Afternoon, and welcome to the Leaf First Quarter 2021 Earnings Call.
Background
noise. I would now like to turn the conference over to Sonia Banerjee, Head of Investor Relations. You may begin.
Thank you. Good afternoon, and welcome to the Lyft earnings call for the quarter ended March 31, 2021. Joining me today to discuss Lyft's results And key business initiatives are our Co Founder and CEO, Logan Green Co Founder and President, John Zimmer and Chief Financial Officer, Brian Roberts. A recording of this conference call will be available on our Investor Relations website at investor. Lyft.com shortly after this call has ended.
I'd like to take this opportunity to remind you that during the call, we will be making forward looking statements. This includes statements relating to the expected impacts of the continuing COVID-nineteen pandemic, the performance of our business, future financial results and guidance, strategy, long term growth and overall future prospects, as well as our definitive agreement to sell our Level 5 self driving unit and our agreement to reinsure our captive insurance subsidiary for certain liabilities. We will also make statements regarding regulatory matters. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors included in our Form 10 ks for the full year 2020 filed on March 1, 2021 call are based on assumptions and beliefs as of the date hereof, and Lyft disclaims any obligation to update any forward looking statements except as required by law.
Our discussion today will include non GAAP financial measures. These non GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. In our earnings release, which was furnished with our Form 8 ks filed today with the SEC and may also be found on our Investor Relations website. I would now like to turn the conference call over to Lyft's Co Founder and Chief Executive Officer, Logan Green. Logan?
Thanks, Sonia. Good afternoon, everyone, and thank you for joining our call today. The rideshare recovery continued in Q1. We exceeded our outlook across revenue, Contribution margin and adjusted EBITDA. The improvements we've made over the last year are paying off.
We've built a much stronger business. And as the recovery continues, we're confident we'll be able to deliver strong organic growth and adjusted EBITDA improvements. We expect to build a significantly larger company by attacking the $1,000,000,000,000 plus market opportunity in front of us. Turning to our financial results. And outperform the high end of the outlook range.
Recall that in early February, we said that Q1 revenue may decline by 3% to 4% quarter over quarter. Active riders increased by over 940,000 from Q4, representing 8% sequential growth as we welcome back riders and increased rider activations in Q1. The rollout of vaccines and reduced pandemic related restrictions This has been an industry wide dynamic. Brian and John will speak to the issue in detail, but we are focused on increasing driver supply and achieving a better balance in our marketplace for Q2 and beyond. Let me turn to April.
Rideshare rides declined month over month due to typical seasonality impact of the holidays. However, on a year over year basis, rides grew by more than 100% as we lap the pandemic trough. It's worth noting that in early April, the CDC significantly reduced testing and quarantining requirements for fully vaccinated domestic travelers, Although people have started moving again, we expect there is still much more to come. We continue to believe that there is significant pent up demand for mobility that will take time to play out. Over the last year, rider demand has been limited by how safe people felt going out and where they were able to go.
As the vaccine rollout continues, warmer weather takes hold and pandemic related restrictions are eased, we anticipate more people wanting to go out behind housing. It exceeds $1,000,000,000,000 annually. Transportation captures more of the consumer wallet than food, backcountry. And car ownership in particular is expensive, inefficient and inconvenient in many ways. We firmly believe that the future of transportation is as a service, one that offers the appeal of more flexibility at a lower cost than traditional car ownership.
John and I have been building towards this transition for over a decade. We deeply understand the market opportunity and I'm confident of integrated services across rideshare, car rentals, bikes, scooters, transit and vehicle service centers. We seek to deliver the best holistic experience to users by integrating the currently fragmented transportation ecosystem through a mix of great technology and operations. When a rider opens the Lyft app, they know what to expect, seamless access to the wide range of transportation options available through our network. This is by design.
We work hard to give people an incredibly simple experience with access to a ride at the top of a button, stood. Our systems dynamically price, dispatch and route riders to their destination at scale and nearly instantaneously. And we're able to do this in a way that maximizes returns by taking into account complex inputs like conversion rate and unit economics. Much of this is proprietary IP that is not easily replicated. Our systems are underpinned by the accumulated learnings from the billions of rides we facilitated with tens of millions of riders over nearly a decade.
