Q4 2019 Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to the lift fourth quarter 2019 earnings call. At this time, all participants are they listen only mode timber.
Let me background noise later, we will conduct a question and answer session and instructions will be given at that time.
If anyone should require operator assistance. Please press Star then zero on your Touchtone telephone.
As a reminder, this conference call is being recorded.
I would now like to turn the conference over to Catherine block.
You have Investor Relations you may begin.
Thank you good afternoon, and welcome to deliver earnings call for the quarter and full year ended December 31 2019.
Catherine won VP of Investor Relations.
Joining me today to discuss list result, our co founder and CEO, Logan Green and co founder and President John Zimmer and Chief Financial Officer, Brian Roberts.
Logan and John will give an update on our business in key initiatives and then Brian will review, our Q4 and full year 2019 financial results as well as our outlook.
This conference call will be available via webcast in our Investor Relations website at Investor day lift Dot com and recording will be available at the time same location. Shortly after this call has ended.
I'd like to take this opportunity to remind you that during the call, we'll be making forward looking statements, including statements relating to the expected performance of our business future financial results in guidance strategy long term growth and overall future prospects.
These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular those described in our risk factors included in our final prospectus for our initial public offering filed with the FCC on March 29, 2019, and the risk factors included in our form 10-Q for the third quarter two three.
As a 19 filed on November 4th 2019, and our form 10-K for the full year 2019 that will be filed by March Thirtyth 2020.
You should not rely on our forward looking statements as predictions of future events. All forward looking statements that we make on this call are based on assumptions and beliefs as of the date hereof and lift disclaims any obligation to update any forward looking statements, except as required by law.
Our discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results.
Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results, maybe found in our earnings release, which was furnished with our form 8-K filed today with the SEC and May also be found on our Investor Relations website at Investor Dot lift dotcom.
I would now like to turn the conference call over to lift co founder and Chief Executive Officer, Logan Green Logan.
Thanks, Catherine good afternoon, everyone and thank you for joining our call today.
First and most importantly, I want to congratulate and thank the entire live team and all of our partners for your tremendous achievements this year.
Q4 was our first billion dollar quarter with 52% revenue growth year over year.
Active writers grew 23% to a record 22.9 million while revenue per active writer also increased 23%.
Contribution margin hit a record high at 54%, our topline momentum and our success with strategic initiatives and our core operations enabled us to improve our Q4 adjusted EBITDA loss by nearly 50% year over year.
I'm extremely proud of the progress our team has made in our first year as a public company for the full year 2019 revenue grew 68% an incremental 1.5 billion versus 2018.
Our 2019, adjusted EBITDA loss of 679 million was more than 40% better than guidance, we provided on our first quarter call.
This was the first full year, where we brought together rideshare bike scooters and public transit and our platform and as Brian will discuss in more detail. We expect to deliver continued strong topline growth in 2020, while also making progress on our path to profitability.
As we've discussed on prior calls there are three key themes that we're focused on.
First is product innovation second is profitable growth and third is operating leverage.
John Brian and I will go through our initiatives in each of these three areas.
Product innovation is a key driver of our growth from our platform technology to the various modes. We offer innovation is what powers our ability to deliver the right product to the right customer at the right time solving that formula in real time at scale is a massive feet of engineering that drives higher user engagement and improved utilization.
Within our marketplace.
And by doing this we best serve our drivers and riders, while maximizing revenue per active rider.
After over seven years and more than 2 billion rides is astounding to reflect on the development of our rideshare marketplace. Since we pioneered peer to peer ride sharing in 2012.
And we're not stopping here.
We continue to see tremendous opportunities to improve our core ride sharing marketplace.
In 2019, we made significant improvements to the technology stack that powers our marketplace.
For example, we launched the lift matching platform, which is enabling new products like shared saver modes, I've shared saver better address certain use cases, such as daily commutes driving increased frequency.
In markets were launched shared saver and now accounts for roughly one third of all shared rides demonstrating the strong demand for most the allow writers to trade off time money and convenience.
In the last few months, we further improved our infrastructure by launching a new modes platform.
While the matching platform gave us the ability to improve the efficiency and flexibility of our matching system. The modes platform allows our teams to create and test new modes with greater velocity.
As an illustration of how our teams can benefit from our improved platform. We are now testing a new variant of shared rides that took nearly 90% less time to build that shared saver I'm very excited about accelerating the pace of innovation in 2020 on the back of this new platform.
We will continue to invest in technology advancements in 2020 and are committed to applying a disciplined approach to this investment.
For example, as part of our recently announced partnership with debt, we acquired a very talented engineering team in eastern Europe that previously developed the Juno Rideshare platform.
2019 was the first full year with bikes scooters and public transportation on our network transforming lift from a ride sharing platform to complete transportation network.
Specifically in Q4, we relaunched our E bikes and made significant progress on our scooter strategy.
Starting with our Bay wheel system in San Jose in San Francisco E bikes are turned to the lift platform in Q4 over.
Over the next few months, we plan to launch our new E bikes in a number of our markets, including the Citibank system in New York Divvy system in Chicago, and the capital Bancshares system Integrator, Washington, DC area early results for Ebike relaunch have been very encouraging with significantly more rise per day than our classic bikes.
We believe that are ebike rollout and strategy will help improve unit economics and fleet availability over time.
In Q4, we also made meaningful progress with our scooter operations in November we made the decision to exit six markets in order to focus on our largest highest density scooter markets and sharpen our attention where resources are most productive.
And our remaining nine markets, we completed the rollout of our latest scooter model, which is better durability and lower operating cost.
