For the afternoon session, Erin Brewer with us from Lyft.
Thank you.
Very pleased to have you here.
Thank you for having us. Yeah, we appreciate it.
We have so much. I'm Brad Erickson with RBC. I cover internet, obviously, so nice to see everybody. Where to start? This was such a, you know, tough decision as we were sort of tossing things around. How about autonomous vehicles?
Okay, let's do it.
Good? Everybody? Everyone okay? Okay. All right. So, several places I want to go, but maybe let's start with kind of the elephant in the living room. Some news came out over the weekend that maybe they're going to start looking at autonomous, you know, regulatory approval at a federal level. And I think the big question in the space, and we're certainly getting it, and I imagine you guys are too, is does this sort of change the fluidity with which these technologies will get approved? And further, you know, given that stuff is very regulated, right, at a state level, does this mean that maybe, you know, the federal aspect of it would supersede that or anything? So, yeah, what are your thoughts, latest and greatest?
Yeah, absolutely, and certainly it has come up. I'm going to start from a place of what we know, right? Because I think that's the best place to start, so Lyft has a long history of working really collaboratively across states and, importantly, across cities and municipalities who happen to really care about how transportation happens within their particular jurisdictions, and we expect to continue to do so in, you know, in any new environment, any new regulatory environment that would take shape overall. As it relates to pathways that, you know, help adoption of AVs, that's great for Lyft. Autonomous vehicles are ultimately great for Lyft. We see a world where this is a hybrid network overall. We bring tremendous capability to that landscape as it relates to everything from demand generation to pricing to what will ultimately be incredibly important, and that's utilization of these assets overall.
A framework that, you know, helps that overall and helps the adoption across is a good thing for Lyft at the end of the day.
Yeah, got it. And just maybe to put a finer point on the federal versus state oversight, just anything you can share in terms of your guys' thinking along those lines.
Yeah, so, you know, again, I'll just stick with what we know from where we are today in that regulatory frameworks exist at multiple levels. They exist at multiple levels, certainly at the state level where we work very deeply. And then I mentioned cities, municipalities are really thinking about the future of transportation within their city frameworks, whether it be things like rideshare or mass transit or bikes and scooters, where we operate in eight markets across the U.S., in case you haven't noticed, a great network right here in New York City. And so there's multiple layers to this that exist today. And I think it's rational to think that all of those actors will absolutely have a voice as we think about broader adoption, safety profiles, regulatory constraints within those jurisdictions going forward.
Yeah, got it. And then I think, you know, the other big question we've been fielding just even in the last week or so is, you know, there's a company based out in, I think, Mountain View, California, that has a self-driving unit that's done fairly well and created some stir in San Francisco, maybe Phoenix, and coming to Texas and Atlanta, I think, coming up. They've gained a material amount of share, or that's what investors believe based on third-party data, right? Who knows if that's true, but that's what's out there. And yet it hasn't seemingly affected you guys. It hasn't affected your biggest competitor here in the U.S. How do we reconcile that? Is it incremental? What's going on there? Why are we not seeing that change anything?
Yeah, yeah. So I think you're primarily talking about Waymo ring-fenced to San Francisco, where they've been operating and where they've been expanding, and we've seen the similar data that's been published. And you know, I think that's absolutely about right. But you're correct in terms of seeing a meaningful impact on our business. Same, we have not seen that as well. I mean, one is just the scale, right? The scale today is still quite small overall. And we do think there's an element of incrementality there because if you think about that service today, on average, it takes a little bit longer. It's priced at a little bit of a premium. So we're talking about where things stand today.
And there's absolutely a novelty effect to it in terms of when you come to San Francisco, it's just a different environment than maybe any city that you might see and that they're quite pervasive, again, within the space that they operate. So I do think there's absolutely sort of an incremental piece to that overall. And that could be a driving force as to why we're not seeing it have a significant impact on our business.
Sure. And then let's talk about the 1P approach, right? The captive brand only, which Waymo has. I think some others are slated to roll those out soon versus the third party, the marketplace, which would be you guys and Uber, obviously. Why? I think people understand sort of like the utilization argument, but why isn't the 1P sort of a bigger threat? And I guess just curious, like in your conversations when you're having with industry participants, like, I don't know, what are some of those entities that they believe like they can, you know, and I'm not asking you to speak from their perspective per se, but like is the logic that they can run both channels or they need to run a 1P channel to sort of learn how to run the business and then they work with you?
