Q3 2021 Lyft Inc Earnings Call
Yes.
[music].
Hi.
Good afternoon, and welcome to the Lyft third quarter, 2021 or at least call at this time, all distancing in listen only mode to prevent any background noise. Later, we will conduct a question and answer session and instructions will be given at that time, if anyone should require operator assistance. Please press star Vince here.
On your attach Ken Thompson as a reminder, this conference is being recorded.
Like to turn conference over to Sanya Banerjea head of Investor Relations you may begin.
Yes.
Thank you welcome to the Lyft earnings call for the quarter ended September 32021.
Joining me today to discuss with results and key business initiatives, our co founder and CEO Logan Green co founder and President, John Zimmer and Chief Financial Officer, Brian Roberts.
A recording of this conference call will be available on our Investor Relations website at Investor Lyft Dot com. Shortly after this call has and that I.
I'd like to take this opportunity to remind you that during the call we will be making forward looking statements.
Crude statements relating to the expected impact of the continuing COVID-19 pandemic the performance of our business future financial results and guidance strategy long term growth and overall future prospects. We will also make statements regarding regulatory matters. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially.
Curiously from those projected or implied during this call.
In particular those described in our risk factors included in our Form 10-Q for the second quarter of 2021 filed on August five 2021, and our Form 10-Q for the third quarter of 2021 that will be filed by November 9th 2021 as well as the current uncertainty and unpredictability in our business the market and economy.
You should not rely on our forward looking statements are predictions of future events. All forward looking statements that we make on this call are based on assumptions unbelief as of the date hereof and Lyft disclaims any obligation to update any forward looking statements, except as required by law or.
Our discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results.
Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results may be found in our earnings release, which was furnished with our form 8-K filed today with the SEC and May also be found on our Investor Relations website I would now like to turn the conference call over to lift co founder and Chief Executive Officer Logan Green.
Logan.
Thank you Tanya and good afternoon, everyone and thank you for joining our call we.
We had a great Q3.
Our outlook on every metric we reported our second consecutive quarter of adjusted EBITDA profitability.
<unk> remains strong and we've seen a material improvement driver supply.
We were well positioned for continued recovery.
About the solid foundation to continue to scale our business.
Let me address a few highlights from the quarter.
Revenue increased by 73% year over year and was better than our outlook.
Active riders grew by nearly $2 million versus Q2, as more renters insurance and resume prior use cases and new writers starting to use the list.
Although recovery trends still very recently, it's clear that with providers.
During each month of the quarter, we set a new pandemic record for Roger Roger.
Thanks.
Can use cases picked up and therefore rise nearly tripled year over year in Q3.
In addition, we saw strong demand for bikes and scooters with background hitting an all time high in the quarter.
Seatback in New York is just one example of the exclusive content only available through left in Q3, Citibank brands made up 40% of our total volume in the region.
And strategically valuable as we look to deliver increasing value to both.
Base.
Switching gears driver supply has materially improved and retention has been strong in.
In Q3 active drivers increased by roughly 45% first posture.
However growth was robust up 50% year over year.
Keep in mind in September of intense federal unemployment benefits and with the highest level of new driver Activations.
Dan.
Just to be clear the number of drivers matters, but certainly the number of ryzen given an hour and.
And we've found that drivers have been giving more rides versus 2019 for some time.
In Q3 drivers gave 20% more on average than you did in Q3 19.
On the innovations in the marketplace engine and higher earnings.
The drivers are busy they can optimize their hourly earnings.
Supportable rather demand.
This is a win for drivers riders and our business.
We build this against the backdrop of a consistently tightening labor market.
Unemployment rate reached a multi decade low just before the pandemic hit.
Driver, earning requirements vary a lot considering city.
Currently the playing field is level, our competitors have to navigate the same factors.
As the marketplace when conditions change, our pricing adjust automatically and dynamically as an offset.
We've seen this dynamic play out this year, we've demonstrated improving leverage even while driver earnings have remained elevated.
I'm confident in our ability to build on the momentum in our business.
Turning to Q4.
Early trends have been positive October tends to be the strongest month in the fourth quarter for rideshare rides to the seasonality Brian.
Brian will talk more about this but people are typically more mobile in the summer and lessen winter four around the holidays. This is especially the case with bikes and scooters.
Other ahead, although this agenda continues to create operating uncertainty we are optimistic that the recovery will continue and drive additional rideshare and use cases as well as fuel this growth.
John will provide key business updates, but before he does I'll turn the call over to Brian to review our financial performance.
Thanks, Logan and good afternoon, everyone before I walk through the numbers, let me start with an update on supply as Logan shared we are extremely pleased with the significant impact the results of our Q3 supply investments.
We ended the quarter determined to improve service levels, given growing demand trends in Q3, new driver Activations increased 34% quarter over quarter and jumped to 100% versus the number of activations in the first quarter of this year.
The growth of these drivers contributed to strengthen active drivers, which increased nearly 20% quarter over quarter.
In this improving supply position hope fuel volume growth that enabled us to outperform our financial outlook, we delivered 71% year over year revenue growth and on a quarter over quarter basis, nearly tripled adjust EBITDA to $67 million.
