. So hopefully that's helpful.

Operator: Your next question comes from the line of Shweta Khajuria with Wolfe Research. Please go ahead.

Shweta Khajuria: Thank you for taking my questions. Could you please talk about consumer sentiment in the quarter? There have been some mixed data points, but anything on resiliency of consumer spend and what specifically are you seeing in terms of maybe some of the drivers? And then the second question is just thoughts on your take rate and/or revenue margin in the near to midterm as you think about its trajectory, at least especially getting -- going into next year. Thanks a ton.

David Risher: Yeah, hey, Shweta, it's David. I'll take the first and Erin can take the second. So we like what we see with consumer sentiment. We really do. And we look at this just like everybody does and try to sort of discern if there are things that are unusual or what have you. But I'll tell you a couple of data points that I think are interesting. So first, we've already mentioned, so our biggest use cases can be, and that's going up and you would sort of expect that because of return to office and obviously Price Lock and some things that we're doing. The thing we might not expect would be that party time is actually our second biggest sort of Lyft and so to speak and a party time which we talked about is sort of a Friday and Saturday night thing and that's increased as well nicely, quite nicely. And I can give you a very specific example which is kind of fun. We've just been looking at Halloween data and our Halloween this year was just a monster just a monster and it was all-time high and sorry about that. [Choke there] (ph) kind of sort of. But anyway, and then back a year ago, it was also a monster. So in other words, we're lapping big increase year-on-year and super interesting to see. So that sort of suggests that that's discretionary, right? I mean, you don't have to go out on Halloween and you certainly don't have to take a Lyft, but people are and people are. So that suggests to us that what we're doing is working, that the service we're providing is landing with people, we're priced well, and so on and so on. So, we -- as Erin just kind of mentioned in a different context around pricing, we're very aware that in order to be a large-scale consumer brand, which we are, you have to have a value component. You just, you have to, right? I mean, there -- for all the people are doing well, there are people who are struggling or feeling frustrated. This is very real. So, so we're quite, so we look at wait and say, for example, our saving mode, sort of look at it very carefully and try to continue to make that product great. I always give a shout out. I'm a little bit weird on this one, but to our bikes world just because for so many people it's a part of their daily lives. We give 250,000 rides a day roughly at peak. It's quite a large number and the per ride cost is quite low. So we sort of look up and down the stack all the way from the bottom to the top and the top being what we call HVMs, high value mode. And we really see strength across the way, not a huge, nothing to worry about. So I know there's a long way of saying, we're not seeing much, but maybe that gives you a little color on how we're looking at.

Erin Brewer: Yeah. And, Shweta, on your question on revenue margins. So, the revenue margin trends that we've seen in 2024, and it's absolutely true for Q3 as well, reflect the efficiency that I was mentioning a few questions ago in terms of overall incentive spend and the strong progress that we're seeing there. But also, I would remind you in particular in the third quarter, there is a mix impact on the revenue margin from our bikes and scooters business. So different from our rideshare business, the bikes and scooters flow through pretty much one-to-one from gross bookings to revenue. So in the quarters where we've got more volume, that's going to have a larger impact. And so, for example, in the third quarter, that was about 2.5 points attributed to the mix of the bikes and scooters mode. So hopefully that gives you some additional color.

Shweta Khajuria: Yes, thank you very much, both of you.

David Risher: Sure.

Erin Brewer: We're ready for the next question. Operator, we're ready for the next question.

Operator: John Blackledge, your line is open.

John Blackledge: Great. Thanks. Two questions. Any further color on how the Canada business performed in the third quarter, and then discuss the continued expansion in Canada? And then secondly, on Lyft Media, if you can give maybe some color on the revenue run rate trend in 3Q and I think Erin mentioned investing in ad tech, any color there would be helpful. Thank you.