This new generation of hardware now accounts for nearly all of our Scooter fleet.
Over the last few months, we've made exciting progress on our two prong strategy to bring economists vehicles to market.
Our open platform is one of the largest publicly available commercial self driving programs in the country.
Underscoring, our leading position among rideshare networks for self driving technology.
We've now provided over 100000 self driving rides to users in Las Vegas with our partner Optive.
This program is helping us understand how consumers view this technology and feedback has been extremely positive.
2019 was a transformative year for level, five engineering center, which continues to drive meaningful progress towards developing our own world class Autonomous vehicle system.
The team delivered substantial improvements to our economy performance over the course of the year as will be shown in the report we recently submitted to the California DMV.
We also massively accelerated our economists mile operating thousands of miles per month in Q4 on public roads.
In addition to these tests the team recently opened our first dedicated test facility, which significantly expands the conditions and scenarios, we can test within a controlled environment.
One of our unique advantages is the billions of miles traveled on the lift platform every year, which provide us with a proprietary data set.
In late 2019, the level five team started utilizing the power of this data for the first time generating very encouraging gains in our self driving systems performance in 2020 will double down on harnessing the power of the lift platform for Avi efforts.
We have very rapidly established a strong foundation since founding the program just two and half years ago and I'm excited about our road ahead.
Now I'll turn it over to John to talk about our momentum with profitable growth opportunities, including our high value enterprise partnerships and our work with organizations for their business travel.
These strategies each added incremental profitable growth opportunities for lift importantly, also talk about new ways, we're serving our driver community.
Thanks, Logan, we've had an incredible year with our various enterprise businesses, whether its medical providers transporting patients business people getting to their clients everyday for auto service centers getting their customers home. These strategies are important opportunities for high growth high margin and high frequency rides.
We're almost any enterprise transportation is a critical part of doing business.
Lifted, particularly well positioned not only because of our singular focus on consumer transportation, but also because of our well known reputation for our values and culture.
More and more companies today care about a shared set of values people they want to work with and product innovation that addresses their specific business and customers need.
In short strong brands attract and partner with strong brands and this is a significant advantage for lift.
This year, we partnered with leading companies, including Disney and Hilton and we expanded our great work with Delta.
We're focused on partnerships that provide more value for our customers and increase our mix of high value use cases.
We also recently announced a new partnership with chase, giving millions of taste card members more reasons than ever to ride with lift.
Chase Sapphire preferred freedom Ann Inc. card members now receive fivex total points or 5% cash back on lift for us.
Okay Sapphire reserve Cardmembers earned 10, X. total points on the Fries and each reserve account is receiving one free year of lift to pick.
Lift pink is our lift membership program that gives subscribers at 15% discount on other personal rides priority Airport pickups enterprise upgrades among many other perks for 1999 per month.
This partnership is fantastic for attracting riders, who travel and go out a lot millions of whom already use one of the several chased card.
And it offers us unique opportunity to drive rider Activations and increased loyalty.
We believe this is an outsized opportunity for lift given the card member bases historical spend.
In the first few weeks, we've seen an extremely positive response.
We are excited by the strong early adoption from users and we look forward to seeing the partnership continue to grow.
Throughout 2019, our partnerships with Hilton and Delta also group.
Since we launched our Hilton partnership in Q2, we have seen a substantial increase in rides from users who have linked their lift and Hilton accounts.
Starting in Q4. These members can now redeem their hilton points for lift ride credits a first in the hospitality industry.
Along with this new redemption benefit lift passengers can request arrived from within the Hilton honors that with our hotel location automatically populated as the pickup location.
Through these new integrations, we can more effectively address the need over 100 million Hilton honors members to increase active riders and ride frequency.
Our partnership with Delta also had a fantastic year.
Together the program has awarded more than 1.5 billion miles to lift riders since launching in May 2017.
We have seen a substantial increase in spending from participating users and look to deepen this partnership with future product development.
We are working to make it possible to pay for lift rides with miles later this year and we're working closely with delta to further integrate lift into the fly Delta App.
We believe that these enhancements, we will continue to drive more engagement and rider loyalty.
In the healthcare sector, we've made tremendous progress in expanding our partnerships and coverage.
We believe non emergency medical transportation is a multibillion dollar opportunity that can drive millions of dollars of savings for our healthcare partners by ensuring their patients make their appointments and have better health outcomes.
Last quarter, we announced our expanded access to rides for Medicaid beneficiaries in six states.
To make that happen our teams work to educate regulators and policymakers about the benefits of including Rideshare for Medicaid programs.
Changes in regulation and policy to include Rideshare are important on many fronts. The patient experience improves we add valuable rights to the business and drivers have more opportunities to earn during these less busy hours.
This quarter, we expanded our commercial agreements with health care providers in hospital systems to service these rights.
Lift currently partners with nine out of the top 10 hospital systems in the United States.
This quarter, we are excited to add Sutter health and common spirit to our list of health systems that have chosen lift as their preferred partner.
In our pilot with Sutter health, we reduced wait times and achieve cost savings.
For them by approximately 25% the new system wide partnership has the potential to improve access for up to 3 million Californian and could help over 60000 clinicians employees and volunteers deliver care in both home and clinical settings.
Similarly, we are excited to announce our partnership with common spirit, the second largest nonprofit health system in the us.
Through our shared partner Logisticare circulation patients can conveniently access rides when they're discharge from common spirits medical facilities in several states, including California and Arizona.
These preferred partnerships give us new channels to provide meaningful rides for patients and the healthcare workforce.
Reflecting on the work we've done this year, we've made great strides in the overall enterprise space.
