Q3 2024 Lyft Inc Earnings Call
The
Speaker Change: Good afternoon and welcome to the list third quarter, 2024 earnings call. At this time, all participants are in a listen only mode to prevent any background noise. Later, we will conduct a question in answer session and instructions will be given at that time.
If you should require operator assistance, please press star then zero on your test zone phone. And as a reminder, this conference call is being recorded. I would now like to turn the conference over to...
All Rear On, North, Science President, FP and A and Investor Relations. You may begin.
Speaker Change: Thank you. Welcome to the list earnings code for the third quarter of 2024. On the call today we have our CEO, David Risher and our CFO, Erin Brewer.
We'll make sure our routine statements on today's call relating to our business strategy and performance, partnerships, future financial results and guidance.
Speaker Change: Disatements are subject to risk and uncertainties that could cause our actual results to differ materially from those projected or implied during the score.
This factor and risks are described in our earnings materials and recent SEC findings.
All of the forward-looking statements that we make on today's call are based on our beliefs other today, and needy-slaying any evviation to debate any forward-looking statements except as required by law.
Additionally, today we are going to discuss customers. All right, Chair, there are two customers in every car. The driver is the least customer and the rider is the driver's customer. We care about both.
Our discussion today will also include non-GAAP financial measures, which are not a substitute for 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.
David Risher: And with that, I'll pass the call to David.
Speaker Change: Thank you, Aurelian.
David Risher: Good afternoon, and thanks for joining us. Once again, our team executed on all parts of our strategic plan, resulting in a spectacular third quarter with progress on what matters most to riders and drivers more than 2 million times a day.
David Risher: Erin will get into the details about our performance this quarter but a driver from North Carolina put it well when they called Lyft superior to the other guys because of better transparency and overall better pay per ride.
David Risher: As we outlined at our Investor Day, our customer obsession engine was fueled by several product innovations, progress with Lyft Media, and some big partnership announcements.
David Risher: First, we said we would differentiate with product innovation. Our strategy is simple but effective, obsess over our customers.
David Risher: That's what we did for commuters when we introduced Price Lock. Commute rides make up nearly half of rides Monday to Friday, so it's no wonder Price Lock is performing beyond our expectations. By the end of September, we already had more than 200,000 active passes, and this number keeps growing.
David Risher: Not only is Pricelock helping commuters, but also drivers by creating more predictability on when and where to drive. It's a win-win. We're pleased with how Pricelock is performing, and we're taking feedback from early users to further enhance the product.
David Risher: Related to this, we're always thinking about and providing more value to our riders. So here's an update on that can of whoop-ass I mentioned last time on primetime, which is our term for surge pricing.
David Risher: Primetime continues to decrease and is now down more than 40% year-over-year and 20% quarter-on-quarter on a per-ride basis. In the regions where primetime declines fast, conversion goes up along with rides and market share.
David Risher: Chicago is a great example where we saw primetime decline very fast in Q3, resulting in conversion improvements, ride growth acceleration, and share gains.
David Risher: I've said before that our strategy was to take Rideshare's most hated feature and turn it into a reason to choose Lyft. And again, this quarter, we're seeing the proof that that's the right strategy.
David Risher: More recently, we launched a new set of improvements for drivers to better ensure that every ride and every minute they spend on the road is worthwhile.
David Risher: Imagine driving with Lyft and you accept a ride for a given amount of pay, but you end up sitting in unexpected traffic. The ride takes longer, and on an hourly basis, you earn less than you expected. Not a great experience.
David Risher: So we addressed it. Now drivers can count on their earnings being increased anytime a ride takes five minutes longer than estimated.
David Risher: Drivers now also see the estimated dollar per hour rate for every ride on the accept screen to help them decide if a ride is worth their time. And if you drive an EV, you can choose to only match with rides that fall within your battery range, a really important change that takes care of range anxiety.
David Risher: All told, just this year, we've launched 33 new products and features, a true testament to our team listening to drivers and riders and delivering on the innovations they want. As a result, we're seeing all-time highs across both driver and rider metrics.
David Risher: Drivers are spending more time with Lyft than they ever have, as driver hours in Q3 reached yet another all-time high. According to interviews, driver preference for Lyft is now 12 percentage points higher than our main competitor.
David Risher: At Investor Day back in June, we said we expect driver hour growth in line with business growth, and right now we're ahead of that target.
David Risher: On the rider side, we see the same. Active riders hit an all-time high, growing at a pace ahead of the long-term target we shared at our Investor Day. We had record rides again this quarter, with commute rides surpassing their all-time highs from 2019.
David Risher: Ride frequency, the average number of rides taken by each active rider, increased for the 7th consecutive quarter. It is also in line with our long-term target.
David Risher: Riders are taking more bike and scooter rides too. Our bikes and scooters mode had strong performance at Q3, breaking another record in quarterly rides.
David Risher: Bottom line, Lyft is still growing. Up next is more expansion in Canada, where right now we're onboarding drivers in Winnipeg. At this point roughly 12% of all Canadians have taken a ride with Lyft and we look forward to riders in Winnipeg joining us soon.
David Risher: So now on to Lyft Media. We've been building Lyft Media into a highly performant platform and we continue to improve it for our ad partners.
David Risher: Brands like Foursquare are now helping us measure foot traffic to brick-and-mortar stores. NC Solutions provides insights on brand loyalty for consumer packaged goods companies. And Coachava is measuring digital outcomes like app installs and purchases.
David Risher: Overall, Lyft Media continues to gain great traction with in-app ads growing nearly 3x year-over-year in Q3.
