Lyft Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 11 speakers on the call.

Operator

Good afternoon, and welcome to the Lyft First Quarter 2023 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. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Sonia Banerjee, Head of Investor Relations.

Operator

You may begin.

Speaker 1

Thank you. Welcome to the Lyft earnings call for the Q1 of 2023. On the call today, we have our CEO, David Risher our CFO, Elaine Paul and our Co Founder and Board Chair, Logan Green. In addition, John Zimmer, our Co Founder, President and Vice Chair and Kristin Sverchak, our President of Business Affairs are here for the Q and A session. We'll make forward looking statements on today's call relating to our business strategy and performance, future financial results and guidance.

Speaker 1

These statements are subject to risks 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 slide deck and our recent SEC filings. All 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. Our discussion will include non GAAP financial measures, which are not a substitute for our GAAP results. Reconciliations of our historical GAAP to non GAAP results may be found in our earnings materials, which are available on our IR website.

Speaker 1

And with that, I'll pass the call to Logan.

Speaker 2

Thanks, Sonia. Good afternoon, everyone, and thank you for joining us. The team is going to address a few big developments on today's call. I'm going to kick things off by talking about our leadership transition. I'm excited to pass the baton to David Richer, who is now Lyft's 2nd ever CEO.

Speaker 2

That change was effective on April 17. John will also be transitioning from his role as President early this summer. David is an incredible proven leader and he's going to be great for Lyft. His experience on our board give him a strong appreciation for the incredible opportunities ahead of us and a clear view of the challenges. He brings the right energy, ambition, and experience to lead Lyft through the next chapter.

Speaker 2

David's customer obsession, purpose driven mindset and competitive spirit are exactly what Lyft needs. With the transition, This will be the last earnings call that John and I join. I'm now the Chair of Lyft's Board. John will continue to serve as President of Lyft until the end of June, at which time he will continue to serve as Lyft's Vice Chair. We are excited for David to be leading the company on a day to day basis and look forward to continuing to serve as Board members and to supporting the company on the next leg of its journey.

Speaker 2

Finally, I want to say thank you to the Lyft investor community. John and I are incredibly grateful to have had the opportunity to build this company with your support. Lyft is our life's work and we are confident it's in great hands. Now, I'm going to turn the call over to David.

Speaker 3

Thanks, Logan. I'm so grateful to you and John for pioneering a new industry, establishing a defining company and building an iconic brand. Lyft has had a profound impact on the lives of millions of riders and drivers have earned 1,000,000,000 of dollars. That is an extraordinary legacy. To everyone who's joined us on today's call, if you haven't we haven't yet met, you should know that I'm an extremely results driven leader, and I'm a builder at heart.

Speaker 3

At Microsoft, I learned the power of scale and competitive focus. At Amazon, I help the company be insanely customer focused. And at Worldreader, I learned how to do more with less. That's what I bring to Lyft. So here's my perspective.

Speaker 3

Lyft addresses 2 basic and very durable needs. We get riders out and about so they can live their lives together. We are a social species, and we provide drivers a way to work that gives them control over their money and time. As one driver told me, driving with Lyft means I will never go broke. These needs aren't going to go away and they are the basics the basis of what will be a large, durable and profitable business.

Speaker 3

But today, Lyft is at an inflection point. People are getting back out to work and play, and we have renewed focus on delivering a great rideshare experience. Near term, we are prioritizing strong execution for riders and drivers. This pure play approach will help us build a growing profitable business over the long term. So here's what we've been doing and here's what you can expect next.

Speaker 3

1st, Over the last 10 weeks, we've been pricing rideshare competitively, which is what riders expect and want. This is key and really important to remember. Every year, millions of riders choose Lyft over Uber. We don't want to give them a reason to go the other direction. The results have been an acceleration in our year on year rideshare growth for the first time in nearly 2 years and a smaller percentage of rides with prime time pricing.

