Q4 2022 Lyft Inc Earnings Call

Speaker 1: I'd like to take this opportunity to remind you that during the call we will be making four looking statements. This includes statements relating to macroeconomic factors, the performance of our business, future financial results, and guidance, the impact of our cost reduction initiative, strategy, long-term growth, and overall future prospects.

Speaker 2: I would now like to turn the conference call over to lift co-founder and chief executive officer Logan Green. Logan? Thanks, Sonya. Good afternoon. Today I'm going to cover the team's Q4 performance, important updates to our non- GAAP financial measures, as well as our Q1 expectations.

Speaker 3: We've also expanded our market reach by relaunching our lift pink membership program with new benefits and a lower price point. Additionally, by integrating services for car owners into the lift app, like roadside assistance, parking and maintenance, we can deliver even more value to the roughly 75% of lift riders who have a car.

Speaker 4: And in Q4, we took action to strengthen our insurance reserves by $375 million, which given the definition change affected our reported results.

Speaker 5: Now let me talk about Q4.

Speaker 6: Right-share demand was strong. We had 20.4 million active riders, which was the highest level in nearly three years, and revenue-practic active rider reached a new record.

Speaker 7: In Q4, we're the most active drivers on our network in nearly three years, reflecting healthy, organic tailwinds.

Speaker 8: and mirror all time high.

Speaker 9: As a result, our conversion rates, meaning the share of ride intents that convert to rides taken, came down quarter over quarter. This dynamic contributed to revenue and adjusted beta, exceeding the high end of our outlook, excluding the increased insurance reserves.

Speaker 10: Next, I'm going to address our Q1 guidance. There are three factors putting pressure on both revenue and adjusted EBITDA relative to Q4. First, seasonality.

Speaker 11: Second, prime time is coming down dramatically quarter of a quarter because of increased driver supply. This reduction in prime time is good for our service levels, but will reduce our Q1 revenue and adjusted a bit.

Speaker 12: Given the combination of these factors, we anticipate Q1 revenues of roughly 975 million.

Speaker 13: And we are laser focused on driving additional growth and managing costs.

Speaker 14: To take advantage of this opportunity and grow the market, we must prioritize competitive service levels.

Speaker 15: We will share additional long-term margin targets in the near future.

Speaker 16: Thank you, Logan, and good afternoon, everybody. To begin, I want to note that, unless otherwise indicated, all income statement measures are non-gap and exclude stock-based compensation and other select items as detailed in our earnings release.

Speaker 17: This reflects a combination of strong ride-share demand, improving supply, and good early progress on our cost reduction efforts.

Speaker 18: This was the highest quarterly revenue in lifts history and it exceeded the top end of guidance of 1 billion 165 million dollars.

Speaker 19: For full year 2022, our revenue reached a new high of $4 billion, $95 million, up 28% versus full year 2020 one.

Speaker 20: And revenue per active rider reached a new high of $57.72.

Speaker 21: To be clear, we are not required to restate our historical financials.

Speaker 22: This is at the high end of management assessment of our potential exposure to past claims in light of past volatility.

Speaker 23: We reported Q4 contribution of $414.7 million, including $225 million of the reserve increase just discussed.

Speaker 24: Outperformance versus guidance was driven by rideshare.

Speaker 25: Sequentially, in addition to the impact of cost savings initiatives, the decline in operations and support expense reflects seasonally less bike and scooter support.

Speaker 26: These modes typically have peak usage and support in Q3, which declines in Q4 and further in Q1 along with winter weather.

Speaker 27: Sales and marketing was $114.4 million. As the percentage of revenue, sales and marketing was 9.7%. Down 150 basis points from Q3 and 190 basis points from Q4 of 21.

Speaker 28: This includes $150 million of the $375 million insurance reserve increase that I discussed earlier, and it's related to certain insurance costs that are generally not required under TNC regulations.