I want to spend a moment talking about our AV strategy. We've signed a definitive agreement with Woven Planet, a subsidiary of Toyota, to acquire our Level 5 self driving division. This is strategically the right move at the right time. When we opened our Level 5 Engineering Center in 2017, certain that there would be multiple well funded autonomous vehicle programs. In just 4 years, we built a world class team and made remarkable progress state of the art machine learning techniques and data collected from vehicles at large scale helped speed up the development process and drove step changes in terms of capability.
The team's rapid progress and industry leading positioning are reflected in the California DMV's most recent disengagement reports. The market for AV technology has grown meaningfully since we first launched Level 5. This means we now don't need to develop the technology ourselves to ensure we have access to of competitive marketer providers and that we achieve our vision of integrating autonomous vehicles into our network. The Level 5 transaction will further strengthen our financial position and enable us to continue to focus on the unique value of Lyft's network. Going forward, we're doubling down on our industry leading Lyft autonomous platform, previously called open platform to deploy and scale AVs with partners on our network.
This team will continue to focus on the autonomous user experience, marketplace and fleet management services that ensure Lyft riders have access to the safest, most advanced autonomous technology on the market and that our AV partners have access to the full power of Lyft's transportation network. John will talk more about our AV strategy and provide a few business updates. Call. But before he does, I'll turn the call over to Brian to review our financial performance and provide details on our path to profitability.
Thanks, Logan, and good afternoon, everyone. In the Q1, while average daily ride volume grew each month, March showed the steepest growth inflection. Demand outstripped supply, which led to elevated prices for ride sharing. Based on third party data, this dynamic appeared to be industry wide and it led to record earnings for drivers This drove increased contribution and contribution margin, especially in March, again, while drivers enjoyed record earnings. Finally, given the strong organic demand, we reduced marketing spend.
Non GAAP sales and marketing declined 15% quarter over quarter and to an exceptionally strong quarter and enabled us to greatly exceed our outlook across revenue, contribution margin and adjusted EBITDA. To further reduce our adjusted EBITDA loss in the second quarter, I'll share more thoughts shortly on Q2. Let's start with a detailed review of the first quarter and begin with top line metrics. In Q1, the number of active riders increased by 942,000 quarter over quarter $0.13 March was the strongest month in the Q1 for new rider activations. Remember, additions to our rider count near the end of any quarter The combination of these trends, especially the nearly 1,000,000 incremental active riders, led to the $39,000,000 quarterly sequential increase And 1st quarter revenue to $609,000,000 Q1 revenue was nearly $60,000,000 above the midpoint of our revenue outlook of 5.45 back to $555,000,000 Now before I move on, I want to note that unless otherwise indicated, all income statement measures that follow are non GAAP and exclude backstop based compensation and other select items.
A reconciliation of historical GAAP to non GAAP results is available on our Investor Relations website and may be found in our earnings release, which is furnished with our Form 8 ks filed today with the SEC. Let me remind everyone that elevated rideshare revenue per ride in the Q1 had a beneficial impact on profitability metrics, including contribution, Contribution margin and adjusted EBITDA. Contribution margin in the Q1 was 55.4%, Help drive strong Q1 contribution of $337,000,000 We exceeded the midpoint of our original contribution outlook by 55,000,000 or 20%. As a reminder, contribution excludes changes to the liabilities for insurance required by regulatory agencies attributable to historical periods. In the Q1, there was 128,000,000 of adverse development, which we attribute to the continued impact of COVID on legacy insurance liabilities, more specifically, the severity of claims from our legacy book as injury costs continue to climb.
We expect the transaction to close in mid May. The net cost of this transaction will be approximately $20,000,000 Unlike when we did the Novation agreement last year, From an economic perspective, when the claims we are re insuring are ultimately resolved, to the extent the ultimate value exceeds the liabilities as of March 30 1, 2021, Lyft will receive dollar for dollar coverage for up to $183,000,000 To the extent, the ultimate insurance liability is below the March 30 Operations and support expense for Q1 was $83,000,000 down 35% year over year. Operations and support expense Q1 R and D expense was $132,000,000 a slight increase from Q4 as we funded growth initiatives. As a percentage of revenue, R and D expense declined to 21.7% in Q1, down from 22.8% in Q4. As I mentioned, given the strong organic demand, we reduced sales and marketing in Q1.
