Q4 2023 Lyft Inc Earnings Call

Operator: will conduct a question-and-answer session, and instructions will be given at that time. If anyone should require operator assistance, please press star then zero on your touchtone button.

<unk> session and instructions will be given at that time, if anyone should require operator assistance. Please press Star then zero on your Touchtone telephone as a reminder, this conference call is being recorded I would now like to turn the conference over to Sarnia Banerjea head of Investor Relations.

Operator: As a reminder, this conference call is being recorded. I would now like to turn the conference over to Sonia Banerjee, Head of Investor Relations. Sonia, you may begin.

Catherine Buan: Tonya you may begin.

Thank you welcome to the Lyft earnings call for the fourth quarter and full year 2023 on the call today, we have our CEO, David Russia, and our CFO Erin Brewer, our president of Christmas Spirit check is here for the Q&A session.

Sonia Banerjee: Thank you. Welcome to the LYFT Earnings Call for the fourth quarter and full year 2023. On the call today, we have our CEO David Rescher and our CFO Aaron Brewer. Our President, Kristen Sperczak, is here for the Q&A session.

Sonia Banerjee: We'll make four forward-looking statements on today's call relating to our business strategy and performance, future financial results, and guidance. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call. These factors and risks are described in our earnings materials and our recent SEC filings. All of the forward-looking statements that we make on today's call are based on our beliefs as of today, and we disclaim any obligation to update any forward-looking statements except as required by law. Our discussion will include non-GAAP financial measures, which are not a substitute for our GAAP results. Reconciliations of our historical GAAP to non-GAAP results can be found in our earnings materials, which are available on our IR website.

Speaker Change: We will make forward looking statements on today's call relating to our business strategy and performance future financial results and guidance. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call.

Speaker Change: These factors and risks are described in our earnings materials and our recent SEC filings.

Speaker Change: All of the forward looking statements that we make on today's call are based on our beliefs as of today and we disclaim any obligation to update any forward looking statements, except as required by law.

Our discussion will include non-GAAP financial measures, which are not a substitute for our GAAP results reconciliations of our historical GAAP to non-GAAP results can be found in our earnings materials, which are available on our IR website and with that I'll pass the call to David.

David Rescher: And with that, I'll pass the call to David. Thanks, Sonia. And good afternoon, everyone.

David: Thanks, Tony.

David: Good afternoon, everyone and thank you for joining us.

David Rescher: Thank you for joining us. I am really proud of what LYFT accomplished in 2023. We supported more than 700 million rides, and gross bookings reached an all-time high. Ride growth accelerated every quarter, ending the year up 26% in Q4 versus last year. More than 1 million drivers collectively earned over $8 billion using LYFT.

David: I am really proud of what lift accomplished in 2023.

David: We supported more than 700 million rides gross bookings reached an all time high.

David: Ryan growth accelerated every quarter.

David: In the year up 26% in Q4 versus last year.

David: More than 1 million drivers collectively earned over $8 billion using lift.

David Rescher: We also have the highest annual ridership in our company's history, and ride frequency growth was the strongest it's been since 2018, prior to our IPO. Our team came together with a vision for how customer obsession can drive profitable growth. We set clear goals, and we achieved them.

David: Also have the highest annual ridership in our company's history and Ryan frequency growth was the strongest it's been since 2018 prior to our IPO.

David: The team came together with a vision for how customer obsession can drive profitable growth.

We set clear goals and we achieved them.

David: So we're entering the year with a lot of momentum, we're competing and executing really well and we're giving drivers and riders great reasons to choose lyft everyday.

David Rescher: So we're entering the new year with a lot of momentum. We're competing and executing really well, and we're giving drivers and riders great reasons to choose Lyft every day. Again, our thesis is that customer obsession drives profitable growth, and we're keeping our foot on the pedal to prove it this year. Rideshare Perfection and Partnership Driven Growth. I'm going to walk through each of these and share a few examples to demonstrate how we go about each.

David: Again, our thesis is the customer obsession drives profitable growth.

David: Keeping our foot on the pedal to prove it this year.

David: So that and we have three focus areas for 2024 and here they are.

David: Innovation.

David: Rideshare perfection.

David: Partnership driven growth.

I'm going to walk through each of these and share a few examples that demonstrate how we're going about it.

David Rescher: First, continuous innovation. One enormous advantage we have at LYFT is our focus on rideshare and on specifically creating the absolute best rideshare experience. Continuous innovation gives riders and drivers differentiated reasons to choose Lyft and increases their preference for using Lyft over our competitors. Women Plus Connect is one great example.

David: First continuous innovation.

David: One enormous advantage, we have that lift as our focus on rideshare and on specifically, creating the absolute best rideshare experience.

David: Innovation gives riders and drivers and differentiated reasons to choose lyft and increases their preference for using lift over our competitor.

David: Women's plus connect is one great example.

David Rescher: Since the launch back in September, roughly two-thirds of eligible riders, excuse me, drivers, and millions of active riders have been using the feature, and their feedback has been outstanding. Women's Plus Connect resonates with a lot of people. In fact, we have seen double-digit increases in driver referrals in markets where that feature has gone live. That's a great sign of strong product market fit. I'll also point out we're the only rideshare company that offers this feature in the U.S. So if you're a woman, or if you have a woman in your life who prefers to ride or drive with another woman, download the LYFT app. We're the only game in town. And there's some news. We're thrilled to announce that as of today, Women Plus Connect is now available in every market across the United States, in over 295 cities, including Atlanta, Boston, Chicago, DC, LA, and, of course, New York City.

David: Since the launch back in September roughly two thirds of eligible riders acoustic drivers and millions of active riders are using the feature and their feedback has been outstanding women plus connect resonates with a lot of people in fact, we have seen double digit increases in driver referrals.

David: Market and markets, where that feature has gone live that's a great sign of strong product market fit.

David: I'll also point out when you only rideshare company that offers this feature in the U S. So if you're a woman or if you have a woman in your life prefers to ride our drive with another woman download the lift out we're the only game in town.

David: Some news, we're thrilled to announce that as of today women plus connect is now available in every market across the United States over 295 cities, including Atlanta, Boston, Chicago D. C. L. A and of course, New York City in fact, if you're in New York and out of the snow.

David Rescher: In fact, if you're in New York and out of the snow, check out our billboard in Times Square if you can. A huge thank you to Christina Aguilera for being such a great advocate. Another great example of how we're innovating is our new pay standard for drivers. We have made a commitment that LYFT drivers will earn at least 70% of rider payments each week after external fees. Most lift riders earn more than that already, but there are instances where that's not the case. The ride-sharing industry talks a lot about driver earnings, often in terms of averages. But with averages, some people walk away unhappy. That's why we've designed this as a guaranteed floor.

David: Check out our Billboard in times square, if you can huge thank you to Christina Aguilera for being such a great advocate.

David: Another Great example of how we're innovating as our new pay standard for drivers we.

Have made a commitment to lyft drivers will earn at least 70% of Ryder payments each week after external fees.

David: Prescribers earn more than that already but there are instances, where that's not the case.

David: The rideshare industry talks a lot about driver earnings often in terms of averages, but with averages some people walk away unhappy.

David: That's why we've designed this as a guaranteed floor or.

David Rescher: Our intention is to set a standard for transparency, raise the earnings bar for our sector, and further increase drivers' preference for LYFT. In turn, that reduces prime Time, which riders strongly dislike; it shortens ETAs, and results in higher rider preference and usage of Lyft. That's what continuous integration looks like.

Our intention is to set a standard for transparency raise the earnings bar for our sector and further increased drivers preference for lyft and term that reduces primetime, which ryder strongly dislike it's shortened dth and results in higher rider preference and usage of lift.

David: Continuous innovation looks like.

David: Our second focus area relates to the way, we execute what we call rideshare perfection.

David Rescher: Our second focus area relates to the way we execute what we call rideshare perfection. You've heard us talk a lot about customer recession; drivers and riders have very high standards. So we put an enormous amount of effort into perfecting the rideshare experience, and we'll do even more in 2024. Let me give you an example of this kind of perfection and how it drives our business. In mid-November, we launched our on-time pickup promise as part of our scheduled ride promise. The idea was simple but ambitious. If your ride to the airport didn't arrive within 10 minutes of your scheduled pickup time, we would pay you up to $100, no questions asked.

David: <unk> heard us talk a lot about customer recession.

Drivers and riders have very high standards. So we put an enormous amount of effort into perfecting the rideshare experience and will do even more in 2024, let.

David: Let me give you. An example of this kind of protection and how it drives our business.

David: In November we launched our on time pickup promise as part of our scheduled dry product.

David: The idea was simple but ambitious.

David: Youre ride to the airport didn't arrive within 10 minutes of your schedule pickup time, we would pay you up to $100 no questions asked.

David Rescher: When we launched this product, we set an extraordinary, almost unreasonably high expectation, or excuse me, standard for ourselves to deliver. So high that we were even willing to cover the cost of a competitor's ride if we failed to deliver. The results have been remarkable. Of the more than half a million rides that have fallen directly under this guarantee, we have had to cover just 2% at a cost of less than 0.01% of gross booking. Helped by this guarantee, scheduled rides to the airport increased 37% year-on-year during Thanksgiving week. And remember that remediation statistic of 2%?

David: Launched this product we set an extraordinary almost unreasonably high expectations, but the new standard for ourselves to deliver so.

So high that we were even willing to cover the cost of our competitors right. If we failed to deliver.

The results have been remarkable.

David: Of the more than half a million rides that have fallen directly under this guarantee we have had to cover just 2% at a cost of less than point.

1% of gross bookings.

David: Helped by this guarantee scheduled rides to the airport grew 37% year on year during Thanksgiving week.

David: Remember that remediation statistic of 2% over.

David Rescher: Over half of those riders took another LYFT ride in the following 30 days. Outcomes like these, particularly at our scale, are a testament to the level of operational excellence we are capable of and what the growth impact can be. The rideshare perfection is central to our plans to drive profitable growth in 2024 and beyond. Finally, partnership-driven growth. Last year, approximately 20% of our rides had a direct connection to one of our partners. Lyft's ability to partner in mutually beneficial ways with other organizations is an underappreciated superpower that can unlock long-lasting new revenue streams and often with very attractive margins.

Over half of those riders took another lyft ride in the following 30 days.

David: Outcomes like these are particularly at our scale are testament to the level of operational excellence, we are capable of and what the growth impact can be the.

David: The Rideshare protection is central to our plans to drive profitable growth in 2024 and beyond.

David: Finally partnership driven growth.

David: Last year, approximately 20% of our rides had a direct connection to one of our partners.

David: <unk> ability to partner and mutually beneficial ways with other organizations is an underappreciated superpower that can unlock long lasting new revenue streams, and often with very attractive margins.

David Rescher: This becomes clear when you look at the relationships we've established and how they've expanded over time. For instance, our Delta Airlines partnership began with Riders Rewards, where you can get points. But we now also support their flight crews with our Lyft Pass Commute Solution. Universal Pictures bought media on our platform in Q4 to support the launch of Trolls 3, and now they're coming back to do even more in 2024.

David: This becomes clear when you look at the relationships, we've established and how they've expanded over time for.

David: For instance, our Delta Airlines partnership began with Blinders rewards, where you can get points.

David: But we know also support their flight crews with our lift pass commute solution.

David: Universal Pictures, but media on our platform in Q4 to support the launch of <unk> III and now Theyre coming back to do even more in 2024.

David Rescher: Our list of deep partnerships goes on and on and includes world-class brands like Starbucks, Disney, Amazon, and Apple, and we've seen similar expansion across all of those. Partnering is rarely easy, but we've proven that we can be world-class partners. The work we're doing in each of these focus areas I just outlined, continuous innovation, rideshare perfection, and partnership-driven growth, will underpin our top line growth and margin expansion in 2024 and set the stage for strong financial performance beyond. Now, before I turn the call over to Aaron, I have two important pieces of news to share. The first is that we're hosting our first Investor Day in early June. It's going to be a great opportunity to see the incredible work we're doing and the amazing team behind it.

David: Our list of deep partnerships, because on and on and includes World class brands like Starbucks Disney <unk>.

David: Amazon Apple and we've seen similar expansion across all of those partnering is rarely easy, but we've proven that we can be world class either.