David Risher: Now I want to take a look at two partnership-focused initiatives that will help strengthen this position going forward. We are very proud.
David Risher: As we said it investor day, that approach includes deeply partnering with other companies for the best of what they do.
David Risher: For food delivery, that's DoorDash. DashPass has millions of subscribers and with last week's partnership announcement,
David Risher: We're giving every one of them a reason to prefer Lyft.
David Risher: So, I encourage each and every one of you to link your accounts immediately so you can save the next time you go out with friends and then on that late night snack when you get home.
David Risher: And again, we're doing that in partnership, beginning with Mobileye, Nexar, and MayMobility.
David Risher: Let me talk about each of these briefly.
David Risher: With Mobileye, our partnership makes our rideshare platform available to all vehicles with Mobileye Drive Level 4 self-driving technology.
David Risher: These vehicles will be lift ready, giving small and large fleet operators seamless access to Lyft's platform and network of riders.
David Risher: With Nexar, our partnership combines Lyft's vast network with Nexar's intelligent video telematics with the goal of accelerating how AVs learn. And finally, we're very excited to partner with May Mobility to make their autonomous vehicles available to Lyft riders in Atlanta next year.
David Risher: Each of these partnerships plays a different role, but collectively, they help Lyft become the best option for AV stakeholders and asset holders to go to market.
David Risher: At Lyft, we envision a robust future that brings together human drivers and autonomous vehicles in an always-on transportation network. Adding AVs is a huge opportunity, and we look forward to partnering with even more leaders in the industry to shape this future.
David Risher: Stay tuned, because this is just the beginning.
David Risher: Before I.
Speaker Change: LIFT has always been passionate about having an impact.
Speaker Change: It's often cited as a reason people love our brand and why people choose us.
Speaker Change: It's one of the reasons I came here, too, and it's good for business in ways beyond brand love. Research shows that purpose-driven organizations have returns that significantly outperform the S&P 500.
David Risher: Lyft's purpose is to serve and connect.
David Risher: Let me say that again because it's new.
David Risher: Our purpose is to serve and connect.
Speaker Change: On service, we want to reset the bar, serving drivers and riders better than they have ever experienced before.
David Risher: And on connection, in an increasingly virtual, physically disconnected world, we're going to fight hard to keep bringing people together in person.
David Risher: Lyft is moving ahead. Quarter after quarter, we're winning riders and drivers over, winning drivers and riders over with our service. As a result, people are choosing Rideshare more, and when they choose Rideshare, they're increasingly choosing Lyft.
David Risher: Sure, we're competing against the other guys that are more than holding our own, but increasingly, you'll find that we're playing a different game. We're competing with your car, even with your couch.
David Risher: Every day, over 2 million times, we serve and connect, and I hope you see how early we are in that journey and just how important that purpose is.
Erin Brewer: Over to you, Erin.
Erin Brewer: Thanks, David. Good afternoon, everyone, and thanks for joining us today. I'm excited to share an update on our results for the third quarter, as well as the outcome of our recent insurance renewals, the next steps regarding our capital allocation plans, and our increased outlook for the full year 2024.
Erin Brewer: For the third quarter, gross bookings exceeded $4.1 billion, up 16% year-over-year, with double-digit rides growth in both rideshare as well as our bikes and scooters mode.
Erin Brewer: Q3 saw strong demand with active riders growth of 9% and frequency up 6%.
Erin Brewer: While demand exceeded our expectations in the quarter, gross bookings per ride and the continued reduction in prime time were in line with our expectations.
Erin Brewer: ultimately drives preference for Lyft and makes our platform healthier.
Erin Brewer: Revenue exceeded $1.5 billion, up 32% year over year.
Erin Brewer: During the quarter, we delivered revenue margin expansion both year over year and sequentially, reflecting efficiency in the deployment of incentives.
Erin Brewer: Consistent with the framework we outlined at our Investor Day in June, our focus is on generating efficiencies on a per-ride basis across total incentive spend.
Erin Brewer: Operating expenses were $602 million or 14.7% of gross bookings, including planned investment in rider engagement, and higher legal and insurance expenses, some of which are accrued on a per ride basis.
Erin Brewer: In the third quarter, adjusted EBITDA was $107 million, which as a percentage of gross bookings was 2.6%.
Erin Brewer: Third quarter adjusted EBITDA included the benefit of a one-time $14 million tax accrual release.
Erin Brewer: Gap net loss in the third quarter was $12.4 million, which includes restructuring charges of $36 million related to the previously announced restructuring plans in our Bikes and Scooters Division, now known as Lyft Urban Solutions.
Erin Brewer: As a reminder, our free cash flow trends will vary quarterly due to the timing of insurance payments. So I'd encourage you to focus on a 12-month view.
Erin Brewer: At quarter end, for the trailing 12 months, we've delivered more than $641 million in free cash flow.
Erin Brewer: This outpaced our previous target, driven primarily by higher insurance reserves directly related to higher ride volume, coupled with lower cash payments related to our legacy book.
Erin Brewer: Next, we're prioritizing investing in profitable growth.
Erin Brewer: We have plans to invest in initiatives like building partnerships and enhancing our ad tech platform, which are important to our long-term growth strategy.
Erin Brewer: And third, we're focused on shareholder returns, starting with dilution management.
Erin Brewer: After restructuring last year, we've seen improvements in stock-based compensation dilution and remain on track to our commitment for 2024 stock-based compensation of approximately $340 million.
Erin Brewer: Building on that progress, starting later this month, we will leverage our improving cash position to transition to net share settlement to address the tax withholding obligation for all employer-restricted stock units.