Sales and marketing was only $69,500,000 in Q1, down by over $120,000,000 or 64% from $191,000,000 in Q1 of 2020. Q1 sales and marketing declined by 15% or $12,000,000 quarter over quarter. As a percentage of revenue, sales and marketing reached an all time low of 11.4%. Within sales and marketing, incentives declined by 87% in Q1 on a year over year basis from $100,000,000 to $13,000,000 or just 2.2 percent of revenue. G and A expense in Q1 was $156,000,000 down 17% from the year ago period.
Remember, policy spend was elevated in Q3 and Q4 of last year related to Prop 22. In Q2, We expect G and A expense to increase in absolute dollars, but decrease as a percentage of revenue. In summary, total operating expenses below cost of revenue On a year over year basis, operating expenses below cost of revenue decreased by $220,000,000 in the first quarter. In terms of the bottom line, our Q1 adjusted EBITDA loss of $73,000,000 was 46% or $62,000,000 better Our latest loss outlook of $135,000,000 On a sequential basis, our adjusted EBITDA loss improved by 77,000,000 We ended the quarter with unrestricted cash, cash equivalents and short term investments of $2,200,000,000 down just $14,000,000 from the potential economic recovery in our operating footprint given the current fluidity associated with COVID related government orders and healthcare recommendations as well as the variability in vaccination rates and reopenings among cities. It is impossible for us to predict our results for the Q2 with any certainty.
However, let me share what I can. In April, Rideshare Rides showed strong growth on a year over year basis as we lap the COVID trough. But April ride volume declined month over month given seasonality and the impact of higher prices. However, from a revenue standpoint, The elevated pricing in April contributed to increased revenue per ride relative to Q1 and helped offset the negative sequential ride growth. And similar to Q1, we are using the surplus from the elevated pricing to fund additional driver supply investments to better balance the marketplace.
We are hopeful that as the vaccine rollout continues, we will attract more new drivers and welcome back drivers who may have stopped driving during COVID. And as driver supply outlook, which is subject to change given the uncertainty with COVID. We expect Q2 revenue of between $680,000,000 $700,000,000 This would represent growth of between 100% to 106% year over year as we lap the bottom of COVID. It also assumes revenue from bikes and scooters doubles quarter over quarter given seasonality. We expect For each dollar of incremental revenue growth in Q2, we expect contribution to increase by approximately $0.70 Finally, we expect that we can limit our Q2 adjusted EBITDA loss to between $35,000,000 45,000,000 This outlook assumes the operating environment improves in May June relative to April given the continued rollout of vaccines.
The loss outlook for Q2 Last August, after implementing a major business restructuring, we announced that we could be adjusted EBITDA profitable With rideshare ride volume only 5% to 10% above the level achieved in Q4 of 2019. And just to remind everyone, Q4 of 2019, we lost $131,000,000 of adjusted EBITDA. Given the additional cost reductions in Q4, Just 3 months ago, we shared that we could be adjusted EBITDA profitable with rideshare ride volume 15% to 20% below the level in Q4 And today, we shared our Q2 adjusted EBITDA outlook, which implies continued progress towards breakeven. While we do not expect the current elevated pricing environment or the increased revenue per ride to persist in Q3, given the higher volume of rides expected in the expense savings from the pending sale of Level 5. Finally, once we become adjusted EBITDA profitable, we expect to remain so even as we reinvest in future growth opportunities and TAM expansion.
So in closing, I want to emphasize 3 key points. 1st, we built a much better business over the last year and we expect to deliver strong financial results as we progress through the recovery. In Q1, we narrowed our adjusted EBITDA loss to the lowest level since going public, even with revenue down 36% year over year. We anticipate further progress in Q2. And then in Q3, we expect to achieve adjusted EBITDA profitability.
Ultimately, we expect which provides a long growth runway. As Logan shared, we expect to build a significantly larger company as we attack the market opportunity in front of us. Finally, we are continuing to invest in growth initiatives that build on our core competencies and monetize assets that are part of or underpin the Lyft ecosystem. These strategic investments are expected to increase our already substantial TAM and contribute to our long term free cash flow growth.