David: The work we're doing in each of these focus areas I just outlined continuous innovation rideshare protection and partnership driven growth will underpin our topline growth and margin expansion in 2024 and sustained strong financial performance beyond.

Speaker Change: Now before I turn the call over to Aaron we have two important pieces of news to share.

Aaron: The first is we're hosting our first investor day in early June it's going to be a great opportunity to see the incredible work, we're doing and the amazing team behind it.

David Rescher: And second, leading up to that event, we are providing directional commentary for our full-year performance this year. The headline is that, in 2024, we expect LYFT to generate positive free cash flow on a four-year basis for the first time in our company's history. It's a huge milestone for us.

Aaron: And second as lead into that event, we are providing directional commentary for a full year performance this year.

Aaron: The headline is that in 2024, we expect lift to generate positive free cash flow on a full year basis for the first time in our company's history.

Aaron: Huge milestone for us.

David Rescher: I am very proud of all LYFT has achieved in 2023 and the first few weeks of 2024. As I said at the beginning, this will be the year we prove customer obsession leads to profitable growth. Over to you, Erin. Thanks, David. Good afternoon, everyone, and thanks for joining us today.

Aaron: I am very proud of our lift is achieved in 2023 and the first few weeks of 2024 as I said at the beginning.

Aaron: This will be the year that we prove customer obsession leads to profitable growth.

Aaron: Over to you Aaron.

Aaron: Thanks, David Good afternoon, everyone and thanks for joining us today I am going to review, our Q4 results as well as our Q1 outlook.

Erin: I'm going to review our Q4 results as well as our Q1 outline. I'll also share some directional commentary for the full year 2024. As a reminder, unless otherwise indicated, all income statement measures are non-GAAP and exclude select items which are detailed in our earnings material.

Aaron: I'll also share some directional commentary for the full year 2024.

As a reminder, unless otherwise indicated all income statement measures are non-GAAP and excludes select items, which are detailed in our earnings materials.

Erin: As David mentioned, 2023 was a year with some strong accomplishments at LYFT, and we continued to build on that momentum in Q4. We are prioritizing operational excellence and seeing great results; driver hours grew 47% year over year in Q4. This reflects strong engagement by existing drivers and meaningful growth in new drivers. So even while rider demand continued to increase, we were able to convert more ride intent into completed rides. The combination of these factors supported our accelerating ride growth, along with improving service levels, including significantly less prime time year-over-year and faster ETAs. We ended the year healthier and stronger, which is reflected in our financial performance. And now to our fourth-quarter results, which are consistent with the outlook we provided on our Q3 earnings call on November 8th. We supported 191 million rides and 22.4 million active riders.

As David mentioned 2023 was a year with some strong accomplishments that list and we continue to build on that momentum in Q4.

Aaron: We are prioritizing operational excellence and seeing great results.

Aaron: Her hours grew 47% year over year in Q4.

Aaron: This reflects strong engagement by existing driver drivers and meaningful growth in new drivers.

Aaron: So even while rider demand continued to increase.

Aaron: We were able to convert more right intense into completed rides.

Aaron: The combination of these factors supported our accelerating rides growth along with improving service levels.

Aaron: <unk> significantly less primetime year over year and faster ETA'S.

Aaron: We ended the year healthier and stronger which is reflected in our financial performance.

Aaron: And now to our fourth quarter results, which are consistent with the outlook. We provided on our Q3 earnings call on November eight.

Aaron: We supported 191 million rides and 22.4 million active riders.

Erin: Total growth grew 26% year over year, accelerating for the fourth quarter in a row, with strength across use cases, particularly commute and nights out. Ride frequency, referring to the average number of rides per active rider, grew double digits year over year, with ride share only frequency growing even faster. Gross bookings exceeded $3.7 billion, up 17% year over year. This reflects strong growth, partially offset by lower prices year over year, given our competitive focus and improving health of our marketplace. Revenue exceeded $1.2 billion, up 4% year over year, reflecting those same dynamics. Cost of revenue was $736 million, down 3% year over year, as we lapped the insurance reserve charge we took in the fourth quarter of 2022 that affected revenue, as well as GNA. Operating expenses were $450 million, down 35% year over year.

Aaron: Total rides grew 26% year over year accelerating for the fourth quarter in a row.

Aaron: With strength across use cases, particularly commute and nights out.

Aaron: Ride frequency, referring to the average number of rides per active rider grew double digits year over year with rideshare only frequency growing even faster.

Aaron: Gross bookings exceeded three $7 billion up 17% year over year.

Aaron: This reflects strong rise growth.

Aaron: Really offset by a lower prices year over year, given our competitive focus and improving health of our marketplace.

Aaron: Revenue exceeded $1 $2 billion up 4% year over year, reflecting those same dynamics.

Aaron: Cost of revenue was $736 million.

Aaron: Down 3% year over year as we lap the insurance reserve charge, we took in the fourth quarter of 2022 that affected cost of revenue as well as G&A.

Aaron: Operating expenses were $450 million down 35% year over year.

Erin: As a percentage of gross bookings, operating expenses were 12%, reflecting an improvement of roughly 10 percentage points versus Q4 of 2022, as we lapped the charge I just mentioned, along with savings from our recent cost restructuring actions, adjusted EBITDA of $67 million, which as a percentage of gross bookings was 1.8%. I will remind you that our updated third-party insurance agreements went into effect at the beginning of Q4. The combination of higher rates along with slightly higher ride volumes quarter over quarter increased the cost of revenue by approximately $100 million sequentially from the third quarter to the fourth quarter. However, we were able to offset around $75 million of these costs with savings largely generated through our healthier, more efficient marketplace. For the full year 2023, we generated $13.8 billion in gross bookings, a 14% year over year increase. Our adjusted EBITDA was $222 million, which as a percentage of gross bookings was 1.6%.

Aaron: As a percentage of gross bookings operating expenses were 12%.

Aaron: <unk> an improvement of roughly 10 percentage points versus Q4 of 2022 as we lap the charge I just mentioned along with savings from our recent cost restructuring actions.

Adjusted EBITDA was $67 million, which as a percentage of gross bookings was one 8%.

Aaron: I will remind you that our updated third party insurance agreements went into effect at the beginning of Q4.

Aaron: The combination of higher rates, along with slightly higher ride volumes quarter over quarter increased cost of revenue by approximately $100 million sequentially from the third quarter to the fourth quarter.

However, we were able to offset around $75 million of these costs with savings largely generated through our healthier more efficient marketplace.

Aaron: For the full year 2023, we generated $13 8 billion in gross bookings up 14% year over year.

Aaron: Our adjusted EBITDA was $222 million, which as a percentage of gross bookings was one 6%.

Erin: We entered 2024 with a solid cash position with unrestricted cash, cash equivalents, and short-term investments of approximately $1.7 billion. And in the fourth quarter, we generated positive free cash flow for the second time in our company's history. Now, let me talk about what we expect in the first quarter. We expect gross bookings of $3.5 to $3.6 billion, up 15% to 18% year-over-year. We expect total revenue growth of approximately 20% year on year. Consistent with the performance we saw in January, we expect healthy marketplace trends will result in a slight increase in the ratio of total revenue to total gross bookings in Q1. As we move through the remainder of the quarter, our plan assumes continued operational excellence and focused execution, particularly related to key events like Spring Break and St. Patrick's Day. For the first quarter, we expect adjusted EBITDA of approximately $50 million to $55 million and an adjusted EBITDA margin as a percentage of gross bookings of roughly 1.4 to 1.5 percent.

Aaron: We entered 2024 with a solid cash position with unrestricted unrestricted cash cash equivalents and short term investments of approximately $1 7 billion and.

Aaron: And in the fourth quarter, we generated positive free cash flow for the second time in our company's history.

Now, let me talk about what we expect in the first quarter.

Aaron: We expect gross bookings of three five to $3 $6 billion.

Aaron: 15% to 18% year over year.

Aaron: We expect total rides growth of approximately 20% year on year consistent with the performance. We saw in January we expect healthy marketplace trends will result in a slight increase in the ratio of total revenue to total gross bookings in Q1.

Aaron: As we move through the remainder of the quarter. Our plan assumes continued operational excellence and focused execution.

Erin: Next, I'm going to provide some directional commentary for full year 2024 to help you understand what we're working toward longer term. What we've seen over the past three quarters is that people are getting out more and connecting with the world around them. They're commuting, traveling, heading to events, and gathering with family and friends.

Aaron: Particularly related to key events like spring break and St. Patrick's day.

Aaron: For the first quarter, we expect adjusted EBITDA of approximately 50 million to $55 million.

Erin: Based on what we're seeing and hearing, our expectation is that these trends will continue and, as a result of the rideshare backdrop, will remain healthy. As David discussed, we're working to give drivers and riders more great reasons to choose LYFT. We believe this work will result in more efficient driver and rider acquisition, higher levels of retention and engagement, and incremental revenue streams with attractive margins. With these factors in mind, for the full year 2024, we expect total revenue growth year over year to be in the mid-teens.

Aaron: And an adjusted EBITDA margin as a percentage of gross bookings.

Aaron: Roughly one four to one 5%.

Aaron: Yeah.

Next I'm going to provide some directional commentary for full year 2024 to help you understand what we're working toward longer term.

Aaron: What we've seen over the past three quarters.

Aaron: If people are getting out more and connecting with the world around them their commuting traveling heading to events and gathering with family and friends.

Erin: Additionally, we expect modest growth in the ratio of gross bookings per ride as we continue to operate competitively with the market. As a result, we expect gross bookings in absolute terms to grow slightly faster than rides on a year-over-year basis. The combination of top line growth, operational excellence, and continued cost discipline with the full year impact of our more efficient cost structure is expected to drive approximately 50 basis points of expansion and our adjusted EBITDA margin as a percentage of gross bookings to 2.1 percent. In 2024, we also expect to generate positive free cash flow for the full year for the first time.

Aaron: Based on what we're seeing and hearing our expectation is that these trends will continue.

Aaron: And as a result of the rideshare backdrop will remain healthy.

Aaron: And David discussed, we're working to give drivers and riders more great reasons to choose lyft.

Aaron: We believe this work will result in more efficient driver and rider acquisition higher levels of retention and engagement and incremental revenue streams with attractive margins.

Aaron: With these factors in mind for the full year 2024, we expect total rise growth year over year to be in the mid teens.

Erin: This is an important milestone for LYFT. Relative to 2023, there are three key drivers that support our free cash flow plan, higher levels of adjusted EBITDA, reduced capital expenditures since our planned bike share fleet electrification upgrades are now mostly complete, and finally, reduced cash outflows related to the change in working capital, largely reflecting the maturity of our insurance program. Let me spend just one more moment on that last point.

Aaron: Additionally, we expect modest growth in the ratio of gross bookings per ride as we continue to operate competitively with the market.

Aaron: As a result, we expect gross bookings in absolute terms will grow slightly faster than rise on a year over year basis.

Erin: Our current insurance risk transfer structure is entering its fifth year, and we've now worked down the vast majority of our legacy exposure to periods when we were largely self-insured. As a result, we're now in a place where our insurance-related accruals and our insurance-related cash payments are expected to be more balanced than they've been over the past few years. To give you some sense of the level of free cash flow we anticipate for the full year 2024, we expect that roughly half of adjusted EBITDA dollars will convert to free cash flow.

Aaron: The combination of topline growth operational excellence and continued cost discipline with the full year impact of our more efficient cost structure is expected to drive approximately 50 basis points of expansion in our adjusted EBITDA margin as a percentage of gross book.

Erin: With that, I'll bring our prepared remarks to a close. Our team did incredible work last year to establish a strong foundation for profitable growth. In 2024, our priorities are clear. We're focused on drivers and riders. And we're excited to continue to build and innovate. It all adds up to one theme.

Aaron: <unk>.

Aaron: To two 1%.

Aaron: In 2024, we also expect to generate positive free cash flow for the full year for the first time.

Aaron: This is an important milestone for lyft.

Aaron: Relative to 2023, there are three key drivers that support our free cash free cash flow plan.

Operator: We're building a customer-focused, financially strong business. I look forward to introducing you all to more of our management team and to having a more in-depth discussion at our Investor Day in June. Operator, we're now ready to take questions. Thank you. If you would like to ask a question, please press the star followed by the number one on your telephone keypad.