<unk> achieved record contribution margin and revenue per active rider.
And keep in mind that we generated these results despite the impact of Covid, very which delayed the return to office for many companies.
Before I move on I want to note that unless otherwise indicated all income statement measures are non-GAAP and exclude stock based compensation and other select items as detailed in our press release, a reconciliation of historical GAAP to non-GAAP results is available on our Investor Relations website and may be found in our earnings release, which was furnished in our form 8-K.
K filed today with the SEC.
Let's move to the details Q3 had strong unit growth despite increasing co located counts with sequential growth of Q3, rideshare ride volumes accelerated and jumped by over 80% relative to the Q2 growth rate.
Fueled by broad sequential strength across cities in terms of specifics 99 of our top 100 cities generated positive sequential rideshare rides growth in Q3.
<unk> is the sole outlier given hurricane either.
Additionally, average daily Rideshare ride volume increased each month in Q3.
Beyond <unk>, we saw healthy growth in unique writers in Q3, the number of active riders increased by 51% year over year, and 11% quarter over quarter to $18 9 million, new rider Activations increased by 47% year over year.
Revenue per active rider increased by 14% year over year to an all time record of $45 63.
Revenue per active rider benefited from a 6% sequential increase and ride frequency.
Partially attribute to improving service levels.
Combination of these trends led to a $99 million sequential increase in third quarter revenue to $864 million, which was above our revenue outlook of $850 million to $860 million.
It's worth, noting our bikes and scooters provided roughly $10 million of the $99 million increase given the seasonal strength.
For the second quarter in a row, we achieved a new record contribution margin level contribution margin in the third quarter was 59, 4%, which exceeded our outlook of $58, 5% to 59% representing nearly 10 percentage point increase from Q3 of 2020.
The outperformance on revenue and contribution margin relative to our outlook helped our strong Q3 contribution of $514 million.
With each dollar of incremental revenue growth versus Q2 contribution increased by over 60.
As a reminder, contribution excludes changes to liabilities for insurance required by regulatory agencies attributable to historical periods and.
In the third quarter, there was no adverse or positive development net of reinsurance recoverable.
Let's move to operating expenses.
Operations and support expense for Q3 was $103 million, a decrease of 12% year over year.
Operations and support expense as a percentage of revenue was 12% in Q3 up slightly from 11, 3% in Q2.
Primarily from bikes and scooter rental activity as well as growth in background checks related to driver Onboarding.
R&D expense in Q3 was $109 million down approximately $20 million quarter over quarter, resulting from the sale of our level five self driving division, which closed in July.
The percentage of revenue R&D expense declined to 12, 7% in Q3 down from 26, 2% in the year ago period.
Q3 sales and marketing was $99 million as a percentage of revenue sales and marketing was 11, 5% roughly flat with Q2's 11, 6%.
Sales and marketing incentives were less than 2% of revenue.
G&A expense in Q3 was $167 million, a decrease of 18% year over year G&A expense as a percentage of revenue was 19, 3% and a decrease of 70 basis points quarter over quarter.
In terms of the bottom line for Q3, adjusted EBITDA profit of $67 million was above our outlook of between 25 and $35 million and nearly triple the $24 million achieved in Q2.
It's worth noting that Q3 adjusted EBITDA included.
$10 million of benefits related to two items first we captured additional gains of $8 million related to flex drive selling vehicles.
We were able to settle a legal matter and released accrual that provided a combined 10 million benefit to G&A expense.
Without these gains totaling $18 million, our Q3 adjustments and short term investments increased quarter over quarter to $2 4 billion.
Before I move to our Q4 outlook I want to remind investors that the pandemic is not yet over future conditions can change rapidly and may impact our outlook.
With that let me share what I can.
In terms of supply given our success in Q3, Onboarding, new drivers and expected tailwind we plan to taper supply investments in the fourth quarter of course, one is extra busy we will use dining and attract additional drivers onto the platform.
In terms of rise in October we achieved our sixth straight months.
The impact of holidays on demand in both 2019 and 2020, so pre COVID-19 as well.
The rideshare rides, we expect to see.
And trend this year.
Additionally, there is a population of rider pre COVID-19 activities.
No right volume increased over the summer in Q3, we were still down.
35% from our peak.
The reasons and circumstances vary.
So people are concerned about the most recent surge in seat counts that are awaiting producers there are parents.
So we're foregoing certain activities until their kids are vaccinated and then there are those waiting for mass mandates.
But for some it's a combination of these factors.
Separately with summarizing Covid case count.
Turning to office until Q1, this is especially true in a city like San Francisco as a data point Q3, rideshare rides in San Francisco was down by more than 60% versus Q3 of 2019 meeting San Francisco quarterly Rideshare rides were less than 40% recovered from two years ago given.
Given the delayed return to office and other features.
We're getting factors, we recovered group, taking additional rideshare and used cases is more likely a first half 2022 events, especially in key West Coast City by San Francisco.
We anticipate this tailwind will help drive volume with each region year over year.
Revenue growth for full year 2022.
2021.
So.