Erin Brewer: This will reduce the number of shares that would otherwise be issued into the market upon vesting.
Erin Brewer: In 2025, we expect to use approximately $100 million of our cash balance, which will reduce dilution by approximately two percentage points compared to our prior tax withholding method.
Erin Brewer: The use of cash will be reflected in the financing section of our Statement of Cash Flows beginning in the fourth quarter of 2024.
Erin Brewer: Now, on to Guidance.
Erin Brewer: Our Q4 outlook includes both the impact of the DoorDash partnership as well as the renewal of our third-party insurance agreements.
Erin Brewer: As we laid out at our Investor Day, partnerships are a key component of our profitable growth strategy. And we're very excited about the opportunity to partner with another category leader.
Erin Brewer: In the fourth quarter, we're investing in the launch and we're excited about bringing the benefits of Lyft and DoorDash to riders and Dash Pass members throughout the U.S.
Erin Brewer: Our experience with large-scale partnerships tells us that achieving broad consumer adoption happens with time, and we look forward to sharing more updates in the coming months.
Erin Brewer: Next, the renewal of our third-party insurance agreements reflects our success in continuing to bend the insurance cost curve through product and safety initiatives.
Erin Brewer: We expect our fourth quarter cost of revenue will increase by approximately $50 million quarter over quarter, reflecting the impact of our 10-1 third-party renewals.
Erin Brewer: That's significant progress versus last year's increase driven by the multi-year strategy we outlined at Investor Day.
Erin Brewer: As such, we're comfortable that we can manage the insurance cost increase within our operating and financial plans.
Erin Brewer: We expect adjusted EBITDA of approximately $100 to $105 million and an adjusted EBITDA margin as a percentage of gross bookings of approximately 2.3 to 2.4 percent.
Erin Brewer: For the full year 2024, we are raising our outlook and now expect rise growth in the mid-teens year-over-year, gross bookings to grow approximately 17% year-over-year.
Erin Brewer: Adjusted EBITDA margin as a percentage of gross bookings to be approximately 2.3% up from the prior outlook of 2.1%.
Erin Brewer: and free cash flow to exceed $650 million.
Erin Brewer: 2024 is the first year of our multi-year plan laid out at our Investor Day in June.
Erin Brewer: With that, I'll bring our prepared remarks to a close. Operator, we're ready to take questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star one. And we ask that you limit yourself to one question and for any additional questions, please requeue.
Speaker Change: Your first question comes from the line of Doug Enmuth with a JP Morgan. Please go ahead
Doug Enmuth: Thanks for taking the questions.
Doug Enmuth: I have two, one for David, one for Erin. David, I was hoping you could talk about the benefits that you're seeing of less prime time and surge on the platform and just how that's showing up in terms of ride volume via frequency and retention. I know you mentioned higher conversion, just wondering if there's any way you can quantify the benefits there.
Erin Brewer: And then Erin, can you talk about the $650 million in free cash flow in 24? I just want to make sure that we understand the drivers of the
Erin Brewer: The Significantly Higher Outlook is about all function of more shift to 1P and captive and then how do we think about that trend in 25 and sustainability. Thanks.
Speaker Change: Sure, Doug, I'll start and then I'll pass it over to Erin.
Erin Brewer: So first, so primetime, yeah, primetime sucks. And so we're really trying to focus on bringing it down. And as you heard, we're down 40% year on year, which is awesome.
Erin Brewer: And so what we find when we look market by market is the areas where we get it down the fastest is where we see incursion and ride growth, incursion and ride growth increase nicely. So I think we mentioned Chicago in the prepared remarks.
Erin Brewer: Boston's actually another city where we're seeing that work out super well. So it's great. It's great. And it's, you know, maybe I liken it a little bit to Starbucks move last week of getting rid of the stupid surcharge on oat milk and stuff. Like, it's just nobody likes it. Nobody likes that kind of variability, particularly when you're being charged for something. Maybe
Erin Brewer: you didn't expect. I put it in a slightly broader frame, too, to say, as we look at frequency, which continues to increase, you know, frequency is driven primarily by great service, right? The better service you have, the more likely you are to take another ride and that's just-
Speaker Change: you. Tautological.
Erin Brewer: But then there's certain things we can do like price lock and some other things that will actually increase frequency You know even more than that so and in prime time is it falls right in the middle of that, right? That's providing great service and also providing consistency. So sort of put it all together Really liking what we see. I think our conversions actually increased. In other words, it's gotten better by about 0.1 percentage point
Erin Brewer: So, you know, we're seeing a good increase there, but of course that averages all kinds of different things. So that's sort of the big picture on that.
Speaker Change: Yeah, sure, Doug. On cash flow, you know, I'll kind of start hovering up a little bit here. You know, first of all, we're incredibly proud of the performance that this team has been able to drive across the business, obviously strengthening our operating efficiency and improving our margins.
Erin Brewer: And then, given that we're a relatively low kind of CapEx profile business, you know, from a modeling perspective, you can assume that a significant portion of that adjusted EBITDA converts to cash. And that is, of course, before considering the impacts of insurance. So let me kind of talk about the dynamics.
Erin Brewer: that we're seeing this year and some of the dynamics that I mentioned here in the third quarter.
Erin Brewer: So, you know, first is the function of our insurance accruals. And those are a bit higher because our, you know, our growth is a bit higher than expectations. So that's one part. The second part is lower cash payouts. So let me spend just a second here.
Erin Brewer: chatting through that. When we accrue for these expenses in period, we expect the total payout from any particular cohort to take approximately seven years to resolve.