Corporate travel now over 30% of the Fortune 1000 companies have contracts in place with lift.
We continue to execute on our University strategy, ending the year with ride programs at over 75 universities.
Profitable growth is our focus and we have many strategies that we are successfully executing for high frequency high growth and high margin rides, both today and over the long term.
By continuing to grow these various sources of quality demand. We're also providing more income opportunities for drivers.
Our team is very passionate about providing a great driver experience and we continue to make great progress on this front.
This quarter, we made significant progress on lift direct our fee free bank account and debit card for drivers.
Launched last May lift your act has now been rolled out to all us markets.
In addition to delivering more value to drivers. This program has led to improved driver engagement in our marketplace.
Another way, we continue to increase value to the driver community is by providing affordable and convenient vehicle maintenance through our driver centers and related partnership.
To expand vehicle maintenance coverage for drivers in Q4, we launched a national partnership with open day to provide discount across open based network of auto shops.
By providing value to drivers through better experiences and exclusive partner offers we're able to improve take home pay an overall driver satisfaction.
In addition to vehicle maintenance, we continue to invest in our express drive rental program, which expands access to vehicles for drivers and also allows us to bring more efficient vehicles onto the lift platform.
We rolled out thousands of hybrid through our partnership with flex drive over the past few quarters.
Recently, we also launched 200 long range electric vehicles into our express drive rental program with like stride in Denver.
This is our largest single deployment of east to date.
The largest single deployment in Colorado history, and one of the largest in the nation.
In addition to helping shift our rights towards 100% electric overtime easy renters in our express drive program are saving on fuel costs, which allows them to take home more of what they arent.
Sustainability has always been part of our mission and we love finding ways, where we can do the right thing while improving the business.
Having ease on the road with Lyft decreases emissions lowers operating costs for drivers and provides thousands of riders and drivers access to clean transportation.
As we reflect on the progress over this past year I'm proud of the products and programs, we have developed with our partners and in many initiatives we've launched four drivers.
We believe we can win on product innovation brand and customer experience and we marked the end of 29 team with a strong scorecard on all these fronts.
Ill now hand, it over to Brian.
Thanks, John and good afternoon, everyone. We finished 2019 with conviction and exceeded guidance on both the top and bottom line.
Focus execution and product innovation led to record results as we surpassed $1 billion in quarterly revenue for the first time and beat our outlook on active riders and monetization.
I'm also pleased on our outperformance extended across the entire piano.
We unlock savings from key initiatives and drove strong cost discipline combined these efforts generated impressive four percentage points of sequential expansion of contribution margin in Q4 and caught our adjusted EBITDA loss nearly in half versus Q4 last year. So let me dive into the details.
Total revenue for the quarter increased 52% year over year to 1.02 billion.
Growth in revenue was driven by increases in the number of active riders and revenue per active rider. We ended Q4 with a record 22.9 million active riders up 23% year over year, which was ahead of our guidance of between 22.7 and 22.8 million.
Given strong monetization revenue per active rider was $44.40 up 23% year over year and ahead of our outlook.
Now before I move on I want to note that unless otherwise indicated all income statement measures a follower non-GAAP and excludes stock based compensation and other select items a reconciliation of historical GAAP to non-GAAP results may be found in our earnings release, which was furnished on form 8-K filed today with the SEC and is available.
On our Investor Relations website. This includes contribution which is defined as revenue less cost of revenue adjusted to exclude amortization of intangible assets.
Based compensation related expenses and changes to liabilities for insurance required by regulatory agencies attributable to historical periods.
Contribution was 550 million in Q4, a record high end up 80% year over year contribution margin for Q4 was 54% 200 basis points above our outlook and up over eight percentage points from the same period a year ago as it as a result of our continued focus on expense leverage.
Improved monetization.
No as a reminder, contribution excludes changes to the liabilities for insurance required by regulatory agencies attributable to historical periods.
We experienced $19 million net adverse development in Q4, the adverse development booked in Q4 relates to historical auto claims virtually all of which are managed by our legacy third party administrator for insurance claims handling.
As you will recall, we move claims administration responsibility, depending on state to travelers Progressive and state farm during 2019.
The cost of insurance required for ride sharing as a percentage of revenue was lower in the fourth quarter than in the third we are pleased that our partnerships with world class insurers are improving claims handling and lowering cost further our initiatives to increase safety and reduce accident frequency continue to show progress in impact insight.
Act the leveraging of insurance cost was a key factor in our 200 basis points outperformance in contribution margin. We're focused on continuing these advances throughout 2020 and beyond.
Let's move to operating expenses operations and support expense for Q4 was 140 million or 14% of revenue and approval of 400 basis points from the same period, a year ago and in line with guidance. We continue to be laser focused on increasing efficiencies to drive margin improvements within operations and support.
R&D expense was 143 million or 14% of revenue, which was flat versus the same period, a year ago, and one percentage point better than guidance, it's worth calling out that our investments in R&D, our unlocking cost savings. In addition of fueling revenue growth R&D also includes autonomous development program.
As a percentage of revenue sales and marketing was 18% in the fourth quarter versus 33% in the same period, a year ago, representing a decline of over 40% or 14 percentage points. This was approximately 60 basis points better than guidance.
Gene a expense, which includes legal settlements and accruals was 227 million or 22% of revenue approximately one percentage point better than guidance.
Our revenue outperformance combined with strong expense leverage led to a significant deepen adjusted EBITDA relative to our outlook.
Our adjusted EBITDA loss for the fourth quarter was 131 million compared to a loss of 251 million in the year ago period and guidance for a loss of between 160 and $170 million.