What do you think the mentality is from the individual players of deciding to work with you versus not work with you?
You know, I'd start out with two things and we can dive in from there. Number one, we're in all of the conversations that you might expect we would be in as this industry develops overall. Just full stop. You've seen us announce an initial set of partnerships in the AV landscape, which we're really excited about and happy to talk about that further if that's interesting. And then I think the second piece of this that is really important to remember is while we are definitely seeing advances, you know, we are still relatively early in the overall cycle. I think sometimes people will tend to, well, there's this player and that player and won't that be it. I don't think that's the case.
And even the models that they're operating in today as they experiment and learn, I still think there's a number of pieces that will ultimately be sorted out in this landscape of where those very real players and more that we haven't named today will want to play in the value chain. Do they want to be asset owners? Do they want to focus on the sensors? Do they want to focus on the tech stack? Do they care about the fleet element of this? Sort of the demand gen side of it and everything that it takes to be extremely efficient around matching and pricing, et cetera. That piece of the market is well matured and Lyft is a substantial player there. But I do think ultimately there's still quite a lot to evolve over time. But again, we're excited.
We've got these initial set of partnerships that we think serve a couple of different dimensions from Mobileye, whether it be having a car come off the assembly line, being Lyft ready to leveraging the value of all the first-party data as AV models are trained. That's really Nexar. So the real-world deployment of physical assets in the streets with May Mobility in Atlanta in 2025.
Got it. Okay. And then just on the Mobileye front, obviously they have a deal with Volkswagen slated for, I want to say it's 2026 or 2027 on Level 4. Anything you can comment on timing-wise of when that could come to market, early tests, that sort of thing?
Yeah. I won't speak for them, but what I will tell you is that our effort is an engineering-focused effort so that as that tech gets deployed, those vehicles will be Lyft ready, ready to deploy on the Lyft network.
Got it. I'll take one second, open it up. Any other questions on the AV topic? We can move on. All right. None. Let's move to pricing. Another topic you never probably addressed, and this is a little bit more of a near-term question, but obviously want to zoom out a bit too. It seemed like so you guys had a good Q3, right, and I don't think anyone was intentionally necessarily doing this, but you ended up, you wound up executing well, maybe even gaining a point or two of share, right, and I know you don't like approach it with the desire effect of taking share, but with pricing, things sort of move around. Talk about how proactively or reactively you have to be in the competitive landscape, and you know, it's tough, right?
On the outside, we have to evaluate what we see with a very limited amount of information. But how should we take sort of those quarterly fluctuations, again, proactive, reactive, that type of thing? Talk about that.
Yeah. You know, I'll start from a couple of different, you know, foundational premises, and that is marketplaces are inherently dynamic, and our goal has been, will continue to be, to operate in a healthy and competitive way. That is the place that we start from overall, and we see a big market opportunity. So you're absolutely right. We don't start from the foundational principle that the opportunity exists within a constrained place. We outline a market opportunity that's more couched in the 160+ billion personal vehicle trips that people take, and our intention to continue to expand the consideration set for rideshare as well as for Lyft. That being said, I'll talk about some of the nearer-term dynamics because I think that gets at the crux of your question, so if you think about maybe let's start just sequentially, if you will, from the second quarter to the third.
We saw our gross bookings per ride come down a bit. That's driven by a couple of things. What I would say is sort of flat-ish trends on the core rideshare side. Prime Time or surge pricing, as it's sometimes called, coming down meaningfully. We saw that come down 40% year- over- year, 20% sequentially, quarter- over- quarter, which was consistent with what we had anticipated coming into the quarter. I think the other thing to think about is mix, right? We've got a great bikes and scooters business. It's grown tremendously in 2024. The peak season is in Q3. Good margin profile, although the gross bookings per ride is obviously lower than rideshare. All of those things factor into how you think about the headline gross bookings per ride number in the third quarter.
We move into the fourth quarter, and I think, of course, all things being equal, that headline gross bookings per ride, you expect to go up because we would have a seasonally lower mix of our bikes and scooters business.
Yeah, got it. And then, you know, I guess you guys talked about working with commuting pretty well. And obviously, Price Lock, I think, is somewhat of a corollary there. I guess just on that point, how come, what is it about those new products that's driving that growth? And is that at some level, I think, because take commuting as an example, it's not an area where maybe it was, you know, your breadbasket historically, but it sounds like you're doing better now. So what is it about the new products or pricing or, you know, that type of thing that's allowing for that part of the incremental growth?