Aaron: Higher levels of adjusted EBITDA.

Aaron: Reduced capital expenditures since our planned bike share fleet electrification upgrades are now mostly complete.

Aaron: And finally reduced cash outflows related to the change in working capital largely reflecting the maturity of our insurance program.

Mark Mahaney: We also ask that you limit yourself to one question and one follow-up, and for any additional questions, please. Your first question comes from the line of Mark Mahaney from Evercore ISI. Please go ahead. Okay, I'd like to ask two product questions. This on-time pickup promise sounds very promising, if you will. Sorry about that.

Aaron: Let me spend just one more moment on that last point.

Aaron: Our current our current insurance risk transfer structure is entering its fifth year and.

Aaron: And we've now worked down the vast majority of our legacy exposure to periods, where we were largely self insured.

Aaron: As a result, we are now in a place where our insurance related accruals and our insurance related cash payments are expected to be more balanced than they've been over the past few years.

David Rescher: But talk about the adoption of scheduled rides, the proliferation of scheduled rides, how big that is, and to what extent you want to try to push that, you know, wider, because I think the economics are usually better for you, and there are good benefits for riders and for drivers. So talk about that. And then also on the ad side, I know that's a very early stage for you, but you want to help us think about how big, given the testing and the learning you've had so far, how big you think that could be for Lyft over time. Thank you very much.

Speaker Change: I would note that our quarterly free cash flow trends will vary so I'd encourage you to focus on the full year.

Speaker Change: To give you some sense of the level of free cash flow, we anticipate for the full year 2024.

Speaker Change: We expect that roughly half of adjusted EBITDA dollars will convert to free cash flow.

David Rescher: Sure. I'll take it, Mark. And Aaron and I will tag team on some stuff, but this one I'll probably take. So, Schedule of Rides is an amazing product, and it's one we've invested in a ton. And as you heard me say, the fact that we can guarantee a schedule of rides at a 98% plus reliability level, I think, speaks really well both to our operational excellence but also to the potential of the product. So, right now, only about 5% of our rides are scheduled. Great upside, because you mentioned it has nice economics. A disproportionate number of those are to the airport. But if you think about it, you know, when Monday morning comes around, you have got to get to the office.

Speaker Change: With that I'll bring our prepared remarks to a close.

Speaker Change: Our team did an incredible work last year to establish a strong foundation for profitable growth.

Speaker Change: In 2024, our priorities are clear, we're focused on drivers and riders and we're excited to continue to build and innovate. It all adds up to one theme. We are building a customer obsessed financially strong business.

Speaker Change: I look forward to introducing you all to more of our management team and to having a more in depth discussion at our Investor day in June.

Speaker Change: Operator, we're now ready to take questions.

Speaker Change: Thank you.

Speaker Change: I would like to ask a question. Please press star followed by the number one on your telephone keypad. We also ask that you limit yourself to one question and one follow up and for any additional questions. Please re queue.

David Rescher: There's really no reason for you to be doing, you know, on-demand ride share at that minute if you know the night before you have to get to the office. If bad weather comes around, we can forecast that just like you can. There's really no reason for you not to schedule a ride up front there. So, we actually see there are a lot more use cases building on this infrastructure we built. And there's a lot of upside, again, for riders, but also for drivers because drivers do get paid more. In fact, as a quick aside, we just did a release last week, and we're now paying drivers to wait as well, which is something that drivers really care about. So, it's a good win-win.

Speaker Change: First question comes from the line of Mark Mahaney from Evercore ISI. Please go ahead.

Okay I'd like to ask two product questions. Please this on time pickup promise that sounds very promising if you will sorry about that but.

Speaker Change: Talk about the adoption of scheduled rides to proliferation of scheduled Raj how big that is and to what extent you want to try to push that broader because I think the economics are usually better for you and they're good benefits in there for riders and for drivers to talk about that and then also on the AD side I know, it's very early stage for you, but do you want to help us think about how big.

David Rescher: On our second question about media, again, so much opportunity, so much opportunity. I think, if I'm not mistaken, I think our Q4 media business was bigger than what it was in all of the prior year, 2022. And the reason for that is brands are hungry for new ways to connect with their customers. And from the moment a person asks for a Lyft, you know, you get sort of this matching screen, and if you've used Lyft recently, which of course I hope you have, you may well have seen an ad. We actually had a almost sold out, I think, ad run around the Super Bowl, and so on and So anyway, you get an ad there. And then, if you're in the car, you know, you're in the car for some 7 to 10 to 12 minutes, and people tend to check their app. Actually, to be more precise, the average, the typical, is more like 15 minutes. And people look at their phone about nine times during that 15 minutes.

Speaker Change: Given the testing and the learning <unk> had so far how big you think that could be for lift over time. Thank you very much.

Speaker Change: Sure I'll take it Mark and Darren and I will tag team on some stuff with this one I'll probably take.

Speaker Change: Scheduled rides.

Speaker Change: Amazing product and it's one we've invested in a ton and as you heard me say the fact that we can guarantee so sort of a 98% plus reliability level of scheduled glide I think speaks really well both to our operational excellence, but also show the potential of the product. So right now only about 5% of our of our rides or sketch.

Speaker Change: Hold on.

Speaker Change: Great upside because as you mentioned it has nice economics.

Speaker Change: Disproportion of those are to the airport, but if you think about it.

David Rescher: They're very sort of open and receptive to high-quality content. And so we're working really closely with, you know, the Disneys of the world, the Universals of the world, the Apple computers of the world, and so on and so on, to produce very, very high-quality content. We've actually just released a video ad unit, as an example, that we thought was going to be captivating, engaging, interesting to riders and, you know, obviously has good margin characteristics. By the way, we hope to be able to share some of those economics back with drivers as well, particularly for the in-table or the in-car tablet, in these cases, where we have about 9000 tablets out there. So anyway, there's a lot more to talk about here, but we're super excited about it.

Speaker Change: Monday morning comes around you got to get to the office. There's really no reason for you to be doing Ondemand rideshare that minute. If you know the night before you have to get to the office and the.

Speaker Change: Bad weather it comes around we can forecast that just like you can certainly no reason for you not just scheduled arrived upfront there. So we actually see there are a lot more use cases building on this infrastructure, we built and Theres a lot of upside again for riders, but also for drivers because drivers do you get paid more in fact squick. Aside we just did a release last week.

Speaker Change: And we're now paying drivers to wait as well, which is something the drivers really care about so it's a good win win.

Speaker Change: On a second question on media against so much opportunity so much opportunity I think if im not mistaken I think our Q4 media business was bigger than what it was in all of the prior year of 2022.

Speaker Change: And the reason for that is brands are hungry for new ways to connect with their.

David Rescher: Just the numbers are fairly small now, but we've got, you know, big aspirations. Thank you, David. Sure. Your next question comes from the line of Nikhil Devnani from Bernstein.

Speaker Change: Their customers.

Speaker Change: In a moment of person asks for a lift you get sort of a smashing screen and if you've used it increasingly which of course I hope you have you may well have seen an AD we actually had.

Nikhil Devnani: Go ahead. Hi there, thank you for taking the question. Thanks for the direction of 24 commentary as well.

Speaker Change: Almost sold out I think add run around Super Bowl.

Speaker Change: And so on and so forth. So anything you can add there and then if you are in the car and the car for some 7% to 10 to 12 minutes and people tend to check their app actually.

Nikhil Devnani: Can we just please clarify the EBITDA margin expansion? I think the slides say 500 basis points, but Aaron, you mentioned 50. So I think it is 50.

Be more precise the average market typically is more like 15 minutes.

Erin: But if you could just clarify that again, please. And then can you talk about the underlying assumptions, even if it is 50, between kind of the gross margin and the opex levers at your disposal, where do you kind of see the most room for that leverage to come? Thanks, Nikhil. This is Erin.

Speaker Change: People look at their phone about nine times during that 15 minutes, we're very sort of open and receptive to high quality content.

Speaker Change: So we're working really closely with the business of the World Universal show the world the Apple computers at World and so on and so on.

Speaker Change: Produce very very high quality content, we've actually just released a video ad units.

David Rescher: And this is actually a correction from the press release. You're correct. In my prepared remarks, I referenced 50 basis points of margin expansion. So if you look at our full-year performance for 2023 at 1.6%, you can translate that into approximately 2.1% in terms of our directional commentary for 2024. And so I think your second question was more about, you know, growth levers as we see them for 2024. And I'm happy to talk about that. But I might also turn it over to David just to start and set the stage. Yeah, why don't we tag team on this?

Speaker Change: Travel.

Speaker Change: But we think is going to be captivating engaging interesting to riders and.

Speaker Change: Obviously has good margin characteristics by the way, we hope to be able to share some of those economics back with drivers as well, particularly for the in tablets or the in car tablet on East Coast, which we got about 9000 tablets out there. So anyway, a lot more to talk about here, but we're super excited about it the numbers are fairly small now, but we've got big aspirations.

Speaker Change: Thank you David.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Nikhil <unk> from Bernstein. Please go ahead.

Nikhil: Hi, there. Thank you for taking the question. Thanks for the directional 24 commentary as well.

David Rescher: Thank you for your detail. By the way, I read your report last week. So anyway, I'm going to zoom out for a second because it sort of gives us the opportunity to speak about the big picture of where we're going, what we've seen, and where we're going. And we'll talk about growth, broadly speaking. So, you know, on the top line, first of all, we see actually super healthy industry dynamics and, frankly, good sector growth. You know, getting back to work is definitely a thing. Travel is definitely a thing to do.

Nikhil: Can we just please clarify the EBITDA margin expansion I think the slides say 500 basis points, but Aaron you mentioned <unk>. So I think it is 50, but if you could just clarify that again, please and then.

Nikhil: Can you talk about the underlying assumptions, even if it is 50.

Nikhil: And kind of the gross margin and the Opex levers at your disposal, where do you kind of see the most room for a for that leverage to come through.

Nikhil: Thanks, Vicki I'll. This is Aaron and this is actually a correction from the press release you are correct in my prepared remarks, I referenced 50 basis points of margin expansion. So if you look at our full year performance for 2023 at one 6%.

David Rescher: All the macro trends that you see. And we look pretty closely and try to detect any reasons to worry, and really just can't. Again, not your question, but just to sort of set the stage. I really can't find much to worry about there.

David Rescher: A lot of, you know, a lot of sort of growth that's just coming. Some from post-COVID and some from just the fact that we've got a great service and people are adopting it. So then when we sort of go down a level... And, you know, again, of course, I talked about continuous innovation and rideshare perfection and partnership-driven growth. I think each of those, both individually and collectively, really add to a very, very strong growth story on the side. Now, I think, Thill, and you'll have to refresh my memory, because it's been a while already since you asked the question, and we've been blabbing here. Maybe just rephrase the end of that question, and we'll sort of try to hit it more directly. Yeah, yeah, thanks, David, for the top line color. Yeah, I was just trying to get a better sense of the core margin drivers at your disposal and really how you're thinking about the evolution of gross margin as well as OPEX leverage to kind of get you that 50 basis points of expansion as the year goes on. Yeah, I love it.

Aaron: You can translate that into approximately two 1% in terms of our directional commentary and 2024.

Aaron: And so I think your second question was more about growth levers as we see them for 2024 and I'm happy to talk about that but it might also turn it over to David just to start and set the stage.

David: Yes, why don't we tag team on this thing.

David: So by the original report last week.

Speaker Change: Got it.

David: So anyway.

David: The amount for a second because it sort of gives us the opportunity to speak of a big picture of where we're going what we've seen and where we're going.

Speaker Change: And I'll talk about growth broadly speaking so.

Speaker Change: The top line first of all we see actually a super healthy industry dynamics and frankly, good sector growth.

Speaker Change: Back to work is definitely thing travel is definitely thing all of the macro trends that you see and we look pretty closely and try to detect any any reasons to worry and really just can't again.

Speaker Change: To your question, but just to sort of set the stage really can't find much to worry about there are a lot of.

Speaker Change: A lot of sort of growth, that's just coming some time post COVID-19 and some from just the fact that we've got a great service and people are adopting it.