Thanks, Brian. We've built a much stronger business. 2020 was a reset and we are now leaner, more efficient and even more focused from the big market opportunity in front of us. I'm going to build on Logan's earlier comments about autonomous vehicles. Most importantly, It is clear to us that the best way to commercialize AVs will be through an existing transportation network.
We are already leading the industry in terms of paid AV rides and partnerships. And with our focus on Lyft Autonomous, We are uniquely positioned to win the AV transition. This is based on 3 distinct elements: 1, our hybrid network 2, our marketplace engine and 3, our capabilities in fleet management. I'd like to touch on each point. Our hybrid network brings together the combination of human drivers and autonomous vehicles to unlock the highest utilization and always available rides.
Our marketplace engine drives the highest revenue per mile with real time demand prediction, vehicle positioning, routing and pricing. And last, Our tech for managing fleets and our operations delivered the lowest cost per mile. Collectively, these foundational pillars Additionally, unlike competitors and highlighted by our Level 5 transaction, Lyft is aligned with our AV partners. We will not have significant ownership in a competing AV program and we are focused on being a trusted partner that can be relied on to improve their success. Switching gears, let me talk about what we're doing to position ourselves to deliver strong growth throughout the recovery.
Demand is improving rapidly, so I'm going to focus my remarks on what we are doing to bring balance to the marketplace with supply. We expect to see organic tailwinds to driver supply in the coming months for several reasons. To start, In many markets, average hourly driver earnings have been up meaningfully relative to pre COVID levels. In some markets, they've been at all time highs. During the month of April, drivers in our top 25 markets were earning more than $30 per hour on average, 2nd, we believe that individuals who have been doing other forms of app based work over the last years will transition to Rideshare.
Take food delivery for example. While exact comparisons are difficult, historically, studies have shown that rideshare represents a higher earnings opportunity This is important. After a year of social distancing, drivers are telling us they crave these in person conversations. They miss the camaraderie and meaningful interactions they have while using Lyft, and we believe this brand preference bolsters our competitive positioning. 3rd, as pandemic conditions continue to improve and health safety concerns abate, we see more drivers feeling more comfortable getting back behind the wheel.
As the vaccine rollout continues, driver availability should naturally improve. While we expect to invest in incentives to improve supply, We are also leaning into the driver experience. We are focused on making sure driving with Lyft is as easy and rewarding as possible. Whether a driver is returning to the platform or opening the app for the first time. This includes proactively flagging potential roadblocks We are confident in how we'll steer our marketplace back to balance.
I also want to take a moment to address the regulatory backdrop. Over the last several months, we've had productive conversations with policymakers at every level. We continue to believe the win on Prop 22 in California passed by nearly 10,000,000 voters across the political spectrum has shifted the policy conversation towards protecting independence while also providing important benefits drivers want. We remain ready to work with policymakers, labor leaders and all interested parties who want to move forward Before we move to Q and A, I want to provide a quick update on the work we are doing to help communities get back on their feet. In Q1, we officially launched our vaccine access program, Since the program's inception, we've established more than 100 partnerships and we are actively facilitating access to rides nationwide.
With that operator,
We have your first question from Doug Anmuth with JPMorgan. Your line is open.
Great. Thank you. I just wanted to follow-up on some of the driver supply comments. In particular, I'm just trying to understand with April with the month over month decline. Just how to think about the driver supply dynamics relative to seasonality and anything else that was going on in the month there?
And then, how do you envision any kind of thought just on timing for when supply will kind of normalizing you'll get back to equilibrium
view? Thanks. Yes. This is Logan. I'll weigh in on a couple of things and then turn it over to Brian.
In terms of how we see this developing, we think that in Q3 and beyond, we'll start to see some a few trends That should give us real tailwinds on the driver side. One is just as more and more drivers are getting their second dose and feeling safer driving. And as overall case rates come down, I think that's really going to change a lot of the kind of feelings of health and safety Around driving. 2 is the federal unemployment benefits are sunsetting in Q3. And that's clearly been having an impact, I think, on the whole ride sharing industry, but on the broader economy beyond ride sharing.