You know, so as we think about this overall, and especially the product set that you see as a consumer, right, we think about the value of that product portfolio. And value means different things to different riders and different use cases overall. It can be the value of a Priority Pickup where you've got to get there right away. It can be the value of a scheduled airport ride where you've got that promise standing behind that we're going to be there, we're going to wait for you, et cetera. And it can be around the value of products like Wait & Save, like a Price Lock, which really the value around that is taking away the variability.
You've got a predictable price point that you sign up for within a particular window with an origin and a destination that remains consistent that from a modest subscription fee, you get that locked-in predictability of pricing. And that really matters. And it really matters to people who are regular commuters or want to incorporate rideshare into their regular commute overall. And so we've seen great success with that product. Just launched on a national level in September. By the end of September, we had over 200,000 passes. So very strong adoption, very strong retention overall, super low churn. So we're excited what we're seeing there, absolutely. And we see no reason why if you're a commuter, you know, why wouldn't you have Price Lock? If you're doing airport rides, why wouldn't you lock that in with the guarantee? So it really starts from that place of customer obsession.
As you see us innovate, you can expect to continue to see it come from that angle as we launch new features and new products into the market.
So, I don't know if you can, not to front-run new products, but if you can share, you know, I want to talk partnerships in a sec, but if you leave that aside, just product-wise, what would you say are some of the other opportunities where you could maybe go down the price curve a little bit and sort of up that frequency?
Yeah, absolutely. So I just mentioned Wait & Save, which is a great product and that we continue to perfect the use case overall. And this is where you basically trade off time for price. So you have a use case where you're willing to wait a little bit more time and you see a little bit more of a discount. That's a great product for us. And we find that people who use Wait & Save are absolutely mode mixers, right? They're using other modes at different points in their journey. So we know that that's a value, a use case that's providing real value. I think the other thing that I would point to is just the significant progress in reducing surge pricing. That pricing predictability, as we think about affordability, value, et cetera, is really meaningful. And it begets additional rides.
When you have that consistent experience, great ETAs, reliable pricing, that's a fantastic cycle. We just talked about Price Lock in that. And then don't forget bikes and scooters, you know, great affordable way to get around. You've had some temperate weather here in New York in November, so you know, great time to ride.
Yeah, got it. And then just talking about shared rides was kind of on my mind as well. And then even into the public transit realm, I don't know, talk about, is that things you guys think about in the future?
Yeah, shared rides are not on our mode selector today, you know, and so we participated in that in the past. You know, I think we like where we're positioned from overall modes today. And I have nothing to add really as it relates to public transit, right? We've got great linkages between that and in the cities where we offer bikes and scooters, those are great transit linkages overall. And cities really appreciate and like having that. And in many cities, it's, you know, they've really reimagined. New York is one case, San Francisco is another of the way that people move throughout the city with bike lanes and move fluidly with public transit. But that's probably the area I'd highlight.
Got it. Talk Canada real fast, actually. It's not a part of the business that gets a lot of attention, but I think it's actually starting to become so, or warranting anyways. Sort of what's the distribution path look like or the footprint expansion, I should say, look like as you roll out up there? And what are some of the challenges or anything you guys have encountered that might be different than the U.S. business, or is it just kind of, you know, a matter of sort of landing and expanding from here?
Yeah, so Lyft has operated in Canada for a number of years is what I would say. But really, as I think about maybe a year ago now, we had a very focused strategy around our Canadian growth and very focused on continuing to build density, continuing to engage with riders. And we embarked on that path really in earnest starting in 2024. And you've heard us talk on our earnings call about the results that we've seen. So we've seen really strong growth in Canada. Toronto has moved up to, you know, one of our major cities overall as we think about North America. And so what does that tell us?
That tells us that the strides we've made in the core operational health of our marketplace that we've been able to implement across our cities in the U.S., taking those improvements, that know-how and capability into Canada has proven meaningful. It's proven that consumers really engage with the brand, what the brand stands for. We offer value to drivers as it relates to earnings opportunities. So taking that and really, I would say it's a matter of focus. If you think about the progress that we've made in 2024, we've been really pleased with the outcome.
Got it. Any sizing or growth rates you can share on that front or?