Adjusted EBITDA margin improved to a loss of 13% our best result ever versus a loss of 38% in the prior year, representing a 25 percentage point improvement year over year.
We remain focused on driving profitable growth in Q4 is another important validation point for investors.
For the year lift generated over 3.6 billion in revenue our adjusted EBITDA loss for 2019 was 679 million, which is a 28% improvement from 2018.
As of December 30, Onest lift at over 2.8 billion of unrestricted cash cash equivalents and short term investments our liquidity position remains extraordinarily strong.
Next I want to spend a few minutes to discuss two strategic transactions the acquisition of flex drugs as well as a potential sales certain legacy insurance liabilities.
Flextronics has been one of our longstanding Express drive partners. The company was formed a joint venture between Cox automotive and home and enterprises.
To streamline our processes and reduce certain costs associated with the partnership we closed the acquisition of Flex drive on February 7th for approximately $20 million plus assumed debt and lease obligations.
From an accounting perspective under the original partnership with Flex drive we were the principal and rental since we became a lessee and a sub lesser for each vehicle prior to its rental by drivers. Therefore flex drive rentals are already reflected in our 2019 financial results is operating leases and as such the revenue related lease expenses.
As had been recognized in our income statement.
And our S. One in 10-Q's Flex drive was referred to as select Express drive partner.
In terms of the balance sheet impact under assay 840 to approximately $124 million assets and 120 million of liabilities related to flex drive we're already on the lift balance sheet as of December 30 Onest.
Prior to the acquisition the company recorded a REIT abuse asset.
And lease liability at the present value of lease payments for flex drive leases greater than 12 months.
Pro forma for the transaction. The owned vehicles acquired will be recorded is fixed assets. There will also be a corresponding liability for the actual outstanding loan balances payable third parties in lieu of the previously imputed present value of the lease payments.
Equals which are leased by flex drive will continue to be recorded at the present value of lease payments over the remaining term.
Pro forma.
Loose consolidated balance sheet is expected to grow modestly we estimate that lift assets and liabilities related to flex drive will grow by approximately 75 to 80 million at the end of Q1 relative to year end.
Let's move to insurance during our third quarter call, we announced that we're exploring the sale certain legacy insurance claims to reduce future potential volatility.
Our objective for any transaction is to eliminate the potential for future adverse development on period sold.
This involves a complex set of transactions that includes both the sale of certain liabilities as well as the transfer of claims handling responsibilities.
We're in active talks to the insurance market and continue to explore such a sale, but have nothing to report at this time.
Before I discuss our outlook for 2020, let me provide a few comments.
2019 was an exceptional year.
We're very proud of our demonstrate product innovation execution and operational excellence, but 2019 also benefited from rapid market rationalization, which drove exceptional and outsize over performance quarter after quarter.
Additionally, as we noted in prior calls we enjoyed a highly favorable tailwinds in the first half of last year from publicity related to our IPO, which helped drive, particularly strong active rider additions and revenue growth in Q1 in Q2.
Going forward into 2020 as the industry focuses on profitable growth. We believe we have better visibility into the current market dynamics.
In terms of our outlook, let me start with revenue for the first quarter. We anticipate revenue will be in the range of 1.055 to 1.06 billion representing year over year growth of 36% to 37%.
For the full year 2020, we anticipate that revenue will be in the range of 4.575 to 4.65 billion, representing an annual growth rate of between 27% to 29%.
Moving to adjusted EBITDA, It's important to note that our outlook includes approximately $130 million of unique 2020 expense headwinds relative to 2019.
Approximately 40% of this amount relates to the conclusion of the magnet co development partnership for autonomy self driving technology.
Payments from Magna are recorded as Contra R&D expense as a result, even if expenses did not grow at all R&D would be 55 million greater in 2020 due to the absence of go for funding that offset a portion of R&D expense in 2019.
In addition, we are prepared to invest approximately an incremental 75 million year over year to fund in support key 2020 policy initiatives across the United States, including the important work, we're doing in California to help protect app based drivers and services.
This is a substantial increase year over year, but we believe this is the right approach to help protect the flexibility that our drivers value today.
For the first quarter, we anticipate our adjusted EBITDA loss will be in the range of 140 to 145 million versus 216 million in the year ago period, representing an improvement of between 33 and 35%.
We expect that the first quarter will represent our peak quarterly loss in 2020, as we drive towards profitability.
For the full year, we anticipate our adjusted EBITDA loss will be in the range of between 450 and 490 million.
This range translates to a year over year improvement between 28, and 34% put differently, we're expecting to improve adjusted EBITDA by approximately 190 to 230 million and again. This ranges inclusive of the approximately 130 million of expense headwinds that partially obscures our underlying momentum.
We are focused on profitable growth and delivering on our path to profitability within this framework, we are making responsible and thoughtful capital allocation decisions to fund investments that we expect will drive long term growth and shareholder returns.
We are proud of the significant progress achieved in 2019 and our results to date demonstrate were on the right track So with that let me turn it back to Logan.
Alright, Thanks, Brian.
Im extremely proud of the work our team accomplished in 2019 and I'm excited for 2020.
We are executing on our strategic pillars product innovation profitable growth and operating leverage and in 2019. It helped us drive our adjusted EBITDA improvement by over 50%, while we grew revenues over 68% year over year.
As we begin a new decade fascinating to think about how much transportation has changed since we started lift.
A few years ago people thought our vision to move away from kroner ship was crazy.
Today, 50% of lift passengers say they use their car less because of lift and 25% say that owning a car is less important to them.
Everyday we continue to help change how people think about transportation.
As we look ahead into this new decade, we see the vision coming delay.