So I think there'll be a change we expect to see there. And the third, nobody knows exactly what the delivery market will look like. But if delivery does slow down as the economy reopens, then we would expect to see a number of delivery drivers move back to ride sharing. And It's hard to get kind of perfect data on this, but there have been some studies that have shown that historically ride sharing pays substantially more than delivery. So we think that could provide a tailwind.
So we
don't know exactly what the
timing looks like, but we expect Q3 to be a kind of notable timeframe where this changes. Brian, did you want to cover some of the driver incentive piece?
Ups. Sure, absolutely. And maybe Doug, just to take it at the top, I think in terms of April, I mean demand was there, it was just Prices were elevated. And I just want to sort of walk through and I want to actually provide more details around the Avada driver incentives and But again, our outlook was made assuming there wouldn't be this near term rapid demand acceleration. And as you can tell, despite the increase, our Q1 financial The results significantly exceeded our outlook for revenue for contribution margin and adjusted EBITDA.
So the elevated pricing that That Logan was referencing relates to prime time. And again, it's there's plenty of third party data that show that this is industry wide. And when prime time increases, let's just say we collected an extra $4 on a ride, say we invest 3 of that then into a driver incentive, All of the driver incentives will show up in our disclosure line item. But net net, if we call. Collected an extra 4 and we paid out 3, net net we actually generated an incremental dollar of revenue.
So In terms of specifics for Q1, incentives classified as contra revenue increased by roughly $100,000,000 quarter on quarter And led to record driver earnings. But again, the reasons I just described, rideshare revenue per ride actually Increased 7% quarter over quarter. And again, that's net of driver incentives. And then in terms of our P and L, certain parts of cost of revenue are fixed, Such as depreciation or relatively fixed per ride. Insurance is typically based on the miles traveled and not the price of the ride.
So this Elevated revenue from higher prices drove increased margins relative to our outlook and helped fund the incentives. And then looking forward towards Q2, We're constantly making dynamic adjustments to balance the marketplace. We don't have an ability to forecast driver incentives in Q2 with any certainty, But our revenue outlook incorporates our best view, that best view of Q2 and that would be obviously net of driver incentives. So We're assuming that elevated pricing will persist in Q2 and we plan to use that to help fund the investments to bring back drivers. But again, if you go to our outlook, Our Q2 outlook down is at $35,000,000 to $45,000,000 in terms of adjusted EBITDA loss, so big improvement relative to Q1 even with those investments.
We have your next question from Stephen Ju with Credit Suisse. Your line is open.
Okay. Thank you so much. So, John, I think going off your prepared remarks earlier, the $30, $35 per hour. I mean, that's sponsored by higher prices to the consumer, so that's probably untenable. But so is anything close to minimum wage on an hourly basis.
So what do you think will be The optimal sort of hourly wage that the drivers may get when you have supply and demand balance. And I guess there's a bigger question here. Do you think the consumer desire for cheaper rides is ultimately at odds with the driver desire for more hourly earnings? And from universities, healthcare organizations, etcetera. I mean, I guess, more enterprise usage.
So what do you think that looks like On the other side of the recovery, are you having more conversations, less conversations? Is there like a greater desire to use Lyft at an enterprise level? Thanks.
Thanks, Stephen. Yeah, this is John. So just to start off on the first piece, bet? Yes, we are seeing driver earnings at all time high as you mentioned, that can get to the $30 to $40 range. Back.
I think what we saw historically was within the $20 to $30 range, which is in many places far above minimum wage. And we got to remember, we are coming out of a pandemic. So in terms of market balance or imbalance, Both the beginning of the pandemic where demand went down and now the end of the pandemic where demand is rising rapidly, that's a good problem to have up. And one that will fix itself over time, and the $20 to $30 range, which is more normal. That also depends on the hour.
And so, at peak times, drivers, even in a more balanced environment wall. You know, can be earning over that $30 an hour. Obviously, that depends on the specific city. But I think as we've demonstrated over the last several years, and the fact that Logan and I have been working on this specific business for close to a decade, We know how to balance the market and we know there's a lot of not only demand for rides, but there's a lot of demand for this type of work, which allows you to drive at hours that are most convenient for you and make above minimum wage and in many cases, far above that if you Drive during the right hours. So balance is the name of the game.
