Q2 2020 Lyft Inc Earnings Call

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Good afternoon, and welcome to the lift second quarter 2020 earnings call. At this time, all participants are any listen only mode to prevent me backdrop.

No.

Later, we will conduct a question 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'd now like to turn the conference over to Sean will head of Investor Relations you may begin.

Thank you.

Good afternoon, and welcome to the list earnings call for the quarter ended June Thirtyth Twentytwenty. This is Sean Woodhall head of Investor Relations.

Joining me today to discuss less results are co founder and CEO Logan Green co founder and President, John Zimmer and Chief Financial Officer, Brian Roberts.

Logan and John will give an update on our business and key initiatives and then Brian will review, our Q2 results and share some commentary regarding our outlook.

This conference call will be available on our Investor Relations web site at Investor Dot lift dotcom and recording will be available at the 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 impact of the covert 19 pandemic. The expected performance of our business future financial results and guidance strategy long term growth and overall future prospects as well as statements regarding litigation.

In matters and the proposition 22 ballot initiative.

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, including in our form 10-Q for the first quarter of 2020 filed on May eight 2020, and our form 10-Q for the second quarter of 2020 that will be filed by August 14th 2020, as well as risks associated with the outcome of litigation, including a decision issued on Monday.

This tends to printing a motion for preliminary injunction in an action by the people of the state of California as was the current uncertainty in unpredictability in our business the markets and economy.

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 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 an isolation from our GAAP results.

Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results may be found in our earnings release, which was furnished with our form 8-K filed today with the FCC and May also be found on our Investor Relations web site at Investor Dot lift dotcom.

I would now like to turn the conference call over to list co founder and Chief Executive Officer Logan Green.

Logan.

Thanks, Sean Good afternoon, everyone and thank you for joining our call today.

Before we review our second quarter results I want to acknowledge how difficult. The past few months have been for writers drivers and the communities we serve.

The effects of covert 19 have been severe for society and economy as well as for our own business.

As a country would also received a long overdue call to action to address the persistent injustices that Black Americans phase, we will discuss our efforts on this in more detail, but we recognize there's more we can do to speak up and to be part of the solution.

Turning to our second quarter I'll focus my remarks on the recovery to date as well as our efforts to accelerate our path to profitability.

Let's start with the recovery, we're seeing at our business. Our Q2 results reflect the challenging operating environment.

Well the recovery in a ride sharing business has not been a straight line, we're seeing encouraging progress.

Revenue for a second fiscal quarter was down 61% year over year, reflecting a significant decline in rideshare rides.

This was driven primarily by a decline in active riders a shelter in place orders and other restrictions across North America reduced travel overall.

At the same time ride frequency was relatively more resilient.

This is reflected in our revenue per active rider.

Which was down just 2% year over year, despite the extremely challenging environment.

Even though right your rides were down significantly in the second quarter rise of meaningfully recovered from the trough we observed in the second week of April.

[noise] trends within Rideshare also reflect changes writers are making in their lives and then how they use lift.

For example in Q2, we saw an increase in the percentage of rides taken during what we would have traditionally been off peak times as writers increasingly turn to ride sharing to complete a central trips.

And while airport rides fell significantly in April and remain down significantly year over year.

Weekly airport rides grew by over 350%.

Between the trough in April in late June.

While rideshare is still down significantly from prior periods, we saw very strong engagement interbike sure operations in Q2.

Bike revenue increase both quarter over quarter and year over year.

This remarkable performance demonstrates the tremendous value that bikes are adding to our platform.

Helps validate our diversified approach to transportation.

Let me turn now to recent trends that we've seen.

We saw a rebound in the band in Q2 and have seen further evidence of this trend since the end of Q2.

Right sure rides in July were 78% greater than April.

And despite all the negative headlines regarding co bid even in the last month, we saw a 12% growth from June to July.

As the recovery progresses, our performance will depend on our ability to anticipate and adapt to changes in marketplace and although the pandemic is certainly unprecedented we have over eight years of experience navigating and evolving marketplace.

More than any other company in our industry managing through adversity, thoughtfully and strategically has been a core part of our success since we founded lift.

Near the started the last decade.

Over that period of time, we've built the right team culture tools and processes to adapt to changes on both sides of our platform, which we are fully leveraging and then current environment.

In March and April our primary challenge was a decline in rider demand relative to driver supply.

Which created an imbalance that led to low driver utilization.

In order to help us protect utilization for existing drivers and provide additional earnings opportunities. We introduced a weightless for new drivers and launched a central deliveries, which John will elaborate on.

Over the last few months, we've seen this dynamic reverse.

Right or demand began to outpace the supply of available drivers. This was observed across the industry and most cities.

Given the circumstances driver earnings in utilization are now at or above pre coated levels in nearly all of our markets.

Accordingly, while we will continue to innovate and launch products and features to encourage riders to come back to our platform.

We're also focusing significant resources on Reengaging drivers so that we can capture all our full growth potential.

John will share some more details on the work we're doing on this front, including the significant progress, we're making on our new health safety program.

Looking ahead, we expect there will be bumps along the road to recovery.

But we're prepared to withstand this turbulence thanks to natural operating leverage in our business, our cost management focus and a robust balance sheet, which we reinforced in may through the issuance.

Our first convertible senior notes.

Before handing the call over to John I want to share an updated view on our path to profitability.

While we cannot control the timing of their covered in our topline results were continuing to make progress on the actions we outlined a few months ago to strengthen our financial position.

And we'll discuss this progress in more detail, but we're executing on our previously announced cost reduction plans as well as projects to improve our unit economics.

We now expect we can achieve adjusted EBITDA profitability with 20% to 25% fewer rides than what was assumed when we initially disclosed this target last year.

While we cant perfectly predict the timing of recovery based on the reduced ride levels required for us to breakeven as well as what we've observed in terms of the recovery to date, we believe that there are multiple scenarios and levers that should allow us to hit this milestone by the fourth quarter of 2021.

Now I'll turn it over to John to talk about the important work, we're doing to support drivers riders and our communities.

Thanks, Logan now more than ever delivering on our mission to improve People's lives with the world's best transportation begins with users health and safety.

As cities reopen and people adopt 13 to cobot. It is critical that we continue our focus on the work we started in March to help protect riders and drivers on our platform.

We know that helped considerations and earnings stability, our two of the most important factors that impacted drivers engagement with our platform.

We're taking meaningful action on both.

First how safety.

In May we announced our health safety program, which established new requirements for driving and riding with left.

As part of this program, both riders and drivers myself certify that Delaware face masks throughout their ride our free of covered 19 symptoms and will follow CDC and local guidelines related to cobot 19.

It's important this program we've now distributed over 150000 sanitizing products masks to drivers across the country.

We further bolstered our health safety program in July with the launch vehicle partitions.

These partitions were designed in house by lift engineers inline with CDC recommendations.

Our team designed the partitions to be easily shipped assembled and installed across a wide range of vehicle makes and models.

So far we have made thousands of partitions available to drivers for free across nine markets, including Atlanta, Baltimore, Boston, Dallas, Denver, New York City, Phoenix, Seattle in Washington DC.

Over the next coming months, we plan to expand this program to 30 regions and provide free partitions to over 60000 drivers.

Our ability to roll out vehicle partition that scale is enhanced by our acquisition of flex drive as we can install partition that scale within the flex directly.

Now, let me talk about what we're doing to protect and support drivers earnings during this time.

Since our last call. We've continued to expand our essential deliveries program, which connects drivers with incremental opportunities to occur.

While it's still early days, we're very pleased with the results so far and continue to grow the program.

With gradual increases in rider demand in the last few months, we've been taking steps to improve supply conditions on a market by market basis.

This includes removing waitlist for new drivers in almost all markets and providing drivers with partitions NPP.

As a result of higher rider demand and corresponding increases in driver incentives drivers average hourly earnings have increased on the live platform over the quarter and are now at or above pre cobot levels in nearly all markets.

We also remain focused on protecting the unique value and importance of flexible work available to drivers.

In California, the proposition 22 ballot initiative, we're supporting would protect driver independence and flexibility, while providing historic new benefits and protections, including contributions towards healthcare coverage occupational accident insurance and minimum guaranteed earnings.

We are simultaneously working through litigation on the issue of driver classification in California.

As we've discussed in prior FCC disclosures the state of California filed a lawsuit in may against lifting luber regarding driver classification.

On Monday, the superior Court of California granted a preliminary injunction motion all by the state, which would force lift into over to reclassify drivers as employees in California.

Got injunction has been stayed until August 20, you and we May appeal this ruling and request of further stay.

If our effort here are not successful it would force us to suspend operations in California.

Fortunately, California voters can make their voices heard by voting, yes on prop 22 in November.

Drivers have said they want to remain independent contractors over being employed by a four to one margin.

Economic studies in California have shown that 80% to 90% of drivers and entire regions of the state with lose access to lift a newer platforms. If drivers were forced to become employees.

We will continue to fight for drivers independence.

Our plans and forecasts are currently based on the assumption efforts to challenge the injunction will yield favorable results.

Still as you know we cannot provide assurances on the timing and ultimate outcome.

I'd also like to share an update on the demand side of our marketplace.

Even with rider coupons near all time lows rider demand has continued to improve and we continue to build new offerings on our platform that we believe best support the recovery.

As businesses around the country wrestle with how to adapt to the effects of cobot lift can play an important role in solving transportation challenges for these organizations.

We recently launched lift path, which allows organizations to cover the cost of rights for employees customers guests patients and more.

For many top brands and organizations lift has been the partner of choice before and during Kogut 19 shelter in place mandates.

We're excited to be able to create solutions that help these businesses navigate the new normal as their employees go back to work and have a renewed focus on safety convenience and flexibility.

We've also made improvements to lift rentals are consumer car rental program that is re imagining the traditional car rental experience.

We launched this service late last year to complement our existing offerings and further build out our full portfolio approach to transportation.

Having vertically integrated car rentals on lift helps customers address their full suite of transportation needs, including trips like weekend getaways.

Lift rentals removes many pain points that renters have historically faced.

Long lines at the service counter insurance Upsells before getting the keys are not getting the car you expected.

With lip rentals, you pick your exact car and skip the counter.

Recent trends in our initial markets, Los Angeles, and the Bay area indicates strong consumer interest in this program.

With revenue per car, surpassing pre cobot levels in recent weeks.

In order to expand our writers access to the seamless car rental experience, we recently announced a partnership with fixed a global leader in the car rental industry known for outstanding customer experience has been expanding their presence in the U.S.