The world is evolving beyond car ownership.
Today millions of people pull their phone out of their pocket when they need to go somewhere instead of reaching for their keys. Today's car ownership ecosystem is fractured and full of painful customer experiences with sky high retail prices.
Car owners typically have to interact with over 10 different companies seem simply the keep up with the basic overhead of owning a car.
From the dealership to the OEM insurance fuel parking towing clean cleaning registration and the rental car you'll need when youre cars in the shop.
None of these experiences are integrated and they require the customer to bear the brunt of connecting the dots.
Looking at this picture, we see endless opportunities to better serve our customers transportation needs.
The promise of a complete transportation network is that you can utilize a single platform to handle all of your transportation needs. Instead of piecing together services from 10 different companies. The transportation network can create frictionless customer experiences and use the scale of the network to deliver more value to customers.
No matter, how you want to consume transportation, whether you want to get a ride read a bike rent a car take public transit you can do it all through the lift platform.
One company instead of 10, and you get access to the world's best transportation.
While we are laser focused on executing in 2020, John and I will always guided lift with this long term view in mind. That's why we're investing in bikes scooters access to public transit fleet management and autonomous vehicles.
These investments will serve as the foundation for what we believe will be a leading company of our generation.
Finally, before we take questions I want to briefly reflect on how our work ties back to our mission improving People's lives with the world's best transportation.
Millions of people lack access to reliable affordable transportation.
Our transportation access programs provide free and discounted rise to those who need the most.
This includes our work on disaster response, as well as our efforts on jobs grocery and voting access.
Just a few weeks ago, we combine all of these programs into a single comprehensive initiative.
That we're calling lift up.
We also announced our newest lift up program a partnership with Lebron James and its athlete empowerment company uninterrupted to expand by share access across the country.
We're thrilled with our results in 2019 and the massive opportunity ahead to continue disrupting one of the largest addressable markets in North America.
Okay, operator, we're ready to take questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press Star then one key on your Touchtone telephone. If your question has been answered all your wish to remove your so from the Q. Please press the pound.
We will be answering questions until the call is over one moment for questions.
First question comes from Brent Thill of Jefferies. Your line is open.
Good afternoon, Brian you had a stated goal for profitability in fourth quarter of 21 I was curious if you could just update us on on your trajectory to hit that target.
Hi, Brad that when we set that target just a couple of months ago, we wanted to be very clear.
That our strategy is to drive profitable growth and as you can see from our last four quarters of EBITDA outperformance, we have a strong track record of delivering on leverage. So we remain truly truly confident that we can achieve our Q4 21 target and just remember with our focus.
We're not exposed to the uncertainty or volatility of emerging markets or non transportation segments, and we're focused on on our profit growth across our business and as we drive towards profitability. We want to ensure we make key strategic investments that can generate strong shareholder returns for years to come.
And we believe investors trust us to make responsible decisions as we drive towards this profitability as we move through the year, we will continue to share updates on our progress so stay tuned.
Thank you.
Thank you. Our next question comes from Mark maybe of RBC. Your question. Please okay. Thanks could you Peel back that revenue per active driver growth. It's been nicely in the 20% range for the last couple of quarters is that engagement or price and or pricing and can you talk about your thoughts on.
Pricing going forwards, where you think your pricing is now versus the value proposition you provide thank you very much sure I'll, let Logan address pricing, but let me let me just spend a moment on.
Sort of the strategy around.
Just how we grow this business I mean, we're focused on building the strongest business over time.
And we want to give our growth leaders the clear directive.
Really optimized for profitable growth and that means.
Actively not targeting users with incentives who may be on profitable. We're okay with that tradeoff, we're really focused on profitable growth not not growth in all costs and we believe the market under appreciate the importance of revenue per active rider.
Lift isn't like.
Spotfire Verizon wireless in the sense, where typical user has an unlimited plan.
Sequencing matters ride mix matters.
I think it's obvious not all riders are created equal and we plan to focus on the ones, who can drive the most profitable growth and so in Q4 as you point out we generated $44.40 of revenue per active rider. We believe that this figure from significantly grow overtime by increasing ride frequency and just capture.
Our share of higher value users.
And more valuable rides and just so there's no confusion mark.
We also believe there's a significant upside in revenue per active rider, even ignoring future potential price adjustments.
Dennis Logan all this way and reiterate.
This is our our strategy and our focus on profitable growth coming to life.
We really want to win on product innovation on customer experience and brand preference not on things like coupons or incentives.
To go back and give a little bit of color on 2019 in Q3 in Q4, we reduced incentives below the industry and we did notice it had a modest impact on the business and so later towards the back half of Q4, we returned back to industry levels.
And it's also worth calling out that we'd be at our outlook by nearly one percentage point on sales and marketing given our strong revenue growth than marketing efficiency.
And the to put it in full perspective, we reduced our non-GAAP sales and marketing expense as a percent of revenue from 33%, 18% year over year Q4.
This is an industry best and a reflection of our focus on transportation in North America.
At a big just to add this is Brian we expect incentives as a percentage of revenue will likely decline in Q1 from Q4.
Okay. Thank you Brian Thank you Logan.
Thank you. Our next question comes from Doug and myth of JP Morgan. Please go ahead.
Thanks for taking the questions.
I wanted to ask you about insurance.
Looking back in 2019, you saw considerable leverage from from sales and marketing is couponing and promotions receded.
So you could talk more about insurance as you, whether you're seeing out as much bigger driver of leverage in 2020.
And how the effort is going to share some risk with insurance carriers in certain states and then just separately, Brian I know you're focused on moving toward consolidated breakeven profitability I'm, hoping you could comment on whether you expect core rideshare profitability in 2020.