Erin: Yeah, Aaron will grab it now. Yeah, thanks, Nikhil. So, you know, first and foremost, to reiterate a little bit of what David said. As we came through the back half of 2023, we saw real health building in the U.S. ride share market, you know, with the trends I mentioned related to travel, commute, etc. And against that backdrop, we executed really, really well.

Speaker Change: So then when we sort of go down a level.

Speaker Change: And again of course, I talked about continuous innovation and rideshare perfection and the partial driven growth I think each of those both individually and collectively really add to a very very strong growth story on the site now I think Nicole and Youll have to refresh my memory. There has been a while already since you asked the question we've been bobbing here, maybe just <unk>.

Erin: And so, as we look into 2024, we see the same healthy backdrop as we think about ride growth, and David touched on some of the pillars and the way that we think about that overall. So, we not only see that ride and gross bookings growth, but we see that growing in an efficient way. So, I touched in some of my remarks on some of the trends we're seeing both on the driver side, right, drivers choosing to drive more with Lyft, spending more hours with Lyft, that really contributes to the efficiency of the way that we efficiently run our marketplace. And David touched on things like partners expanding with LYFT.

Speaker Change: At the end of that question.

Speaker Change: Got it.

Speaker Change: More directly.

Nicole: Yes, Thanks, David for the top line color. Yeah, I was just trying to get a better sense of the core margin drivers at your disposal and and really how youre thinking about the evolution of gross margin as well as opex leverage to kind of get you that 50 basis points of expansion as the year goes on.

Speaker Change: Love It internal grabbing though yeah. Thanks, <unk> so first.

First and foremost to reiterate a little bit of what David said.

As we as we came through the back half of 2023, we saw real health building in the U S. Rideshare market trends I mentioned related to travel commute etcetera and against that backdrop, we executed really really well and so as we look into 2024, we see the same <unk>.

Erin: And so those are areas that we continue to see growth overall. And then, as you think about leverage, as we engage in a much more efficient way, that creates an opportunity. And then to your point, as we think about operating expenses, we obviously took significant cost reductions in 2023, and our directional comments for 2024 really are grounded in continued operating expense discipline. So even as we are able to grow the top line, engage more efficiently with the market, et cetera, we retain that operating expense discipline.

Speaker Change: The backdrop as we think about rides growth and David touched on some of the pillars and the way that we think about that overall, so we not only see that rise in gross bookings growth, but we see that growing in an efficient way. So I touched in some of my remarks on some of the trends we're seeing.

Erin: And our plan does contemplate, on the insurance side, we have great visibility into the first nine months given our renewals at the beginning of the fourth quarter of last year. But we are contemplating some increases in the back part of the year that is fully contemplated in the directional guide that we've provided. But we think we have a number of different levers on which we can continue to expand EBITDA margins into the full year. Sorry, I'm going to go in a little wilder on this one.

Speaker Change: <unk> both on the driver side right drivers choosing to drive more with lyft spending more hours with lyft.

Speaker Change: That really contributes to the efficiency the way that we efficiently run our marketplace and David touched on things like partners expanding with left and so those are areas that we continue to see growth overall and then as you think about leverage as we engage in a much more efficient way that.

David Rescher: So, because there are a lot of interesting opportunities, Mark asked a question about priority pickup and actually not priority pickup, scheduled rides, which is a slightly higher margin product. Priority pickup is another. Extra comfort is another.

Speaker Change: That creates an opportunity and then to your point as we think about operating expenses. We obviously took the significant cost reductions in 2023 and our directional comments for 2024 really are grounded in continued operating expense discipline. So even as we are able to grow the <unk>.

David Rescher: We've talked about that a couple of times. We launched that in October. It's a slightly premium priced product. So, you know, a buck or two, call it that.

David Rescher: But our costs are not significantly different. So, if you look at Nix, there's lots of opportunity there. And then again, back to the point of media, you know, that's a very high-margin business for us, as well as a lot of our partner-originated rides. So, you know, I'd say a lot of our focus so far has really been on that, growing the top line in a very efficient way and in a sort of structured, financially strong way. We've got real opportunity on the margins, which is reflected in the remarks that Aaron just made. Thank you both.

Speaker Change: Top line.

Engage more efficiently with the market et cetera, we retained that operating expense discipline and our plan does contemplate on the insurance side, we have great visibility into the first nine months given our renewals at the beginning of the fourth quarter of last year, but we are contemplating some increases in the bag.

Speaker Change: Part of the year that is fully contemplated in the in the directional guide that we've provided but we think we have.

Erin: Appreciate it. Your next question comes from the line of Doug and Muth from J.P. Morgan. Please go ahead. Hey, this is Wes on behalf of Doug.

Speaker Change: A number of different levers upon which we can continue to expand EBITDA margins into the full year.

Doug: Thanks for taking the question. They've got their rods for How Should We Think About Acceleration here. So, you know, we, Wes, thanks for the question. We're not in a position really to talk about the quarterly sequencing, but we've talked about our assumption in terms of ride growth for the full year in the mid-teens, and we've also provided guidance for Q1 that rides will grow approximately 20% year over year. And just as a reminder, you know, we are lapping, that 20% assumes the lapping of the prior year, where we weren't fully operating in sort of the more competitive way that really started for the full quarter in the second quarter of 2023. So hopefully, that gives you some context for how we guided to Q1 and maybe how to think about that in the context of the full year of 2024. So if I could ask just one more question on Women Plus Connect,

Speaker Change: And I'm, sorry, let me just kind of.

I won't even go into the water on this one because there's lots of interesting opportunities. So.

Mark asked the question about Prairie pickup.

Speaker Change: Operator, our first scheduled rise, which has a slightly higher margin product part of the pickup is another extra comfort is another we've talked about that a couple of times, we launched that in October.

Speaker Change: It's a slightly premium priced products, a buck or two call it.

Speaker Change: But our costs are not significantly different.

Speaker Change: So if you look at mix lots of opportunity there and then again back to the point of media.

That's a very high margin business for us as well as a lot of our partner originated right. So.

Speaker Change: I'd say a lot of our focus so far has really been on that growing top line in a very efficient way.

Speaker Change: Sort of a structured finance strongly.

Speaker Change: Got real opportunity on the margin side, which is reflected in the remarks.

Thank you both I appreciate it.

Erin: I've seen a lot of success there. Great. Are you seeing kind of any incremental, like, share gains, like, whether that be on the driver's side or, you know, rider's side, kind of, as a result, or maybe... Yeah, thanks for the question. A couple things that I'll just say, you know, sort of directionally. First, it's a level set for everyone.

Speaker Change: Sure.

Your next question comes from the line of Doug Anmuth from Jpmorgan. Please go ahead.

Speaker Change: Okay.

Speaker Change: Hey, this is Wes on for Doug Thanks for taking the question.

Wes: Got into rides growth mid teens in 'twenty, four or how should we think about kind of the pace of deceleration from 20% from here.

Speaker Change: So Wes thanks for the question, we're not in a position really to talk about the quarterly sequencing, but we've talked about our assumption in terms of rides growth for the full year in the mid teens.

David Rescher: You know, we launched it at the end of last year; it was first in five markets, and it was in 55 markets. Now, just as of today, you know, it's in over 200 markets. So, you know, obviously, from an overall buying perspective, it's still fairly small, but from a product market fit perspective, it's super, super good. And Frankly, you know, sort of an off the charts type of thing. If there aren't many features that you launch, for example, that have something like a 98% driver acceptance rate, and no one turns it off once it's on,

Speaker Change: And we've also provided guidance for Q1 that rides will grow approximately 20% year over year and just as a reminder, we are.

We are lapping that 20% assumes lapping of the prior year, where we werent fully operating in sort of the more competitive way that really started for the full quarter in the second quarter of 2023. So hopefully that gives you some context for how we guided to Q1 and maybe how to think about that in the context for the.

David Rescher: And so those are the types of early indicators we look for. I mentioned the fact that drivers are now referring LYFT to other potential drivers. These are women drivers referring potential new drivers. And back to that margin expansion point, roughly speaking, if we have higher density, we have higher margins because of the way, you know, sort of the structure of rides goes. So anyway, that's really good.

Speaker Change: Our full year of 2024.

Speaker Change: Thanks, if I could ask just one more on women's plus connect I've seen a lot of success there great to see.

Speaker Change: Are you seeing kind of any incremental like share gains whether that'd be on the driver side or the router side kind of as a result, or maybe has that ability really to tell.

Speaker Change: Yes. Thanks for the question a couple of things there I'll, just say sort of Directionally first just to level set for everyone. We launched at the end of last year. It was first in five markets and it was 55 markets now just as of today.

David Rescher: I don't know if we mentioned it, but we've done about 7 million rides so far on Women Plus Connect just in the last couple of months, just in those 55 markets. And we expect, obviously, that to accelerate quite a bit now that we're nationwide. So nothing specific to share, but really good product market fit. And, you know, as I always say, if you look at the sort of social media commentary, or, frankly, ask your wife or your daughter or a woman in your life whether they think this is a good thing, you'll, I think, probably hear a very positive, very positive response. Great, thank you. Come on. Your next question comes from the line of John Blackledge from TD Cowen. Please go ahead.

Over 200 markets. So obviously from an overall volume perspective.

Speaker Change: So fairly small but from a product market fit perspective, it's super Super Good and frankly sort of off the charts type of thing if there aren't many features that you launched.

For example that have something like a 98% driver acceptance rate and no.

Speaker Change: And no one turns it off once a dog and so those are the types of early indicators. We look forward I mentioned, the fact that drivers are now referring.

John Blackledge: Oh, great. Thanks. Two questions. First, on the 2024 free cash flow. Can you just remind us again what the drivers of the 50% EBITDA conversion into free cash flow in 2024 were? And is that kind of sustainable going forward, that conversion rate, or should we expect it to perhaps rise as we go forward?

Speaker Change: Lift to other potential drivers is a women drivers referring to potential new drivers.

Speaker Change: Back to that margin expansion points roughly speaking if we have higher density we have higher margins because of the way.

Speaker Change: The structure of Rajko, so anyway, that's where we get I don't know if we mentioned we've done about 7 million rides, so far moving plus connect just in the last couple of months just in those 55 markets.

Erin: And then the second question is on the customer experience with the ETAs and prime Time. Could we see further incremental improvements in both of those consumer experience metrics in 2024? Thank you. Thanks so much, John.

Speaker Change: And we expect obviously that's accelerate.

Speaker Change: Quite a bit now that we're nationwide so nothing specific to share, but really good product market fit and as I always say if you look at the sort of the social media commentary or frankly ask excuse me away for your daughter eliminate your life, whether they think this is a good thing.

Erin: I'll start with the first question and then turn it over to David. So, you know, as we mentioned in our prepared remarks, we are very pleased to give this directional commentary on free cash flow for 2024. You know, from where we sit today, we believe we've reached a turning point, and it's an important milestone overall for our company. In terms of what's driving that, you know, first and foremost, obviously just operating a healthier business, right?

Speaker Change: I think probably here.

Speaker Change: Very good and very good results.

Speaker Change: Great. Thank you both.

Speaker Change: Your next question comes from the line of John Blackledge from TD Cowen. Please go ahead.

John Blackledge: Great. Thanks, two questions first on the 2020 for free.

John Blackledge: Free cash flow.

John Blackledge: Can you just remind us again, the drivers of the 50% EBITDA conversion.

John Blackledge: And if free cash flow in 'twenty, four and is that kind of sustainable going forward that conversion rate or should we expect it to perhaps rise as we go forward and then second question is on the customer experience.

Erin: We've got adjusted EBITDA growth and expansion year over year. And then I talked a little bit about the transition with respect to our insurance program. So there was a period of time in our history when we were largely fully self-insured. But, as insurance works, it can take up to seven years for claims to fully resolve.

John Blackledge: With the <unk> in Prime time kind of improving could we see further incremental improvements in both of those.

John Blackledge: Tumor experience metrics in 2024, thank you.

Speaker Change: Thanks, So much John I'll start with the first question and then turn it over to David So as we mentioned in our prepared remarks.