Revenue in Q4 of between $930 and $940 million.
This implies growth of between.
63% to 65% year over year versus the 73 percentage.
In Q3. This outlook includes the typical Q4 rideshare seasonality and the delayed reopening acceleration. In addition, remember that Q3 is also the seasonal peak for micro mobility in North America in the fourth quarter bike and scooter revenue we expect.
Q4 contract.
Future margins to be around 59% given the impact of seasonality among other factors the midpoint of our outlook for revenue and contribution margin implies what would be an all time record for contribution eclipsing the level in Q4 of 19.
We continue to expect the contribution.
On a per <unk> basis will be greater post COVID-19 than it was pre COVID-19.
In terms of the bottom line, we expect our Q4.
EBITDA will be between 70 and $75 million versus the $49 million in Q3, adjusted $16 million to $18 million of benefits <unk>.
Similar to revenue, we faced seasonal pressures that one as well that can pressure EBITDA.
Trends in 2019, so pre COVID-19, our adjust EBITDA loss increased between Q3 and Q4 last year, we undertook layoffs in Q4 that obscured the typical trend. So the fact that we expect to hit four despite the headwinds.
The improvements we've made to our.
Our use of approximately 8%.
This compares to seven 8% in Q3 or five 7% without the $18 million of benefits.
Separately based on our momentum we continue to expect that lift will achieve adjusted EBITDA profitability.
On a full year basis in 2021, which is an important milestone.
In fact year to date through Q3, which has already generated cumulative positive adjusted EBITDA of nearly <unk>.
One 8 million the midpoint of our outlook implies annual 2021, adjusted EBITDA of approximately $90 million, which represents an improvement of roughly $850 million year over year.
So let me close.
We've overcome a number of formidable challenges by remaining resilient and focused on our execution and strategy that pandemic is.
<unk>.
For the past 18 months, we have transformed our operating model achieved adjusted EBITDA profitability ahead of expectation.
Now demonstrating improving leverage.
Looking forward as we emerge from the pandemic, we expect to be a stronger company with greater leverage we plan on building a significantly larger business as we attack the massive market opportunity ahead of us.
We see exciting opportunity to lean into growth to deliver solutions that serve the growing scale expected tailwind from the recovery, we are positioned to unlock natural business leverage so we expect that.
We can fund these growth opportunities, even as we generate improvements to overall profitability.
So with that let me turn it over to John to provide key updates on our business and our strategy.
Thanks, Brad I'm excited by the momentum in our business and by the significant market opportunity ahead near.
Near term, let's say advancing our technology to optimize our real time market balance, which makes our network even better for drivers and riders.
On the driver side, we are continuing to dive deep on innovation that delivered the best possible user experience at.
As one example, we've been testing a new app interface that gives drivers more granular visibility into our market conditions before they start driving.
The early results have been fantastic.
Saw a roughly 25% increase in the number of times and driver are engaged with our app and an almost 5% increase in the net incremental refinements to our prime time dynamic pricing technology can support a higher ride volume improved pickup times and increased driver pay all at the same time.
We will continue our diligent focus on the square since these types of enhancements can result in higher driver engagement and retention better marketplace dynamics, and ultimately tens of millions of dollars and leverage every year.
On the <unk> side, we've scaled new modes that give our riders more often.
While also providing valuable benefits to a real time marketplace.
The rideshare mode like wait and save that allows riders to wait a little longer for pickup and pay a little by giving them the ability to prioritize what's most important to them at the moment price or time.
And more usage of our network.
And less expensive option.
Bike and scooter along with different use cases, such as with lift rentals further help us maximize the overall usage of lift transportation network.
These advancements and services add value today and help us prepare the infrastructure for the future as we deliver more and more transportation value to consumers.
Competitive differentiation the.
The Lyft network is a product of nearly a decade.
So the engineering investment and we are perpetually achieving new levels of efficiency and functionality with a focus on transportation.
The tremendous value of our specific approach will become increasingly more apparent over the next few years as we look forward. We continue to see a very long runway to both add riders and capture our transportation market opportunity is just getting started and the critical profitability and product milestones. We hit this year set us up well.
For the quarters and years ahead.
Every year in the U S around 4 million people turning 18.
Splitter, and the ease to get up.
But theyre express drive and <unk>.
Significant lifetime value.
Our focused execution.
Will allow us to establish lyft as their go to transportation partner.
Both directly with more than 150 University and college partners to develop transportation solution for more than half of it.
Students can get access to <unk>.
The funded or discounted rideshare rides as well as to our bikes and scooters.
For these writers.
Indeed, our low risk trial period to get to know lift for us, it's an opportunity to cement our relationships with these writers becoming.
Before we move.
On the regulatory front in Massachusetts.
The coalition for independent work reached an important milestone in Q3.
Overwhelmingly support the ballot measure by a 7% or one market because it allows them to keep their demands.
Sorry for the benefits.
We are.
Legislated solution and are highly.
Let's say an independent silo.
This model for guidance for.
We're now ready to take questions.
And ladies and gentlemen.
As a reminder to ask a question you will need to press star one on your thoughts.