Sure. So let me let me start with the insurance question.
So we are on a September fiscal year related to our insurance policies. So.
Starting on October Onest, we started.
New policies with progressive in state farm.
To cover riders and drivers.
In six states and we when we look at the outperformance I mean, one of the biggest beats again.
We expected contribution margin a covenant, 52% in Q4, we came in at 54% insurance was one of the big standouts, there and beyond just the policies I think the quality of the team and the quality of the execution, we're trying to make the platform San Fran safer and so when you look.
At the.
Full year 2020, we do expect to get more benefits from insurance on contribution margin for the full year.
In terms of sorry, Doug driving your your second question.
The potential for core rideshare profitability.
So we are a single segment company. So we don't provide.
Right during stand alone I think it is fair to say, we reported for great quarters as a public company in terms of leverage here.
We are we're really trying again, bringing the entire company for US we have no loss leaders. It's every business that we operate has to be profitable over time. So we're trying to bring consolidated adjusted EBITDA profitable.
Yes, and I said before you know we are funding investments to drive long term growth and while the strength of ride sharing is allowing us to accelerate our path to profitability. We are committed to making responsible investments that will drive long term growth and create shareholder value.
Thank you sure.
Your next question comes from Stephen Ju of Credit Suisse. Your line is open.
Okay. Thank you so I guess all pile on to the guidance question for the year.
So Brian.
There are a bunch of moving pieces for your business between I guess to be equal at the operating environments.
Wallace actions and reactions between you and your competitor.
You are giving us the full year outlook. Once again like you. This last year, but can you give us some additional perspective on the parameters for the full year, what speak good and what's not baked in and it seems like your incremental I guess EBITDA margins for the first quarter is between 24% to 26% and the year.
Between 18 to 24 so.
I know you kind of touched on this earlier in the call. The should we continue to think about what I guess in sort of a midyear.
EBITDA dollars throughout the year or will there be some amount of variability. Thanks sure David Thanks for answering the question, let me let me provide.
Framework to think about the full year from when we start with Q1.
Before jumping.
Into the details of our outlook I really want to reiterate again, how pleased we are.
The performance of the business in Q4 was just another great demonstration quarter in terms of the operating leverage.
And our platform.
And so let me share some additional thoughts and perspectives regarding our outlook I I hope it's clear by this point that in 2020 were focused on driving profitable growth more than ever.
And we believe that the quality of our growth. This year really creates a foundation for more durable long term growth in 2021 and beyond.
In terms of the first quarter in terms of topline as I mentioned.
We expect Q1 revenue will be between 1.055 to 1.06 billion, which represents growth of 36% to 37% year over year off of a pretty difficult comp given the.
The revenue boost we were.
We realized from the IPO publicity.
In terms of expenses.
Im thrilled with the leverage we delivered in Q4 and what we delivered in full year 2019.
No one advantage that is not broadly understood is lists low cost culture, we try to stretch every dollar more than our competitors I mean since day. One lift has competed against the competitor with more capital and we use the situation just internally to create strong competitive advantage, you mean being a low.
So costs operators one of our key strategic pillars, I think one very tangible example that I can share as our travel policy.
And we went live flies coach them by everyone. I mean, everyone. There is no carve off for executives are board members.
This low cost mindset has really a key part to how we are driving towards profitability is one of the ways. We make sure that every investment dollar generate the maximum return for shareholders now before I get into specifics on Q1, let me just remind everyone that unless otherwise indicated.
All income statement measures and follow our non-GAAP and exclude stock based compensation other select items.
So in terms of specifics for Q1.
We expect the contribution margin should hold at 54%.
Mike in Scooter revenue will decline quarter on quarter, given seasonality and so this puts pressure on contribution margin.
Because we still absorbed full depreciation and this could just creates negative leverage remember depreciation is in contribution margin.
And our operations and support expense in Q4.
It was 14% of revenue, which was 100 basis points better than Q3.
Looking forward, we remain focused on cost efficiencies and expect to drive a further reduction in operations and support as a percentage of revenue.
We expect that we can 12% in Q1, but this will grow especially in Q2 in Q3 is bike in scooter Ryan's accelerate.
R&D as a percentage revenue was was better than expected in Q4 in Q1, we are investing in head count and we lose $14 million of co development dollars from Magna, which creates some headwind that I spoke about so we expect R&D in the first quarter will be 16% of revenue.
We expect sales and marketing in Q1 will be approximately 20% of revenue, which is versus 29% in the year ago peers. This implies a 900 basis point reduction year over year.
We anticipate a DNA expense as a percentage of revenue will be 22%, which is flat with Q4 I. Just remember again. The DNA includes the investments, we're making and policy in government relations and the California ballot initiatives. So for the first quarter, we anticipate our adjusted EBITDA loss will be in the range of 140 to 140.
5 million versus the 260 million in the year ago periods. This is an improvement of 71 to 76 million or 33% to 35% year over year.
I think in terms of some of the other key stats for Q1, we expect capex will be roughly 5% of revenue depreciation will be in that $25 million range.
We expect SBC should tick down from Q4.
Yes to answer some of your question around 2020, we've provided an outlook for revenue and adjusted EBITDA.
In terms of shape, we expect sequential quarterly revenue growth will accelerate in Q2, and then taper in Q3, and especially Q4, given the bike and scooter impact.
We believe this is now the certain a permanent go forward shape of seasonality that will repeat in 2021.
In terms of for full year leverage we expect we will demonstrate improvements across the personnel.
When you look back at last year contribution margin was 50%.