Speaker 29: We achieved 50 million of these savings between Q2 and Q3 of 2022 related to OPEX.

Speaker 30: In Q4, we reported an adjusted EBITDA loss of 248.3 million, including the 375 million insurance reserve adjustment.

Speaker 31: We ended Q422 with unrestricted cash equivalents in short-term investments of 1.8 billion in line with the level at the end of Q322.

Speaker 32: First, seasonality. We tend to see a different mix of rides your rides. For example, shorter rides and fewer airport trips.

This is ultimately good for our service levels that will reduce our revenue and adjusted EBITDA in Q1.

The sequential revenue decline of 200 million translates into a sequential adjusted EBITDA decline of roughly 157 million at the midpoint of our guidance range.

As Logan mentioned, and I want to reiterate, our profitability in Q1 is a consequence of the new mix we are facing.

We are looking for opportunities to significantly cut costs and drive efficiencies. As one example, let me speak to stock-based compensation expense.

To conclude, we are facing near-term financial headwinds driven by current market conditions.

Second, deliver more value to a growing population of lift loyal riders.

LiffMaps continues to be a great example of how we're differentiating and strengthening our marketplace technology.

It's the reason why we were the first to market to integrate our driver app with CarPlay and with Android Auto, which has been incredibly well received by the driver community.

It's a big one for the driver to have turn-by-turn directions on the in-car display and also creates nice route visibility for the rider.

With this partnership, we can introduce millions of people to pink, increase our touch points with business travelers, and capture more high value rides.

resulting in a meaningful increase in the time driver spend using lift.

We are also working to make owning an AV and driving it on lift more affordable and convenient.

Given the high utilization lift drivers have of their vehicle, driving the electric vehicle can help increase their take home earnings.

At this time, if you would like to ask a question, simply press the star, followed by the number one on your telephone keypad.

Thanks so much for taking the questions. Something you could just talk a little bit more about how the competitive environment has changed in the past three months. And just when you talk about one-q dynamics and current market conditions, isn't this more of a return to normalcy and a healthier marketplace, turn understanding the impact on prime time and base prices?

and this is a very good thing. The primary thing that has changed, and I will say it happened more rapidly than expected, is the supply side. So the supply side has come back in a very meaningful way, as we talked about already on the call, and some top metrics on the supply side in nearly three years. So the primary thing that has changed, is the supply side.

So this is very good for our riders. This is a good thing. What is happening with the guidance? Obviously, seasonality, which is expected in our business, both rides, share, and bikes. But also price with that.

smart about ensuring competitive service levels.

Bye.

I guess, you know.

And then the other kind of key piece on insurance is, you know, we had previously increased base prices in Q4.

But the bottom line is that puts margin pressure on Q1 as you can see in the guidance

Sure, thanks for the question. So I think you asked about California and New York, is that right?

to issue a decision. Regardless of which way the ruling goes, the next step is likely an appeal by either side to the California Supreme Court. That could then take a few months to even over a year, depending on whether the Supreme Court accepts that review.

Thank you.

Hi there, thanks for taking my question. So in the press release you talk about reinforcing the competitive position. Do you expect to be stepping up promotional intensity across the business here for drivers or riders and how should we think about, I guess, the structural level of growth spend for lift going forward?

All right. Next question. East Side. handed?

benefits inside companies on the West Coast. Can you talk a little bit about the recovery trajectory you're seeing in some of your key cities on the West Coast and how some of the cost-eating measures might be acting as a bit of a headwind as you think about how the arc of the recovery projects into Q1 in the first half of the year?

even on a ride basis. So we've seen, you know, general, all of the kind of typical use cases start to return. One kind of notable call out is that travel has been incredibly strong across the board.