Tom can withdraw your question Vince.
Please standby will be Doug Anmuth from Jpmorgan. Your line is open for.
Taking the questions maybe.
Thank you.
First just on driver supply.
The supply of 45%.
Papering the investments into <unk>, but can you kind of help frame what that means more and perhaps explain a little bit around.
And what percentage recovered you might be versus current provider demand as you or color you can add there and then secondly, just on Citi bike. If I heard you correctly you talked I think you said, 40% overrides in the New York region.
Related to <unk>.
Citi bike can you just talk about how that's kind of driving acquisition of customers.
Between bike and core rideshare and anything else you can add on just acquisition trend characteristics of those users.
You see versus kind of regular.
Lyft users. Thanks.
Sure Hey, Doug This is Brian let me start and then I'll hand off to John.
Look we definitely played offense in Q3 to invest in supply and improve service levels and we're tapering because we see more drivers returning to the platform and as Logan pointed out they're giving more rights and there's there's three contributing factors the sunsetting of enhanced federal unemployment benefits. If this increase in productivity and there is also a pool of potential.
Potential drivers who are being cautious so let me let me just touch on each of these.
We believe that sunsetting of enhanced federal unemployment benefits is acting as a tailwind it it's too early to tell but the long term impact but in September driver Activations. So these would be new drivers jumped 17% month over month and grew further in October and if you look at the full third quarter driver.
Percent year over year.
It's important to understand.
So I understand this.
Last year, 85% of drivers drove less than 10 hours per week on our part.
Platform, the significant majority of drivers or using the lyft platform for supplemental income and so youll government plus whatever estate added it really eliminated the need for some folks to drive for supplemental income purposes, and again the jump in new drivers.
After the enhanced benefits expired as really providing some organic tailwind.
Second as Logan pointed out productivity has increased on the platform and so when analyzing supply you don't have to look at just the number of how many rides per driver and we've seen the number of rides per driver increased versus pre COVID-19. So as Logan mentioned in Q3, the number of riders sorry, the number of rides per driver with more than 20.
<unk>.
Percent greater than Q3 of 2019, and then finally, there's some conscious people who have not yet resumed driving or apply to drive and there's different reasons.
Some have concerns about the most recent.
Second to improve over the coming months.
As this happens we expect to see people shift from delivery to rideshare work earnings tend to be higher based on historical studies.
This is John before I touch on a city by question just wanted to also zoom out on that.
Question around drivers one of the data points that we look to was from the Bureau of Labor statistics.
Looked at what you could call comparable.
Kind of labor markets and so we looked at the retail industry.
Combined with the hospitality and leisure industry and what we saw from January through September is that our active drivers grew out of page five times faster than the recovery in the combined retail and hospitality sectors and one of the main reasons that I would say that is because.
The flexibility provided by the platform and that you can turn on and off the App and earn an earnings whenever you want as people come out of Covid.
We feel strongly that the type of model. We offer is one that workers want.
Moving on to Citi bike Youre right. The stat is that Citi bike rides made up 40% of our total lead volume in New York.
We've been saying for many quarters the bike share acquisition, we did a while back and the types of contractual long term category exclusivity, we get with a program like city Citi bike a strategically valuable.
And kind of drill into the question you back you asked around potential crossover.
We see incredible crossover between rideshare bikes.
People consumers think of how much they spend on transportation, they think about their transportation options and compare them against each other and we're the only place you can do that with Citibank.
Year to date, the number of Rideshare rider that tried our bikes for the first time is up nearly 100% versus last year in New York, It's even higher up nearly 150%.
Thank you.
Sure I would actually answer a question you didn't ask.
In fact that just in terms of Contra revenue.
Related to some of the <unk>.
Incentives classified as <unk>.
Contra revenue increased on a quarter over.
A quarter basis by $47 million.
For the quarter was stronger than expected, we plan to reinvest more into supply to improve service levels and we're pleased that we're able to do this and still exceed our outlook on revenue contribution margin and adjusted.
Net of incentives as the cleanest metric.
Revenue in isolation could be a red herring.
Especially of higher prices.
And being the driver incentives when it's extra busy and we need more drivers we're focused on.
On funding the required driver incentives from the elevated prices. So actual GAAP revenue, which of course is net of the incentives is the clearest metric to measure the true impact of this relationship we're going to continue to report the amount of focus on GAAP revenue and overall EBITDA.
Just keep in mind too that the second quarter not the third was the peak quarter for Contra revenue on a per <unk> basis, given volume growth.
Q4.
Thank you Dan.
For our next question.
Goldman Sachs Eric Your line is open.
Thank you so much for taking the questions and hope all is well.
So I wanted to follow up on what you just said there as you think out.
2022, and you think.
Fully normalizing and drivers.
But theyre being some inflationary elements around energy prices, how do you think about striking the right balance between incentive supplied by and drivers to be on the platform versus levels of driver earnings drivers might've gotten used to during periods of supply.
Supply demand balance.
As we come out of the pandemic I'm curious for just philosophically. How you guys think about striking the right balance of supply and demand as we turned the corner.
Comment you guys had earlier.