We expect to generate further leverage from insurance transaction processing and hosting this year.
We expect we can achieve contribution margin for the full year between 55 and 55.5% for the full year. So an annual improvement of 500 550 basis points.
On an annual basis, we expect operations and support will show leverage.
Sales and marketing, we expect will show leverage the only areas, which will show modest headwinds, our R&D and Gionee and this is related to the previously mentioned situation with Magna and the investments, we're making and policy and we expect to generate leveraging both of these areas in 2021.
Given a number of cost initiatives, we expect our smallest adjusted EBITDA loss will be in Q4, the peak will be in.
Q1, and ultimate ultimately our strategy is to just continue driving industry, leading growth as we leverage expenses.
Terms of just final static for the full year, we expect capex will be in the range between eight and 9% of revenue, which we would expect to be backend loaded and for the full year total depreciation amortization will probably be in the range of.
Roughly 3.5% of revenue.
And then finally SBC, we expected nearly cut in half from levels of last year. So obviously Steven lot of moving pieces here hopefully as additional information is helpful.
Very helpful. Thank you very much.
Thank you. Your next question comes from Brian Fitzgerald of Wells Fargo. Your line is open.
Thanks, guys, maybe one on maybe five and then one of them by computers or any changes you're seeing in market share that you're observing in relation to some of the things that.
Hooper is done in California is there anything you need to do that kind of emulate that approach and then on the bikes and scooters.
With respect to E bikes regular bikes, there's differences in cost some maintenance and then depreciation and how those dynamics meter through your contribution margin as you as you roll out of E bikes in cities. Thanks.
Hey, Thanks for the question this is John so.
Quickly on the changes you mentioned.
From the competitor, we obviously look at the impacts and are always evaluating but we have no no additional product features to report at this time, we're confident in in our position in the market.
And how how the marketplaces performing overall for drivers and riders we feel good about in terms of bison screeners.
You know there because of the additional cost within E bike that comes from the equipment as well as the charging or swapping of the batteries.
We are working with our partners in the cities that we operate.
To ensure that as reflected in the pricing of the ride where where possible. Yes. Just to add this is Brian I mean, I think as you know we will be deploying our E bikes.
Across multiple cities.
This year and when you look at the trending what we expect for contribution margin we expect.
Especially.
The banks will be used most in Q2 in Q3, and we expect contribution margin to be higher than Q1, So we expect leverage.
Thanks, John Brian.
Thank you.
Thank you. Our next question comes from Eric Sheridan.
Yes. Your line is open.
Thanks, very much for taking the questions one on disclosure and then worn on on sort of the cash flows on the disclosure piece are we going to get the bookings and the take rate.
For the full year, either Tonight on the call or maybe in the 10-K and then I'm curious if a follow up to that about how to think through what that might mean in terms of building blocks for demand versus take rate dynamics looking out to 20, and how you see the industry evolving and then one on the insurance piece, which I guess the follow up to Doug.
Question from earlier, we noticed the insurance reserves sort of flattened out.
In Q4, both on the balance sheet and there was a big improvement on the operating cash flow is that the new policies you referenced that went into place on October one and how should we think about that dynamic going forward. Thanks. So much.
Thanks, Eric So this is Brian.
In terms of bookings.
We did discuss this last year.
We are a single segment company and some of our revenue streams are equivalent to 100% of bookings. So we believe investors should use revenue to measure topline growth.
As you think about sort of.
The right way the metrics to build up to 2020, we have provided an annual revenue outlook.
Yes, we're focused on positioning the company for strong long term growth and profitability and so.
Our teams are charged with optimizing and growing our business, while achieving both goals and as a result, we're not sharing for example, an active rider target because we want our teams to have the full flexibility and latitude to make the right long term decisions for the business both in truck quarter and entry year.
Yes, it again.
We're very excited we we are putting up what we believe is industry leading growth in the United States for 2020, and then on the the last question related to insurance, you're absolutely right. The though the reason for the flatness is related to the fact that about.
Historically.
We covered about 100% of the CNC related policies for.
Ride sharing insurance and beginning on October Onest.
About 25% of that went to state farm and progressive and so thats why the quarter over quarter.
Trend change there.
Thank you. Our next question comes from Justin Patterson of Raymond James Your line is open.
Great. Thanks, so much.
Skus the importance of the new modes platform in more detail how should we think about that influence, saying CPI is like writer frequency and since your R&D tends to play both off that defines how should we think about the potential on block.
On modes around expense efficiencies over time, thanks, so much.
Yes. Thanks this is Logan.
I think the best way to think about it as it increases the velocity of our innovation. So again, we can move a lot faster.
You know those.
I think quite quite a few different opportunities to pursue for a new modes and new use cases.
In.
Ultimately when you get.
Better sort of menu of options in front of users.
You do see engagement go up overtime UGC.
Revenue per active rider increase overtime, so I think.
I think those will be major level levers in the business for us driving profitable growth and and as we make these.
Core infrastructure investments, we're able to execute better.
And move a lot faster so there's there's a lot opportunity out there.
We've been.
Lift was the the innovator in peer to peer back in 2012, we were the innovator behind shared ride a few years later and we've got a lot of other.
A lot of other concepts that we're working on it really excited about this helps us.
Execute on that vision, even faster.
A way to bring that to live for you is think about kind of a user experience, we think about in New York.
City as an example.
We can start bringing our mode together in the form of new modes are just in form of integrating the two so for example, you get on a city bike, which is exclusive obviously to the lift platform and it connects due to the closest subway stops and all that can can get planned and executed within within the lift up.
Another example of something that.
Increases the or has the potential to increase frequency.