Unlike third party Aggregators, we're integrating with six systems on the backend. So the entire reservation flow is built directly into the lift app delivering an integrated premium experience.

Live writers, who rental vehicles from six will have access to special perks and privileges, including a lift to ride credit to get to and from the rental lot expedited pickup and the ability to choose the exact Macon model of the vehicle head of time.

Our partnership with fixed is rolling out over the next few months and will eventually become available nationwide.

Additionally, as Logan mentioned earlier, one, particularly bright spot in Q2 was bike share.

Weekly bike rides increased over 200% from the beginning of April to the end of June.

And new bike rider Activations in the month of June were up 11% year over year.

Right volumes for bikes are now above pre cobot levels as rider seek out this affordable efficient and open air mode of transportation.

We are extremely well positioned given our leadership in the bike sure market, including our exclusive right to operate by share in some of the largest cities in the U.S.

We are continuing to lean into this area by expanding the availability of our popular E bikes, which are now available in San Francisco with Bay Wheels, New York with Citibank, Chicago, with Debbie as well as Washington, DC, Minneapolis and Columbus.

Since we launched our new E bike roughly one year ago in the Bay area writers have taken over 1 million any by trips and we're excited to bring these bikes to more markets later this year.

Before I hand things over to Brian I wanted to highlight lift first annual environmental social and corporate governance report, which we published at the end of July.

In order to execute our mission, we must deliver for all stakeholders.

This drives our work on a wide range of issues, including transportation access in equity economic mobility and sustainability.

An exciting example of our work in these areas is our recent commitment to reach 100% electric vehicles on the lift platform by 20 Threerd.

By working with drivers to transition to electric vehicles, we have the potential to avoid tens of millions of metric tons of greenhouse gas emissions and to reduce gasoline consumption by more than a billion gallons over the next decade.

In addition to being the right thing for the environment and Society, we expect that a fully electric fleet will allow us to help driver save money.

Our commitment to this issue is clearly and deeply integrated into our decision, making and strategy lift.

We're driving our business toward a sustainable future, we're riding with lift is the obvious choice.

Our SG report is the first for our industry and we're proud of the progress we're making.

We look forward to continuing to share updates with you through this annual report.

With that I'll now hand, it over to Brian to review, our Q2 results and outlook.

Thanks, John and good afternoon, everyone.

Let me share a few perspectives before I get the specifics regarding our Q2 performance and outlook.

Given the significant decline in revenue related to cobot I'm extremely proud of our success minimizing our adjusted EBITDA loss in Q2.

We've also positioned the company to be stronger and more profitable long term.

Attribute this to our decisive actions to reduce costs as well as our strong execution I.

I'm also pleased with lifts sequential monthly ride recovery.

Which resulted in meaningful month over month revenue growth from the April lows.

The combination of this improving topline trend along with broad and significant cost reductions helped us to close Q2, well below the loss level, we've publicly communicated.

As you will recall when we announced Q1, we said we could manage our Q2 adjusted EBITDA loss to under 360 million. If April ride volumes persisted in May and June.

In early June we updated our outlook and indicated that if June hold it may ride volumes, we could manage the loss to under 325 million.

I will share more specific shortly but our Q2 adjusted EBITDA loss came in at 280 million an improvement of 45 million versus our early June update to put this in perspective for every dollar revenue decline from Q1 Q2, our adjusted EBITDA loss increased by less than 32 cents, which helps.

Demonstrate how resilient our business model is.

Finally, similar to our perspective three months ago, we continue to treat this crisis as a catalyst to shine a bright light on every expense line to drive incremental savings and efficiencies. However, let me be very clear, we're continuing to invest in initiatives that we expect will drive long term growth and attractive shareholder returns.

Let me now turning to our second quarter results revenue declined 61% year over year, given the significant impact of cobot on our marketplace. It's worth noting that this decrease was less than the 68.5% decline and ride sharing rights.

Q2 revenue benefited from increased right your revenue per ride versus a year ago period, and our bike business achieved positive year over year revenue growth.

As Logan mentioned the decline in Roger rights was driven primarily by a decline in active riders, which decreased 60% from a year ago period to 8.7 million.

Revenue per active rider in Q2 was $39.06 down only 2% year over year, despite extremely challenging environment, reflecting both improved revenue per ride and encouraging resilience in ride frequency.

To put this in perspective, our revenue per active rider in Q2 is $1.20 greater than it was in Q1 of 2019 the quarter, we went public.

Now before I move on I want to note that unless otherwise indicated all income statement measures a follow our non-GAAP and excludes stock based compensation and other select items a reconciliation of historical GAAP to non-GAAP results is available on our Investor Relations website and may be founder earnings release, which was furnished with our form 8-K.

File today with the FCC.

This includes contribution which is defined as revenue less cost of revenue adjusted to exclude amortization of intangible assets stock based compensation related expenses and changes to liabilities for insurance required by regulatory agencies attributable to historical periods.

Both contribution to adjusted EBITDA are also adjusted to exclude the restructuring charges that we've previously discussed both on the Q1 call and in our SEC filings. The majority of these restructuring charges relate to the workforce reduction we announced in April.

In Q2 contribution was 117 million and contribution margin was 35% down from 46% in the same period, a year ago and 57% last quarter.

Many of the factors the Cogs. This decline were unique as evidenced we expect Q3 contribution margin will increase 10 percentage points. If rides were to remain in July levels in August and September.

Let me walk through Q2, the declining contribution margin reflects the significant sequential decline in revenue in conjunction with the fixed nature of certain expenses included in cost of revenue such as allocated personnel costs and depreciation remember depreciation expense is included in contribution margin.

Separately, while insurance expenses virtually fully variable based on mileage at the beginning of Q2 as shelter in place orders took effect, we experienced lower driver utilization, which led to more idle miles and greater insurance costs per ride.

Given current driver utilization trends, we expected the cost of insurance per ride will be lower in Q3 than Q2.

Finally hosting costs were also a headwind the contribution margin in Q2 as our ability to quickly adjust our hosting costs is limited by our usage of ADW us reserved instances now as a reminder, contribution excludes changes to the liabilities for insurance required by regulatory agencies attributable to historical periods.

We experienced $17 million adverse development in Q2 related to historical claims finally $3.5 million costs related to our restructuring is excluded from contribution.

Let's move to operating expenses operations and support expense for Q2 was $88 million down 39% year over year and down 32% quarter over quarter.

Operations and support expenses, a percentage of revenue increased 900 basis points from the same period, a year ago, which reflects the impact of a significant revenue decline with certain fixed cost within operations and support such as facilities.

R&D expense was 134 million down 13% quarter over quarter, reflecting improved cost management and our recent restructuring.

Sales and marketing in Q2 as a percentage of revenue reached an all time low of 13% in terms of absolute sales and marketing was only 44 million in Q2 down 77% from 191 million in Q1.

A key driver to our sales and marketing leverage was our discipline on rider incentives.

Total incentives classified as sales and marketing declined 96% between Q1 in Q2 from 100 million to just 4 million or 1.2% of revenue.

Gene a expense was 168 million down 12% year over year and down 10% quarter over quarter. The sequential decline in Gionee expense is notable as improved cost management more than offset a roughly $25 million increasing costs related to legal settlements between Q1 in Q2.

As we discussed in our Q1 call legal settlements of accruals were lower than expected in the first quarter due to the postponements of Mediations in hearings.

Capex for the quarter was approximately 22 million, which was less than half of our outlook as we focus on preserving cash.

Stock based compensation and related payroll tax expense was 111 million, which included a net benefit of approximately 50 million related to our workforce reduction.

We ended the quarter with 2.8 billion of unrestricted cash cash equivalents and short term investments an increase of over 100 billion from March 30, Onest, our ending cash balance reflects both the net proceeds of approximately 600 million from our convertible debt issuance and corresponding cap call transactions as well as a previously disclosed.

Cash use of 91 million related to the insurance Novation transaction that we closed in April.

Let me now turning to our outlook, we remain on track to achieve the fixed cost savings that we outlined on our last earnings call 300 million on an annualized basis by Q4. This year. In addition, we're tracking the beat our Capex reduction plan on our last call. We outlined the goal of reducing 2020 capex.

From our original plan of roughly 400 million to 150 million. We now expect that we can lower full year capex to 125 million, resulting in an additional $25 million of cash savings.

Since our Q1 call. We've also made important progress on initiatives across the company to improve our underlying unit economics, we will share more information on these initiatives later in the year, but the progress to date suggests that there is upside to the long term margin targets. We first outlined at the time of our IPO. We also believe we.

And now achieved adjusted EBITDA profitability with fewer rides is Logan mentioned I will come back to this.

In terms of our near term outlook, given the fluidity associated with government orders in health care recommendations to contain the spread of Cobas 19, it is impossible for us to predict with any certainty our results for the third quarter.

As such similar to the second quarter, we're providing investors with an estimate of adjusted EBITDA loss based on July ride volumes.

As a starting point, let me describe the right comps on a ride share platform April was down 75% year over year may was down 70%.

June was down 61%.

July was down 54%.

Right sure rights for the week ending August 9th reached a new high since April but remain down 53%.

Now when evaluating year over year ride comps keep in mind that August was a much stronger month than July back in 2019, which is contributing to these trends.

Before I discuss the loss I want to remind everyone of the important increase in policy related spend that we first mentioned at the beginning of the year. Most of this investment will be recorded in our Q3 results with policy related spend increasing by approximately 40 million in Q3 versus Q2, given the timing of key policy initial.

As in California, as well as other states.

In California as John described we are focused on winning the prop 22 ballot initiative.

Alongside our coalition partners, including over Jordache in Instacart as well as tens of thousands of drivers and leading community organizations will continue to support a very large vote, yes on prop 22 campaign in the coming months.

A majority of the incremental $40 million quarterly policy expenditures relates to our share of third quarter coalitions bed, which was prefunded by lift back in 2019, So we'll not be accused of cash.

Now for comparison purposes, if we weren't investing this large one quarter increase in policy spend and ride through to remain at July levels in August and September we would expect our Q3 adjusted EBITDA loss would be 225 million, a 20% improvement relative to Q2.

But we are investing an incremental 40 million in Q3 policy spent and this will be reflected in adjusted EBITDA. So inclusive of this spike we expect to manage the business to a 265 million dollar loss of rides remain in July levels.

While the company is not providing revenue guidance for Q3, we do expect year over year growth will more closely tracked the change in right you're right as we invest improved service levels.