Erin Brewer: with the peak of that usually happening in year three and the majority of those claims paying out sort of year one through three if you think about that overall horizon.
Erin Brewer: So today, for example, it's fair to assume that the majority of claims that we're paying out are from the 2021 to 2023.
Erin Brewer: time period where of course our rides volume were lower, therefore fewer claims, therefore a reduction in those cash outflows.
Erin Brewer: You know, I think it's fair to assume that that conversion in that near term, say 2025 part would be a bit higher than 90%, but likely not as high as we're seeing here in 2024.
Erin Brewer: And then as we move into the outer years of that LRP, we would expect that dynamic to normalize as insurance related accruals and cash payments would be a little bit more balanced. So the longer term, we believe that 90% plus adjusted EBITDA conversion target is appropriate.
Speaker Change: Great, thank you both.
Erin Brewer: , , , , , , , , , , , , , ,
Erin Brewer: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.
Eric Sheridan: Thanks so much for taking the question. Really just a two-parter, when you think about some of these new partnerships you're announcing with DoorDash and on the supply side with Autonomous,
Erin Brewer: And in terms of autonomous, maybe just refresh us on your view about how adding autonomous supply and partnering across the autonomous vehicle industry landscape might alter some of what you see in terms of the growth prospects and the margin prospects going forward. Thanks so much.
Speaker Change: Sure let me take those are two chunky ones and so I will I'll talk to partnerships
Speaker Change: University of Nashville.
Erin Brewer: Anyway, that's a big number. And you know, some of them obviously are Lyft users, but but, you know, maybe a smaller number than you might expect.
Erin Brewer: in a way that's super customer friendly, because we know that people like to take rides when they go out. And then when they come home, you know, they'll get something delivered. So it's a it's an off to a great start. I won't give you too many details. And I will say that, you know, all these partnerships tend to
Erin Brewer: you know, they sort of take time to build. So, you know, let's not get ahead of ourselves, but we certainly like what we see so far. And we can see that riders are responding to it, you know, signing up to link their accounts.
Erin Brewer: and then, and then, you know, maybe ordering something or maybe taking a ride that they wouldn't have taken otherwise. So, yep, great to think about as a top line driver and something that's going to kind of unfold over time, but we like what we see.
Erin Brewer: So far, for sure.
Speaker Change: On AVs, that one, if you don't mind, I'm going to, I'm going to sort of zoom out for a second. I mean, you asked specifically about additional supply, but I actually want to give a little bit of context because this isn't something we've talked too much about so far.
Speaker Change: So, the first thing I should say about AVs is, AVs are great.
Speaker Change: They're great, right? It's a good experience. You know, you can see them on the streets of San Francisco. I mean, to be clear, it's a very bespoke experience right now. You know, it's a very expensive car, you know, and all kinds of things are going on behind the scenes to make sure that it works super well. And the scale is quite small in the grand scheme of things. But it's a really interesting experience. And so we absolutely see it as being, you know, a TAM expander for us.
Speaker Change: because it'll bring additional supply and it'll bring a new experience for riders on that some riders will like. Maybe others don't choose so much. And so the idea of having a hybrid between the two of them, between human driven cars and robot driven cars, is super exciting to us.
Speaker Change: Our strategy is to become the partner of choice to any AV stakeholder. That might be an OEM, equipment manufacturer, any number of things. And for one basic reason, we want to be the best way to keep your AV utilized and therefore making money.
Speaker Change: And that's sort of the thing, like, these are expensive assets, they're going to be expensive for a long time. And so they got to be moving around, right, just like an airplane or a restaurant's got to have people in seats or airplanes got to be in the sky, like, these things have to be utilized. And so I'm going to break that down a little bit. And again, sorry for the long answer, but it's a
Speaker Change: It's kind of a chunky area. So the first is demand generation. So three big pillars I want everyone to think about. First is demand gen, right? So you know this, I mean, we're one of two big scale platforms in North America, 40 million active riders, 2 million rides a day. So that I think sort of stands to reason.
Speaker Change: The second place is marketplace management.
Speaker Change: So, you know, 1.4 million drivers today are on our platform every year.
Speaker Change: That's a lot of individuals. And what do they do? What do they rely on us today for? And then you can.
Speaker Change: sort of fast forward and think whether AB is going to rely on us.
Speaker Change: Tomorrow 4.
Speaker Change: Well, they got to be onboarded, they got to be insured, they got to get paid, they got to get matched, right? 24 hours a day, seven days a week.
Speaker Change: Cars get matched with riders, which means that you have to estimate the ETA. That's the pickup time. You gotta price it right. You gotta do customer care when things are left in the car. All of this marketplace, but you gotta manage pickup and drop-off, and that sounds easy, but it's not, because...
Speaker Change: is going to want to plug into.
Speaker Change: And then the third is fleet utilization. Okay, so this.
Speaker Change: is actually a little bit subtle.
Speaker Change: And it sounds straightforward, right? But it's actually, you know, it's quite complex. Again, of course, it's...
Speaker Change: onboarding. But then it's things like maintenance, right? Again, think of a think of a car as an asset. Again, for some reason, at least I find it actually easy to think of airplanes as very expensive assets, you just have to make sure flying around and not sitting in maintenance docks and so forth. And so if you think about what a car needs, and everything is maintenance, right, they need to be recharged, they need to get
Speaker Change: paid for their time, maybe insured, all these policy issues, all these customer care issues, all this sort of stuff. So we've been doing for about the past four years with our FlexDrive subsidiary, a ton of this, just a ton of this.