Speaker 3

In this way, we have strengthened our category position on both the bookings and ride basis. 2nd, To fund these service improvements, we've cut costs and restructured our organization. We didn't make these decisions, to cut cost to headcount lightly, but it is critical to consistently being able to offer good prices and fast pickup times. Collectively, we expect the changes we announced last week to deliver about $330,000,000 in annual savings when in full effect, and Elaine will review the financial impact of those in greater detail. Even more importantly, we have restructured the organization and nearly halved the number of management layers from 8 to 5, flattening teams and enabling for faster decision making.

Speaker 3

Our new structure gives me direct contact with our rideshare leads, removing layers so we can innovate faster. 3rd, we need to drive awareness that Lyft is a great choice so that more people open our app and see our improved pricing and service levels. We've been too quiet for too long. So you'll see us use low cost, high visibility ways to remind folks of who we are and point out real differences between us and Uber. I hope you've gotten a chance to see our collaboration we launched just yesterday with TikTok influencer, Delaney Roe.

Speaker 3

It's funny, It's smart and it's designed to get people to consider us on there. Finally, it's time to grow again. Riders and drivers both want a healthy competitive rideshare market with Lyft as a strong player. I can't yet share our long term growth plans, but I can tell you I'm spending the majority of my time on projects that grow top line and margin. In fact, this was the topic of the very first meeting I had as my first day of CEO 3 weeks ago.

Speaker 3

I am super excited about what I believe is the significant untapped opportunity to innovate and grow North American Rideshare. So let me finish by saying this. I am very aware of our current levels of growth and profitability are not acceptable. I also know that investors are waiting for long term on updated long term targets. I'm new in the job.

Speaker 3

I want to wait to provide those targets until I'm sure we can deliver on them. So here's the recap. Here's the game plan. 1st, at a time when demand is increasing, we are all about execution. We're focusing on the basics of what riders and drivers want and demand and in particular on competitive pricing that increases our ride volumes.

Speaker 3

2nd, we have clear objectives and we are executing in a disciplined way. We've structurally removed costs from our business and we organize to increase the velocity of execution and bring real innovation to the sector. And third, my focus is on building a great business over the long term by focusing on riders and drivers. It's what I learned from my time building Amazon's retail business and we're off to a very strong start. Look, I am committed to growing Lyft into a large durable profitable business that our riders, drivers and shareholders love.

Speaker 3

And I look forward to keeping you informed on our progress. Helane, I'll turn it over to you.

Speaker 1

Thanks, David. To start, I want to say a big thank you to Logan and John for building Lyft and for having the vision to pioneer this industry. I'm also excited to welcome David. He's already bringing Alon's energy and vision to the team, and I'm energized about the path forward. Before I review our financial results, I want to remind everyone that unless otherwise indicated, all income statement measures are non GAAP and exclude select items which are detailed in our earnings release.

Speaker 1

Turning to Q1. Our focus on pricing competitively produced solid early results. Our year over year rideshare ride growth rate Accelerated in Q1 for the first time in nearly 2 years. Q1 was a partial quarter of operating with this renewed focus. And with the full quarter impact in Q2, we expect rideshare ride growth to accelerate further.

Speaker 1

Our Q1 financial results were better than guidance driven by Rideshare's strength. Q1 revenue was roughly $1,000,000,000 up 14% year over year and was 26,000,000 better than our guidance. We had 19,600,000 active riders in Q1, up 10% year over year, which represents an acceleration from 9% year over year growth in Q4. Revenue per active rider was $51.17 in Q1, up 4% year over year versus 11% year over year growth in Q4 of 2022. The decelerating growth rate was primarily driven by our pricing changes.

Speaker 1

Contribution was $465,000,000 in Q1, down 7% year over year. As a percentage of revenue, contribution margin was 47%, in line with guidance and down 11 percentage points from Q1 of 2022. The decrease versus last year is primarily due to higher insurance costs as well as lower per ride unit economics. Operating expenses were $465,000,000 in Q1, down 2% year over year. As a result of our cost cutting efforts to date, operating expenses were 46% of revenue, an improvement of 8 percentage points from Q1 of 2022.