Erin: Now, while we did transition to our risk transfer structure about five years ago, and we are at the tail end of the legacy book, it's not fully resolved. And so, again, meaningful progress this year, but there's still some resolution of that legacy book to go. So I think you can think about that somewhat in the free cash flow conversion, if you will, directional commentary we've given for 2024. You know, the last thing that I would say is that I obviously touched on our capital expenditures, which are moderating year over year. This is largely because, you know, we invested in 2023 in updating our bike fleet across our bike and scooter business. And we've got a much larger mix of e-bikes that allows us to, first of all, riders love them. Second of all, it allows us to be more efficient, and that's a higher margin ride overall, and, just frankly, an overall better experience for riders.

David: Very pleased to give us directional commentary on free cash flow for 2024 from where we sit today. We believe we've reached a turning point and it's an important milestone overall for our company.

David: In terms of what's driving that right.

David: First and foremost obviously just operating a healthier business right. We've got adjusted EBITDA growth and expansion year over year, and then I talked a little bit about the transition with respect to our insurance program. So there was a period of time in our history, where we were largely fully self insured.

As insurance works it can take up to seven years for claims to fully resolved now.

David: Now, while we did transition to our risk transfer structure about five years ago, and we are at the tail end of the legacy book, it's not fully resolved and so again meaningful progress this year, but there's still some resolution of that legacy book to go. So I think you can think about that.

Erin: So while most of that investment and deployment happened in 2023, there's still some more to come in 2024. So hopefully, that gives you some additional color on free cash flow and a little bit about, you know, how we're thinking of the conversion in 2024. But the bottom line is, again, we feel we've reached a turning point, and we're very focused on improving from here. Let me pick up on that, speaking of improving from here. So I'll give you some data about what we've seen, and then maybe directionally in the future. What we've seen, and you mentioned ETAs specifically, as well as primetime. So ETAs actually got faster in Q4 quarter over quarter and year over year than they've been before, so we saw a really nice directional improvement there. Primetime, I can actually be more precise.

David: What in the.

David: Free cash flow conversion, if you will directional commentary we've given for 2024.

David: Last thing that I would say is I, obviously touched on our capital expenditures.

David: Moderating year over year.

David: This is largely because we invested in 2023 in updating our bike fleet across our bike and scooters business and we've got a much larger mix of E bikes that allows us to first of all riders love them.

David: Second of all it allows us to be more efficient and that's a higher margin right overall and just frankly, an overall better experience for riders. So while most of that investment and deployment happened in 2023, there is still some more to come in 2024.

David Rescher: We saw about a 40% reduction in the share of rides affected by primetime in Q4, again, year on year. So really significant, meaningful changes in both. So then the question is how much further is there to go? And this is an area where, look, here's a little personal story. I just finished a book recommended to me by a colleague here called Unreasonable Expectations. And my expectations are unreasonable.

David: So hopefully that gives you some additional color on the free cash flow in a little bit about how we're thinking of the conversion for 2024, but bottom line is again, we feel we've reached a turning point and we're very focused on improving from here.

David Rescher: I will continue to push this very hard. And the team, I hope, is energized by it because, as we've seen with things like the on-time pickup promise, when we really focus on doing something, even at the scale we are, and just as a reminder, we're doing 2 million rides a day. One thing I sometimes comment on with Lyft here is that you look at an airline, like Delta Airlines, they might do three or four thousand flights a day. Now, obviously, they're shipping around a lot of people. Those are 180 or 200 passenger jets.

Speaker Change: Let me pick up on that speaking of improving from here. So.

So I'll give you some data about what we've seen and then maybe directionally in the future what we're seeing on and you mentioned <unk>, specifically as well as prime time, So <unk> actually got faster in Q4 quarter over quarter and year over year than they've been before so we saw really nice threat.

David Rescher: But still, the scale that we're working at is really quite large. And so I remind our team, while it's large, it's no excuse. We still have to do just an unreasonably good job every day. So, you know, I don't want to speculate on how much further we can go, but I will say we're quite focused on perfection. That's not a word we chose casually.

Speaker Change: Directional improvement there.

Speaker Change: Primetime I can actually be more precise we saw about a 40% reduction in the share of rides effected by prime time in Q4 again year on year, So really significant meaningful changes in both so then the question is how much further is there to go and this is an area.

Speaker Change: Theres a personal story I just finished a book recommended to me by colleague here called unreasonable expectations and my expectations are unreasonable.

David Rescher: Thank you. Your next question comes from the line of Alec Brondolo from Wells Fargo. Please go ahead.

Speaker Change: We will continue to push this very hard on this and the team I hope is energized by it because it is.

Alec Brondolo: Hey, thank you so much for the question. Um, two for me: why is now the right time to establish a 70% minimum driver payout threshold? It seems like all of the commentary suggests that industry supply trends are extremely healthy.

Speaker Change: As you've seen with things like the on time pickup promise.

Speaker Change: We really focus on doing something even if the scale. We are like just as reminder, lunar 2 million rides a day.

Speaker Change: Well I think that sometimes comment on live here as I look at an airline like Delta Airlines might be three or 4000 flights. A day now obviously they are shipping a lot of people. It was a 180 to 200 passenger interests, but still the scale that we're looking at is really quite large and so I remind our team while it's large.

David Rescher: And so I think that stands a little bit in contrast with increasing the path to just any commentary on the timing, I think it would be really, and then maybe secondly, if I could ask one on insurance. You guys indicated correctly that, you know, you've been mixing the business towards risk transfer. Obviously, in the US, your primary competitor has been moving in the other direction; they've been shifting their on, you know, I guess, how can And is there any concern that they're going to build, you know, a structural cost advantage over Lyft by, you know, leveraging the captive insurance, insurance muscle? Yeah, let's do one on one on that. I'll start with the first. So I mean, there are a couple of things there. So actually, I'll start with an old chest tie. You know, the best time to replace your roof is when the sun is shining.

Speaker Change: No excuses, we still have to do just in a reasonably good job everyday so I don't want to speculate on how much further we can go but I will say, we're quite focused on.

Speaker Change: Protection, that's not a word we chose.

Speaker Change: Kevin earlier.

Kevin: Thank you.

Kevin: Your next question comes from the line of Alex <unk> from Wells Fargo. Please go ahead.

Alex: Hey, Thank you so much for the question.

Alex: Two for me I guess why is now the right time to establish a 70% minimum driver payout thresholds. It seems like all of the commentary suggests that industry supply trends are extremely healthy and so I think that stands a little bit in contrast, with increasingly passed so just any commentary on the timing I think would be really interesting and then maybe secondly, if I could ask.

David Rescher: So we have strong driver preference for Lyft already. And that's been true for a long time, really, since the earliest days of Lyft. I'd say it's one of the real sort of differentiators between Lyft and Uber on kind of a perception basis. Drivers, And so we're leaning into that. We're leaning into that. And so, behind the scenes, you might have seen the report that came out a couple weeks ago from GridWise that sort of suggested that Uber drivers' earnings have been decreasing. I think they estimated about 17%. Ours have been going up over the same period; I forget what the period was, I think two years. Maybe a little over 2%.

Alex: On insurance, you guys indicated correctly that even mixing the business towards risk transfer obviously in the U S. Your primary competitor has been moving the other direction briefing shifting their business towards captive insurance.

Alex: I guess, how can we explain the differential and strategy there.

Alex: Concern that they're going to build a structural cost advantage over lift by leveraging the captive insurance insurance muscle. Thank you.

Speaker Change: Yes, that's what I'm wanting that I'll start with the first so.

Speaker Change: I mean, a couple of things there so.

Speaker Change: Actually I'll start with an old chestnut.

Speaker Change: Tend to replace the roof is when it's finished shining so.

Speaker Change: We have strong driver preference for Lyft already and that's been true for a long time really since the earliest days of lift I'd say, it's one of the real.

Speaker Change: A differentiator has been lyft and Uber on kind of a perception basis drivers right.

David Rescher: So in the background, we've been working quite hard at making sure that our drivers are paid as well as they can. And again, just for clarity, it's technically the riders who pay the drivers, and we just take a cut. So that's kind of the mechanics of it.

Speaker Change: And so we're leaning into that we're leaning into that and some behind the scenes you might have seen the report that came out a couple of weeks ago from grid wise.

Speaker Change: Sort of suggested that.

David Rescher: So then I say, given those mechanics, the riders pay the drivers, and we take a cut. Well, what can we do to address a very consistent set of pain points the drivers have communicated to me, often in quite personal ways, I might add, since the day I started? One is around transparency. You know, a question of fairness. Are you taking too much?

Speaker Change: Liberal drivers earnings had been decreasing I think they estimated about 17%.

Speaker Change: Ours have been going up over the same period I forgot if trade wars I think two years, maybe a little over 2%. So in the background, we've been working quite hard at making sure that our drivers are paid.

Speaker Change: As well as they can and again just for clarity, which technically the riders who pay the drivers and we just take a cut so that's that's kind of the mechanics of it.

David Rescher: And the second is a question of minimums, frankly. You know, why are there some drives where it feels like my rider pays 20 bucks, and I get, you know, barely, barely anything? So it was a very deliberate strategy on our part. It was for some period of time to say there are two customers in every car. It's a rider and a driver.

Speaker Change: So then you say given those mechanics, the riders that the drivers when we take a cut well.

Speaker Change: What can we do to address a very consistent set of pain points that drivers are communicated to me.

Speaker Change: And then quite personal <unk> might add since.

Speaker Change: The day I started one is around transparency question of fairness are you taking too much.

Speaker Change: Second is <unk>.

David Rescher: And if we can drive preference for both, that's what ends up creating marketplace efficiency, which then, in turn, obviously increases service levels, improves service levels, but also increases top line and margin. So it's really quite a self-fulfilling prophecy. And back to your question around timing, you know, sort of if not now, when? You sort of want to do it when things are going pretty well rather than feeling like you have to defend yourself.

Speaker Change: Question of Minimums, frankly, why are there some drives where it feels like my my rider pays 20, Bucks and I get barely barely anything so.

Speaker Change: He was a very deliberate strategy on our part it's been for some period of time to say there are two customers. In every car is a rider and a driver and if we can drive preference on bone, that's what ends up creating marketplace sufficiency, which then in turn obviously increase the service levels.

David Rescher: I'll say one last thing before I turn it over to Aaron. There is a piece we published last week that I would encourage everyone to read. You know, the customer obsession doesn't just mean, you know, listening to customers. Of course, it means that and trying to come up with things, innovating on their behalf. But it also means deeply, deeply understanding their needs so that the work that you're doing, you know, responds to those needs. We published a white paper about 10 days ago, or actually, I guess about a week ago, and it's called something like the Driver Transparency Earnings Report. I forget the exact name of it, but it's really quite a nice piece of work.

Speaker Change: Food service levels, but also increases topline and margin. So it's really quite a self fulfilling prophecy.

Speaker Change: And back to your question around timing.

Speaker Change: Sort of if not now when you sort of want to do it when things are going pretty well rather than feeling like you're going to have to defend yourself.

Speaker Change: I'll say, one last thing before I turn it over to Aaron Theres a piece, we published last week, but I would encourage everyone to read.

Speaker Change: The.

Customer obsession doesn't just mean.

Aaron: Listening to customers of course, it means that and trying to come up with things innovating on their behalf, but it also means deeply deeply understanding their needs. So that the work that youre doing responds to those needs. We published a white paper about 10 days ago, or actually I guess about a week ago and.

Aaron: And it's called something like the driver transparency earnings report I forget the exact name, but there's really quite a nice piece of work and I'm going to brag on the team for a second chance quite a large team extra cross the company spent a lot of energy looking not just a gross earnings which is how much drivers get paid.

David Rescher: And I'm going to brag on the team for a second. The team, quite a large team actually across the company, spent a lot of energy looking not just at gross earnings, which is how much drivers get paid, you know, kind of off the top, but also net earnings. In other words, what they make after their expenses, their gasoline, their maintenance, their depreciation, even the cleaning of the car, all the marginal costs that you have when you drive for a rideshare. And I did it for all kinds of reasons.

Off the top but also net earnings in other words, what they make after their expenses their gasoline there maintenance depreciation in the cleaning of the car all the marginal costs that you have when you drive for rideshare.

Aaron: And for all kinds of reasons policymakers are interested in this but frankly. So are we are really interested in understanding how much drivers' take home and on average after all the expenses. The best we can see and this is an average you can see that.