Speaker Change: I will just say that again, we're the only Rideshare.
Speaker Change: company that has this.
Speaker Change: and the House. And by the way, we're good at it. And I'm going to brag on behalf of the Flex Tribe folks, we achieved about 90% utilization over the course of the year, which is industry leading. Okay, so you put all that together. And I think you can see why ABUs are so exciting for us.
Speaker Change: form of supply. You can say it sort of tactically like that. They blend very nicely with driver driven cars, right? You don't have to choose between one or the other. You can do both. And we have the capabilities to put them to use. And by putting them to use, that makes all the stakeholders more money, which is great. And that's why they're going to choose us again and again.
Speaker Change: and again. So I think it's more than just sort of the sort of any one of those pieces, I think sort of the whole screen, some of the parts, and that is probably more than enough.
Speaker Change: for AVs right now. And Erin, did you want to add anything to any of that?
Erin Brewer: No, you nailed it in terms of just
Speaker Change: You know, I think there's a lot of great work being done out there about how this will fold over some some period of time, the cost, the cost of the asset, how the regulatory and insurance environment, etc. But the bottom line, as you just said, is asset utilization is going to be incredibly important for unit economics and
Speaker Change: That's it.
Speaker Change: Thanks a lot.
Speaker Change: Your next question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead.
Brian Nowak: Thanks for taking my questions. I have two. The first one on price lock. It's a good early signal on adoption and frequency bumps.
Brian Nowak: all markets, are you rolling it market by market? Are you targeting certain types of users and sort of rolling it that way? Just how do we think about kind of the strategic rollout of that business across the corpus of users is the first one.
Brian Nowak: And then the second one just on Autonomous, there's a decent amount of discussion about sort of San Francisco and Waymo, etc. So anything you can tell us about sort of San Francisco trends and sort of what you've seen on San Francisco volumes over the last, call it, call it three, six months.
Brian Nowak: Thanks.
Brian Nowak: Sure.
Brian Nowak: Let me take them in order. So on PriceLock.
Brian Nowak: It's rolled out nationally. It's rolled out nationally. Every single person in the country, as far as I know, has access to Price Lock.
Brian Nowak: It's targeted at commuters, and so when we do our internal targeting, so again, when we look at our daily volumes, about half of it, Monday to Friday, is commute volume, which is a huge, huge deal.
Brian Nowak: And you can imagine how frustrating it is for people to sort of wake up in the morning and literally people do this. I mean, if you talk to folks, in fact, as a driver, one of the people who got in my car a couple months ago was someone from Sausalito.
Brian Nowak: who literally said every morning she wakes up, basically, if it costs 20 bucks, she'll take a lift.
Brian Nowak: https://www.youtube.com or the link in the description below.
Brian Nowak: to work. One of the things we like about it is, aside from the foreign criminal rights that we've talked about, is it also gives drivers some certainty because we can use that as...
Brian Nowak: You know.
Brian Nowak: input to certain things we do in the background. And as a result, there's good marketplace management on this as well. And we know it's good, because we can see that people who sign up for PriceLock tend to renew. So it's a low churn. Now, again, it's still new, right? We're a couple months in, but we like the dynamics we're seeing.
Brian Nowak: And which brings us back to go to market. You know, you can expect within sort of economic guide rails that we will continue to promote it, you know, more and more and more because once people sign up, they tend to.
Brian Nowak: they don't tend to leave and they tend to take more rides, which is just, you know, obviously, you know, great sign all around. So, you know, stay tuned for more. Definitely early days in that these features always take a, you know, a time to kind of get to any significant scale. But, but we but we like what we see and it'll be a certainly a nationwide product.
Brian Nowak: On AVs in San Francisco, you know, we're obviously looking at it quite closely. If you've been in San Francisco, you certainly see a lot of Waymo's around. You'll see Zoox around a little bit as well. They just announced last week, Jesse, the CTO at Zoox, just announced that they'll be on the road soon in San Francisco. So, you know, from a sort of density perspective, you know, they're obviously working pretty hard. But when we look at companies like that, we really see them more as partners than as competitors.
Brian Nowak: David Risher, CarPlay, David Risher, PBSC, Erin Brewer, ROTH MKM
Brian Nowak: you know, not just build, obviously, it's very complex, but, you know, maintain on the road, you know, keep repaired, keep chart all these things, you know, how can we play a role there? See, one last little thing, which is in San Francisco, it's interesting, you see them a lot.
Brian Nowak: What's also interesting to see, I'll just point this out, it's a little bit of a side, is you also see big parking lots with them, right? They have to stay somewhere. This is quite expensive as well. And it's also an interesting thing, this is super just random, but I was just reading this thing about hail.
Brian Nowak: and how hail hits cars pretty hard and causes repairs and all these sorts of things. So
Brian Nowak: it's really my only point there is just the stuff that you're seeing at relatively small scale right now is super interesting and it's a good experience and the companies are doing a good job but they're also realizing is that they scale up to you know beyond hundreds to thousands tens of thousands hundreds of thousands some of the problems are going to change and some of the issues they're going to confront are going to be quite different and we're super excited about partnering super deeply with them to help them with that.
Speaker Change: Great. Thank you.
Speaker Change: Thanks so much to if I may
Speaker Change: How do you think about...
Brian Nowak: Pricing and and specifically what I'm thinking about is
Brian Nowak: You've got primetime likely continued to come down and you've talked about battling against that primetime and surge pricing. And then you also have, you know, rider incentives and think about things like price lock. How should we think about any?