Speaker 1

Q1 adjusted EBITDA was $23,000,000 exceeding the high end of guidance of $15,000,000 Our adjusted EBITDA margin in Q1 was 2%. We ended Q1 with a strong cash balance. Unrestricted cash, cash equivalents and short term investments were $1,800,000,000 flat with the level at the end of 2022. Next, I'm going to address the financial impact of our latest cost saving initiatives. When our headcount and operating cost savings are in full effect, we expect to generate approximately $330,000,000 and annual savings.

Speaker 1

This is made up of approximately $215,000,000 related to headcount and $115,000,000 of operating cost reductions. We expect to realize roughly 40,000,000 $60,000,000 $70,000,000 of savings in each of Q2, Q3 and Q4 respectively. As David explained, in the near term, we expect to use these savings to pay for our continued service improvements. So these savings will not materially flow to adjusted EBITDA. Over time, the lower operating costs will position us well for improved long term profitability.

Speaker 1

We are also further bringing down our stock based comp expense. We've changed our compensation plans and when combined with the impact of the staff reductions, we expect our stock based compensation costs will be roughly $550,000,000 in 2023 $350,000,000 in 2024, down from approximately $750,000,000 in 2022. Our reduction in force will result in a one time charge of approximately $41,000,000 to $47,000,000 in Q2, which we are excluding from adjusted EBITDA. Before I share our Q2 outlook, let me provide some framing. Q1 was a Partial quarter of adjusting our prices to be competitive with the market.

Speaker 1

Q2 will be a full quarter with this continued focus, and we expect our rideshare ride growth to accelerate further. While this will result in lower per ride unit economics in the quarter, We are actively offsetting the impact with our cost savings initiatives. As a result, we expect our Q2 adjusted EBITDA and adjusted EBITDA margin will be roughly flat with Q1. With that, let me share our Q2 guidance. We expect revenues of between $1,000,000,000 $1,020,000,000 which is up 1% to 3% year over year.

Speaker 1

This assumes rideshare ride growth accelerates to at least 15% year over year in Q2. We anticipate contribution margin will be approximately 42%, reflecting the full quarter impact of lower per ride unit economics. We expect operating expenses as a percentage of revenue will be between 42% 43%, which includes roughly $40,000,000 of restructuring related savings. Finally, We expect adjusted EBITDA of between $20,000,000 to $30,000,000 and an adjusted EBITDA margin of 2% to 3%. At the midpoint, both would be roughly flat with Q1.

Speaker 1

Before I open the call up to Q and A, Let me share 3 closing thoughts. First, we have a renewed focus on the basics of what riders and drivers Expect. This is accelerating our ride growth. 2nd, we are executing in a disciplined way. We've moved decisively to cut our operating costs and we'll use the savings to pay for continued service level improvements in the near term.

Speaker 1

3rd, over time with higher ride volumes and as we mix in higher margin opportunities, our economics can improve and we can achieve greater operating leverage. As David mentioned, we expect to provide an update on our long term financial targets in the coming months. Operator, we're ready for questions.

Operator

Your first question is from the line of Doug Anmuth with JPMorgan. Your line is open.

Speaker 4

Thanks so much for taking the questions. One for David and one for Elaine. David, you talked about pricing more competitively and

Operator

providing great service and both

Speaker 4

of those being big focus areas going forward. But can you just talk about how you think Lyft can really differentiate in the market over time. And then also provide when you talk about pricing more competitively, is that pricing kind of in line with the market and with parity? And then, Elaine, on contribution margin, reflecting the lower levels of revenue per ride, how does that play out across both insurance and pricing and can we expect it around that low 40s level going forward that you kind of talked about for 2Q? Thanks.