And then we think it's probably just going to take a little bit more time for the West Coast to get back to normal. And then since you asked a little bit about companies spend and how that affects us, I just want to comment on our enterprise business we call lift business. We have a few different segments, enterprise universities in healthcare, on enterprise. We're continuing to see that actually pick up.

margin opportunity and growth opportunity. We also, as I mentioned, have health care in our enterprise business. We're seeing great, great traction, health care bookings in Q4, where 92% higher than the level of Q4 2019. And so that business is scaling nicely and there's actually more.

Thank you. Thank you.

Even a full year number, just we can compare that to the overall industry, trips or bookings. Then the second one, and the past, you've talked about growing in line with the industry, etc. I know you're making some price adjustments now. Logan, how do you think about other big picture adjustments? You might have to make to the platform just to ensure that you can...

Can you repeat the second part of your question or are you looking at that?

and ETA for our riders and competitive pay for our drivers. That's kind of first and foremost. The second.

Great, thanks. You mentioned this is the following up there on the pink.

at the early stages of a membership.

So just to be clear, the $29 doesn't mean that the individual is paying $9.99 and we have costs of $29. It means that the value they get from the program, on things that we may have a large margin on, is $29. We are running the program profitably.

and we're seeing industry level retention for these types of membership programs. So again, we are running the program profitably and still users are able to get that type of value.

Thank you.

and even a margin over time. And if there's anything about the first quarter that's causing sort of transitory headwinds the profitability. And I also wanted to ask quickly going back to sort of regulation. I believe in New York City, there's a proposed rideshare wage increase that was recently announced.

Yeah, so I think the most kind of important piece to understand is what we talked about before, which is the timing of our insurance renewal and the significance that that has had on our Q1 margin. I think if you look back at our...

We're not partying that litigation that's ongoing. If there's any pricing change, it would be at the industry level, and so it would be passed through.

Thanks for the questions.

Based on what you know today, including the recent change in base pricing, how do we think about your expectations for what kind of driver supply you would like to bring on, what kind of ridership growth you think is reasonable to assume what is a normal pace of pricing decline going forward. How does the market place look to you from those aspects?

I guess what I just follow up real quick on that, I guess you don't want to put hard numbers on it, we're trying to understand. But do we look back at what the pre-COVID business model looked like, or are there just same changes now when we think about pricing, or I know the technology, advanced, etc. Is there anything you would say, alright, this is a major...

I'd say our tools have gotten better because we've had to manage those extreme swings primarily from like a year plus ago. So we built all these tools for oversupply, undersupply that we're continuing to refine and use on a market by market basis. But in general, the only major structural difference is...

We can, you know, we can, can you to see that as an opportunity in our business as we offer the off-lead vehicles to continue to put them for sale in the aftermarket.

I think it's still a distraction because the individuals that use Express Drive drive many hours and so it's a great high quality lever for that type of supply.

Your next question comes from the line of DPEC Matherman with Wolf Research.

Sure, so on on base price just to kind of repeat what we've gone through in Q4 insurance prices went up significantly. We made a base price increase at that moment. In the beginning of January , we saw our competition removed their fuel surcharge, which was a price, this price.

Is that?

Your next question comes from the line of John Blacklage with Cohen. Your line is up and...

So thanks John . So on pink.

Only, you know, towards, I'd say in early second half of last year, did we kind of really relaunch that with the lower $9.99 price, which was obviously material in getting more interest versus a $19.99 program. We adjusted the benefits as well to make that make financial sense. And as I said, with an earlier question, we run that program profitably.

as a percent of maybe bookings or something revenue. We do track that, and that is one of our internal targets for your end that we are focused on. We are not sharing that externally at this time. And then I think your last question was around supply.

dramatically by the pandemic and important for drivers is consistency of earnings. And now that we're out of the pandemic and the rideshare industry has moved past that, there's consistent earnings. And so at the macro level, it's come back.

Your next question comes from the line of Benjamin Black or Deutsche Bank. Your line is up in.

and sure we prioritize that that that's critical in this really

Thank you.

This concludes today's call. You may now disconnect.