It's our business. It's not at odds With anything, it's just that, again, we're coming out of a pandemic, where supply and demand are spiking in different ways than they do on a more normal basis. To the second part of your question about the enterprise business, we're having a lot of great conversations. We invested a lot throughout the pandemic, obviously, in the healthcare industry. We launched And more recently, Lyft Pass for healthcare.
We announced the Chase partnership, coming out of the pandemic when people will be more likely to travel to really take advantage of that relationship. In So a lot of exciting things. You mentioned universities as well. I was just talking with our team earlier this week about a specific university Deal that they're likely to get. So I think with the pandemic, a lot of people questioned their Normal behavior and are looking for ways to, like many people have said, build back better, which is allowing us to have some really fruitful conversations.
We have your next question from Alex Potter with Piper Sandler. Your line is open.
Great. Thanks. So I guess one question that I've spend to which consumer travel patterns might change pre pandemic versus post pandemic. Now that we're starting to come out, I guess, of the pandemic, do you have any trends that you would Maybe like to highlight to the extent that travel patterns actually are changing. Is there more activity in suburbs?
Is back. Are you seeing commute come back, airport rides? Anything that you can provide there would be helpful.
Sure. I'll provide a little bit of color there. I think we're starting to see some real recovery in cities. I think cities are clearly starting to come back to life. And we think I think we've talked about this broadly before, but we don't imagine there's been a steady march of the population to move into cities and denser suburbs, and we don't imagine that trend changing post COVID.
On the commute business, I think it's too early to tell. We are seeing that tick back up a little bit. The commute business has historically been supply limited. So during rush hour, demand is off the charts. It's one of the times during the day where both morning and evening when the spike is much higher than we're able to serve.
And so if the commute sort of demand softens impacts our broader volume. We are seeing travel and airport volume pick up. I think there's clearly some pent up demand. And as the roaring 20s kick off, I think we'll play a real role in that. So broadly speaking, I think there will be A handful of adjustments here and there, but I don't think it's going to change the kind of the broader shift from car ownership to transportation as a service.
1 of the largest markets in the world shift from an ownership based market to transportation as a service. And that's a $1,000,000,000,000 plus shift that's coming down the line. And we don't see that substantially altered. Brian, I don't know if there's any particular numbers that you want to
Yes. I mean, just
to provide up. A couple of data points. I think in your prepared remarks, you shared that if you go back a year ago, ARROW rides as a percent of total rides in April 2020 dropped to 1.6% of total rides. Just to give you a sense, in January of this year, so just a few months ago, we were at 4.5% of total rides. And in April, we just closed April, 7% of rides were airport rides and this is a rideshare rides.
And the peak at least I can see in sort of the last year and a half Was Q4 of 2019 at 9.4 percent of rides. So again, we're definitely moving in the right direction there. And I agree with Logan's backslash remarks. I think there is there are a lot of people who couldn't take a family vacation last year or couples or there are so many different events that postponed. And I think as more and more people get that second vaccination, it's lighting up a lot of leisure travel that I think we expect to see.
Yes. We're starting to see
a little of it, but
I think you're really going to see it ramp up in late Q2 and into Q3 and Q4.
Okay, great. And then maybe one last question on, I guess, lobbying campaign spending. I can appreciate now that Prop 22 is Over and done with spending on that particular initiative has sort of dropped off the radar. Any visibility on some of the other states back half of the campaigns. Are you planning on banding together with some of the other platforms and replicate the success in Prop 22 that you had in California?
And if so, can you quantify? Thanks.
Yeah, I can give
a high level kind of regulatory overview. And then, Brian, I don't know if you want to comment anything on the dollars there. Ups. At a high level, yes, we're talking to policymakers across the country, having very good conversations about What drivers want, which was made clear in Prop 22, they want independence as well as benefits. And so I would expect We were successful with Prop 22 was working together and creating a coalition of the stream and that's how we'll do it going forward.
So overall, I'm optimistic we'll have a few more success stories on bringing this model to more states this calendar year. And but don't expect the type of dollar impact that we saw last year. Brian, anything you want to add?
No, I think that was spot on.
Great. Thanks, guys. Thank you.
We have your next question from Mark Mahaney from ISI. Your line is open.