You then get on a plane and go to Los Angeles.
And you want to rental car and you pick up a lift ride to the rental.
Location get a lift rental.
And then get around in Los Angeles, So lots of new use cases, as we increase the modes, but also how the modes interact we believe provides the best consumer experienced and therefore can increase how much people use the service.
Got it thank you.
Thank you. Our next question comes from Ross Sandler of Barclays. Please go ahead.
All right just two questions for me.
On the Chase fire deal can you talk us talk just about the unit economics.
Those trips versus regular trips.
That wireless sales and marketing of de leveraging.
For for the first quarter from second quarter, ROE I guess and what kind of market share increase are you expecting to see no.
Thats life.
In the second question.
So we kind of normalize we've long lasting takeout autonomous and schooling bike they made about 100 million EBITDA.
Lost about 100 million EBITDA in the fourth quarter, So I guess.
What do you think explains.
The difference here is that mix of shared rides higher mix of California for you guys. What do you think is the structural margin difference.
Ride hailing only between.
You and your and your competitors this is not about market share, but as Bob.
Huge market occasionally thank you.
Sure Hey, Rob This is Brian So let me just talk first about sales and marketing in Q, what it will cover Chase and then I'll get your question in terms of just structural differences between the two companies.
We are continuing to make important investments in the brand in Q1.
Recently, we had both.
We will Smith at Alicia keys.
Talking about lift and we're going to continue to double down. These opportunities are the biggest driver of the incremental sales and marketing investment is our new partnership with Chase as John outlined we're excited about the partnership in what it means for lift.
And we do believe this partnership will allow us to efficiently grow.
Yeah.
I have to repeat again, we we are lowering sales and marketing as a percentage of revenue by 900 basis points year over year, and we expect that Q1, 20% is the high watermark for the year. So we expect to show reduction in sales and marketing as a percentage of revenue in 2020 versus 2019 as I mentioned, we also expect incentive.
As a percentage of revenue to decline in Q1 versus Q for US I think there's a positive sequential trend there I think in terms of your question around just.
EBITDA comparisons between the two companies it's important to keep in mind. We are single segment, our competitor has five segments and one of their.
They have five segments and then they have.
What they call GNS and centralized R&D that specific cost center is almost five times larger than my total loss. So I don't think you would really compare the two apples to apples and I would just look at the him I mean again at a company level, we have better adjusted EBITDA margins that are competitor, but thanks.
Q3 and Q4.
I think we're taking the right thing segment minus two corporate R&D and GSK. That's the 100 million I was talking about but okay. We can take it offline I mean again, we're funding autonomy I mean again all of that is.
Hidden for over investors.
Thank you. Your next question comes from Ron Josey of JMP Securities. Your question. Please.
Great. Thanks for taking the question I just wanted to ask about active writers and Brian I know you you did give guidance here and that was purposeful, but sort of what Ross, we're just saying with your partnerships like the chase partnership and the newer markets like Vancouver launching in January.
These provide some some infill on active riders, particularly given the tougher comps in the first half of the year related to just the IPO and news well. Thank you sure. So as we've mentioned previously.
We did get a big boost last year, just around the publicity related to our IPO I think folks should think about chase as really a big driver to increase revenue per active rider.
We're just getting more rides and and quite frankly, we see a lot of opportunities to drive up revenue proactive rider and it's.
It's a whole host of reasons its attracting more valuable riders.
Improving our ride mix, it's better segmenting the value we deliver.
And increasing frequency.
And now historically, we have under indexed on.
Business relative to our competitor this is growing for us faster than the rest of our business. It's an area, we're going to double down because we live business, we're opening up new verticals and we're also just driving both premium rise and just more.
Airport rides, which which drivers really value because those tend to be high income opportunities.
Great. Thank you.
Thank you.
Next question comes from the line up Benjamin Black of Evercore ISI. Your line is open.
Yes, thanks for the question here.
I think you guys mentioned 25 to one of your footprint is not covered by third party insurance.
How should we thinking about remaining 75% over next couple of years with though and then just one more on the data the market I mean I'm sure you saw that your main competitor.
So from that you're on bank little bit more aggressive last month I'm just curious to hear your thoughts on your ability of the current rationality. Thanks.
Sure. So this is Brian let me talk to insurance and then I'll hand, it over to Logan talking about the pricing environment and just the state of incentives.
You know Uninsureds again, if you look at.
For the fiscal year ending September thirtyth.
Last year for TNC related write insurance.
Lift was reinsuring.
100% of the risk when we move forward on October Onest.
We have moved 25% of insurance off.
Off our books.
And we really just saw this as an opportunity to help lower costs and reduce volatility in our platform and then we have.
Great Partners, who are just world class and claims handling and we've seen benefits from that and obviously the beaten contribution margin.
Help demonstrate the impact we've seen already just in Q4.
In terms of longer term I think we're open minded we like I think the insurance industry has matured and evolve to really understand ride trace I think we have more opportunities today than we did a few years ago, and we will always be opportunistic.
And then on pricing and the industry as I mentioned before in Q3 in Q4 2019, we've reduced our incentives below the industry.
And we did notice that it had an impact on the business and so towards the back half of Q4, we returned.
And in increased incentive back to industry level.
No not above.
And it's worth calling out that while we did all that we still be our outlook by nearly one percentage point on sales and marketing.
So I think.
This is one thing you take away is that we are focused on profitable growth.
We do not want to win on pricing.
Our incentive.
We're focused on product innovation customer experience and brand preference.
So with that we will call it a wrap.
Incredible year and very excited for 2020. Thanks, so much everybody. Thank you. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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