Let's now move beyond Q3, and discuss an important milestone we expect that we can achieve adjusted EBITDA profitability by Q4 2021, while this does require rights to continue to recover we see multiple scenarios and levers to achieve this milestone.

At Logan indicated given our actions to reduce costs and increased unit economics, we're now position to achieve adjusted EBITDA profitability with 20% to 25% fewer rides than what was required when we first put out our Q4 21 target back in October of 2019. This is a further improvement from the 15% 20.

Percent reduction that we announced last quarter for context, we now expect we can achieve adjusted EBITDA profitability when quarterly rise on a ride share platform reach approximately 5% to 10% above the level achieved in Q4 2019.

So while we expect our operations will be impacted by Kobin 19 for some time, we again believe that there are multiple scenarios and levers that should allow us to hit this milestone by Q4 up next year.

Our leadership team is focused on achieving adjusted EBITDA profitability to allow our business to self fund future growth and demonstrate the strength of our model. In fact, we expect that we will lead our industry in terms of long term margins, while scale matters and yes. We have scale was critical to understand is the importance of focus both busy.

This model and geographic footprint.

We expect that the margins of a north American pure play transportation network will exceed conglomerate models that include lower margin businesses and geographies.

Also as we look forward our focus positions us well for the rebound. We expect we will have strong organic year over year revenue growth in 2021, given our sold transportation focus no portion of lifts business enjoyed favorable tailwinds from cobot. So lift is well positioned as a pure play in the expected recovery.

In terms of our geographic focus we operate solely in the U.S and Canada and the US government is directing nearly $10 billion into gaining priority access to and volumes of select cobot vaccines and therapeutics, we believe that faster and wider availability of treatments in vaccines may helped drive an accelerated and broader economic.

Quick rebound in our direct operating footprint.

In closing, while the operating environment, we faced in the second quarter was a challenging test we were able to limit the impact of the downturn. Thanks to our team's execution the resilience of our business model and the critical role our platform players to facilitate a central transportation.

We're making progress on key initiatives to improve our long term margin profile and we expect the decisions. We made in Q2 will also positioned the company to reach profitability sooner and be stronger and more profitable in the long term finally with 2.8 billion of unrestricted cash cash equivalents in short term investments we have the financial strength.

And runway to achieve our strategic objectives, so with that let me turn it back to Logan.

Thanks, Brad.

The second quarter was extremely challenging on many fronts, we're grateful for our driver and rider community partners team members and shareholders for their continued support and dedication.

We're encouraged by the recovery in our business today, and we're confident that we're taking on the critical work necessary for the business to emerge stronger on the other side.

While the headwinds we're facing won't disappear overnight, we believe they'll prove temporary and we'll look back on this as a defining moment the strength in the company.

So while we navigate this crisis our leadership team remains focused on capturing the norm as long term opportunity ahead of us.

We continue to believe that people rely on transportation networks like lift more than ever post pandemic.

We're the only pure play transportation network companies in North America that has integrated rideshare bikes scooters transit and car rentals onto a single platform and we believe that we're better positioned than ever to be the platform of choice for drivers riders and the deliver outstanding value to shareholders.

Before we take questions I want to acknowledge that for many of US the past few months have been unlike anything we've ever seen before.

Recent acts of injustice against Black Americans have created an inflection point in America.

As we seek to become true allies and leave the company, where a team feels empowered to do the same.

Our actions have been guided by our longstanding commitment to support the communities we serve.

Our work starts within our own walls.

Where weve doubled down on our internal efforts around inclusion diversity, especially in regards to hiring and promotion.

From there were harnessing the power of our platform to partner with organizations across the countries to help eliminate access to transportation as a barrier to upward mobility for black communities.

Alongside partners, including the NAACP National Urban League and my brothers Keeper Alliance will be providing access to roughly 1.5 million free and discounted car bike and scooter rides.

To enable black communities to access a powerful network of essential resources and services over the next five years.

This work is an important part of fulfilling our mission by ensuring that the world's best transportation is accessible to all.

And with that we're now ready to take questions.

As a reminder to ask a question you will need to press star one in your telephone.

Withdraw your question press the pound key again that star wanting your telephones ask a question.

Please standby, while we compile the county roster.

Okay.

Our first question come from a lineup Benjamin Black of Evercore ISI. Your question. Please.

Hey, Thanks, Thanks for the question and thank you for the for the update on the timeline to profitability. I think you mentioned several so you see several scenarios, which would get you to profitability in the fourth quarter 2021 could you maybe help us understand the lever that we'll get it there and I'm wondering cost side I know you gave us.

An update on.

When we should could you give us an update on when we should see the full benefit of the 300 million cost reductions and I think you also mentioned shining a light on all cost. So are we done with the route rationalizations now our or do you got some more wood to chop. Thank you.

Sure.

Thanks, Ben This is Brian So let me just again repeat why breakeven is just so important to us because it's really the catalyst for us to start self funding on future growth and I think it's important for us to demonstrate to investors just the strength of our model. So we are committed to this target as we mentioned it does require.

Slide recovery.

Theres several factors that give us confidence in our ability to reach this milestone.

First as you point out their success in terms of reducing costs and improving unit economics.

And this is leading to a reduction in a number of rides, we need to generate to achieve profitability and so as we mentioned based on the progress to date between the first and second quarter now we can achieve profitability with.

5%.

Basically the required right now our 20% to 25% reduction which is.

Proven of 5% or five percentage points.

The go back to your specific question, we are committed to to try to achieve this milestone we referred to scenarios of levers.

And this is across the BNL, so both levers that affect top line as well bottom line to help execute on this on the school as well in terms of our success in the fixed costs.

Okay.

Cutting fixed costs out of a business requires really really difficult decisions, but once you make those hard decisions.

Yes, very high probability of success and so as we saw on the call. We do expect to achieve the full $300 million of run rate savings.

By Q4, and this is against our original plan for the year and I forget what was your last question.

As you mentioned that you're signing a light using a pandemic decentralized on on all costs in the business I was wondering if there are some more rationalizations that you have.

But anymore on the cost saving front there. Thank you.

Yes so.

As I mentioned, we've we feel very good in terms of the fixed cost that we've taken out but we're spending.

Incremental time.

And energy across the company driving higher unit economics, and so in terms of what that means it's both.

Initiatives in projects.

Yes that that helped us increase revenue.

And so this is driving more rights as well as more revenue per ride and then we have a number of initiatives to reduce costs. So this is everything from increasing our computing efficiencies unlocking savings on transaction processing and funding incremental initiatives on safety to reduce insurance costs.

Again, one of the things that we mentioned in the the launch and the prepared remarks.

That's why our success now on executing on the reductions in the fixed cost base and our success on driving forward on these projects to reduce our.

Improve our unit economics, we believe we're creating lasting structural improvements to our business and given these improvements. We now believe we can generate margins in excess of the long term model that we discussed at the time of our IPO. So we'll be planning to update investors in early early next year on that.

Great. Thank you.

Sure.

Okay.

Thank you. Our next question comes from the again with JP Morgan Your question. Please.

Great. Thanks for taking the questions too.

First John you talked about potentially suspending operations in California, If you don't get the extended stay down in August Twentyth.

Hoping you can help us understand how that work is that just temporary as you adjust the model to a certain markets and adjust service levels and curious how far along your planning is along this path.

Maybe you can just remind us how big California is as a percentage of rights or revenue.

And then Brian just on insurance.

If you could talk about the opportunity to further shift insurance risk later this year I know you went to about 25% risk transfer last October.

Curious where that could go to and how does co bid.

Impact the potential new there in October thanks.

Thanks, Doug This is John so on the first question.

It's not it's a longer stay is not granted than the injunction I would go into effect on the August 21st in which case would be forced us to spend right your operations in California.

And as we explained to the trial court a preliminary injunction forces lift to transform its business model in California.

One thing to remind everyone is a majority of the drivers on the platform have full time jobs outside of left and the constraints that we would need to add to the platform such as schedules would not work for many of them and lift can not comply with the injunction at the flip a switch reclassifying tens of thousands of self employed drivers would be a significant challenge.

In in normal times and in the current pandemic environment.

That would be nearly impossible. So it's difficult to predict you know.

Timing as you mentioned our focus is on crop 22, we're confident.

In in moving that forward anything.

Outside of that would be need to be assessed at a later time in terms of the business impact within California, California currently makes up.

Around 16% of total rights.

So that should address your question there.

And.

This is Brian So let me just give a little more color on California.

I would say the west coast is one of our weakest regions in terms of rebound.

So if you look at month to date in August.

California as a percentage of total rides was down over five full percentage points year over year as John mentioned down to 16% of total rides.

In terms of specific data points.

Notwithstanding the recovery other parts of the country in July right. Your rights were down 75% in San Francisco, 72% in San Diego and 75% in San Jose and then the most recent we both San Francisco, San Jose were down 77% year over year.

In terms of.

Yes, the second part of your question around risk transfer. So as you recall, we are on a September fiscal year as it relates to insurance policies and so in our current policy or which ends the September thirtyth, we transfer the majority of risk related to six states with with regards to primary auto and we're actually in a.

Alive RFP right now for our next policy year, which begins October 1st So the first day of of Q4.

As the two key benefits from transferring risk first.

Helps me sleep at night, because it reduces volatility our financials.

And second and aligns incentives between us and our insurance partners. The RFP is live right now so I don't have too many details that I can share, but I can say that we're pleased by the demand for.

For our business amongst leading auto insurance for the upcoming policy year and our progress to date on safety initiatives has done well received by the market and this is super important to us because it factors into pricing. So negotiations are continuing nothing has been awarded but we expect that we will have the option to transfer additional.

No risk for the upcoming policy or that we began on October onest.

Great. Thank you both.

Thank you. Our next question comes from Stephen Ju of Credit Suisse. Your line is open.

Okay. Thank you very much so logon to John.

You touched on those to some degree but can you talk about the.

Puts and takes to the lift use case over the next 12 months, perhaps and the next five years clearly the morning, an afternoon commute use cases are way down right now as Arthur Airport rights.

And there may be a possibility that some of the decline will be permanent us people work from home. So could you put that a contest with your efforts to expand into new use cases that doctors' visits among other things that is perhaps not as work related.

Brian.

Touched on this to some degree as warm overall see overall it seems like rides improved pretty significantly from the April trough, but I'm. Just wondering if you could provide what's a us with more granularity on some of the regional activity outside of California, especially as parts of the country seem to be bought a different directions in terms of cases. Thanks.