We don't break it out separately, so not today.
Okay. Hopefully at some point. Got it. And then just on the partnership front, obviously the DoorDash announcement was pretty cool, whatever it was a month ago now, I guess. It's been a long time since earnings. I guess the basics of what that relationship is seems pretty straightforward, right? You're going to get a look at their DashPass customers. They're going to look to your customer base to try to sign up more DashPass customers. Where's the real sort of like torque going to come from in the relationship? Like where are you guys hoping where it can really kind of catapult you?
We are really excited about this partnership as well. You talk about two companies who think about their customers through a very similar customer-obsessed lens who are focused on what they do. We are focused on North American rideshare. They are focused on food delivery, kind of, you know, best in category and bringing together the opportunity to create value, create value for whether it be existing Lyft riders, existing DashPass members, but also obviously opening that aperture. You go into these partnerships understanding what our opportunity might be to introduce a new ridership base to Lyft. And so we are really excited about how the initial launch has gone. It's just been live for a number of weeks. But you obviously go into these things making some estimation for initial account linking, et cetera. We're excited about where we are. We're absolutely on track.
I also mentioned in our recent earnings call, you know, partnerships are not just an announcement followed by a few weeks of support and then you're finished. You enter into these things and you're always going to learn about the experiences that are happening with both partners, with customers, how you enhance that over time, how maybe you introduce it and talk to customers through different channels, so you should continue to expect us to see working collaboratively to do that as we enter into 2025, but we're obviously really excited about how it's coming out of the gate.
Got it. It was a little surprising, I think, you know, you guys have low 20 million active riders. I think you've said 40 million total riders in any sort of given year. DashPass has, I don't know, not quite say 20 million DashPass subs. But you've said there actually isn't that much crossover or as much crossover as you might think. Why is that? Is that just like, is it like a suburban urban mix or something? Or it just seems, it seems counterintuitive. Why is that?
Yeah, it's a great question. So to be clear, we have not talked specifically about what any sort of numerically, what the overlap is. But fair to say that we obviously believe we have an opportunity. It's, you know, it is difficult to say exactly what that foundational case is. And we will absolutely continue to learn more about that as we progress down the partnership realm. There is some habituation, I'm sure, that's at play over time here. Some amount of, you know, Lyft just introducing itself again as an incredibly strong player in rideshare. We've made a tremendous amount of progress over the last six quarters. Very fast ETAs, competitive pricing, great experience. And so opportunities to resurrect riders who maybe haven't checked us out for a couple of quarters, I think is another fantastic opportunity.
Yeah, got it. Real quick on the media business, which ironically we all had dinner with your team last night and a group of investors, and this did not come up in a single question. Kind of interesting. So on the media front, obviously David's talked about that opportunity, super attractive. You put out long-term targets, clearly going to be a profit driver. I think the one question we get from investors on that is if you look at the numbers relative to your targets, so like media revenues relative to sort of the booking targets, do the numbers imply you're over-indexing maybe relative to some of the others we've seen in the industry? And I'm just curious like why that is. Not that you're speaking for others, but just from your perspective, why would that be?
Yeah, absolutely not speaking for others, but we are excited about the opportunity that we see in media, so we outlined a broad framework at our investor day, and we are on track for where we expected to be in 2024. Really, as you think about sort of initial stages, and these are stages of build, it's about really having a fully performant, you know, highly measurable ad platform because that's what matters to brand partners. They care about that very deeply, so you've seen us over the last couple of quarters talk about new measurement partners that we're bringing onto our platform to continue to build out that capability set. We continue to see advertisers come back. We continue to see them not only come back, but increase their share of wallet and spend on the platform overall.
Those are the indicators that we're making strong progress, that the value that they're seeing is meaningful enough, that they're willing to have more share of wallet overall on the platform. So very, very deliberate build of that core foundation. And that's the foundation which we think we have interesting opportunities to grow off of as we think about the next few years.
Got it. And what verticals are you doing well so far in and any you can call out where you think there's big opportunities?
You know, the verticals are varied. Anything from consumer brands to tech brands, healthcare types of brands have been some of the larger areas as we think about advertising partners.
Got it. Okay. Let's move to insurance. Everyone's favorite sexy topic.
Okay.