David Rescher: Policymakers are interested in this, but frankly, so are we. We're really interested in understanding how much drivers take home. And on average, after all the expenses, the best we can see, and this isn't average, you can see the quintiles in the report, but on average, $23.46 per engaged hour is what NIF drivers make.

Aaron: Quintiles in the report but on average.

Aaron: $23.46 per engaged dollar is what lyft drivers and we're very proud of that we think it stacks up really nicely against other potential ways people can earn money, particularly when you add the flexibility you get so it was a very long answer, but really I think I hope.

David Rescher: And we're very proud of that. We think it stacks up really nicely against other potential ways people can earn money, particularly when you add the flexibility you get. So it was a very long answer, but really, I think it, I hope, reveals the way we think about driver supply, which is not just some generic number, a million drivers, you know, making a billion dollars, whatever. But very specifically, why do drivers drive? How much money do they make?

Aaron: Reveals the way, we think about drive resupply, which is not just some generic number 1 million drivers making billion whatever the very specifically wider drivers drive how much money they make and how can we give them a certain amount of assurance within the.

David Rescher: And how can we give them a certain amount of assurance within the context of our business model, that they're independent contractors, that their take is fair? And Alec, I'll take your question overall on insurance. And so, you know, in last quarter's conference call, we talked a fair bit about insurance. But what I'd like to leave you with is, you know, insurance is price per mile, right? So it's not as if there's a bulk discount as you think about that overall.

Aaron: The context of our business part of it as their independent contractors.

Aaron: But theyre take us there.

Speaker Change: And Alex I'll take your question overall uninsured and so.

Speaker Change: And last in last quarter's conference call, we talked a fair bit about about insurance, but what I'd like to leave you with is insurances price per mile right. So it's a it's not as if there's a bulk discount as you as you think about that overall and we continue to do a tremendous amount.

Erin: And we continue to do a tremendous amount of work, you know, implementing our strategy here at LYFT, as relates to increasingly building features into our product, you know, working across various policy initiatives, and doing a number of things that, you know, we believe, and we've demonstrated in the past, have a positive impact on what has been a rate of increase, historically, over time. I couldn't comment on our competitors' choice about But what I can tell you is the thought that is behind how we've structured ours. And so we do risk transfer a majority of our business, which means there's a portion of it, a small portion, that is self-insured. And we like that mix; we think it's the right one for us. And I will tell you a little bit about why.

Speaker Change: Out of work.

Speaker Change: Implementing our strategy here at Lyft as it relates to increasingly building and features in our products.

Speaker Change: Working across various policy initiatives.

Speaker Change: And doing a number of things that you know.

Speaker Change: We believe and we have demonstrated in the past I'm a positive impact on on what has been a rate of increase.

Speaker Change: Historically over time.

Speaker Change: I Couldnt comment on our competitors' choice about how they how they structure their program, but what I can tell you is.

Speaker Change: The thought that is behind how we've structured hours and so we do risk transfer a majority of our business, which meant which means there's a portion of it a small portion that is self insured and we like that mix. We think it's the right one for us and let me tell you a little bit about why so on the portion that we retain and we do that.

Erin: So on the portion that we retain, we do that on a selective basis where we think it makes sense. And so that's a thoughtful approach. And then as it relates to the portion of the business that we risk transfer, you know, there's a benefit there and that there's some certainty and cash flows that are provided. We think that's important. And then the second thing that I'd highlight is, you know, we work very closely with partners, and partners is a really important word here, because these are long-term partners that have been with us for a number of years, and they have deep expertise, deep expertise in the states where they operate. And so as we continue to work increasingly in a very collaborative way, we think this is the right way in terms of, you know, resolving claims So we like the mix of how we're structured today and how it works for us. And beyond that, I couldn't comment on what our competitors choose. I'm going to say one more thing. I want to say one more thing here, too, because it gives us the chance to brag on our team a little bit.

Speaker Change: On a selective basis, where we think it makes sense.

Speaker Change: And so that's a that's a thoughtful approach and then as it relates to the portion of the business that we are a.

Speaker Change: Risk transfer, there's a benefit there and that there is some certainty in cash flows. It's provided we think that's important and then the second thing that I'd highlight is we work very closely with partners and partners is a really important word here. Because these are long term partners that have been with us.

Speaker Change: For a number of years and they have deep expertise deep expertise in the states, where they operate and so as we continue to work increasingly sort of in a very collaborative way. We think this is a is the right way in terms of resolving claims in a timely fashion in a reasonable.

Speaker Change: Fashion, so we like the mix of of how we're structured today and it works for us and beyond that I couldn't comment on on what our competitor cheeses.

Speaker Change: I'm going to say one more thing.

Speaker Change: When I say, one more thing here too because.

Speaker Change: Gives us a chance to brag on our team a little bit so and actually get a little preview of Investor Day, We mentioned with you at Investor Day, I think one of the thing is that this will sound strange, but if you come to Investor day, and I Hope you do.

David Rescher: So, and actually give a little preview to Investor Day. We mentioned we're going to do an Investor Day. I think one of the things, this will sound strange, but if you come to Investor Day, and I hope you do, and you get a chance to meet Max Feldman, who heads up our insurance and risk management, the guy's a rock star. And it's just an incredible, incredible team we have that focuses on risk management. I think you'll come away, you know, both impressed and educated about how we think about this. I'll also point out one of the newest additions to our board, Till Beggs, who's the head of North American and Global, especially reinsurance for Everest Re, brings an enormous amount of insurance expertise to the company. An enormous amount. And so, as Aaron said, we really like this sort of mix. And yeah, we'll be interested to see what the other guys do, but we feel pretty good about our strategy. Thanks so much.

Speaker Change: And you get a chance to meet Max Feldman, who is up our insurance and risk management.

Speaker Change: You guys are Rockstar and it's just an incredible incredible team who've cockpit focus on risk management.

Speaker Change: I think youll come away Super both impressed but also educated about how we think about this I'll also point out one of the newest additions to our board so bags is that.

Speaker Change: The head of North American and global specialty reinsurance for Everest re brings an enormous amount of insurance expertise to the company enormous amount and so his answer we really like the sort of the mix.

Speaker Change: Yes, but we'll be interested to see what the other guys do but we feel pretty good about our strategy.

Speaker Change: Thanks, so much.

Speaker Change: Your next question comes from the line of Deepak Maths Vernon from Wolfe Research. Please go ahead.

Deepak Mathavanan: Your next question comes from the line of Deepak Mathavanan, Wolf Research. Please go ahead. Great, thanks for taking the question. So first, David, with all the efforts to grow the portfolio of products and then bring prices, service level, and priority to the forefront, can you talk about the trends in active riders? I know there are some seasonal elements in 4Q, but how should we think about the importance of growing the audience and users to hit kind of like the mid-teens and potentially compound around that into the... And then, related to that, you know, on the cost side, how should we think about the level of investments that's required for headcount, maybe to expand the scope of product initiatives as you think about kind of balancing the growth, you know, over the

Speaker Change: Great. Thanks for taking the question. So first David with all the efforts to grow the portfolio of products and then bringing prices service Lebanon Authority was this competition can you talk about the trends in active riders I know there is some seasonal element in <unk> or how should we think about the importance of growing audience users to head kind of like the mid teens and potentially.

Compound around that into the future and then sort of.

Speaker Change: Later to that.

David: On the cost side, how should we think about the level of investments that's required for head count maybe to expand on the scope of product initiatives. As you think about kind of balancing the growth over the medium term. Thank you so much.

Deepak Mathavanan: Thank you so much, Sure. Hey Deepak, I'll take the first part, and then Aaron and I will tag team on the second. So, first, yeah, good question about active riders, and I definitely want to double down on something you alluded to, but it's good for everyone to understand, which is, you know, because our active riders are the sum of rideshare and bikes and scooters, you see a bit of a sort of switch in Q4, where obviously, when there's snow on the ground and cold, people don't take bikes very much. So there's a little bit of a switch going under the covers.

Speaker Change: Sure Hey, Deepak ill take the first part and then Aaron I'll tag team on that and I'll take the second.

Speaker Change: So first.

Speaker Change: Yes. Good question about active riders and definitely want to double down on something you alluded to but it's good for them for everyone to understand which is.

Aaron: Our active riders as the sum of rideshare and bikes and scooters.

Speaker Change: You see a bit of a sort of a switch in Q4, we're obviously when there's snow on the ground and cold people don't take thanks very much.

Speaker Change: So theres a little bit of a switch there going on under the covers.

David Rescher: But broadly speaking, you know, this is the way we look at it. We and we sort of zoom out here a little bit. Every single time we get a rider, and I mentioned that 25% of our riders were new labs, it's very, very important that we work on our service levels, we work on obsessing over that ride and over that rider, because just to say the cliche thing, it's so much easier, more efficient, to hold on to an existing rider than to acquire a new one. And so our first order of business over the last couple of quarters has really been to focus on making sure that every time we get a rider, new or existing, we take good care of them. What that translates to is higher frequency.

Speaker Change: Broadly speaking here's the way we look at it.

Speaker Change: We are.

Speaker Change: I'm going to sort of zoom out here, a little bit like for us.

Speaker Change: Every single time, we get a rider and I mentioned, the 25% of our riders with new last year.

Speaker Change: Very very important that we work on our service levels were work on obsessing over that rising over that that rider.

Speaker Change: Just to say the same thing, it's almost easier more efficient to hold on to an existing rather than to acquire a new book and so our first order of business over the last couple of quarters has really been to focus on making sure that every time, we get a rider new or existing we take good care.

Speaker Change: What that translates to is higher frequency and particularly when you look at our high frequency riders again writers come in all shapes and sizes and Theyre all sorts of segments, but if you look at our high frequency riders.

David Rescher: And particularly when you look at our high-frequency riders, again, riders come in all shapes and sizes, and there are all sorts of segments. But if you look at our high-frequency riders, you actually see a meaningful increase in frequency there. We think that's incredibly telling because it's a really good leading indicator that when your biggest fans, who also tend to be your biggest critics, are positively responding to the work you've done, that has massive ripple effects. And so it means that over time, as we focus even more energy on rider acquisition through new product initiatives like Women Plus Connect and some of these other things we do, every single one of those riders that comes in is effectively a more Because we expect them to be a heavier user of LYFT.

You see a meaningful increase in frequency there we think that's incredibly tablet because it's a really good leading indicator when your biggest fans who also tend to be a biggest critics are positively responding to the work you've done that has lots of ripple effects and so it means that over time as we focus even more energy on Ryder.

Speaker Change: <unk> through new product initiatives like plus connect some of these other things. We do every single one of those writers that comes in is effectively a more profitable rider for us right, because we expect them to be a heavier user of lift. So that's sort of the focus the focus is on really increased working on those basics.

David Rescher: So that's sort of the focus. The focus is on really increasing, you know, working on those basics that creates some good frequency things. If you do a good job of it, you see it first in high-frequency riders because that's obviously where the data is the densest.

Speaker Change: That creates some good frequency things would you do a good job of it you see it earliest and high frequency riders because thats, obviously thats, where the data is the dancers and then you can sort of overtime to the extent you want to or need to you can do more customer acquisition, either in terms of product innovation or even marketing efforts or some combination, but that's kind of a dip.

Erin: And then, sort of, over time, to the extent you want to or need to, you can do more customer acquisition, even in terms of product innovation or even, you know, marketing efforts or some combination of both. So that's kind of the structure. And then I'll turn it over to Erin to talk about the cost.

Speaker Change: Structure.

Speaker Change: And then yes, and then I'll turn it over to Eric to talk about the cost yeah, So you're asking a little bit about our cost overall and sort of how to think about initiatives into 2024. So I think you've specifically chatted about head count.

Erin: Yeah, so you're asking a little bit about cost overall and sort of how to think about initiatives into 2024. So I think you've specifically asked about headcount. You know, we've talked about a real focus on operational excellence, and that absolutely includes a focus on cost discipline. And so we are not anticipating, you know, any material changes, if you will, in the overall level of headcount, et cetera.

Eric: We've talked about a real focus on operational excellence and that absolutely includes a focus on cost discipline and so we are not anticipating.

Eric: Any material changes if you will in the overall level of head count et cetera.