Okay. Let me try this. The new active riders that you had, it sounded like there was a mix of rejoins and maybe new riders. Do you have any
Do you
have any more detail on that? What was the mix?
And then I want to make
sure I understand about driver incentives In the back half of the year and it sounds like there's some organic factors that will drive pardon me, will drive drivers back to Lyft, Those hourly wages that you talked about and coming out of the pandemic, etcetera. But how much do you think that you need to Fuel that recovery of the how much do you think you need to spend or how much effort do you think you're going to have to make financially to incentivize drivers back. That's what I want to get at. Thanks a lot.
Thanks. Brian, any color we can share on that?
Sure. So let's start with active rider. So Again, we were very pleased to see the nearly 1,000,000 increase in active riders. We grew 942,000. We definitely saw some increases in activations and these would be new riders to Lyft.
And so if you look in the month of March, they jumped 43% month over month. And then again, that Put a little pressure on revenue per active rider because if you activate that last month, there's less time to take rides. But even if you look on the full quarterly basis, activations of new riders jumped 21% quarter over quarter. And again, I think it just goes back to We're still in the early days. I mean, there's just long term secular and structural trends that underpin our growth.
I believe that the status there's 4,000,000 people each year who turn 18 in terms of these digital natives who really don't want to own things, who really lean into the service back Service experience for the reasons that Logan outlined. On driver incentives, I think Logan outlined 3 potential tailwinds that we expect, Right. As more drivers get that second vaccine, I think you're going to see some supply shift. Because again, it's Historically, drivers have made a lot more doing rideshare versus delivery. 2nd, I think, again, the federal unemployment benefits are expected to expire within Q3.
So I think that also provides a little tailwind. And then I think one thing that is worth calling out in Q2, We expect to increase sales and marketing roughly probably $12,000,000,000 or so With a lot of that spend focused on marketing for new drivers. And so I think that is as we bring in more drivers, And again, as John pointed out, like the earnings right now are at all time highs. It's a really great time to bring new drivers into the system. And then again, I think we'll get some organic supply help just in terms of drivers who come back, Who maybe just didn't feel super safe in the earlier parts of the pandemic before they got their vaccines to be giving rides on the platform.
We have your next question from Brent Thill with Jefferies. Your line is open.
Thanks. Just on the supply of drivers, I'm just curious if you can update data and how that's coming back? I think we've all noticed, little longer wait times and clearly you're constrained on some of the train on some of the driver availability. How are you seeing that progress right now? Are you getting the type of flow that you need?
Or is there more work that has to be done there? Yes, I mean, we can't share
much more than we have already, but I would say we're pleased in terms of when we look at The funnel, we're seeing growth in the number of leads coming into the funnel and that is generally obviously you fill in the funnel and then you Drive activations of new drivers. So we do expect more new drivers coming into the platform as well as bringing back drivers who may have stopped driving during the pandemic.
Okay, that's great. And your profitability goal, I guess the question is that you've obviously, and the things that you're doing now that you have the expense structure set to grow beyond the recovery of this. Can you talk to How you're setting aside the right investments to think creatively about the next chapter of this, understanding in your comment last quarter and bringing it back to the stubs? Sure. Let me maybe kick this
off and then I'll hand
it off ups. Logan, just to be super clear, our restructurings are behind us. As you know, we took out significant cost from the business. There's $360,000,000 run rate annualized in Q4 relative to our original outlook. And then even in Q1, We took down OpEx below cost of revenue by $56,000,000 So profitability is now all about growth And the leveraging of OpEx and we're really excited about a number of different revenue streams and new initiatives.
I think just this deal sort of Logan's words, We expect to build a significantly larger company as we attack the market opportunity in front of us. So maybe I'll hand out to Logan to talk about some of the investments we are making.
Sure. So even as we made significant cuts across the business, we continue to place new bets and to invest to our marketplace engine. So when it comes to one of the kind of effects that we haven't talked about In terms of the supply side, is that drivers make more money when they operate at higher utilization. And we've had some real breakthroughs in terms of how we operate our place to be able to help drivers do more rides per hour and operate more efficiently. And every inch of waste that gets knocked out of the system, unlocks huge amounts of value that goes to drivers, to riders, and to the bottom line.