Thanks, David Yes, I'll touch on a couple of interesting trends, we are broadly seeing.

A shift to more sort of essential trips.

And seeing the commute case has been fairly consistent actually between Q1 in Q2.

Makes up roughly 30% of our told her rides but.

But seeing more central trips you know to grocery stores structures apartments et cetera, a couple of interesting trends you know public transit usage across the country has really fallen nationally.

And a lot of cities have been and really tough budgetary sort of conditions and.

Forced to cut back them out of transit service that they offer.

And what we're seeing a lot of people turn to ride sharing as a reliable.

Safe affordable alternatives there.

One of the what are the exciting things that we've launched on that front as part of lift business, we launched a new products to comp lift pass no just lots that in July.

And let pass is.

A new products that allows organizations to cover the cost of rides for an employee for customer a guest patient.

Et cetera, and find a provide a safe and convenient flexible option.

So.

And organizations or the way it works and organization can buy a onetime or recurring lift pass.

And set up a great set of custom rules and restrictions around the time of day that its use the right type that it can cover the location.

And more so we're really excited about lift pass.

And we'll we'll continue to look for more ways to build products that support.

Folks and support cities as they reopened.

One other thing it you know we talked about a little bit before but I just want to comment on.

Personal vehicle ownership.

We really believe that people are going to depend on lift and shift to lift.

More and more on the other side of the pandemic.

Affordable and reliable transportation is going to be critical and navigating a challenging economic environment.

They got on the other side of the pandemic.

Most folks expect there to be obviously very challenging economic environment to deal with.

So we think yelp car owners and folks considering car ownership.

Might opt out of the high fixed costs.

That go along with owning a car.

Either because they can't afford it or they don't want to sign up for that type of long term burden.

And obviously, it's still the early days, but we think we're.

Still at the at the very beginning of a long term secular shift away from car ownership.

And towards adopting a broader transportation as a service.

Type product.

So as far as specific cities, Brian can you weigh in on some of those trends sure. Thanks Logan. So let me just be quickly touch on right mix and I'll talk about the cities.

What's interesting for us if you look at weekends rides as a percent of our total rideshare rides in Q3 in Q4 last year. We can rights were 32, and then 33% of total rides.

The absolute cope with bottom weaken rights dropped to 20% of total.

In the last week a July we can rise of now reached 29% of total so we're seeing a rebound there and then as it we reported lifetime Airport rides in Q3 in Q4 last year were 9.1, and 9.4% of total ratio rights in April Airport rights dropped to 1.6% and as Logan mentioned.

For Reits are beginning to rebound in the month of July they have more than doubled as a percent of ride mix and they're now up to 4% still down from last last Q3, Q4, but definitely trending in the right direction.

In terms of cities in regions.

I think is really important for investors to realize that the U.S. is a collection of unique data points.

What you're seeing in your home town doesn't necessarily represent what is happening in aggregate across the us and so as I mentioned.

The reason the west coast in particular are weaker but other regions have already recovered to a much stronger degree.

For example, 10% of our top 50 cities in July were down, 25% or less year over year and at the other key points I understand as each month cities recover at different rates and so while July rideshare rides jumped up 12% system wide month over month as Logan mentioned.

Over 10 of our top 50 cities grew faster than 20% month over month, and we had one top 20 city rope, 57% month over month, and then finally, even in areas with really high Cobot case counts and lots of media attention like a Los Angeles and Miami, We did see positive month over month.

Growth in July.

Thank you.

Thanks Steven.

[laughter].

Thank you. Our next question comes from Mark Mahaney of RBC.

Question. Please.

Thanks two questions. Please first can you describe why you think the drivers supply challenges our existing you putting weightless early on because there was.

Surgeon drivers, but then it seemed like it reversed I think they're probably macro factors at play here, but your thoughts on why you're experiencing drivers supply challenges and then secondly, Brian could you talk about why Reits volume will more closely match revenue rights declines will more closely match revenue decline.

It's going forwards than what we've seen in the last quarter or too. Thank you.

Thanks, Mark I could take the first one.

Around.

Driver participation in the platform. So the two most important factors for drivers when considering whether they want to get behind the wheel right now our health considerations and earning stability.

And so on the on the healthcare consideration side.

To your point a lot of that is more macro but we are we're taking that very seriously and doing everything we can add to improve safety and health.

Protection within within the platform. So for example.

In house I created partition.

We've shipped tens of thousands of those units.

We're going to continue providing PPV and those petitions to keep driver safe and make sure. We're communicating all the different options they have to protect themselves if they choose to come back to the platform on earnings because there was kind of.

That back and forth on the marketplace early on its now important that we communicate the fact as we mentioned that driver earnings are now at or above pre comfort levels and so we've really increased our communication around that for those drivers that are comfortable driving at this time.

And Mark Let me, let me touch on your the second part of your question just give a little more context on Q2, and then I'll.

Transition at Q3, so in the second quarter incentives that are classified as contra revenue as a percentage of revenue were roughly flat year over year, but increased as the quarter progressed and so John was mentioned the started you to the marketplace had really low driver utilization. So much so that we created these waitlist.

But as the quarter progress demand began to outstrip supply. So we used incentives to help attract drivers back on the platform very similar to the comments from our competitor last week, we use incentives to help the marketplace more quickly reached equilibrium in terms of supply and demand in terms of Q3, we expect the year over year revenue growth will.

Likely track the change in ride sharing rides as we invest improve service levels by bringing drivers back on the platform. Now. This is really a region by region balancing act in general the city reopens demand tends to outstrip supply and we think it's the right long term moved to increase liquidity and really strategically invest in supply in Q3 and as.

As we invest to bring Jarvis back on the platform. This has from a GAAP perspective, a contra revenue impact and this is why we expect that Q3 year over year revenue growth will track the change in rideshare rides versus Q2, where we actually earned dislike benefit.

In terms of trends beyond Q3, we believe that high unemployment will lead to more people signing up to drive on the platform, especially as federal unemployment benefits expire or a further reduced.

And of course, all this is factored into our Q3 adjusted EBITDA estimate and overtime. We believe that this will create a future benefit relative to Q3 is more markets reach really typical equilibrium levels and incentives can declined back or below historical levels.

Okay. Thank you very much.

Thank you. Our next question comes from Eric Sheridan of UBI US. Please go ahead.

Thanks, So much for taking my question, maybe two following up on the answers to Steven in March question in those markets, where there's been a greater the degree of recovery than not.

Have you seen any changes in competitive behavior between you and your main competitor in terms of away either one of you might be approaching the market in the markets, where you're seeing more of the healthy recover your snapback generally in the environment and then secondly, maybe following on to the loss to answer how should we think about the demands on vehicle.

Asia Bolsters the supply some of the equation as you see a market recover how much you lead in the on marketing initiatives and customer acquisition initiatives versus allowance from like demand to come to you sort of organically holistically. Thanks, so much.

Sure I can I'll weigh in on some of the macro trends, we're seeing and maybe Brian can hit some specifics.

So good competition has been nationally fairly stable.

So you know nothing no no dramatic changes and.

As a as a company, we're putting our competitive focus on differentiating our platform through product innovation.

They are providing a better experience to tar writers and drivers.

You know if you look at some of the.

Programs that we run and markets on the writer side, we have really significantly cut coupons.

You know down to a record lows and that seems to be consistent with what we've seen from third party data.

And of course, you know we're in a place where generally we have more demand than we can handle. So so we are really pulled back on that side.

On the over the last last few months.

As as we've seen demand to ramp faster that supply.

You know we remove the weightless we had on the driver side, we've started acquiring drivers again.

And we are leaning into using incentives to to balance the marketplace against the strong rider demand.

Yes, ultimately our focus is on putting ourselves in the best possible position to deliver strong growth.

As as the market recovers.

Maybe Brian could weigh in on a couple of specifics sure.

Thanks again for the question, Eric I look I think I have to repeat it because it just so powerful if you look at the second quarter, we reduce incentives classified as sales and marketing, 96% from Q1 levels, but at the same time, we saw a meaningful rebound as the quarter progress without using coupons.

Yes.

Again, as Logan mentioned, we want to win a product innovation and customer experience and brand preference not coupons and so much of the investment in product innovation customer experience is captured in our R&D line.

We believe these investments can create competitive krill true competitive advantages and have stronger ROI than coupons, which can turn into a zero sum game. So we expect that sales and marketing expense for us as a percentage of revenue will be permanently lower post co bid.

So you should take away that this is more than just a short term cost cutting measure.

And then I you know just to add in terms of what we've seen a difference. It. It is back to my comment like each city is so unique it is really hard to.

Generalize across the United States, It's really a city by city balancing Act.

Thank you our last question comes from Edward Yruma at Keybanc. Your line is open. Thanks, Hey, Thanks for squeezing the and just two quick ones. The I know you lead in flash introduced a new.

Upstream in the quarter, specifically weight and save and delivery I guess, just any initial observations of how they perform and kind of how these sensors may scale over time. Thank you.

Sure.

So we're really excited about what we've seen from from wait and see if so.

In the sort of first days of the pandemic, we paused shared rights.

Across the country.

And it was the right thing to do but it took away our most affordable option from our customers.

Which was.

Particularly I think a difficult moment to do that as we had a lot of people switching from public transit into lift looking for affordable options.

And wait and save.

It is really great at providing a lower cost option for folks who are more flexible on their schedule and if you can wait a few minutes.

No wait five to 10 minutes, you can get a significantly better price.

And that drives marketplace efficiency.

Because we can send you know we can increase driver utilization and ultimately drive is not going is going out of their way a little bit less.

And for that kind of pure on demand experience.

So we're not not breaking anything out or disclosing any kind of specific metrics on on weight and safe.

But were you know we're pleased with how it's performing.

And excited to be able to kind of unlock that type of innovation right when the market needs. It.

Maybe John you can.

Yes, I went to deliver yes sure.

So for clarity we on delivery, we launched an essential delivery program, we're not we're not doing a consumer facing delivery service.

We are well aware of those despite the growth in delivery the continued growing losses as well in that space. So we're really focused on our current programs in essential delivery, we've been really happy with the speed at which the team has built that product.

It's early days, but we're looking for a working with additional organizations. So that look drivers can can help deliver essential items and we're just continuing to monitor and and look for opportunities there.

Alright, well with that.

Thanks, everybody for joining our call today, we hope everybody is staying healthy and safe. During this time and we'll talk to everybody again next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

You have been removed from the call.