Speaker 3

Hey, Doug, it's David. Thanks for the question. So on differentiation, it's a great issue. Right now, our real focus is on execution on the basics. And as you said, it's really on pricing and getting service levels in line with where The market is and where the competition is, and it's just table stakes.

Speaker 3

Now when you start to zoom out, then you have to start to tell people who you are. And in our case, I think we've been a little quiet on that. So even before significant differentiation, I think just reminding people of who we are is really important. Now we get to differentiation. We do have different models.

Speaker 3

And again, I don't know if you've seen the TikTok ad, but that gives you a little bit of an indication of one way we can differentiate in short term, but medium and long term, there's so many ways where I think this category has sort of treated all drivers and all rides more similarly than different. And we've got a lot of ideas on how we can create products and services that our riders and drivers both like that are really differentiated against where Uber is. And maybe we can talk later in the conversation about some of the approaches we've taken around shared ride versus wait and save as an example. That will be for the future. Let me turn it over to Elaine for the second part of the question.

Speaker 1

Hi, Doug. Thanks for the question. With respect to your question on contribution margin and lower revenue per ride versus what's driving things in terms of insurance versus pricing. So year on year, The increase in insurance rates that we experienced in Q4, that's impacting the contribution margin year on year, as is pricing. From Q4 to Q1 and Q1 to our Q2 guide, The deterioration in contribution margin is driven entirely by our lower revenue per ride driven by pricing and operating competitively.

Speaker 1

To be specific, we've lowered prices on average. We're generating less revenue per ride. Our costs per ride have not changed materially subsequent to Q4 and thus our per unit economics are compressing, which is driving the change in contribution margin. In terms of long term margin, We are not giving go forward guidance at this point. But as we alluded to on the call, we'll be providing long term guidance at a future time this year.

Speaker 1

Thanks for the question, Doug.

Speaker 3

Great. Thank you both.

Operator

Your next question is from the line of Stephen Ju with Credit Suisse. Your line is open.

Speaker 5

Okay. Thank you so much. So David and Elaine, if we could dig in a little bit on your commentary in regards to the accelerating unit growth, Does this imply that we have been decelerating, I guess, pretty much linearly since the peak in early 2021 and We are starting to see, I guess, what is an inflection point. And secondarily, I think you guys have been talking about closing the service gap versus Uber. So As you are doing that, are you finding that consumers are coming back straight away given the affinity with the Lyft brand?

Speaker 5

Or are you finding that you have to go back and rewind their business? Thank you.

Speaker 3

Yes. Good question, Steven. Thanks for it. So On the first, yes, we're absolutely I like your characterization of it as an inflection point. I think that's exactly what we're seeing.

Speaker 3

We've been really on this sort of focused execution strategy for about 10 weeks. You've seen some of the results there. We've talked about the 30% overall share we're enjoying, up from sort of Mid to high 20s. I can give you a little bit more color there. In some of our markets, we're actually seeing even stronger growth.

Speaker 3

Portland, Oregon being an interesting example where we're running just about neck and neck, Phoenix, Arizona being another example, running pre close to neck and neck, and there are others. So What does that tell us? That tells us that when we execute well, share can move fast and riders vote with their apps. So that's what we're seeing in the short term. And maybe I'll just stop there and we can talk about it in more detail after.

Operator

Your next question comes from the line of Eric Sheridan with Goldman Sachs, your line is open.

Speaker 6

Thanks. Thanks so much for taking the questions. Maybe I can follow-up on some of the topics that were touched upon already. In terms of driving incremental rider growth, what are you sort of investing behind to continue to build rider scale where maybe there's an ability to have a differentiated market share dynamic among newer riders or riders coming back to the product versus a pre pandemic period as opposed to possible market share dynamics among existing riders. I'm curious your sort of framework around that.