A lot of this is under the hood. Some of it we can't get into detail for competitive reasons. But we have continued to innovate bet through the last year. And we are looking forward to placing significant new bets as we go forward. Another couple of areas where we've continued to invest has been in our fleet management capabilities.
We've done some quite exciting things on that side of the house. And then we've talked about it a little bit, but our B2B delivery initiatives. Cuts. We're not looking to cut down to the studs in terms of reducing the cadence and the velocity that we can move at when it comes to innovation.
We have your next question from Ed Ruhn with KeyBanc Capital Markets. Your line is open.
Ups. Hey, good afternoon. Thanks for taking the question. Just on that line of innovation, it seems like you guys continue to roll out new initiatives like Priority Pickup and Wait and Save. Just So just trying to help us understand kind of where the bike business is today and how you would characterize the growth opportunity?
Thank you.
Yes. So I don't know that we can share any specific numbers, but we've seen some great customer feedback pickup, saving a few dollars to wait a few minutes. There's a lot of value to be unlocked there, and we're really able to serve our customers better. Similarly, like you mentioned, on the in the bikes and scooters business, absolutely, as more people have wanted backstay outside when they traveled. Bikes and scooters have been a phenomenal option.
So, we've seen a lot of uptake there And we're quite excited about the level of future growth. We're seeing cities at the same time also lean into growing their programs. And exciting horizon there.
Yes, and I could add a
little more detail on the bikes and scooters. So as Logan mentioned, We operate the largest shared micro mobility network in the U. S. And as of 2021, the largest dock bike share system in the world outside China. And this adds depth to our network, allowing us to offer a full set of transportation services.
On Citi Bike alone in 2019, riders took almost 21,000,000 rides. That's comparable to the pre COVID annual ridership of San Francisco's Bay Area Caltrain. And in 2020, we had more than 1,800,000 new riders tried our micro mobility systems. Those investments are really paying off. So as Brian also said, with warmer weather, we expect even more growth from bikes and scooters in the months ahead.
We just got Citi Bike here in Hoboken, so I'm excited to use it. Thanks so much. Thanks.
Enjoy.
We have your next question from Ittai Micali with Citi.
Just had one question on AV and another actually AV partnerships. And if so, what the receptivity is from AV players, given that some of them seem to be angling to potentially become future competitors? Just wondering kind of And what your thoughts are there? And hoping to get an update on what the plan is to bring electric vehicles on the platform in terms off. And as well as kind of staying asset light within that?
And how do you view kind of the economics of EVs on the Lyft platform in terms of your driver as
On AV, as we discussed last week, we feel like we are in the best position to win the autonomous transition for 3 distinct and main reasons. 1 is the hybrid network. So this goes to the point you asked about, if others want to go and do it themselves Without human drivers and autonomous vehicles, it's near impossible, I'll say, to manage the demand curves. Demand is not a static line. And so if you were to ask an AV only operator, would you buy 100,000 vehicles that meet a noon peak demand or 1,000,000 vehicles that meet a Saturday night peak demand.
Maybe they pick something in the middle And then that would really their utilization would suffer and or their prices would suffer. And so having that hybrid network is critical to operating in an AV environment. The second piece is the marketplace engine. Some of the pieces Logan discussed on the call, All of the data science and tech built over the last nearly decade to get really good at ETA dispatch routing specific to this use case. We believe it gives us, depending on the market, 10%, 20%, 30% advantage inefficiency.
And third, something that we do that no one else does is fleet operations And technology that is essential to maximize revenue per mile and minimize cost per mile. And so those three pieces together are specific and unique to our approach. We are excited to work with multiple partners in this space And I think more and more people are understanding the power of the network and the importance now that we're focused on what we do best, We're excited about EVs. When you think about utilization again, the cost of the battery is some oftentimes a big part of why EVs are more expensive and when you have drivers utilizing a vehicle much more than a kind of personally owned vehicle, You can make that payback equation work more quickly. I think we're still hopeful to get more mass market EVs, which are starting to come out over the next back couple of years and then using our fleet business, which we've talked about to help drivers get access
to them. So I think we're in
a great spot as EVs become more accessible.
That's all very helpful. Thanks so much.
All right. Thank you so much, everybody. Great catching up with everybody and we will