Good bye.

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Good afternoon, and welcome to the lift second quarter 2020 earnings call. At this time, all participants party listen only mode to prevent me background noise.

We will conduct a question answer session and instructions will be given at that time, if anyone should require operator assistance. Please press star then zero on your Touchtone telephones.

A reminder, this conference call is being recorded.

I would now like to turn the conference over to a shot <unk> head of Investor Relations you may begin.

Thank you.

Good afternoon, and welcome to the left earnings call for the quarter ended June Thirtyth Twentytwenty. This is Sean what <unk> head of Investor Relations.

Joining me today to discuss lesser results are co founder and CEO Logan Green co founder and President, John Zimmer and Chief Financial Officer, Brian Roberts.

Logan and John will give an update on our business and key initiatives and then Brian will review, our Q2 results I'm sure some commentary regarding our outlook.

This conference call will be available on our Investor Relations Web site at Investor Dot left Dot com and recording will be available at the same location. Shortly after this call it sounded.

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 impact of the cobot 19 pandemic. The expected performance of our business future financial results and guidance strategy long term growth and overall future prospects.

Well, let's statements regarding litigation matters, and the proposition 22 ballot initiative.

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, including in our form 10-Q for the first quarter of Twentytwenty filed on May eight 2020, and our form 10-Q for the second quarter of 2020 that will be filed by August 14th 2020, as well as risks associated with the outcome of litigation, including a decision issued on Monday.

August 10th granting a motion for preliminary injunction and an action by the people of the state of California as was the current uncertainty in unpredictability in our business the markets and economy.

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.

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 an 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 FCC and May also be found on our Investor Relations web site at Investor Dot lift dotcom.

I would now let's turn the conference call over to less co founder and Chief Executive Officer Logan Green.

Logan.

Thanks, Sean Good afternoon, everyone and thank you for joining our call today.

Before we review our second quarter results I want to acknowledge how difficult the past few months of Ben Hur writers drivers and the communities we serve.

The effects of covert 19 have been severe for our society and the economy as well as far own business.

As a country. We also received a long overdue call to action to address the persistent injustices that black Americans face.

We will discuss our efforts on this in more detail. We recognize there's more we can do to speak up and to be part of the solution.

Turning to our second quarter I'll focus my remarks on the recovery to date as well as our efforts to accelerate our path to profitability.

Let's start with the recovery, we're seeing at our business. Our Q2 results reflect the challenging operating environment.

Well the recovery in our ride sharing business has not been a straight line, we're seeing encouraging progress.

Revenue for a second fiscal quarter was down 61% year over year, reflecting a significant decline in rideshare rides.

This was driven primarily by a decline in active riders shelter in place orders and other restrictions across North America reduced travel overall.

At the same time ride frequency was relatively more resilient.

This is reflected in our revenue per active rider.

Which was down just 2% year over year, despite extremely challenging environment.

Even though right your rights were down significantly in the second quarter rise of meaningfully recovered from the trough we observed in the second week of April.

[noise] trends within Rideshare also reflect changes writers are making in their lives and then how they use left.

For example in Q2, we saw an increase in the percentage of rides taken during what we would have traditionally been off peak times as writers increasingly turn to ride sharing to complete a central trips.

And while airport rides fell significantly in April and remain down significantly year over year.

Weekly airport rides grew by over 350%.

Between the trough in April in late June.

While rideshare is still down significantly from prior periods, we saw very strong engagement and our bikes your operations in Q2.

Bike revenue increase both quarter over quarter and year over year.

This remarkable performance demonstrates the tremendous value that bikes are adding to our platform and helps validate our diversified approach to transportation.

Let me turn now to recent trends that we've seen.

We saw a rebound in the band in Q2 and have seen further evidence of this trend since the end of Q2.

Right sure rides in July where 78% greater than April.

And despite all the negative headlines regarding co bid even in the last month, we saw 12% growth from June to July.

As the recovery progress is a performance will depend on our ability to anticipate and adapt to changes in the marketplace and although the pandemic is certainly unprecedented we have over eight years of experience navigating and evolving marketplace.

More than any other company in our industry managing through adversity, thoughtfully and strategically has been a core part of our success since we founded lift.

Near the started the last decade.

Over that period of time, we've built the right team culture tools and processes to adapt to changes on both sides of our platform, which we are fully leveraging and then current environment.

In March and April our primary challenge was a decline in rider demand relative to drive our supply.

Which created an imbalance that led to low driver utilization.

Did that help us protect utilization for existing drivers and provide additional earnings opportunities. We introduced a wait list for new drivers and launched a central deliveries, which John will elaborate on.

Over the last few months, we've seen this dynamic reverse.

Either demand began to outpace the supply of available drivers.

This was observed across the industry and most cities given the circumstances driver earnings in utilization are now at or above pre coated levels in nearly all of our markets.

Accordingly, while we will continue to innovate and launch products and features to encourage riders to come back to our platform.

We're also focusing significant resources on Reengaging drivers so that we can capture all our full growth potential.

John will share some more details on the work we're doing on this front, including the significant progress, we're making on our new health safety program.

Looking ahead, we expect there will be bumps along the road to recovery.

But we're prepared to withstand this turbulence thanks to natural operating leverage in our business, our cost management focus and a robust balance sheet, which we reinforced in may through the issuance.

Our first convertible senior notes.

Before handing the call over to John I want to share an updated view on our path to profitability.

While we cannot control the timing of their covered in our topline results were continuing to make progress on the actions we outlined a few months ago to strengthen our financial position.

And we'll discuss this progress in more detail, but we're executing on our previously announced cost reduction plans as well as projects to improve our unit economics.

We now expect should we can achieve adjusted EBITDA profitability with 20% to 25% fewer rides than what was assumed when we initially disclosed this target last year.

While we cant perfectly predict the timing of recovery based on the reduced ride levels required for us to breakeven as well as what we've observed in terms of the recovery to date, we believe that multiple scenarios and levers that should allow us to hit this milestone by the fourth quarter of 2021.

Now I'll turn it over to John just talk about the important work, we're doing to support drivers riders and our communities.

Thanks, Logan now more than ever delivering on our mission to improve People's lives with the world's best transportation begins with users health and safety.

Cities reopen and people adopt 13th to cobot. It is critical that we continue our focus on the work we started in March to help protect riders and drivers on our platform.

We know that helped considerations and earnings stability, our two of the most important factors that impacted drivers engagement with our platform.

We're taking meaningful action on both.

First health safety.

In May we announced our health safety program, which established new requirements for driving and riding with left.

As part of this program, both riders and drivers must self certify that Delaware face masks throughout their ride our free of covered 19 symptoms and will follow CDC and local guidelines related to covert 19.

It's important this program we've now distributed over 150000 sanitizing products masks to drivers across the country.

We further boasted our health safety program in July with the launch vehicle partitions.

These partitions were designed in house by lift engineers in line with CDC recommendations.

Our team design, the partitions to be easily shipped assembled and installed across a wide range of vehicle makes and models.

So far we have made thousands of partitions available to drivers for free across nine markets, including Atlanta, Baltimore, Boston, Dallas, Denver, New York City Phoenix.

Ill in Washington DC.

Over the next coming months, we plan to expand this program to 30 regions and provide free partitions to over 60000 drivers.

Our ability to rollout vehicle partitioned that scale is enhanced by our acquisition of flex drive as we can install partition that scale within the flex drive fleet.

Now, let me talk about what we're doing to protect and support drivers earnings during this time.

Since our last call we've continued to expand our essential deliveries program, which connects drivers with incremental opportunities there.

While it's still early days, we're very pleased with the results so far and continue to grow the program.

With gradual increases in rider demand in the last few months, we've been taking steps to improve supply conditions on a market by market basis.

This includes removing wait list for new drivers in almost all markets and providing drivers with partitions NPP.

As a result of higher rider demand and corresponding increases in driver incentives drivers average hourly earnings have increased on the lift platform over the quarter and are now at or above pre cobot levels in nearly all markets.

We also remain focused on protecting the unique value and importance of flexible work available to drivers.

In California, the proposition 22 ballot initiative, we're supporting would protect driver independence and flexibility, while providing historic new benefits and protections, including contributions towards healthcare coverage occupational accident insurance.

Minimum guaranteed earnings.

We are simultaneously working through litigation on the issue of driver classification in California.

As we've discussed in prior FCC disclosures the state of California filed a lawsuit in may against lift in October regarding driver classification.

On Monday, the superior Court of California granted a preliminary injunction motion filed by the state, which would force lift into over to reclassify drivers as employees in California.

That injunction has been stayed until August twentyth, and we May appeal this ruling and request of further stay.

If our effort here are not successful it would force us to suspend operations in California.

Fortunately, California voters can make their voices heard by voting, yes, I'm proud of 22 in November.

Drivers have said they want to remain independent contractors over being employed by a four to one margin.

Economic studies in California have shown that 80% to 90% of drivers and entire regions of the state with lose access to lift in newer platforms. If drivers were forced to become employees.

We will continue to fight for drivers independence.

Our plans and forecasts are currently based on the assumption efforts to challenge the injunction will yield favorable results.

As you know we cannot provide assurances on the timing and ultimate outcome.

I'd also like to share an update on the demand side of our marketplace.

Even with rider coupons near all time lows rider demand has continued to improve and we continue to build new offerings on our platform that we believe that support the recovery.

As businesses around the country wrestle with how to adapt to the effects of cobot lift can play an important role in solving transportation challenges for these organizations.

We recently launched lift path, which allows organizations to cover the cost of rights for employees customers guest patients and more.

For many top brands and organizations lift has been the partner of choice before and during cobot 19 shelter in place mandates.

We're excited to be able to create solutions that help these businesses navigate the new normal as their employees go back to work and have a renewed focus on safety convenience and flexibility.

We've also made improvements to lift rentals are consumer car rental program that is re imagining the traditional car rental experience.

We launched this service late last year to complement our existing offerings and further build out our full portfolio approach to transportation.

Having vertically integrated car rentals on lift helps customers address their full suite of transportation needs, including trips like weekend getaways.

Lift rentals removes many pain points that renters have historically faced.

Long lines at the service counter insurance Upsells before getting the keys are not getting the car you expected.

With Lyft rentals, you pick your exact car and skip the counter.

Recent trends in our initial markets, Los Angeles, and the Bay area indicates strong consumer interest in this program.

With revenue per car, surpassing pre cobot levels in recent weeks.