Pockets of active riders that have not come up.
Back how much do you think that's just time versus elements, where the company needs to lean in and maybe.
We have sent some of the demand or lean in on the incentive side to drive active.
We're confident that we have the right levers regardless of the pricing environment to drive strong business results and longer term.
Sherman's we fully emerged from the pandemic, we expect for prices to be lower in volumes for obviously to be greater I think it's worth repeating rideshare rides in Q3 were still down more than 35%.
For <unk> from the Q4 2019 peak so as we recover volume will definitely help us leverage fixed costs within cost of revenue things like depreciation and to a certain extent hosting.
Also as we emerge from Covid, we expect ride frequency to increase and this will help us will help us increase monetization, which should help contribution.
In fact to exit the pandemic structurally.
More profitable per ride than we were going in in terms of just the comments around it.
Sales and marketing as a percentage of <unk>.
The percent for the sixth straight quarter and incentives classified.
Sales and marketing, we're just one point.
About our competitive position so.
I think just maybe at the risk of repeating.
Our long term strategy Hasnt changed we want to win on product innovation on customer experience and brand preference not coupons and we believe that R&D investments can create competitive advantages and just have stronger ROI than coupon. So we expect that absolute sales and marketing will increase in future periods as revenue rebounds.
We expect that sales and marketing expense as a percentage of revenue will likely be lower post COVID-19 than it was pre COVID-19.
So for US I think it's just a matter of time and then just going back to something you heard Ed.
Every single year, Theres 4 million, new people who've become of age to use ride sharing in the U S and that's just a constant inflow every single year. So again there are structural.
Growth trends here in terms of driving up that active riders.
Thanks for the color Brian.
Sure.
The next question we have.
Steven Your line is open.
So look at our John.
Top on word mobility continues to improve and drive our suppliers continue to come back.
And you have brought back I believe shared rides in certain cities. So can you talk about the rider.
Uptake, there and whether it's tied to more widely rolled that out across the country.
Brian I think.
Since the onset of the pandemic.
<unk> done a lot of to right size your cost base relative to demand levels.
What you were seeing at the time.
Particular to it ops and support so do you think you have the resources in place to spool things back up as demand unit growth began to Bob Walsh. Thank you.
Thanks This is Logan.
So we have.
As the pandemic sort of came into place, we sunset shared rides and relaunched wait and save which is.
And a lot of ways.
Phil.
Similar market need.
Slightly.
Lower service level, where riders wait a few extra minutes to.
To save a little bit on every ride we did experiment with launching shared in one market in Philly, we have paused any further scaling up sort of waiting on CDC guidance. So there is nothing further eminently planned on the share front, we will on that yet and then I'll turn it over to Brian.
So on operations.
Operations and support expense as a percentage of revenue should decline by about 100 basis.
At this point, so we feel good in terms of our ability.
Thank you.
Evercore ISI Mark.
Your line is open.
Wanted to ask a high level question about rider and driver incentives created.
And post Covid and I'm wondering if the net and the impact on the financial model.
There is the service really has.
Spiders, and therefore, there's a lot of pricing power. So there's maybe less need for I'm, sorry for rider incentives, but there may have been some structural changes.
Especially the rise of alternative.
<unk> opportunities I am talking about delivery for drivers such that.
And the need for driver subsidies. So could you just comment on that whether that could be all neutral to the business model that may be lifted in the future is less driver at more bloodless rider and more driver incentives just because of that.
Change brought about by Covid, the pricing power that you've shown.
Riders and then just now youre, having a more competitive environment with with drivers. Thanks a lot.
Sure. So let me let me take the writers at first I will transition to the drivers side.
And so just as a reminder, in the year before.
37% of revenue at the time of the IPO, We said that the long term, we expected it between 10 and 15% probably closer to 15%.
We just reported a quarter with 11, 5% was our sixth straight quarter again below 15%.
So I think thats, a pretty good validation, we would rather drive growth through innovation and taken care rider is better than the competition. So again I think longer term, we expect that sales and marketing as a percentage of revenue will be lower than it was pre COVID-19 and I agree with you I think there is.
Great generally more pricing power than anyone ever realized existed in the industry in terms of earnings for drivers again.
Large buckets, many if youre looking at rideshare versus delivery.
Earnings tend to be higher because there's just there's more qualifications you have to pass a background check to drive you need a car that qualifies and so earnings tend to be higher and so I think there are some reasons why there are some people being cautious right now.
There are people still on the sidelines because they may have concerns about the recent surge again they want their boots.
Sure some have kids and they just don't want to be driving until their kids are vaccinated in there and there are a lot of folks.
Now.
Ask me that is a requirement we're following CDC guidelines and for a lot of folks I think they are waiting for that requirement to drop and then I think we will expect more drivers coming in but I think going back to what I, just said earlier I think.
Navigating hi.
High price low price.
Different volumes et cetera, we can really we have a lot of levers to manage this and manage growth in the P&L. So.
Okay.
Okay. Thank you Brian.
Our next question, we have Alex Potter from Piper Sandler.
Your line is open.
Great. Thanks, guys, maybe another high level question.