All right, everybody knows insurance costs have been going up a lot, right? 40%, something like that per ride. Two years ago, I think it was 17% last year. And obviously it's going to be up on a per ride basis, but less than sort of 17% this year. But then, you know, as you guys compete, right, you have to sort of maintain that balance with pricing. How do you kind of, how do you balance that? And I guess like related to the latest insurance renewal, how did you handle either passing along that price or absorbing it or that type of thing?
Yeah, so I'll just start out by saying we're excited about the progress that we've made. There's a lot of teams across Lyft that focus on this very, very deeply, and it's not just on the insurance or risk side, but we collaborate deeply with our marketplace team that sort of delivers the tool and tech, and it's all about continuing to bend that curve on accident, severity, and frequency, so we've made a ton of progress there that we're really pleased about. We continue to work really collaboratively. We have a portion of our business that we partner with, with third-party partners, a portion that we self-insure. Those collaborations are very deep and have proven to be meaningful over a number of years, so proud of that, proud of the work we do on the policy side overall.
And then, importantly, as you think about the structure of this, last year we moved to a structure where, as opposed to renewing all of our agreements at a single point in time for 12 months, you recall we broke that up into two periods. So some agreements renewing for 12 months, some on a six-month cycle. We'll do the same thing again this year. And that really allows us, as you think about an environment to your point where costs are going up, they're going up less, obviously, but allows us as a business to better manage that when we're dealing with some of those increases across not a single time period, but multiple time periods first and foremost. So we gave very specific guidance sequentially Q3 to Q4.
We expected our cost of revenue to be up about $50 million, primarily related to the impacts of insurance renewals. That is fully captured within the scope of the guide that we gave for the fourth quarter and then our increased guidance for full year 2024.
Got it. And so given that it's still delevering technically on a per ride basis, what are the primary offsets to that as you sort of build? Because you've obviously guided for variable cost leverage overall. What are the primary offsets to that deleverage?
Yeah, so it kind of goes back, and I'm just going to lean on many of the frameworks that we talked about at Investor Day for how we continue to get leverage in the business. We talk a lot about operational excellence, the translation in terms of the financial metrics that derive from that are fixed cost leverage, so great example, we've grown tremendously over the last six quarters on flat head count, so great progress by the team. Another area that we talk about is efficiency and incentive spend, so we deploy incentives on the contra revenue line, so the line between gross bookings and revenue, and then we deploy incentives into the marketplace that flow in our sales and marketing line on the P&L. And we outlined a framework where we will drive 10% efficiencies on a per ride basis annually on our combined incentive spend.
In the third quarter, we drove 17% year- over- year. So we're ahead of that framework for 2024. Those are some of the really key points as you think about just broader leverage in the business overall, where we'll continue to lean into those frameworks over the course of our long-range plan.
Got it. Would you, on the incentive piece you just mentioned, is that the, you guys were able to obviously guide up on the margins here in the most recent quarter? Was that the single biggest reason, would you say?
I wouldn't say that. I think it's a variety of, it's a culmination of, I think, all of the work, and I wouldn't point to any one thing as the core primary lever, but certainly getting more efficient in the business and continuing to execute really, really well not only drives those efficiencies, but frankly, if you think about it from a driver or a rider lens, produces more engagement and more rides overall.
Got it. And then one last one, I guess just on back to the fixed costs. You know, we do get asked about this from a headcount perspective. You basically said you're kind of at the right place or whatever. Is that, I mean, that plus inflation, is that kind of the right way to think about on the G&A line in particular?
Yeah, so I'll mention headcount very briefly and then come back very specific to G&A. So I just mentioned headcount flat-ish, even though the company's grown significantly over the last couple of quarters. We have invested in incremental areas, media being a great one where we see really strong near-term payback. So we will continue to do some of those things around the edge. Specifically related to G&A, what I would tell you is that a little bit more than half of that line is actually variable cost. And those variable costs really primarily flex with rides. And they are related to some portion of our insurance accruals. The majority of those will sit in the core P&L, but there are certain insurance expenses that are accrued on a per ride basis that sit in G&A, as well as certain legal accruals that sit there as well.
I think that's important as you understand the dynamics in particular of that line.
Got it. Got it. Have you ever, I guess on that point, maybe if you could just break out the variable versus the fixed just as a percentage?
We haven't given a percentage other than to say, you know, more than half of this variable.
Got it. Okay. I think we're out of time. We'll leave it there.
Thank you very much.
Thanks for being here.
Good to be here. Thank you.