In order to expand our riders access to the seamless car rental experience, we recently announced a partnership with fixed a global leader in the car rental industry known for outstanding customer experience has been expanding their presence in the U.S.

Unlike third party Aggregators, we're integrating with six systems on the backend. So the entire reservation flow is built directly into the lift app.

Delivering an integrated premium experience.

Lip writers, who rental vehicles from fixed will have access to special perks and privileges, including a lift to ride credit to get to and from the rental lot expedited pickup and the ability to choose the exact Macon model of the vehicle head of time.

Our partnership with fixed is rolling out over the next few months and will eventually become available nationwide.

Additionally, as Logan mentioned earlier, one particular any bright spot in Q2 was by share.

Weekly bike rides increased over 200% from the beginning of April to the end of June.

And new bike rider Activations in the month of June were up 11% year over year.

Right volumes for bikes are now above pre coven levels as rider seek out this affordable efficient and open air mode of transportation.

We are extremely well positioned given our leadership in the by share market, including our exclusive right to operate by share in some of the largest cities in the U.S.

We are continuing to lean into this area by expanding the availability of our popular E bikes, which are now available in San Francisco Bay, Whale's, New York with Citibank, Chicago, with Debbie as well as Washington, DC, Minneapolis and Columbus.

Since we launched our new E bike roughly one year ago in the Bay area writers have taken over 1 million any by trips and we're excited to bring these bikes to more markets later this year.

Before I hand things over to Brian I wanted to highlight lift first annual environmental social and corporate governance report, which we published at the end of July.

In order to execute our mission, we must deliver for all stakeholders.

This drives our work on a wide range of issues, including transportation access in equity economic mobility and sustainability.

And exciting example of our work in these areas is our recent commitment to reach 100% electric vehicles on the lift platform by 23rd.

By working with drivers to transition to electric vehicles, we have the potential to avoid tens of millions of metric tons of greenhouse gas emissions and to reduce gasoline consumption by more than a billion gallons over the next decade.

In addition to being the right thing for the environment and Society, we expect that a fully electric fleet will allow us to help driver save money.

Our commitment to this issue is clearly and deeply integrated into our decision, making and strategy lift.

We are driving our business toward a sustainable future. We're riding with lift is the obvious choice.

Our SG report is the first for our industry and we're proud of the progress we're making.

We look forward to continuing to share updates with you through this annual report.

With that I'll now hand, it over to Brian to review, our Q2 results and outlook.

Thanks, John and good afternoon, everyone.

Let me share a few perspectives before I get the specifics regarding our Q2 performance and outlook.

Given the significant decline in revenue related to covet I'm extremely proud of our success minimizing our adjusted EBITDA loss in Q2.

We've also positioned the company to be stronger and more profitable long term.

Attribute this to our decisive actions to reduce costs as well as our strong execution.

Also please with lifts sequential monthly ride recovery.

Which resulted in meaningful month over month revenue growth from the April lows.

The combination of this improving top line trend along with broad and significant cost reductions helped us to close Q2, well below the loss level, we publicly communicated.

As you will recall when we announced Q1, we said we could manage our Q2 adjusted EBITDA loss to under 360 million in April ride volumes persisted in May and June.

In early June we updated our outlook and indicated that if June hold it may ride volumes, we could manage the loss to under 325 million.

I will share more specific shortly but our Q2 adjusted EBITDA loss came in at 280 million an improvement of 45 million versus our early June uptake to put this in perspective for every dollar revenue decline from Q1 Q2, our adjusted EBITDA loss increased by less than 32 cents, which helps.

Demonstrate how resilient our business model is.

Finally, similar to our perspective three months ago, we continue to treat this crisis as a catalyst to shine a bright light on every expense line to drive incremental savings and efficiencies. However, let me be very clear, we're continuing to invest in initiatives that we expect will drive long term growth and attractive shareholder returns.

Let me now turning to our second quarter results revenue declined 61% year over year, given the significant impact of cobot on our marketplace. It's worth noting that this decrease was less than the 68.5% decline and ride sharing rights.

Q2 revenue benefited from increased right your revenue per ride versus a year ago period, and our bike business achieved positive year over year revenue growth.

As Logan mentioned the decline in right. Your rights was driven primarily by a decline in active riders, which decreased 60% from the year ago period to 8.7 million.

Revenue per active rider in Q2 was $39.06 down only 2% year over year, despite extremely challenging environment, reflecting both improved revenue per ride and encouraging resilience in ride frequency.

To put this in perspective, our revenue per active writer in Q2 is $1.20 greater than it was in Q1 of 2019 the quarter, we went public.

Now before I move on I want to note that unless otherwise indicated all income statement measures a follow our non-GAAP and excludes stock based compensation that other select items a reconciliation of historical GAAP to non-GAAP results is available on our Investor Relations website and may be founder earnings release, which was furnished with our form 8-K.

File today with the FCC.

This includes contribution which is defined as revenue less cost of revenue adjusted to exclude amortization of intangible assets stock based compensation related expenses and changes to liabilities for insurance required by regulatory agencies attributable to historical periods.

Both contribution to adjusted EBITDA are also adjusted to exclude the restructuring charges that we've previously discussed both on the Q1 call and in our SEC filings. The majority of these restructuring charges relate to the workforce reduction we announced in April.

In Q2 contribution was 117 million and contribution margin was 35% down from 46% in the same period, a year ago and 57% last quarter.

Many of the factors the Cogs. This decline were unique as evidenced we expect Q3 contribution margin increased 10 percentage points. If rides were to remain in July levels in August and September.

Let me walk through Q2, the declining contribution margin reflects the significant sequential decline in revenue in conjunction with the fixed nature of certain expenses included in cost of revenue such as allocated personnel costs and depreciation remember depreciation expense is included in contribution margin.

Separately, while insurance expenses virtually fully variable based on mileage at the beginning of Q2 as shelter in place orders took effect, we experienced lower driver utilization, which led to more idle miles and greater insurance cost per ride.

Given current driver utilization trends, we expected the cost of insurance per right will be lower in Q3 than Q2.

Finally hosting costs were also a headwind to contribution margin in Q2 as our ability to quickly adjust our hosting cost is limited by our usage of AAMC reserved consensus.

Now as a reminder, contribution excludes changes to the liabilities for insurance required by regulatory agencies attributable to historical periods, we experienced $17 million of adverse development in Q2 related to historical claims.

Finally, $3.5 million costs related to our restructuring is excluded from contribution.

Let's move to operating expenses operations and support expense for Q2 was $88 million down 39% year over year and down 32% quarter over quarter.

Operations and support expenses, a percentage of revenue increased 900 basis points from the same period, a year ago, which reflects the impact of a significant revenue decline with certain fixed cost within operations to support such as facilities.

R&D expense was 134 million down 13% quarter over quarter, reflecting improved cost management and our recent restructuring.

Sales and marketing in Q2 as a percentage of revenue reached an all time low of 13% in terms of absolute sales and marketing was only 44 million in Q2 down 77% from 191 million in Q1.

A key driver to our sales and marketing leverage was our discipline on rider incentives total incentives classified as sales and marketing declined 96% between Q1 in Q2 from 100 million to just 4 million or 1.2% of revenue.

Gene expense was $168 million down 12% year over year as down 10% quarter over quarter. The sequential decline in gene a expense is notable as improved cost management more than offset a roughly $25 million increasing costs related to legal settlements between Q1 in Q2.

As we discussed in our Q1 call legal settlements of goals were lower than expected in the first quarter due to the postponement remediations in hearings.

Capex for the quarter was approximately 22 million, which was less than half of our outlook as we focus on preserving cash.

Stock based compensation and related payroll tax expense was 111 million, which included a net benefit of approximately 50 million related to our workforce reduction.

We ended the quarter with 2.8 billion of unrestricted cash cash equivalents in short term investments an increase of over 100 billion from March 30, Onest, our ending cash balance reflects both the net proceeds of approximately 600 million from our convertible debt issuance and corresponding cap call transactions as well as a previously disclosed.

Cash use of 91 million related to the insurance Novation transaction that we closed in April.

Let me now turn to our outlook, we remain on track to achieve the fixed cost savings that we outlined on our last earnings call 300 million on an annualized basis by Q4 of this year. In addition, we're tracking the beat our Capex reduction plan.

Our last call we outlined the goal of reducing 2020 capex from our original plan of roughly 400 million to 150 million. We now expect that we can lower full year capex to 125 million, resulting in an additional $25 million of cash savings.

Since our Q1 call. We've also made important progress on initiatives across the company to improve our underlying unit economics, we will share more information on these initiatives later in the year, but the progress to date suggest that there is upside to the long term margin targets. We first outlined at the time of our IPO. We also believe we.

And now achieved adjusted EBITDA profitability with fewer rides is Logan mentioned I will come back to this.

In terms of our near term outlook, given the fluidity associated with government orders in healthcare recommendations to contain the spread of Kobe team. It is impossible for us to predict with any certainty our results for the third quarter.

As such similar to the second quarter, we are providing investors with an estimate of adjusted EBITDA loss based on July ride volumes.

As a starting point, let me describe the right comps on a ride share platform April was down 75% year over year may was down 70%.

June was down 61%.

July was down 54%.

Right sure rights to the week ending August night reached a new high since April but remain down 53%.

Now when evaluating year over year right comps keep in mind that August was a much stronger month than July back in 2019, which is contributing to these trends.

Before I discuss the loss I want to remind everyone of the important increase in policy related spend that we first mentioned at the beginning of the year. Most of this investment will be recorded in our Q3 results with policy related spend increasing by approximately 40 million in Q3 versus Q2, given the timing of key policy.

Initiatives in California, as well as other states.

In California as John described we are focused on winning the prop 22 ballot initiative alongside our coalition partners, including over Jordache and Instacart as well as tens of thousands of drivers and leading community organizations will continue to support a very large vote, yes on prop 22 campaign in the coming months.

A majority of the incremental 40 million of quarterly policy expenditures relates to our share of third quarter coalitions bed, which was pre funded by lift back in 2018, So we'll not be accused of cash.

Now for comparison purposes, if we weren't investing this large one quarter increase in policies, Ben and ride through to remain at July levels in August and September we would expect our Q3 adjusted EBITDA loss would be 225 million, 20% improvement relative to Q2.

But we are investing an incremental 40 million in Q3 policies spent and this will be reflected an adjusted EBITDA. So inclusive of this spike we expect to manage the business to a 265 million dollar loss of rides remain in July levels.