Speaker 6

And then I know we're going to wait for a period on longer term guidance, but I did want to understand a little bit better philosophically how you think about The pricing lever versus the margin lever in terms of striking the right balance in the business over the medium to long term and how you think about sort of striking that balance against the broader goals. Thank

Speaker 3

you. Yes, great question. And my apologies, I didn't catch the name at the beginning.

Speaker 6

It's Eric Sheridan from Goldman Sachs.

Speaker 3

Eric, okay, got you. Nice to talk to Eric. So, let me start from the end of the question and look backwards. Long term pricing, look, we're pricing in line with the market. That's our strategy and that's where we'll stay.

Speaker 3

So I don't think pricing is a super interesting area of focus once you're in line. So then the question becomes, How do you compete in other ways? And part of it, of course, is we do have a brand that people like. It's really quite an iconic brand. And this is maybe easy to dismiss, but it's quite Important, riders make a choice every single time they open their app.

Speaker 3

Some of it's based on price, but once you take that away, it turns out to other things. Some of it is just brand impression, how much they like you versus the other guys. And then some of it is differentiated service. So on that side, We're building out some really interesting products. And I can maybe allude to a couple just very, very high level.

Speaker 3

1, of course, as we enter the summer travel season, You'll see us make some noise there. In fact, I think we've got an event planned next week to make some announcements on how we're going to make life easier, particularly for riders as they enter the summer travel season. And then another sort of secular thing that's happening is bosses are trying to get employees to come back to work. We're doing the same here at Lyft where we're making that actually a requirement of the job. And so that's a really interesting opportunity because it gives us a way to introduce ourselves in a different way to take a non productive commute ride into a productive commute ride.

Speaker 3

So there's some real areas of growth. I think we're just beginning, as I say, to scratch the surface on. If you're looking for sort of a framework, it's kind of price in line with the market, differentiate on brand for sure. And again, you can see some evidence of that just what we're doing now and that will grow over time. And then really start to build some service levels or excuse me, some products that, meet head on people where they are in 2023, which might be a little different from where they were in 2019.

Operator

Your next question is from the line of Nikhil Divnani with Bernstein. Your line is open.

Speaker 7

Hi there. Thank you for taking the question. I had a couple, please. Just on that Q2 revenue outlook, could you please unpack some of the underlying pieces there and maybe provide some color around Trip growth or bookings growth, just trying to understand how much of this low single digit revenue outlook is really a function of pricing and incentives maybe, which are Some near term drags on revenue that you can lap at some point down the road. And then maybe David, on the back of the recent cost cuts, could you talk about some of the trade offs You might be making going forward or have had to make between kind of driving incremental efficiency and maybe giving up some longer term growth opportunities like locks for shared rights.

Speaker 7

Thank you.

Speaker 3

Yes, let's do this, Nicole. Thanks for the question. Let me let, Elaine is going to sort of tackle the first part and I will tackle the second.

Speaker 1

Hi, Nicole. Thanks for the question. In terms of what is behind our Q2 revenue guide, let me give you some more color there. We're seeing significant acceleration of the rides growth in Q2 to at least 15% year on year. The significant acceleration of our growth and we anticipate that that's faster than the overall market growth.

Speaker 1

In terms of bookings, we're assuming in our Q2 guidance assumes that gross bookings grow at a faster rate quarter on quarter year on year than revenue. And as a result, that means that our take rate is moderating quarter on quarter and year on year. So hopefully that gives you some color behind our single digit Revenue growth. Thanks for the question.

Speaker 3

Yes. And then on sort of the cost cutting and kind of where does that lead, I guess, was sort of That question. Let me start with 2 things. The first is, why did we cut costs? We cut costs so that we could be more competitive for riders and drivers and pass along great prices and great earnings.

Speaker 3

So that was the rationale. The second piece was, accelerating decision making. So it's maybe a little counterintuitive, but sometimes less is more. And in this case, we think we can move faster now that we've rightsized the organization, which I think sort of gets to the other point. I didn't so much think of it as a trade off, and I certainly did not let me say it just affirmatively.