Brian Nowak: or any upside you get from decreases in kind of primetime be offset by other initiatives or how should we think about just overall your pricing strategy looking into next year? Thank you.
Speaker Change: Hi, Ken. So, on the cost or revenues side, the answer to your question is no. There's nothing other of significance or that you should be considering in that line in terms of the changes I outlined from Q3 to Q4. With respect to pricing,
Speaker Change: You know, let me let me kind of start and I'll hover up just a little bit.
Speaker Change: Our goal is to operate in a healthy and competitive way. We've talked about that previously, right? Pricing competitive to the market. There's no change to that. No reason to think that there would be any change to that as you think about the future.
Speaker Change: mode mix. It includes a distance. It can also obviously include prime time depending on the supply conditions at a certain geography at a certain time. And so our job, and I think our results speak for themselves, we've been doing this really well, is to bring value to riders.
Speaker Change: it means providing reliable pricing. We've talked a bit about price lock and then obviously prime time coming down is is really really beneficial to that.
Brian Nowak: So those are some of the, I think, foundational, if you will, theses as, as, as, you know, I think we would ask you to think about pricing. I, I won't talk about 2025 because, you know, I think it's,
Brian Nowak: You know, I don't have anything specific to say there, you know, maybe offering a little bit of color as you think about
Brian Nowak: the third quarter, our gross bookings per ride was down queue on queue compared to what we saw in the second quarter.
Brian Nowak: And that is influenced by primetime continuing to come down, as we've mentioned.
Brian Nowak: But also, seasonally, Q3 tends to be the highest.
Brian Nowak: You know, hopefully that that gives you, you know, some beneficial color on just how we think about pricing overall and some of the maybe more near term dynamics.
Speaker Change: Thank you so much. Yeah.
Speaker Change: Your next question comes from the line of Benjamin Black with Deutsche Bank. Please go ahead.
Benjamin Black: Great. Thank you for taking the question. So, Erin, I guess, contra revenue and consumer incentives, they were down 17% year in year. Can you just help us understand what the drivers of the outperformance were and how should those trend as we look ahead?
Speaker Change: and then I guess besides what David or Erin, but you know, could you just touch on the returns you are seeing on your consumer incentive investments?
Speaker Change: Are you generally seeing growing competition for active riders in the US and Canada? And you know, how should we think about the durability of the current active rider growth? Thank you.
Speaker Change: Yeah, sure. Thanks. Thanks for the question. So, you know, as a reminder, when we think about the deployment of incentives, it's really aligned with our broader strategy as a company. We make those investment trade-offs to keep the marketplace balanced.
Speaker Change: And at the same time, we're, you know, we've made really, really strong progress. David mentioned this in his prepared remarks.
Brian Nowak: more drivers to our platform.
Brian Nowak: And this allows us.
Brian Nowak: to invest. So, you know, you mentioned what are we seeing? I think if you look at our really strong progress, we've been talking about it now.
Brian Nowak: Some of you get curious about this.
Speaker Change: Six quarters.
Speaker Change: So absolutely driving efficiency there. And as we.
Brian Nowak: continue to, you know, build on the great momentum we've seen with drivers, it allows us to invest. So, you know, you asked a little bit about maybe how we think about investing, etc, and what we're seeing in terms of outcomes.
Brian Nowak: I'll do the how first because I think I've already talked about the outcomes in terms of growth and in riders and frequency, etc. But
Brian Nowak: You know, we monitor that impact as we make those investments, whether it's, you know, a particular initiative around incremental rides or new riders or retention rates, it really depends on the nature of the incentive.
Brian Nowak: but we we monitor the efficiency of that incentive deployment. And we've been really leaning in because we're seeing great efficiency and and really good outcomes in the way that those are deployed. So
Brian Nowak: Hopefully that's helpful.
Speaker Change: Your next question comes from the line of Shweta Kajuria with Wolf Research. Please go ahead.
Shweta Kajuria: Thank you for taking my questions. Could you please talk about
Shweta Kajuria: consumer sentiment in the quarter. There have been some mixed data points, but anything on resiliency of consumer spend and what specifically are you seeing in terms of maybe some of the drivers? And then the second question is just thoughts on your take rate and or revenue margin in the near to midterm as you think about its trajectory, at least, especially getting going into next year. Thanks a ton.
Shweta Kajuria: Hey Shweta, it's David. I'll take the first and Erin can take the second. So we like what we see with Consumer Center. We really do. And you know, we look at this just like everybody does and try to sort of discern if there are things that are unusual or what have you.
Brian Nowak: The thing that you might not expect would be that party time is actually our second biggest sort of lift, so to speak, and a party time which we talk about is sort of a Friday and Saturday night thing.
Brian Nowak: And that's increased as well, nicely, you know, quite nicely. And I can give you a very specific example, which is...
Brian Nowak: kind of fun. We've just been looking at Halloween data. And our Halloween this year was just a monster, just a monster. And it was all time high. Sorry about that joke, kind of sort of but anyway, and then back a year ago, it was also a monster. So in other words, we're, we're lapping, you know,
Brian Nowak: a big increase year on year and super interesting to see. So that sort of suggests that, you know, that's discretionary, right? I mean, you don't have to go out on Halloween. You certainly don't have to take a lift, but people are and people are. So that suggests to us that what we're doing is working, that the service we're providing is landing with people, we're priced well.
Brian Nowak: We're very aware that in order to be
Brian Nowak: a large-scale consumer brand, which we are.
Brian Nowak: You have to have.