Erin: You know, although I would point out that even on flat headcount, you're going to expect some increases, you know, for merit and some inflation and cost of benefits, et cetera, year over year. But outside of things like that, you know, we are very, very disciplined as it relates to our sort of base cost structure. You asked about the cost of initiatives.

Eric: Although I would point out that even on even on flat head count Youre going to expect some increases.

Eric: For Merit and some.

Eric: <unk> and cost of benefits et cetera are year over year.

Eric: But outside of things like that we are very very disciplined as it relates to our sort of base cost structure.

Eric: You asked about the cost of initiatives and frankly, I think I'm going to go back to the driver earnings commitment because I think it's a really good framework.

Erin: And frankly, I think I'm going to go back to the driver earnings commitment because I think it's a really good framework in the way that we think about investing in these types of initiatives. So first and foremost, just want to emphasize, even though it's probably obvious that everything associated with the driver earnings commitment is included in our outlook for 2024. But you know, if you think about that at the heart, you know, we've published a lot of information here. Some of those things include things like, on average, drivers are taking about 88%. And then we announced this 70% that you can think of as a floor. So, you know, another way to consider this is that these are edge cases that are really a pain point for drivers.

Eric: The way that we think about investing in these types of initiatives, so first and foremost.

Eric: I want to emphasize even though it's probably obvious that.

Eric: Everything associated with the driver earnings commitment is included in our outlook for 2024.

Eric: But you know if you think about that at the heart, we published a lot of information here.

Some of those things include things like on average drivers are taking about 88%.

Eric: And then we announced the 70% that you can think of as a floor. So another way to consider this or are these are edge cases that are really a pain point for drivers and so while there is a cost to the promotion. The really important premise is that we're taking some of the biggest pain points for <unk>.

Erin: And so while there is a cost to the promotion, the really important premise is that we're taking some of the biggest pain points for drivers off the table. And if you step way back, that really allows us to engage with drivers overall in a much more efficient way. And so, you know, hopefully that gives you a framework for the way that we think about investing in things. This is a clear sort of customer obsession way to do that, and how, for our total business, it ends up being, over time, just a really efficient thing to do. So, good for the customer, good for our business. Your next question comes from the line of Benjamin Black from Deutsche Bank. Please go ahead.

Drivers off the table and if you step way back that really allows us to engage with drivers overall and a much more efficient way and so.

Eric: Hopefully that gives you a framework for the way that we think about investing in things. This is a clear sort of customer obsession.

Eric: Way to do that and how for our total business. It ends up being over time, just a really efficient thing to do so good for the customer.

Eric: Good for our business.

Speaker Change: Thank you so much.

Speaker Change: Your next question comes from the line of Benjamin Black from Deutsche Bank. Please go ahead.

Benjamin Black: Thank you for the question. Aaron, I think you mentioned that the improvements in marketplace balance were able to offset 75% of your incremental insurance costs. Can you dig into that a little bit more? Was that mostly due to driver incentives coming down?

Benjamin Black: Thank you for the question.

Benjamin Black: Perhaps I think you mentioned that the improvements in marketplace balance, we're able to offset 75% of your incremental insurance costs. So can you just dig into that a little bit more was that mostly a function of the driver incentives coming down and then secondly for your directional guidance for 'twenty 'twenty, four and place slightly faster bookings growth.

Erin: And then secondly, for your directional guidance, for employees with slightly faster bookings growth versus trip growth, so should we be expecting pricing to potentially be a lever in 2024 as well? Thank you. Yeah, so thanks. I think you were talking about Q4, where we had the full impact of our third-party insurance renewals.

Benjamin Black: Trip growth, so should we expecting pricing to potentially elaborate in 'twenty 'twenty four is well. Thank you.

Benjamin Black: Yeah.

Speaker Change: Yeah. So thanks, I think you were talking about a Q4, where we had the full impact of our third party insurance renewals.

Erin: And so, you're correct. I mentioned that, along with ride growth, as we had anticipated and guided to, cost of revenue increased substantially in Q1. And so, yes, we were largely able to offset that, operating, you know, more efficiently.

Speaker Change: And so you are correct. If I mentioned, if you think about that along with ride growth.

Speaker Change: As we had anticipated and guided to cost of revenue increased substantially in Q1.

Speaker Change: And so yes, we were largely able to offset that.

Speaker Change: Operating more efficiently as you think about dry driving increased driver preference for Lyft and I talked about the increase that we saw in driver hours, which have been which were meaningful in Q3, and Q4 that really allows us again to engage with that driver community in a much more.

Erin: As you think about driving increased driver preference for LYFT, and I talked about the increase that we saw in driver hours, which were meaningful, you know, both in Q3 and Q4. That really allows us, again, to engage with that driver community in a much more efficient way. And it's good for riders as well, right?

It shouldn't weigh.

Speaker Change: And it's good for riders as well Ryan R. E T. H go down et cetera. So it becomes this sort of virtuous cycle. If you will overall in the business.

Erin: Our ETAs go down, etc. So, it becomes this sort of virtuous cycle, if you will, overall in the business. You're gonna have to repeat the second question for me, Benjamin.

Youre going to have to repeat the second question for me Benjamin.

Benjamin Black: Um, yeah, growth in bookings is going faster than trip growth in 2024. So curious if there's an assumption for price to be a catalyst. Yeah, thanks.

Benjamin Black: Yeah gross bookings.

Speaker Change: Growing faster than trip growth in 2024, so curious if there is an assumption for pricing.

Speaker Change: To be a catalyst in 'twenty four.

Speaker Change: Yeah. Thanks, sorry, thanks for repeating the question, yes. So we did guide for gross bookings to grow slightly faster than rides growth in 2024, I think it's important to remind everyone that gross bookings Wallace a significant majority of that number.

Erin: Thanks for repeating the question. Yes, so we did forecast for gross bookings to grow slightly faster than ride growth in 2024. You know, I think it's important to remind everyone that, you know, gross bookings, while a significant majority of that number is our core rideshare business, it's important to remind you that things like our bikes and scooter business, media, etc. are also flowing through our gross bookings line. So I'd point that out.

Speaker Change: As our core rideshare business important to remind that things like our bikes and scooter business media et cetera are also flowing through our gross bookings gross bookings line. So I'd point that out as it relates to pricing, it's not driving assumption in our 2020.

Erin: As it relates to pricing, you know, it's not a driving assumption in our 2024 guide. And so hopefully, that all just gives you some context. Our strategy remains to be price competitive overall. Great, thank you very much.

Speaker Change: For our guide and so hopefully that all just gives you some context.

Speaker Change: Our strategy remains to be price competitive.

Speaker Change: Overall.

Speaker Change: Great. Thank you very much.

Michael Morton: Your next question comes from the line of Michael Morton from Moffitt & Nathanson. Go ahead. Hi, thanks for the question. I was wondering if we could talk some more about the directional guidance for 2024 and what the expectations are for the performance of the advertising business as part of that guide. I remember a little while ago on Yahoo Finance, David referenced the potential for a half-billion dollar advertising business. So just trying to get a deeper understanding of the cadence of that advertising business going forward. Thank you. Yes, sir. Hey Michael, it's David.

Your next question comes from the line of Michael Martin from Moffett Nathanson. Please go ahead.

Michael Martin: Alright. Thanks for the question I was wondering if we cannot talk some more about the directional guidance for 2024 and what the expectations are for the performance of the advertising business as part of that guidance I remember a little while ago on Yahoo Finance David referenced.

Michael Martin: Over a half a billion dollars advertising business. So I'm, just trying to get a deeper understanding of the cadence of that advertising business going forward. Thank you.

Speaker Change: Yeah, sure Hey, Michael Yes, that's one of those close that it's come back a couple of times I've seen that way.

David Rescher: Yeah, that's one of those quotes that's come back. I've made it a couple of times. I've seen that one.

David Rescher: So that was meant to be aspirational and long term, to be clear. Who knows, maybe we'll get there sooner, maybe later. The team is working pretty hard. I think, I hope I'm not saying anything out of line here, but last week, they had their biggest sales week ever in history.

Speaker Change: So that was meant to be aspirational and long term to be clear.

Speaker Change: Who knows maybe we will get there sooner. Maybe later team is working pretty hard I think I hope I'm, not saying anything out of line here, but last week. They had their biggest sales week ever in history. We just didn't have that on stage just internally and that's on a Friday. So what does that tell you that shows you that the business is growing fast by definition. It does give us good product market fit it doesn't tell you the size and will be.

David Rescher: We just announced that internally on Friday. So, what does that tell you? That tells you the business is growing fast, by definition. It tells you there's a good product-market fit. It doesn't tell you the size, and we're being deliberate about it.

Speaker Change: Deliberate about it is not particularly large from a sort of overall total company perspective, but again, we see really good fit with what are our advertisers. Our media partners are looking for and you'll see a lot of innovation on our side when it comes to new.

David Rescher: It's not particularly large, you know, from a sort of overall total company perspective. But again, we see really good fit with what our advertisers, and our media partners are looking for. And you'll see a lot of innovation on our side when it comes to new ad units. Just as a quick reminder, and just for the big picture for one second, we have advertising units that we sell in the Lyft app, we have advertising units that we sell on tablets, which are in cars. You've probably seen them if you've been in New York City recently. We have advertising units we sell on top of cars. And then we even have, thanks again to our bike and scooter business; we've got panels, some of which are old school analog panels, some of which are increasingly digital electrified panels in some cities.

Speaker Change: AD units just as a quick reminder, and just big picture for one second.

Speaker Change: We have advertising units that we sell in the Lyft App, we have advertising that we felt on tablets, which are in Congress, you've probably seen them. If you've been in New York City recently, we have advertising as we saw on top of cars and then we even have thanks again to our bike and scooter business, we've got panels.

Speaker Change: Some of which are old school analog Pamela some of which are increasingly digital electrified panels in some cities. So we've got a really nice thing there is one of the reasons why.

David Rescher: So you know, we've got a really nice site and it's one of the reasons why, you know, on Super Bowl Sunday, for example, I mentioned, I think I didn't mention Zillow. Zillow also did a big buyout. And, you know, they tend to be, you know, sort of multi-channel buyouts that cost these sort of multiple, you know, kind of ad outlets, sort of surround And it's something that we can provide that, you know, there aren't a lot of other ways in the physical and digital world. And that's really quite interesting, right? Because the physical world still turns out to be quite important to a lot of people, and we're right there in front of them. So anyway, all that's really just kind of meant to be colored.

On Super Bowl Sunday for example, I mentioned I think.

Speaker Change: You mentioned, a zillow Zillow also did a big buyout.

Speaker Change: And you know they tend to be sort of multichannel buyouts.

Speaker Change: Multiple.

Speaker Change: Kind of add outlets serviced.

Speaker Change: Surround sound type things and it's something that we can provide that there arent a lot of other ways in the physical and digital world and it's really quite interesting right because the physical world still turns out to be quite important to a lot of people and we're right. There in front of them. So anyway. All of that is really just kind of mentioned the color in terms of the actual numbers, though we're not releasing those yet.

David Rescher: In terms of the actual numbers, though, we're not releasing those yet. But for sure, it'll be something you'll be hearing us talk more about over time. I do stand by my prediction. I'm just not putting out time for it.

Speaker Change: But for sure it will be something you'll be hearing us talk more about over time and I do standby my prediction I'm, just not putting a timeframe on it.

Stephen Ju: Thank you so much. Sure. Your next question comes from the line of Stephen Ju from UBS. Please go ahead.

Speaker Change: Thank you so much.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Stephen Ju from UBS. Please go ahead.

David Rescher: Okay, thank you, David. I think you have talked in the past about the marketplace connecting of supply and demand as sort of a base level service, and you were really looking forward to rolling out incremental value-added services. So, any directional pointers you can share with us and how product development has been progressing here? And maybe advertising, as you just alluded to, is one piece, but what else should we be thinking about? Thank you. Yeah, this is always an area where I get frustrated as a teacher as well as just as just myself.

Stephen Ju: Okay. Thank you David.

Stephen Ju: I think you have in the past.

Stephen Ju: Talked about the marketplace connecting supply and demand is sort of a base level of service and.

Stephen Ju: You were really looking forward to rolling out incremental value added services. So.

Stephen Ju: Any directional pointers, you can share with us how the product development has been progressing here and maybe advertising as you just alluded to is one piece, but what else should we be thinking about thank you.