David Risher: Sure. Hey, John. I'll touch on both briefly. So Canada, and I think we've probably said all these things publicly before, but I'll reiterate that we're very much on track. In Canada, our goal is to double ride volume year-on-year, and we're on track. And it's great. It's great. We literally are, Canada seems just killing it. Super good to see how strong the product market fit is, and something we're paying a lot of attention to. I mentioned that Toronto is now our sixth biggest market. That's the greater Toronto area, which is wonderful. I forget what it was a year ago, but I can tell you it wasn't in the top 10. That's for sure. So liking what we're seeing there, good momentum, good product market fit, more to come for sure. And then on Lyft Media, we were again on track, we've put out some goals. I think we've talked about a run rate that we're very much on the path for this year. Really, I would say the focus now just to sort of maybe one click deeper on that is, people are -- and I, some of this again, a little bit big picture for a sec but like marketers brands are always looking for new ways to get to their customers, they just always are. And sometimes again, I look sort of very big picture at this and think of build pamphlets back in the late 1800s, billboards on the highways, interstates, came up and then radio again, very car focused, also home focused and TV, so forth. The thing that's different now, of course, is not just the onlineness of everyone, which is kind of obvious, but that the people with first party data really tend to do well. And we have first party data, right? Every time you get in a car as a rider, you're telling us a lot about yourself, right? You're saying, where are you coming from? Where are you going to? What's your intention? Are you going to a coffee shop? Are you going to a bookstore? A drugstore? A pharmacy? Any number of things. And that's first party data. And so, to the extent we can create tailored experiences for our riders, who by the way tend to spend about 17 minutes in the car or a little bit more, they tend to check their app out several times, up to 7 times to see whether they're there yet. All this provides a real platform for great media opportunities. So we continue to be, again, as we always say, it's still quite early days. I mentioned earlier that we're really in kind of a foundational mode now where we're in particular really focusing on measurability because of how important marketing efficiency is to every marketer out there. But we're very enthusiastic about what we see and we like -- the video ad unit is still relatively new and see maybe yourself, maybe you'll see an ad trip or a movie trailer if you open up the Lyft app. Anyway, long way of saying we like what we see on track to the sort of statements we made about the exit run rate for this year, and I'm itching for more.

John Blackledge: Thank you.

David Risher: Sure.

Operator: Your next question comes from the line of Mark Mahaney with Evercore ISI. Please go ahead.

Unidentified Analyst: Hi, this is David on for Mark. I wanted to follow up with an AV question. You talked about AVs as a TAM expander. I'm just wondering, are there any specific use cases where you think riders might prefer an AV ride over a regular ride and any early signals from what you're seeing competitively in San Francisco that might inform that?

David Risher: Yeah. Hey, David. It’s -- I honestly would say it's probably too early for us to have real insight there. I mean, certainly remember, we've given about 130,000 rides, primarily in Las Vegas over the years. So we have a sense from that. But of course, Las Vegas is a very particular use case. And that's kind of its own world. And then we're looking very closely and monitoring what's happening here on the ground. And we see it in San Francisco. We see it obviously in Phoenix as well. We see it in Texas. So kind of looking at it, I wouldn't say there's anything dramatic that we've seen, maybe nothing worth really talking about just yet. It's also a little bit of a funny thing right now, because now it's a couple of things that's happening. So partially there's this novelty thing, and tourism is a big driver actually if you see in San Francisco. In fact, literally someone on our team just said that they get their parents arrived when they were here, so in an AV. So the sort of tourism effect from the novelty effect probably swamps other things. And then again I'll just say it again, it's also a very very curated experience right now. I mean on the on the ground here in San Francisco, these are literally Jaguars. They're driving people around. So that's a nice experience. Tomorrow's AV experience will be quite different as they show up on all sorts of different models and makes and so forth. So anyway, that maybe gives you a sense that, like, I think we're very much in monitoring and we're super excited about our partnerships we just announced. I think in particular, May Mobility will be very interesting. That'll be at Atlanta, that's next year, that's Toyota (NYSE:TM) Siennas. That'll give us more insight. So we're all kind of in learning mode, but I don't think we can draw any strong conclusions right now in part because it's just so novel.

Unidentified Analyst: Got it. Thank you, David.

Operator: Your next question comes from the line of Steven Choi with UBS. Please go ahead.