Brian Nowak: a value component. You just, you have to, right? I mean, they're, for all the people who are doing well, there are people who are struggling or frustrated.
Brian Nowak: This is very real.
Brian Nowak: So we're quite so we look at wait and save, for example, our saving mode, you know, sort of look at it very carefully and try to continue to make that product. I'm great. I always give a shout out a little bit weird on this one, but to our bikes world just because for so many people, it's a part of their daily lives. We give 250,000 rides a day, roughly a peak, it's quite a large number and
Brian Nowak: the per ride cost is quite low. So we sort of look up and down the stack all the way from the bottom to the top and the top being the, what we call HVMs, high value modes. And we really see strength across the wide, not a huge, nothing to worry about. So I know there's a long way of saying, not saying much, but maybe that gives you a little color on how we're looking at.
Brian Nowak: Yeah, and Shweta, on your question on revenue margins, so, you know, the revenue margin trends that we've seen in 2024, and absolutely true for Q3 as well, reflect the efficiency that I was mentioning a few questions ago in terms of overall incentive spend.
Brian Nowak: But also, you know, I would remind you in particular in the third quarter, there is a mixed impact on the revenue margin from our bikes and scooters business.
Brian Nowak: So in the quarters where we've got more volume, that's going to have a larger impact. And so, for example, in the third quarter, that was about two and a half points attributed to the mix of the bikes and scooters mode. So hopefully that gives you some additional color.
Brian Nowak: We're ready for the next question.
Brian Nowak: Operator, we're ready for the next question.
Speaker Change: John Blackledge, your line is open.
John Blackledge: Great, thanks. Two questions. Any further color on how the Canada business performed in the third quarter and then discuss the continued expansion in Canada? And then secondly, on Lyft Media, if you can give some maybe some color on the revenue run rate trend in 3Q, and I think Erin mentioned investing in ad tech, any color there would be helpful. Thank you.
Speaker Change: Sure. Hey, John, we'll touch on both briefly. So Canada, and I think we've probably said all these things publicly before, but I'll reiterate that we're very much on track. In Canada, our goal is to double ride volume year on year, and we're on track. And it's great. It's great. We literally, our tanner team is just killing it. Super good to see how
Brian Nowak: how strong the product market fit is, and something we're paying a lot of attention to. I mentioned that Toronto is now our sixth biggest market at the Greater Toronto Area, which is wonderful. I forget what it was a year ago, but I can tell you it wasn't in the top 10. That's for sure. So liking what we're seeing there, good momentum, good product market fit.
Brian Nowak: More to come for sure.
Brian Nowak: And then on Lyft Media, we were again on track, you know, we've put out some goals, I think we've talked about a run rate that we're very much on the path for for this year. Really, I would say the focus now just to sort of maybe, you know, one click deeper on that is
Brian Nowak: you know, people are, and I, some of this, again, a little bit big picture for a sec, but like marketers, brands are always looking for new ways to get to their, their customers. They just always are. And, you know,
Brian Nowak: I sometimes again, I look sort of very big picture at this and think of, you know, build pamphlets back in the late 1800s, you know.
Brian Nowak: Billboards on the highways as interstates, you know, came up and then radio, again, very car-focused, also home-focused, and TV.
Brian Nowak: and so forth. The thing that's different now, of course, is not just the onlineness of everyone, which is kind of obvious, but that the people with first party data really tend to do well. And we have first party data, right? Every time you get in a car as a rider, you're telling us a lot about yourself, right? You're saying, where are you coming from? Where are you going to? What's your intention? Are you going to?
Brian Nowak: coffee shopping, a bookstore, a drugstore, a pharmacy, any number of things and that's first party data and so and to the extent we can create tailored
Brian Nowak: experiences for our writers.
Brian Nowak: who, by the way, tend to spend about 17 minutes in the car for a little bit more. They tend to check their app out several times, up to seven times to see whether they're there yet. Like all this provides a real platform.
Brian Nowak: important marketing efficiency is to every marketer out there. But we're very enthusiastic about what we see. And we like, you know, the video ad unit is still relatively new, you can see maybe yourself, maybe you'll see an ad trailer, movie trailer if you open up the list app. Anyway, long way of saying we like what we see on track to the
Brian Nowak: That's our statements we made about the exit run rate for this year, and stay tuned for more.
Brian Nowak: Thank you.
Speaker Change: Hi, this is David on for Mark.
Brian Nowak: I wanted to follow up with an AV question. You talked about AVs as a TAM expander. And you're wondering are there any specific use cases where you think writers might prefer an AV ride over a regular ride and any early signals from what you're seeing competitively and single?
Brian Nowak: Transcisco again.
Brian Nowak: might inform that.
Brian Nowak: Yeah, hey David, it's
Speaker Change: I honestly would say it's probably too early for us to have real insight there. I mean, certainly, remember, we've given about 130,000 rides, primarily in Las Vegas over the years. So we have a sense from that. But of course, Las Vegas is a very particular use case, and that's kind of its own world. And then we're looking very closely and monitoring what's happening here on the ground. And you know, we see it in San Francisco, we see it in Phoenix as well.
Speaker Change: and things in Texas. So kind of looking at it, I wouldn't say there's anything dramatic that we've seen. Maybe nothing worth talking about just yet. It's also a little bit of a funny thing right now, because now, you know, it's a couple of things that's happening, right? So partially, there's this novelty thing. Unknown Speaker
Speaker Change: and Tourism is a big driver actually. If you see in San Francisco, in fact, literally someone on our team just said that they gave their parents a ride when they were here.