While the company is not providing revenue guidance for Q3, we do expect year over year growth will more closely track the change in right you are right as we invest to improve service levels.

Let's now move beyond Q3 and discussed an important milestone we expect that we can achieve adjusted EBITDA profitability by Q4 2021, while this does require rights to continue to recover we see multiple scenarios and levers to achieve this milestone.

At Logan indicated given our actions to reduce costs and increased unit economics, we're now positioned to achieve adjusted EBITDA profitability with 20% to 25% fewer rides than what was required when we first put out our Q4 21 target back in October of 2019. This is a further improvement from the 15 to 20.

Percent reduction that we announced last quarter for context, we now expect begin to achieve adjusted EBITDA profitability when quarterly rise on a ride share platform reach approximately 5% to 10% above the level achieved in Q4 2019.

So while we expect our operations will be impacted by cobot 19 for some time, we again believe that there are multiple scenarios and levers that should allow us to hit this milestone by Q4 of next year.

Our leadership team is focused on achieving adjusted EBITDA profitability to allow our business to self fund future growth and demonstrate the strength of our model. In fact, we expect that we will lead our industry in terms of long term margins, while scale matters and yes. We have scale was critical to understand is the importance of focus both busy.

This model and geographic footprint.

We expect that the margins of a north American pure play transportation network will exceed conglomerate models that include lower margin businesses and geographies.

Also as we look forward our focus positions us well for the rebound. We expect we will have strong organic year over year revenue growth in 2021, given our sold transportation focus no portion of lifts business enjoyed favorable tailwinds from cobot. So lift is well positioned as a pure play in the expected recovery.

In terms of our geographic focus we operate solely in the us in Canada and the U.S. government is directing nearly $10 billion into gaining priority access to and volumes of select cobot vaccines and therapeutics, we believe that faster and wider availability of treatments and vaccine may help drive an accelerated and.

I think rebound in our direct operating footprint.

In closing, while the operating environment, we face in the second quarter with a challenging test we were able to limit the impact of the downturn. Thanks to our team's execution the resilience of our business model and the critical role our platform plays to facilitate essential transportation.

We're making progress on key initiatives to improve our long term margin profile and we expect the decisions. We made in Q2 will also positioned the company to reach profitability sooner and be stronger and more profitable long term finally, with 2.8 billion of unrestricted cash cash equivalents and short term investments we have the financial strength.

And runway to achieve our strategic objectives, so with that let me turn it back to Logan.

Thanks, Brian.

The second quarter was extremely challenging on many fronts.

We're grateful for our driver in rider community partners team members and shareholders for their continued support and dedication.

We're encouraged by the recovery in our business today, and we're confident that we're taking on the critical work necessary for the business to emerge stronger on the other side.

While the headwinds we're facing won't disappear overnight, we believe they will prove temporary and we'll look back on this as a defining moment that strengthen the company.

So while we navigate this crisis our leadership team remains focused on capturing the norm is long term opportunity ahead of us.

We continue to believe that people rely on transportation networks like lift more than ever post pandemic.

We're the only peer play transportation network company in North America that is integrated rideshare bikes scooters transit and car rentals all onto a single platform and we believe that we're better positioned than ever to be the platform of choice for drivers riders and to deliver outstanding value to shareholders.

Before we take questions I want to acknowledge that for many of us to past few months have been unlike anything we've ever seen before.

Recent acts of injustice against Black Americans have created an inflection point in America.

As we seek to become true allies and leave the company where team feels empowered to do the same.

Our actions have been guided by our longstanding commitment to support the communities we serve.

Our work starts within our own walls.

Where weve doubled down on our internal efforts are on inclusion diversity, especially in regards to hiring and promotion.

From there were harnessing the power of our platform to partner with organizations across the country is to help eliminate access to transportation as a barrier to upward mobility for black communities.

Alongside partners, including the NAACP National Urban League and my brothers Keeper Alliance will be providing access to roughly 1.5 million free and discounted car bike and scooter rides.

To enable black communities to access a powerful network of essential resources and services over the next five years.

This work is an important part of fulfilling our mission by ensuring that the world's best transportation is accessible to all.

And with that we're now ready to take questions.

As a reminder to ask a question you will need to press star one of your telephone.

Withdraw your question press the pound key again that star wanting your telephone to ask a question.

Please standby, while we compile the county roster.

Our first question come from a line of Benjamin Black Evercore ISI. Your question. Please.

Hey, thanks, Thanks for the question.

And thank you for the for the update on the timeline to profitability I think you mentioned several since you see several scenarios, which would get you to profitability in the fourth quarter 20 to 21 could you maybe help us understand the lever that we'll get it there and then I'm wondering costs and I know you gave us.

An update on.

When we should could you give us an update on when we should see the full benefit of the 309 cost reductions and I think you also mentioned shining a light on all costs. So are we done with the route rationalization now our argued that some more wood to chop. Thank you.

Sure.

Thanks, Ben This is Brian So let me just again repeat.

Why breakeven is just so important to us because it's really the catalyst for us to start self funding on future growth and I think it's important for us to demonstrate to investors just the strength of our model. So we are committed to this target as we mentioned it does require ride recovery.

Theres several factors that give us confidence in our ability to reach this milestone.

First as you point out its our success in terms of reducing costs and improving unit economics.

And this is leading to a reduction in a number of rides, we need to generate to achieve profitability and so as we mentioned based on the progress to date between the first and second quarter now we can achieve profitability with.

5%.

Basically the required right now our 20% to 25% reduction which is.

Proven up 5% or five percentage points.

If you go back to your specific question, we are committed to to try to achieve this milestone we refer to scenarios of levers.

And this is across the BNL, so both levers that affect top line as well as bottom line to help execute on this on the school as well in terms of our success in the fixed cost.

Cutting fixed costs out of a business requires really really difficult decisions, but once you make those hard decisions.

Very high probability of success and so as we said in the call. We do expect to achieve the full 300 million a run rate savings.

By Q4, and this is against our original plan for the year and I forget what was your last question.

As you mentioned that you're signing a life using pandemics analyzed on all cost in the business I was wondering if there if there are some more rationalizations that you have.

Anymore on the cost saving front there. Thank you.

Yes so.

As I mentioned, we've we feel very good in terms of the fixed cost that we've taken out but we're spending.

Incremental time.

And energy across the company driving higher unit economics, and so in terms of what that means it's both.

Initiatives in projects.

Yes that that help us increase revenue.

And so this is driving more rights as well as more revenue per right and then we have a number of initiatives to reduce costs. So this is everything from increasing our computing efficiencies unlocking savings on transaction processing and funding incremental initiatives on safety to reduce insurance costs.

Again, one of the things that we mentioned in the the launch there in the prepared remarks.

That's why our success now on executing on the reductions in the fixed cost base and our success on driving forward on these projects to reduce our.

Improve our unit economics.

I believe we're creating lasting structural improvements to our business and given these improvements. We now believe we can generate margins in excess of the long term model that we discussed at the time of our IPO. So we'll be planning to update investors in early early next year on that.

Great. Thank you.

Sure.

Okay.

Thank you. Our next question comes from Doug Anmuth JP Morgan Your question. Please.

Great. Thanks for taking the questions too.

First John you talked about potentially suspending operations in California, If you don't get the extended stay down August Twentyth.

Hoping you could help us understand how that work is that just temporary as you adjust the model to a certain markets and adjust service levels and curious how far along your planning is along this path.

Maybe you can just remind us how big California is as a percentage of rights or revenue.

And then Brian just on insurance.

If you could talk about the opportunity to further shift insurance risk later this year I know you went to about 25% risk transfer last October.

Curious where that could go to and how does co bid.

Impact the potential new there in October thanks.

Thanks, Doug This is John so on the first question.

It's a longer stay is not granted than the injunction would go into effect on the August 21.

In which case would be forced us to spend right your operations in California.

And as we explained to the trial court a preliminary injunction forces lift to transform its business model in California.

One thing to remind everyone is a majority of the drivers on the platform have full time jobs outside of left and the constraint that we would need to add to the platform such as schedules I would not work for many of them and lift tend not comply with the injunction that the flip a switch reclassifying tens of thousands of self employed drivers would be a significant challenge.

In in normal times and in the current pandemic environment.

That would be nearly impossible, so it's difficult to predict.

Timing as you mentioned our focus is on crop 22, we are confident.

In moving that forward.

Anything.

Outside of that would be need to be assessed at a later time in terms of the business impact within California.

California currently makes up.

Around 16% of total rise.

So that should address your question there.

And.

This is Brian So let me just give a little more color on California.

I would say the west coast is one of our weakest regions in terms of rebounds.

So if you look at month to date in August.

California as a percentage of total rises down over five full percentage points year over year as John mentioned down to 16% of total riots.

In terms of specific data points.

Notwithstanding the recovery other parts of the country in July right. Your rights were down 75% in San Francisco, 72% in San Diego and 75% in San Jose and in the most recent we both San Francisco, San Jose were down 77% year over year.

In terms of.

Yes, the second part of your question around risk transfer.

So as you recall, we are on a September fiscal year as it relates to insurance policies and so in our current policy or which and the September thirtyth.

We transfer the majority of risk related to six states with regards to primary auto and we're actually in alive RFP right now for our next policy year, which begins October 1st So the first day of of Q4.

For us to see benefits from transferring risk first.

Helps me sleep at night, because it reduces volatility our financials and second it aligns incentives between us and our insurance partners.

The RFP is live right now so I don't have too many details that I can share, but I can say that we're pleased by the demand.

For our business amongst leading auto insurance for the upcoming policy year and our progress to date on safety initiatives has been well received by the market and this is super important to us because it factors into pricing. So negotiations are continuing nothing has been awarded but we expect that we will have the option to transfer addition.

No risk for the upcoming policy or that would begin on October onest.

Great. Thank you both.

Thank you. Our next question comes from Stephen Ju of Credit Suisse. Your line is open.

Thank you very much so a little bit of John.

You touched on those to some degree but can you talk about the.

Puts and takes to go lift use case over the next 12 months, perhaps and the next five years clearly the morning afternoon commute use cases are way down right now as are the airport rides.

And there may be a possibility that some of the decline will be permitted us people work from home. So could you put that in context with your efforts to expand into new use cases that doctors' visits among other things that is perhaps not as work related and Brian.

Touched on this to some degree as warm overall, so overall it seems like rides improved pretty significantly from the April trough, but I'm. Just wondering if you could provide whats us with more granularity on some of the regional activity outside of California, especially as parts of the country seemed to be bought a different directions in terms of cases. Thanks.