Speaker 3

I am very focused on the long term health of this business, very focused on the long term health of this business. So I'm really not so interested in making short term trade offs This jeopardizes the long term health and growth of the business. That doesn't make any sense to me at all. Now, If you look very specifically, you kind of alluded to a couple of things like, for example, wait and save. And I want to actually bring this up even a little proactively because I think it's an interesting case study.

Speaker 3

So, wait and save is our mechanism for giving riders something they really like, a segment of our riders, which is a way to save money. And it's something we've leaned into. We're quite excited about it. It's a different approach from what Uber is taking. We can talk about that if that's of interest.

Speaker 3

But I bring that up as an example of we're very, very focused on what our riders and our drivers want, and that's really the primary lens I use to make the cuts.

Speaker 7

Great. Thank you both for the color. Sure.

Operator

Your next question is from the line of Mark Mahaney with Evercore ISI. Your line is open.

Speaker 6

Hi, guys. This is Ian Peterson on for Mark. One quick question here. It would be great if you could provide an update on how Lyft Pink is tracking. I know Membership growth doubled in Q4.

Speaker 6

If you could just provide us an update there. And any progress in some of your new for key segments, including enterprise, universities and healthcare. Thanks.

Speaker 3

Sure. I'll speak a little generally here. I'm not actually sure whether we have much to report kind of on a more detailed basis, but we cannot. We can find out. On Lyft Pink, what's really interesting If you look at those members, they take more than double the rides on average.

Speaker 3

And so what that tells me is that if you are Lyft loyal for whatever reason, You're really important to us. You're really important to us. So, we're going to double down on that. Now, I think of it And this might be slightly differently from the way we've talked about in the past, so I'll acknowledge that. I'll think of this as how can we make sure we build a strong Perfect base of people who are Lyft loyal.

Speaker 3

And you'll notice I say people, I mean riders, but I also mean drivers. I think that's going to be a real area of focus of this of ours over time because, look, the economics are such that rider and driver acquisition is one thing, but retention A very different thing. So anyway, that's a little bit theoretical. I realize I'm speaking, liking a lot what I see, but I think we've got a lot more work to do A lot more work to do there and I love the fact that we've got such loyal riders. I don't know, Elaine, do we want to go into any detail on the other segments or maybe not for today?

Speaker 3

I can tell you this, on our B2B side, we've had really strong momentum with healthcare. And as I've kind of alluded to, we see some real opportunities to drive Enterprise usage on our network. And there, I think I just have to stay tuned for more on that, but that's what we got. Great. Thank you.

Speaker 3

Sure.

Operator

Your next question is from the line of Benjamin Black with Deutsche Bank. Your line is open.

Speaker 8

Hey, David, perhaps this is a bit of a follow-up, but you spoke about in your blog this narrow focus, you discontinued share and Lux. What gives you the confidence that this narrower focus or narrower rideshare offering can fuel growth? And also, is there any way that Help us size the revenue contribution of shared or Luxe. And then from a marketplace balance perspective, how do you feel positioned today? And where do you feel the need to grow incentives on the asset side of the marketplace, either be it on the consumer side or

Speaker 3

on the driver side? Thank you. Yes. Again, thanks for the question, Benjamin. And we'll see if we can divide and conquer a little bit on this one.

Speaker 3

I actually want to bring up shared rides. You just mentioned it, and I want to say a little more about that because I know that's a change of what you've heard in the past. We introduced shared rides, of course, pre COVID. One of the things we found though is it was Let's say it was a little complicated because certainly as we moved into COVID, people were not at all interested in that product offering. But what they were interested in was saving money.

Speaker 3

So, we came out with a new product called Wait and Save. And here's what I can tell you about that, which is Wait and Save is already more popular than shared rides ever was. And I think we can explain that again by looking at it through the lens of our riders And our drivers, from a riders perspective, it means you can save money without going out of your way. And people really don't like that feeling of I'm headed to one place and all of a sudden I'm going in a different direction. They really don't like that feeling.