Speaker Change: A.B. So, the sort of tourism effect and the novelty effect probably swamps other things. And then again, I'll just say it again, it's also a very, very curated experience right now. I mean, on the ground here in San Francisco, these are literally, you know, jaguars, they're driving people around. So that's, that's an experience.
Brian Nowak: Tomorrow, they'd be explained to be quite different as they show up on all sorts of different models and makes and so forth.
Brian Nowak: So anyway, maybe it gives you a sense that like, I think we're very much in monitoring, and we're super excited about our partnerships we just announced. I think in particular, Maine Mobility will be very interesting. That'll be at Atlanta, that's next year, that's Toyota Siennas, that'll give us more insight. So we're all kind of in learning mode, but I don't think we can draw any strong conclusions right now, in part because
Brian Nowak: It's just so, it's just so novel.
Speaker Change: Thank you, David.
Speaker Change: Your next question comes from the line of Stephen Jew with UBS. Please go ahead.
Stephen Jew: Okay, great. Thank you so much. So, David, I think the default thought process right now is that Lyft will be an asset light partner for the fleet owners of AVs.
Speaker Change: But should we be thinking about you potentially taking a more direct role, you know, either, you know, in fleet maintenance or management, you know, does that come up in discussions with potential new partners at all?
Speaker Change: And second, as the active rider base gets larger, I mean, I would imagine that growth will decelerate, given the law of large numbers. So
Speaker Change: In order to get to the longer term booking targets, you need to drive frequency higher as an offset. So, you know, can you talk about what your latest data is telling you about cohort behavior? You know, maybe how is your rider's age?
Speaker Change: The activity picks up meaningfully so that, you know, the average usage right now is about three per month, but the gap between the newer cohorts versus older cohorts, you know, any sort of color you can provide there in terms of the overall level of activity as you're
Speaker Change: customers become more used to using you. Thank you.
Speaker Change: Yeah, I'll give a couple thoughts there. And Erin, of course, if you have things to add in as well, let's go back and forth on this.
Speaker Change: I think your premise is right. Asset Light, that's how we run our business, for sure. And it's really worth just remarking that, again, 1.4 million drivers on the platform, but they own their own cars, which is quite
Speaker Change: that's a good thing. Certainly helps us a lot. That'd be a lot of capital to have to deploy. So anyway, we certainly consider that to be a very core to the model for sure.
Speaker Change: You know, I think when we talk about things like maintenance and service and so forth, that's not an area where we need to do that ourselves and I'll maybe give you a tiny bit again more.
Speaker Change: insight into that. Our FlexDrive subsidiary, which does own a relatively small number of cars, but that's through the subsidiary, it's kind of done today to allow people who maybe don't want to use their primary car for rideshare or maybe don't have a primary car. It's also good for us because it's kind of good R&D. We can kind of get direct exposure to what's going on for drivers through the subsidiary.
Speaker Change: But even when they do things like service and maintenance and so forth and so on, it's much more around, you know, service level agreements with other partners, right, with people who are expert at repairs and maintenance.
Speaker Change: and what have you and and to go just peel back the onion one layer more a lot of the software we have built
Speaker Change: allows us to to make sure, for example, that those SLAs are being met, right? So if you know you've got to change out on
Speaker Change: I don't know, catalytic converter or whatever it might be.
Speaker Change: then you know that that costs a certain amount and you know that that takes a certain amount of time and we have a lot of data on that, which we've developed over the years. And so as a result, we can track very carefully and make sure that that's being done to spec and being done within SLA and so on and so forth. So a lot of the work that we do is kind of on the management side, that's what we call fleet management, rather than the operations side. So we're not going to be building or buying
Speaker Change: and I don't mean list that way. I mean, like list as you would find in a garage, like that. So no, so when the asset life, for sure, but but the but the network and the fleet management capacity that we've built is, is extraordinarily.
Speaker Change: Important.
Speaker Change: and also increasing frequency. I'll remind you that as proud as we are, and with, I think, legitimacy, about our 800 million rides a year, roughly 2 million rides a day.
Speaker Change: obviously growing.
Speaker Change: United States. So I would say in terms of our penetration of use cases and riders we're still, you know, it's
Speaker Change: It's almost negligible, really, when you think of all the different times that people are driving around today versus the number of times they're taking a ride share. Even if you add in our competitor, it's still, I mean, now, okay, now, it's two times zero. So I think there's a lot more. So I wouldn't say that we're anywhere close to penetrating on that side.
Speaker Change: I will absolutely say that we're certainly focused on increasing frequency among existing riders. But we want to do it first and foremost by providing great service. That's the single best way, single best way. And I think if you, we're not confused about that. So our customer obsession strategy is
Speaker Change: is very focused on providing a level of service that will encourage people to come back. There's a great Walt Disney quote that I can tell you about another time. But anyway, we're very focused on increasing that way.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: And that's all the time we have for questions today.
Speaker Change: And now I would like to turn the call.
Speaker Change: Back to David Risher, CEO, for closing remarks.
David Risher: Thank you very much, everyone. Look, I know everyone's busy, particularly today, there's a lot going on in the world, but we're super excited about what we've achieved, but also really what lies ahead.
Speaker Change: and are looking forward to connecting with our investors.
Speaker Change: community. I have a little bit of news here. We'll be out in L.A., New York, London, San Francisco over the next few weeks. And we actually plan to further ramp up our outreach in 2025. So please do reach out if you'd like to connect with any of us.
Speaker Change: We look forward to talking to you. Thanks for your interest and your curiosity, everything you do to help us be as good as we possibly can, and we will connect with you another time. Thank you.
Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.