Okay. Thanks, Stephen Yes, I'll touch on a couple of interesting trends, we are broadly seeing.

A shift to more sort of essential trips.

And seeing the commute case has been fairly consistent actually between Q1 in Q2.

Makes up roughly 30% of our told a rides but.

But seeing more central trips to grocery stores structure supplements et cetera.

A couple interesting trends public transit usage across the country has really fallen nationally.

And a lot of cities.

I've been really tough budgetary started conditions and.

Forced to cut back them out of transit service if they offer.

And we're seeing a lot of people turn to ride sharing as a reliable.

Safe and affordable alternatives there.

One of the what did the exciting things that we've launched on that front as part of the business, we launched a new product called lift pass no just lots that in July.

And lift bass is.

A new products that allows organizations to cover the cost of rides for an employee for customer a guest patient.

Et cetera.

And you will find a provide a safe and convenient flexible option.

So.

Organ and is the way it works and organization can buy a onetime or recurring lift pass.

And set up.

Great set of custom rules and restrictions around the time of day that its use the right type that it can cover the location.

More so we're really excited about lift pass.

And we'll continue to look for more ways to build products that support.

Folks and support cities as they reopened.

One other thing it we talked about a little bit before but I just want to comment on.

Personal vehicle ownership.

We really believe that people are going to depend on lift and shift to lift.

More and more on the other side of the pandemic.

Yep affordable and reliable transportation is going to be critical and navigating a challenging economic environment.

They got on the other side of the pandemic.

Most folks expect there to be obviously very challenging economic environment to deal with.

So we think car owners and folks considering car ownership.

Might opt out of the high fixed costs.

Go along with owning a car.

Either because they can't afford it or they don't want to sign up for that type of long term burden.

And obviously, it's still the early days, but we think we're.

Still at the at the very beginning of a long term secular shift away from car ownership.

And towards adopting a broader transportation as a service.

Type product.

So as far as specific cities, Brian can you weigh in on some of those trends sure. Thanks Logan.

So let me just maybe quickly touch on Ryan Macdonald talking about the cities.

What's interesting for us if you look at we could rise as a percent of our total rideshare rights in Q3 in Q4 of last year. We can rise were 32, and then 33% of total rides at the absolute cope with bottom weaken rights dropped to 20% of total.

In the last week in July we can rise of now reached 29% of total so we're seeing a rebound there and then as it we reported last time airport rides in Q3 in Q4 last year were 9.1, and 9.4% of total ratio rights in April Airport rights dropped to 1.6% and as Logan mentioned.

What rights are beginning to rebound in the month of July they've more than doubled as a percent of ride mix and they're now up to 4% still down from last last Q3, Q4, but definitely trending in the right direction.

In terms of cities in regions.

I think it's really important for investors to realize that the us as a collection of unique data points.

What you're seeing in your hometown doesn't necessarily represent what is happening in aggregate across the us that so as I mentioned.

On the West coast in particular are weaker but other regions have already recovered to a much stronger degree.

For example, 10% of our top 50 cities in July were down, 25% or less year over year and the other key points I understand each month cities recover at different rates and so while July rideshare rides jumped up 12% system wide month over month as Logan mentioned.

Over 10 of our top 50 cities grew faster than 20% month over month, and we had one top 20 city rope, 57% month over month, and then finally, even in areas with really high Cobot case counts and lots of media attention like Los Angeles, and Miami, We did see positive month over month.

Growth in July.

Thank you.

Thanks Steven.

Yeah.

Thank you. Our next question comes from Mark Mahaney of RBC.

Question. Please.

Thanks two questions. Please first can you describe why you think the driver supply challenges our existing you put in weightless early on because there was.

Surgeon drivers, but then it seemed like it reversed I think they're probably macro factors at play here, but your thoughts on why you're experiencing driver supply challenges and then secondly.

And could you talk about why rides volume will more closely match revenue rides declines will more closely match revenue declines going forwards than what we've seen in the last quarter or too. Thank you.

Thanks, Mark I can take the first one.

Around.

Driver.

Participation in the platform. So the two most important factors for drivers when considering whether they want to get behind the wheel right now our health considerations and earnings stability.

And so on the on health care consideration side.

To your plant a lot of that is more macro but we are we're taking that very seriously and doing everything we can add to improve safety and health.

Protection within within the platform. So for example.

The in house I created partition.

We've shipped tens of thousands of those units.

We're going to continue providing PPV and those partitions to keep driver safe and make sure. We're communicating all the different options they have to protect themselves if they choose to come back to the platform on earnings because there was kind of.

That back and forth on the marketplace early on its now important that we communicate the fact as we mentioned that driver earnings are now at or above pre called at levels and so we've really increased our communication around that for those drivers that are comfortable driving at this time.

And Mark Let me, let me touch on your the second part of your question just give a little more context on Q2 and then ill.

Transition at Q3, so in the second quarter incentives that are classified as contra revenue as a percentage of revenue were roughly flat year over year, but increased as the quarter progressed and so job as mentioned the started you to the marketplace had really low driver utilization. So much so that we created these waitlist.

But as the quarter progressed demand began to outstrip supply. So we used incentives to help attract drivers back on the platform very similar to the comments from our competitor last week, we use incentives to help the marketplace for quickly reach equilibrium in terms of supply and demand in terms of Q3, we expect that year over year revenue growth will.

Likely track the change in ride sharing rise as we invest improve service levels by bringing drivers back on the platform. Now. This is really a region by region balancing act in general the city reopens demand tends to outstrip supply and we think it's the right long term moved to increase liquidity and really strategically invest in supply in Q3 and add.

As we invest to bring drivers back on the platform. This has from a GAAP perspective, a contra revenue impact and this is why we expect that Q3 year over year revenue growth will track the change in right your rights versus Q2, where we actually earned a slight benefit.

In terms of trends beyond Q3, we believe the high unemployment will lead to more people signing up to drive on the platform, especially as federal unemployment benefits expire or a further reduced.

And of course, all this is factored into our Q3 adjusted EBITDA estimate and overtime. We believe that this will create a future benefit relative to Q3 is more markets reach really typical equilibrium levels and incentives can decline back or below historical levels.

Okay. Thank you very much.

Thank you. Our next question comes from Eric Sheridan of UBI US. Please go ahead.

Thanks, So much for taking my question, maybe two following upon the answers to Stephen to Mark's question in those markets, where there's been a greater degree of recoveries did not have you seen any changes in competitive behavior between you and your main competitor in terms of way either one of you might be approaching the market in the markets where.

Are you seeing more of a healthy recovery or snapback generally in the environment and then second lien installing onto the last answer how should we think about the demands on the equation most of the supplies for the equation as you see a market recover how much you lead in the on marketing initiatives and customer acquisition initiatives.

This is allowing some of that demand comes you sort of organically holistically. Thanks, so much.

Sure I can all weigh in on some of the macro trends, we're seeing and maybe Brian can hit some specifics.

So competition has been nationally fairly stable.

So nothing no no dramatic changes.

And.

As a company, we're putting our competitive focus on differentiating our platform through product innovation.

Providing a better experience to tar riders and drivers.

Yeah, if you look at some of the.

Programs that we run in markets on the writer side, we have really significantly cut coupons.

Down to a record lows and that seems to be consistent with what we've seen from third party data.

And of course, you know we're in a place where generally we have more demand than we can handle. So so we are really pulled back on that side.

On the over the last last few months.

As as we've seen demand to ramp faster than supply.

We remove the weightless we had on the driver side, we've started acquiring drivers again.

And we are leaning into using incentives to to balance the marketplace against the strong rider demand.

Yes, ultimately our focus is on putting ourselves in the best possible position to deliver strong growth.

As as the market recovers.

Maybe Brian could weigh in on a couple of specifics sure.

Thanks again for the question, Eric I look I think I have to repeat it because it just so powerful if you look at the second quarter, we reduce incentives classified as sales and marketing, 96% from Q1 levels, but at the same time, we saw meaningful rebound as the quarter progress without using coupons.

Yes.

Again, as Logan mentioned, we want to win a product innovation.

Customer experience in brand preference not coupons and so much of the investment in product innovation and customer experience is captured in our R&D line.

We believe these investments can create competitive real true competitive advantages and have stronger ROI than coupons, which can turn into a zero sum game. So we expect that sales and marketing expense for us as a percentage of revenue will be permanently lower post cobot.

So you should take away that this is more than just a short term cost cutting measure.

And then just to add in terms of what we've seen a difference. It is back to my comment like each city is so unique it is really hard to.

Generalize across the United States, It's really a city by city balancing Act.

Thank you our last question comes from Edward Yruma at Keybanc. Your line is open. Thanks, Hey, Thanks for squeezing the and just two quick ones I know you leaned in flash introduced the new.

Upstream quarter, specifically weight and saved and delivery I guess, just any initial observations of how they performed and kind of how these sensors may scale over time. Thank you.

Sure. So so we're really excited about what we've seen from from weight and say if so.

In the sort of first days of the pandemic, we paused shared Raj.

Across the country.

And it was the right thing to do but it took away our most affordable option from our customers.

Which was.

Particularly I think a difficult moment to do that as we had a lot of people switching from public transit into lift looking for affordable options.

And wait and save.

It is really great at providing a lower cost option for folks who are more flexible on their schedule and if you can wait a few minutes.

No.

Wait five to 10 minutes, you can get a significantly better price.

And that drives marketplace efficiency.

Because we can send you know we can increase driver utilization.

And ultimately drive is not going is going out of their way a little bit less.

And for the kind of pure on demand experience.

So we're not not breaking anything out or disclosing any kind of specific metrics on on weight and safe.

But we're we're pleased with how it's performing.

And excited to be able to kind of unlock that type of innovation right when the market needs. It.

Maybe John you can.

Yes, I went to deliver yes sure.

So just for clarity we on delivery, we launched an essential delivery program. You know, we're not we're not doing a consumer facing delivery service.

We are well aware of those despite the growth in delivery the continued growing losses as well not space. So we're really focused on our current programs in essential deliveries, we've been really happy with the speed at which the team has built that product.

It's early days, but we're looking for.

Working with additional organizations so that lets drivers can can help deliver essential items.

And we're just continuing to monitor and and look for opportunities there.

Alright, well with that.

Thanks, everybody for joining our call today.

We hope everybody is staying healthy and safe during this time and we'll talk to everybody again next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.