As Youre, probably aware right now, it's pretty hard to buy a new car, it's pretty hard to buy a used car.
Generally speaking.
It's tough to buy any kind of car.
So all else equal that should benefit.
Sort of mobility model I'm, just wondering the extent to which you are trying to capitalize on different environment, whether you regard it as an opportunity to try to get.
Consumers comfortable potentially we're pitching that second car.
And embracing.
Ride hailing is as a primary mode of transportation.
Any opportunities you have to do that thanks.
Yes, I mean I think it's.
Sure.
It's a good a good pressure.
Sure.
Or to what everyone was asking like during the pandemic of Hey is everyone going to go out and get a car now.
So it provides kind of a backstop to that.
We spend multiple years on building out our fleet business and primarily we have.
Been focused on doing that for drivers.
And now we see opportunity to.
Do that provider so we've launched.
Lift rentals with first party vehicles as well as third party vehicles.
So I think it just further supports having our broad and focused approach to transportation, where we can offer you a rideshare vehicle. We can offer you a rental.
And do that first party and provide the best experience a bike and scooter etcetera.
Et cetera, and so yes, it's an opportunity when there are shifts in the market when there are limitations in the market on vehicles.
But again, we want to cover every aspect of transportation to increase the size of.
What someone's spent on transportation with linde, but to reduce their overall spend on transportation and that's something we've been consistent about we stay focused on in the pandemic and we'll continue to pay off.
Okay, Great and then maybe one any additional comments on our strategy with regard to electrification would be helpful. Thanks.
Sure I can say that again kind of similar to what I was saying we spent a couple of years building out this program.
Part of our business.
The fleet business.
We have a unique asset through our ownership of <unk>, which is our independently managed subsidiary.
And this gives us a massive strategic advantage as we convert all vehicles on the platform to Evs you brought up Evs. We're very excited about that transition. We were the first company rideshare company to commit to having 100% electric vehicles by 2030.
Seeing others follow suit as a good thing for the planet.
But by having that ability to offer it from our providers. It gives us the ultimate control, we've actually had <unk> available through express drive for multiple years.
And we feel great about leading that transition.
With flex drive and partners if needed.
Great quarter, Thanks, guys.
Yes.
The next question, we have Ed <unk> from Keybanc. Your line is open.
So taking the question.
Really interesting to hear the strategic importance of the.
In micro mobility segment, particularly you guys, calling out city by I guess as you kind of look over the medium term argument is Joanne and I guess, just any update on kind of improvements you've made for the longevity of the devices given that people.
People can be pretty tough.
Thanks.
Yes, thanks for the question.
In terms of the markets.
We have already a relationship in Chicago with <unk> similar to what we do in New York City on Citi bike.
We have similarly in Boston.
We feel quite good about we are we have a majority of shares and those relationships typically are exclusive.
So we're really happy with that strategy and Im happy to see it paying.
Payoff in terms of the actual devices. The fact that our largest market is in New York.
And being built kind of like a tank bikes for New York think of all the weather changes in New York and OE.
The streets and the way those bikes can be handled so they've been battle tested the great News is that we continue to take all the learnings from the bikes and scooters and you look at a total cost.
While the ownership model for our device. So we look at not just what it takes to serve.
What it cost to buy the bike, but we might actually.
First for longer.
And our first ground up piece of hardware, we launched the.
E bike is showing massive advantages just didn't really early.
Testing in terms of cost to deliver that ride per ride. We are a bigger battery we look at all the repairs needed and we can fix the parts are hard in the parts. So that they don't need repairs. So the team has done a phenomenal job and we feel great about.
Our strategic position as the exclusive provider in those key markets.
I also want to call out something we're doing with Lyft Pink a membership program. We recently so so in every market, we sell a local bike share member share into.
In addition to that offering.
Membership that gives you unlimited access.
SaaS.
Two our bike and Scooter network and.
And we're seeing some some great uptake from that program is just another example of how we can.
Leverage the businesses together and you can think about as long as I'm talking about you can think about like the bikes in New York as our exclusive content similar to Ah Kee show.
Good games on Netflix.
And so.
If you are in New York, and you want to get transportation to access.
Through pink.
Or through any rideshare provider, but you use citibank, even occasionally it's going to make sense for you to to join with delineation and for giving the color on king.
Our next question, we have Deepak Matthew Zanun from Wolfe Research Your line is Hilton.
Great. Thanks for taking the questions. Brian can you provide an update on where the rights volumes on a unit basis always says 2019 levels currently.
Some of the use cases are still lagging any update you can call out a few.
Carlos would be great.
Second question can you talk about what you're seeing in terms of market share price currently.
Do you think theres been any shifts or any change in your strategic approach to market share right now. Thank you.
Sure. So let me let me talk about used cases, I'll talk about Q4 rides and then I'll.
Talk about competitive trends.
So in terms of use cases COVID-19 is obviously still here. So it's difficult at this time to provide a precise view I think in general in general looking at use cases, we expect all of them to return we expect commute rides to strengthen as more companies return to the office I'd say, we're beginning to see in <unk>.