Speaker 3

And from drivers, drivers also Don't love the added the loss of control, let's say, because I thought I was going in one direction and then all of a sudden I'm picking somebody else up. And by the way, pickups and drop offs are the least fun part of a driver's life. They'd much rather have you in the car and have a good conversation with you or not, but at least, kind of stay Stay on track. So we like our strategy there a lot and we're really impressed with how fast customers have picked it up. So again, I'm using it as a sort of maybe example of kind of the bigger point of how we're evaluating the types of opportunities we look at going forward, both to differentiate from the competition as it turns out, but also to give our customers, our riders and our drivers what they really want.

Operator

Your next question is from the line of Rohit Kulkarni with ROTH MKM. Your line is open.

Speaker 9

Hey, thank you for taking my questions. Couple of them, maybe talk about driver incentives and how that It feeds into your entire algorithm of profitability versus growth over the near term as in there has been history of kind of how driver incentives have sometimes been very short term oriented and drivers tend to be Quite fickle. So would love to hear how you're thinking over the next, call it, critical period of summer to incentivize drivers to Drive more on left. And then just on bikes and scooters, maybe latest thinking Beyond the restructuring on how bikes and scooters fits into the portfolio, if you think strategically We need to make any changes because sometimes it may lead to more seasonality than what some of the investors

Speaker 1

Rohit, sorry, we can't hear you at the end.

Speaker 3

Thanks. Rohit, you faded out there a little at the end, but I think we got The essence of your question. Yes, let's do this. Let me say one quick thing about drivers. Elaine is going to go more into the incentive side, which is also the question we were hearing last and then we'll kind of end up with the bikes and scooters.

Speaker 3

On the driver side, I think a really important data point is that more drivers are choosing Lyft than ever before. So or At least in recent memory, I can say more clearly. So in Q1, we had the most drivers in about 3 years, which is really Pretty exciting for us and we see that growth has accelerated in Q1 for the first time in a year on the driver supply side. So we that obviously is very important for Our business for our riders as well. And so, Elaine can give you a little color on the incentive side of things.

Speaker 1

Yes. So on the incentive side, We are being helped by tailwinds to organic supply. To give you some color, in Q1, in absolute terms, Incentives and contra revenue were $304,000,000 On a per ride basis, incentives were down 13% quarter on quarter. This is consistent with what we were anticipating. It's also consistent with what we said in February that will be down quarter on quarter in absolute terms and on a per ride basis.

Speaker 1

And then looking forward to Q2, we currently anticipate that content revenue incentives We'll be roughly flat with the level in Q1 and also down quarter on quarter on a per ride basis. So, Of course, the extent of our investment is dependent on what we see with real time market conditions, but that's our outlook. And one other point of color to add, we're seeing that our driver investments are more efficient. The cost per incremental driver hour was the lowest that it's been in 2 years in Q1. And again, that's helped by tailwinds we see to organic supply.

Speaker 3

I'm going to say one more super quick thing on that one and then move to your bikes question. And this is a little bit more philosophical you guys. Of course, driver incentives will always play a role. They do. They help balance supply and demand in the short term.

Speaker 3

I will tell you backing up just a touch that the drivers really like the work. They like the flexibility it gives them and the control it gives them over their time. And they like the flexibility and frankly control it gives them over their earnings. 1 of the drivers said to me not so long ago, I love driving for Lyft because I know I'll never go broke. I can just drive more.

Speaker 3

The reason I'm saying that is because, while again incentives are important, strategic in a sense, strategically they don't make for the best driver experience because they reduce visibility and earned earnings. And so we'll use them tactically and there's nothing wrong with that. But It's not let's say, strategically, it's the tail of the dog, it's not really the dog. The dog has created a great experience for drivers. Now on your question about bikes and scooters and kind of other businesses, a couple of things I want to get to first.