Stephen Ju: Yeah.

Speaker Change: This is always an area, where I get frustrated as a as just a physicist myself because of course I always wanted to talk about all of the things we've got in the pipeline, but it's not such a good idea I think.

David Rescher: Because, of course, I always want to talk about all the things we've got in the pipeline, but it's not such a good idea. I think, you know, thus, I have to sort of, you know, keep talking about some of the same things. Let's look at Comfort Plus for just a second.

Speaker Change: The us I have to sort of keep talking about some of the same thing, let's look at comfort pause for just a second comfort plus.

David Rescher: Comfort Plus is a relatively small product in the portfolio, but I think we've given about 2 million rides or so since we launched it. And that's wonderful. And it's not a product we've particularly marketed.

Relatively small products in the portfolio.

Speaker Change: But I think we've given about 2 million lives or so since we've launched it and.

Speaker Change: And that's wonderful and it's not a product, we particularly marketed we play around with a little bit on site stuff, but there is more we can do there when people want either a second larger cars slightly newer car or at least in my case, sometimes a slightly quieter car.

David Rescher: We play around with a little bit of on-site stuff. But there's more we can do there when people want either a slightly larger car, slightly newer car, or, at least in my case, sometimes a slightly quieter car is another option we give there. So that's a sort of small example. The online pickup promise.

Speaker Change: As another option to get there. So that's the sort of small example online pickup promise again today, it's very focused on the airports right, but that doesn't necessarily have to be where you stop with that with a promise like that you can imagine all sorts of ways that we can.

David Rescher: Again, today, it's very focused on airports, right? But that doesn't necessarily have to be where you stop. With a promise like that, you can imagine all sorts of ways that we can guarantee reliability and maybe charge a premium for it. So there's a lot more to do there. I wish I could get more specific, but I'm going to have to sort of leave it there.

Speaker Change: Guarantee reliability and maybe charge a premium for it so.

Speaker Change: A lot more to do there.

Speaker Change: I wish I could get more specific but I'm going to have to sort of leave it there, but I think one of the things Thats really that I just enjoy frankly about.

Yusuf Squally: But I think one of the things that's really, that I just enjoy, frankly, about our, Pardon me, my job and about the team is how focused people are on coming up with amazing new ideas for customers. You know, expect to see a lot more over time. Your next question comes from the line of Yusuf Squally from Truist Securities. Please go ahead.

Speaker Change: Pardon me my job and about their team is focused folks are I'm coming up with amazing new ideas for our customers.

Speaker Change: Expect to see a lot more overtime.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Youssef Squali from tourists Securities. Please go ahead.

David Rescher: Great, thank you guys for taking the questions. First, David, you said that 20% of rides had a connection to partners back in 2023. I was wondering what it was in 2022. And as you look at 2024, are you, And there's an extra one, or you could change all of those?

Youssef Squali: Great. Thank you guys for taking the questions.

Youssef Squali: You said that 20% of rides.

Youssef Squali: In connection to partners back in 2023.

Youssef Squali: One I was wondering what it was in 2022 and as you look at 2024 are you expecting additional already.

Yusuf Squally: Guide, Bacon, and additional partners that have yet to be announced. And Aaron, relative to that 50 basis point improvement in margins in 2024 versus 2023. As we look beyond, I know you're not guiding to beyond 2024 yet, just yet, but as we look beyond it from a modeling perspective, is it? What are the things that are happening in 2024 that may actually... Include you from having that 50 basis point be sustainable beyond 2024 if you can point to Mark. Hey, Yousef, it's David. I'll start, and again, Aaron will tag team with me.

Youssef Squali: The guide baking in additional partners.

Youssef Squali: We announced and Erin relative to that 50 basis point improvement.

Youssef Squali: And margins 2024 versus 2023, as we look beyond that I know, you're not guiding to be on 'twenty 'twenty four yet just yet, but as we look beyond it from a modeling perspective is it.

Youssef Squali: What are the what are the things that happened in 2024 that may actually.

Youssef Squali: Preclude you from having that 50 basis point be sustainable beyond 2024, if you can point to one or two.

Youssef Squali: Hey, Youssef, it's David I'll start and again are no we'll tag team with me. So I. Unfortunately have to disappoint you a little bit we're not going to give specifics on that percentage, how we expect it to change, but I will add a little color because I think it helps tell the story and the word partner such a broad word it's maybe helpful to have a.

David Rescher: So unfortunately, I have to disappoint you a little bit. We're not going to give specifics on that percentage or how we expect it to change. But I will add a little color because I think it helps tell the story.

David Rescher: And the word partner is such a broad word, so it's helpful to have a bit of a framework. You might think of some of these partners, and let's use Chase as an example, of a fairly clear value proposition where Chase is not the largest credit card issuer, or I think they are actually the largest credit card issuer in North America. You know, we have a very strategic and long-term relationship with them involved in Chase Sapphire, in particular, where people can earn points by using their Chase credit card. And that's something, as a driver, I hear fairly regularly from my riders, that they say that's a reason that they choose LYFT. So those sorts of, you know, we have a similar relationship with Delta, and we have similar issues with Alaska Airlines. There's a lot more we can do. You know, with all of those.

Youssef Squali: Bit of a framework.

Speaker Change: You might think of some of these partners and let's use cases, an example of a fairly clear value proposition where tastes.

Speaker Change: If not the largest credit card issuer I think they are actually the largest credit card issuer in North America.

Speaker Change: They have we have a very strategic and long term relationship with them evolving chase Sapphire in particular, where people can earn points.

Speaker Change: By using their chips off our car and that's something as a driver I here fairly regularly from my riders that they say that's a reason that they choose left so those sorts of we have some relationship with Delta we have similar issues with Alaska Airlines, there's a lot more we can do.

Speaker Change: With all of those I.

David Rescher: I mentioned briefly, by the way, that those partnerships sometimes start in one way, and then they morph into something different. So Alaska Airlines, excuse me, Delta Airlines started as a points partnership. It's now evolved to be a community partnership, right? Because, as I say, flight crews get transported by Lyft to the airport. Let me give you some other examples, again, just purely for color.

Speaker Change: I mentioned briefly by the way those partnerships, sometimes start in one way and then a more through different things. So Alaska Airlines are going to be Delta Airlines started as appoints partnership. It has now evolved to be a commute partnership right. So because as I say flight crews get transported by a lift to the two.

Speaker Change: To the to the airports.

Speaker Change: We gave you some other examples again just purely for color.

David Rescher: With Amazon, we have a relationship with them, where we're providing a certain amount of support for their distribution center workers, as well as some businesses. Starbucks, I mentioned early on, and so did I with Delta and FedEx. So FedEx, we help them get to and from their distribution centers, again, in kind of a commute context. And then, similar with LinkedIn. LinkedIn actually had an interesting situation with Return to Office, where their parking lots actually ran out of space. And so we now, with our Lyft Pass product, provide a commute solution for them. So each of these, and you've heard us talk about healthcare in the past, which has had some nice growth. Again, these are relatively small individually, but collectively they turn out to be quite meaningful.

Speaker Change: With Amazon, we have a relationship with them, where we're providing a certain amount of support for their distribution center workers as well as some business travel.

Speaker Change: Our books.

Speaker Change: I mentioned early on and so did I did with Delta.

Speaker Change: Fedex Fedex, we help them get to and from their distribution centers again and kind of a commute context, then in a similar with Linkedin Linkedin actually had an interesting situation with return to office, where their parking lots actually ran out of space and so we know with our lift pass product provider can be a solution for them. So each of these <unk>.

Speaker Change: Heard us talk about health care in the past, we just had some nice growth again. These are relatively small individually, but collectively they turn out to be quite meaningful and so again without wanting to sort of get ahead of myself on exactly what percentage prediction or whatever it is I will say, it's a part of the business, where we're making real investments because we see a lot of opportunity and they tend to be by the way.

David Rescher: And so, again, without wanting to sort of get ahead of myself on exactly a percentage prediction, whatever it is, I would say it's a part of the business where we're making real investments because we see a lot of opportunity. And they tend to be, by the way, quite sticky relationships, which is nice, right? If you're doing a good job for your partner, there's no reason for that partner to switch.

Speaker Change: Quite sticky relationships.

Which is nice right if youre doing a good job for your partner there is no reason for that part of the switch and so thats that.

David Rescher: And so that provides us with some long-term stability, as well as potentially higher margins and, of course, incremental rise. And thanks, I'll take the question. You're right, I'm not going to comment on things beyond the directional guide we gave for 2024. But to the extent it's helpful, I think it's interesting to think about, you know, in our remarks and today in the Q&A, we've sort of touched on three key areas: continuous innovation, rideshare perfection, and sort of leaning into this partnership-driven growth. You know, I suppose the other element, as you think about expansion over time, would relate to cost discipline, which frankly is the hallmark of any durable, profitable business. If you think about all of those four things, they're not meant to be sort of, you know, annual, annual things that have an expiration date.

Speaker Change: That provides us some long term stability as well as.

Speaker Change: Potentially higher margin and and of course incremental rights.

Speaker Change: And thanks, I'll take the question, you're right I'm not going.

Speaker Change: I'm going to comment on things beyond the directional guide we gave for 2024, but to the extent. It's helpful. I think it's interesting to think about.

Speaker Change: In our remarks in today in the Q&A, we've sort of touched on three key areas continuous innovation rideshare perfection and sort of leaning into this partnership driven growth.

Speaker Change: I suppose the other element as you think about expansion over time would relate to cost discipline, which frankly is the hallmark of any durable profitable business. If you think about all of those four things, they're not meant to be sort of annual.

Speaker Change: Annual things that have an expiration date. These are sort of core ways that we think about.

Erin: These are sort of core ways that we think about what it means to have a healthy business, right? Innovation and continuous innovation, ride share perfection. If you think about what it takes to deliver great execution at scale, meaning millions and millions of rides every day and doing all of those things with a laser focus, that's very much a continuous cycle as well. So, you know, those are some of the things that I think I would think about.

Speaker Change: What it means to have a healthy business right innovation and continuous innovation right.

Speaker Change: Rideshare perfection, if you think about what it takes to deliver great execution at scale, meaning millions and millions of rides everyday and doing all of those all of those things with a laser focus.

Speaker Change: That's very much a continuous cycle as well.

Speaker Change: So.

Speaker Change: Those are some of the ways that I think I would think about I think we've touched on sort of underpinnings of the way that we would are running the business in 2024, and they're all fairly durable themes.

David Rescher: I think we've touched on sort of the underpinnings of the way that we would, you know, run the business in 2024, and they're all fairly durable themes. That's helpful. Thank you. This will conclude our question and answer session. I will now turn the call back to LYFT CEO David Risher for any closing comments. I'll be brief.

Okay. That's helpful. Thank you both.

Speaker Change: Sure.

Speaker Change: This will conclude our question and answer session I will now turn the call.

Speaker Change: Back to lift CEO, David Russia for any closing comments.

David Russia: I'll be brief I really appreciate the opportunity. Thanks for joining us today. All this business really has come a long way over the past year.

David Rescher: I really appreciate the opportunity. Thanks for joining us today, you all. You know, this business really has come a long way over the past year. We are competing well, but we're executing really well for our riders and drivers. And I think growing some great new businesses and doing it, you know, dropping free cash through the whole statement. So super excited about where we've been. Here's where I want to end.

David Russia: We're competing well, but we're executing really well for our riders and drivers and I think growing some some great new businesses and doing it dropping free cash.

David Russia: Of the whole statements. So super excited but we're we've been here's where I want it and thank you to our shareholders for being.

David Rescher: Thank you to our shareholders for being such good partners for us over the years. And, in particular, thanks to our team members. I know we have team members who sometimes log on to these calls.

David Russia: Good partners for us over the years and in particular, thanks to our team members I know we have team members that sometimes log into these calls really appreciate every single person on the call has been broken so hard on behalf of riders and drivers and making a great business. So thank you all we look forward to keeping up to date and.

Operator: I really appreciate every single person on the call who's been working so hard on behalf of riders and drivers and making a great business. So thank you all. We look forward to keeping up to date. And thanks again. This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Speaker Change: Thanks again.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Speaker Change: Okay.

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Speaker Change: Yeah.