Tick in business travel, but it's early and we expect that this will become more pronounced as more companies return to the office. One interesting data point is that airport rides reached eight 5% of total rideshare rides in Q3.
And if you go back two years ago Airport rides were nine 1% of total rides in Q3 of 2019, so while leisure has been strong we believe some of that some of these airport rides is actually the BNA of corporate travel.
Looking at Q4, what I can say is we've learned COVID-19 can change quickly. So it's always important for me to start with that caveat in terms of data points.
Logan mentioned October was our best month and last week was our best week since April of 2020 for Rideshare rides.
We talk to the seasonality.
October is the peak month in Q4.
In terms of some of these.
As I shared the summarizing Covid case count.
Many companies as a result postponed to return to the office until Q1 and this is pronounced.
And so when you think about sort of our P&L and our financials right now, we're only 40% recovered I'm willing to bet San Francisco.
Cisco will.
Regain its former glory here.
And so as we mentioned we do have.
If you missed it.
Sure.
Our earlier comments, we do expect that.
Full year 2022, we'd actually expect.
One <unk>.
In terms of our outlook for Q4 give.
Given the uncertainty of Covid, we see multiple ride growth scenarios. Our revenue outlook is not tied to a single scenario that we can pace quarter over quarter at the midpoint.
Our outlook implies revenue growth of 63.
65% year over year in terms of competitive trends in general we really have if you look at sort of pre COVID-19 versus where we are today.
Per share changes.
We believe.
The overall theres strong demand, which has ended.
Specific trends, we were really pleased to see the volume growth.
To accelerate in Q3 versus Q2 as I've mentioned, the sequential growth rate in terms of ride units increased 80% the growth rate increased 80% relative to the.
Q2 sequential growth rate.
Okay. Thanks, Brian.
Sure.
Our next question, we have John Zak Glitch from colleagues John Your line is open.
Great. Thank you two questions first on the driver supply, where there any geos where driver supply was at or above pre COVID-19 levels, and if so where ride volumes into our service levels.
Better in those markets and second question the new rider Activations number was really strong just any particular cohorts of geos that drove.
The new rider Activations. Thank you.
Yes, I would say in general we did we wanted to play offense in Q3, we sort of beat the industry to profitability in Q2, which is the big milestone and we decided we would actually play offense. So we're very pleased that we were able to invest and I think you can see it in terms of the results in terms of our the supply.
<unk> position now going into Q4, I think in general if you look at third party data.
You can see that there were some states with sunset federal unemployment earlier.
General supply came back sooner prices came down more relatively more in those markets I think thats probably early indications.
But generally I mean, the market is pretty efficient at all balanced pretty quickly.
So.
I think thats, probably the most I can share in terms of.
It's all the use cases are coming back.
What we refer to as party hours, which is sort of the late night rides commute.
Off peak airport rides like we're seeing volume of all of those categories of rides increase.
Okay.
And on the rider Activations.
Thank you.
Yes.
No look we were.
We were very happy in terms of on the rider activation. So again in terms of new rider jumped 8% quarter over quarter and up 47% year over year, I think as John points out, we do lean into University programs.
Typically these programs are either fully paid by the university or heavily discounted by University. So that's just a great way to habituate someone on the Lyft platform. So we love those those new digital natives, who are going all in on lift.
But again it goes to the dose of at least 4 million people, who become of age to use ridesharing each year and then the fact that we have bikes and scooters to John's point, It's just another entry point into the Lyft ecosystem.
The other cohort Ed just to repeat that Brian brought up a couple of minutes ago.
Return of the business user.
And given he provided those numbers around airport travel.
We're continuing to see that moving in that direction, which is an important cohort as well and we have a whole lift the business team executing.
To bring in that segment as John talks about business travel and airport right. There's one thing that I think it's worth clarifying for folks we've seen a lot of reports and a lot of studies allegedly trying to figure out.
Where prices are versus where they were.
Wanted to say it is impossible to precisely calculate the magnitude of price changes since right details can change and what I mean by that is the average time and distance of rides can change in the mix of city. The mode can also impact average prices. So for example in Q3, they mentioned airport rides as a percentage of total rideshare rides continue to inch.
Kris Airport Reits tend to be more expensive because they are longer. So clearly first of all you have a shift contributed lager rides that are if you are looking at credit card data will be looked like higher price rise separately as more people resume their normal lives traffic is returning so even if you take a ride that was the same exact length and.
Compared to say January that Ray is going to be more expensive because it's a longer right in terms of minutes in minutes factor into prices.
Remember COVID-19 artificially reduce traffic.
And then for the folks who are trying to do comparisons versus two years ago is really important as John touched on this our lowest priced option shared rides is back and only a single market Philadelphia.
Sure rides were only offered in bigger cities, which tend to be the same cities with these attempted pricing studies and just as a useful data point in Q3 of 2019 shared rides represented approximately 40% of rides in Miami and right now with zero and see if you can imagine doing a weighted average calculation on average price because.
The mix shift that will look different.
Thanks, so much.
Paul.
The next question we have.
Hi, Kelly from Citi. Your line is open.