Speaker 3

So we've Focus is, I think, a real strength of ours. I mean, we're effectively a pure play on rideshare. So that's important for us to execute So what have we done? We've wound down the car services, like what we call garage and the consumer rental business We experimented with it for a while. We're spinning off Loop, which is the infrastructure that we built in house, Not a material change economically, but it's material in terms of our focus.

Speaker 3

And now we get to bikes and scooters. The bike operation and this is a sort of secular comment I'm about to make, e bikes are a big deal. When people ride e bikes, they like them a lot. But for us, I think we haven't done the job we need to do to make sure that every time a person rides a bike, they get welcomed into the Lyft system and frankly welcomed into the rideshare side of things. So we'll do some thinking on how to do that better.

Speaker 3

We've also got some work on the economics of the bike side of our Operation tune up, it's a capital intensive business relatively, of course. So we've got some work to do there to kind of optimize, but I like the interplay we have, Thank you.

Operator

Your next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Speaker 10

Hi, good afternoon. You've talked a lot about just making new decisions around product offerings. And I think the company has a pretty good history of introducing products with decent level of success. So I'm trying to understand What you're seeing that needs to change in terms of maybe how you introduce products into the rideshare space, What mistakes were made in the past? And

Operator

what kind

Speaker 10

of selectivity is going into it now with under the new structure? Thanks.

Speaker 3

Yes. Thanks, Stephen. And thanks for your comment about the past as well. I agree. Look, in terms of changes, I think bigger and faster.

Speaker 3

Bigger and faster. So I think we have some big opportunities in front of us that to a certain extent COVID slowed us all down from and now we're kind of on the other side of that so we can think big again. And in FAST, it's just a it's a bit of a mantra internally of how can we move more quickly because drivers excuse me, Riders' and drivers' expectations are quite dynamic. They change. And so our focus, of course, is on building a profitable business.

Speaker 3

That profitability is going to be driven in large part by can we create products and services that our drivers and riders absolutely love. We've got a great brand. We've got great history to build on and lots to do and we want to do it with urgency.

Speaker 10

That's helpful. And then just, any comments on sort of how you think, autonomy eventually fits into your network going forward?

Speaker 3

I do. I mean, it's, yes, I have a lot to say about this, but I'll be very brief today. Autonomy is a big deal. It's a big deal. And The reason it's a big deal is because the companies that have invested in it so far have invested, and this is not hyperbole, 1,000,000,000 of dollars into their platforms.

Speaker 3

That means that in order for them to make have any chance at all of making a decent ROI or any return on that investment, they got to plug in to effectively I'll use fleets in a very generic way of operators who can bring that volume because it's going to take a while on the consumer These are going to be expensive and sort of niche for some period of time. So very, very important that we position ourselves as being an incredible partner. Now, We're doing some experiments in Las Vegas with this. We've got cars on the road in kind of a venture there. And the whole point of that is to Be very, very ready to be that great partner with the AV guys.

Speaker 3

I'll say one last thing. This Like AI, I think we will wake up one day and think, wow, where did this come from? Where did AV come from so fast? So right now, the narrative is, oh, it's always just around the corner, it's always just around the corner, and that's Been true. But if you're here in San Francisco, and again, this is not hyperbole, you can within 5 minutes see 5 cars driving with no one in the front seat.

Speaker 3

And that's, again, not hyperbole. That's lived reality day by day. So what that tells you is this is one of those phenomena that are going to seem Below the surface for most people for a fair period of time, kind of background noise. But when it happens, it will happen fast. And we are, positioning ourselves to be very ready for that.

Speaker 10

Great. That's very helpful. Thank you. Sure.

Operator

There are no more questions at this time. Ladies and gentlemen, thank you for participating. This does conclude today's conference call. You may now disconnect.

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Earnings Conference Call
Lyft Q1 2023
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