Steven Choi: Okay, great. Thank you so much. So, David, I think the default thought process right now is that Lyft will be an asset light partner for the fleet owners of AVs, but should we be thinking about you potentially taking a more direct role, either in fleet maintenance or management? Does that come up in discussions with potential new partners at all? And second, as the active rider base gets larger, I mean I would imagine that growth will decelerate, given the large numbers. So in order to get to the longer term booking targets, you need to drive frequency higher as an offset. So, can you talk about what your latest data is telling you about cohort behavior? Maybe how is your rider's age, the activity picks up meaningfully so that the average usage right now is about three per month, but the gap between the newer cohorts versus older cohorts, any sort of color you can provide there in terms of the overall level of activity as your customers become more used to using you. Thank you.

David Risher: Yeah, I'll give a couple thoughts there. And, Erin, of course if you have things to add in as well, let's go back and forth on this. I think -- so I think your premise on the AV side -- I think your premise is right. Asset light is that's how we run our business for sure. And it's really worth just remarking on that. I mean, again, 1.4 million drivers on the platform, but they own their own cars, which is quite a good thing. Certainly helps us a lot. That'd be a lot of capital to have to deploy. So anyway, we certainly consider that to be very core to the model for sure. I think when we talk about things like maintenance and service and so forth, that's not an area where we need to do that ourselves. And I'll maybe give you a tiny bit again, more insight into that. Our Flexdrive subsidiary, which does own a relatively small number of cars, but that's through the subsidiary, it's kind of done -- they allow people who maybe don't want to use their primary car for rideshare or maybe don't have a primary car. It's also good for us because it's kind of good R&D we can kind of get direct exposure to it for drivers through the subsidiary. But even when they do things like service and maintenance and so forth and so on, it's much more around service level agreements with other with other partners, right, with people who are expert at repairs and maintenance and what have you. And to go just peel back the onion one layer more, a lot of the software we have built allows us to make sure, for example, that those SLAs are being met. So if you know you've got to change out a catalytic converter, whatever it might be, then you know that costs a certain amount and you know that that takes a certain amount of time and we have a lot of data on that which we've developed over the years. And so as a result we can track very carefully and make sure that that's being done to spec and being done within SLA and so on so forth. So a lot of the work that we do is kind of on the management side. That's why we call it fleet management rather than the operations side. So we're not going to be building or buying Lyfts and I don't mean Lyfts that way. I mean like Lyfts as you would find in a garage like that. So no, so asset light for sure. But the network and the fleet management capacity that we've built is extraordinarily important. And then you asked another question and unfortunately I got so excited about that.

Steven Choi: User growth versus frequency growth, yeah.

David Risher: Yeah, for sure. Yeah, so when we said this at Investor Day, typically we really look at it as kind of a 50-50 thing, right, new riders versus and also increasing frequency. I'll remind you that as proud as we are, and with, I think, legitimacy about our 800 million rides a year, roughly 2 million rides a day, obviously growing at a nice clip, just as a reminder, that compares to 160 billion rides that people take in their private vehicles, personal vehicles every year, just in the United States. So I would say in terms of our penetration of the use cases and riders, we're still -- it's almost negligible, really, when you think of all the different times that people are driving around today versus the number of times they're taking rideshare. Even if you add in our competitor, it's still, I mean, now, okay, now it's 2 times 0. So I think there's a lot more. So I wouldn't say that we're anywhere close to penetrating on that side. I will absolutely say that we're certainly focused on increasing frequency among existing riders, but we want to do it first and foremost by providing great service. That's the single best way. Single best way. And I think if you -- we're not confused about that. So our customer obsession strategy is very focused on providing a level of service that will encourage people to come back. There's a great Walt Disney (NYSE:DIS) quote that I can tell you about another time. But anyway, we're very focused on increasing rates that way.

Steven Choi: Thank you.

David Risher: Sure.

Operator: And that's all the time we have for questions today. And now I would like to turn the call back to David Risher, CEO, for closing remarks.

David Risher: Thank you very much, everyone. Look, I know everyone's busy, particularly today. There's a lot going on in the world, but we're super excited about what we've achieved, but also really what lies ahead and are looking forward to connecting with our investor community. I have a little bit of news here. We'll be out in LA, New York, London, San Francisco over the next few weeks and we actually plan to further ramp up our outreach in 2025. So please do reach out if you'd like to connect with any of us. We look forward to talking to you. Thanks for your interest and your curiosity, everything you do to help us be as good as we possibly can. And we will connect with you another time. Thank you.

Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

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