Great. Thanks, everybody just two quick ones for me first maybe Brian can you comment on where your service to 100% by 2030, how are you thinking about managing lift asset intense.
From Citi.
Next several years in terms of how many evs are you willing to have kind of.
Owned fleet relative to <unk>.
Partnering with Sir yes, so in terms of service levels.
As I mentioned.
We do expect as we get more and more drivers back again, there are definitely some.
Cautious people, who again do not want to be giving rides right now today.
Are doing some more probably more on the delivery side.
But again looking at all the historical studies Rideshare, you tend to make more money versus deliberate.
So we do expect that we will see this influx of new drivers again, and I think that was a big focus in Q3, and we feel really good in terms of.
The impact on both lowering.
Improving pickup.
Pickup times and so that's an area we continue to focus and we always wanted to get better there.
On Evs.
Again.
So strongly that the.
The way, we're running the fleet business it gives us a.
Really kind of two types of third party you can have.
Third party operators and you can have like third party financing partners.
The operations to us is super important to do well to get right and to not pay a kind of a middle person extra fees and so that's what I mean, when I talk about first party, there's lots of smart ways to finance it with third parties.
Which I think we're going to get better and better at and we're exploring lots of different options to do that so that it doesn't burden us.
But operationally.
When the transition to Evs.
Doing that in a first party way in key markets and then getting national coverage through third parties that we believe is the right way to do it.
Okay.
Hi, This is Brian the only other thing I would add as we look at total Capex for 2021.
We now expect it will be lower than 2020.
Got it lower.
That's very helpful.
Our next question, we have Brent Thill from Jefferies. Brent Your line is open.
Thanks, Scott just a question around pricing I know, you've been investing and trying to get right times shorter than pricing down can you just give us a just a general sense of.
Where where you stand on that and how you expect that to play out in the next couple of quarters.
Yes.
Just shared why there is many reasons why it's really difficult to look at sort of average price I do think again when you look at where we were in Q3.
Interesting is if you look at our revenue, we're actually only 15% off our all time high quarterly revenue would ride down more than 35% from our peak and in Q4. If you look at our outlook I think it's around 8% off our peak. So we're doing a really good job in terms of the monetization.
But again in general.
Volume really matters and rideshare and so maybe at the risk of repeating myself.
The extra volume that we expected the recovery helps us leverage fixed costs within cost of revenue.
Unlike our competitor we include depreciation within cost of revenue they put it in a different category and so it does provide significant leverage for us.
Hosting.
To one where.
There is a lot of there is significant ability to leverage hosting cost with volume it's not a one for one relationship will drive volume.
And then one of the areas that we've decided that we're sort of leading the industry on is around transaction processing and one of the programs in a few use lyft youll see this.
We're doing aggregated billing, where we're actually.
We send you received each time, but we are billing your credit card. Once every 24 hours and so as ride volume comes back there is just that ride frequency ticks up and most people when they're using ridesharing.
We'll use lyft and Theyre going to a party and then they are coming home, they're going to be office or coming home and these round tripped add up and so that provides a lot of in terms of our contribution there is some <unk> leverage there and then finally.
Don't think we talk about it enough we have one of the preeminent teams if not the most preeminent team on marketplace. When you look across the industry and so what they are driving in terms of improvement on monetization. Both in terms of revenue and driving down variable costs should also help contribution so.
As I said, we expect to exit the pandemic structurally more profitable per ride than we were going in.
Great. Thanks, Brian.
Our next question, we have Steven Fox with Fox Advisors, Steven Your line is open.
Thanks, Good afternoon, just to follow up on that last point I just had a clarification and then a question one just to be clear you said that you.
We dropped down about 60 cents of EBITDA for every dollar of revenue growth and then you said increasing leverage into next year does that mean, you're saying that that dropdown ratio can improve and then for a question I was just curious like you laid out a lot of obvious leverage.
Options you can pull on where does mix factor into your leverage thinking next year and maybe longer term. Thanks.
Sure. So let me talk about leverage and then I may hand off to talk about mix, but.
When we look at Q4, we expect to increase our take rate and generate contribution leveraged. So despite seasonality. We expect contribution margin leverage was nearly 55 on each incremental dollar of revenue and if you normalize for the Q3 remarketing gains the Leverages <unk> 65 from a dollar in Q4, which is an increase from.
Q3, Q3 was 62 sets.
And this is inclusive of the $20 million sequential decline in quarterly bike and scooter revenue, which obviously creates a headwind to contribution.
And it's probably worth calling out despite this headwind the midpoint of our outlook implies contribution will reach an all time record all time.
Absolute dollars in Q4.
Terms of just as we again, we're not providing an outlook on 2022 at this point, but.
All of our mode to be back next year, and I think again to John's point product at the right time for them.
Right user and it changes throughout the day throughout a week throughout a month.
And as folks travel and so again.
We're really excited because again some of these other modes help us attract and really increase the <unk>.
Dresser Bull market for us.
Great.
We need that as time.
And we look forward to talking with everybody next quarter have a great evening.
Ladies and gentlemen, this concludes today's conference call. Thank you all for participating you may now disconnect.
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