Lyft, Inc.

DPS, TNA, and investor relations. You may begin.

Thank you. Welcome to the LEAST earnings call for the second quarter of 2024. On the call today, we have our CEO, David Risher, and our CFO, Erin Brewer. We'll make forward-looking statements on today's call relating to our business strategy and performance, future financial results, and guidance. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implying during this call. These factors and risks are described in our earnings materials and our recent SEC filings. All of the forward-looking statements that we make on today's call are based on our belief as of today, and we disclaim any obligation to update any forward-looking statements except as required by law. Additionally, today we are going to discuss customers. For ride share, there are two customers in every call. The driver is LEAST's 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. Reconciliation of our historical GAAP to non-GAAP results can be found in our earnings materials, which are available on our IR website. And with that, I'll pass the call to David.

Thank you, Aurelian. Good morning, everyone, and let's jump right into it. LIFT's strong results in the second quarter continue to validate our long-term strategy. Customer obsession drives profitable growth. To start, in Q2, LIFT reached GAAP profitability for the first time in our company's history. This is a testament to our team members and their hard work every day, obsessing over our riders and drivers, and operating with discipline and excellence. It's an important milestone, and another step along the path we laid out to you earlier this year. Aaron will share our financial results in more detail shortly. Turning now to our customers, driver and rider engagement hit all-time highs in Q2. Q2 saw the most new drivers in any quarter since 2019 on the platform, including 34% more women and non-binary drivers compared to Q2 last year, thanks to Women Plus Connect. Our 70% driver earnings commitment launched nationwide, and in those launch regions, we saw a meaningful increase in driver perception of pay fairness from the prior quarter, a leading indicator of driver preference. This quarter, driver hours hit an all-time high, showing our forward progress with the number of drivers and the time they choose to spend on LIFT. In related news, two weeks ago, the California Supreme Court unanimously upheld Prop 22, protecting the independence that drivers value. Drivers also had huge wins in Minnesota and Massachusetts that secure their freedom to earn when, where, and however they want. Drivers rely on LIFT for available and flexible earnings opportunities. Gig work like driving helps people live their lives on their terms, and that's why it's here to stay. Now, when it comes to riders, in Q2 we had a record 23.7 million quarterly active riders, up over 10% year on year. At the same time, ride intent conversion increased, and ride frequency kept growing, thanks in part to the fastest pickup time we've had in four years. We also had record rides in Q2, including the most scheduled rides in the company's history, and we saw record bike and scooter rides, especially e-bike rides in our largest market, New York City. Rides on our best in class e-bikes now represent over half of all bike and scooter rides this year. So to state it simply, our focus on customer obsession and operational excellence have led to more riders choosing LIFT than ever, and they're riding more often. Before moving on, I wanna give you a closer look at part of the rider experience and how we're working to radically improve it. It's what's known as primetime, or surge pricing in the industry. Many of you have probably experienced it at one time or another, and I'm willing to bet you didn't care for it one bit. It's probably rideshare's most hated feature. Well, thanks to an enormous effort on the part of our team, building on the great momentum we've seen with drivers, the number of rides impacted by primetime has decreased dramatically. In Q2, the average primetime amount included on each ride declined by 25% versus the first quarter, and that contributes to better conversion rates. In fact, the markets where we saw the sharpest declines in primetime in Q2, like Phoenix, Baltimore, and Orlando, are the markets where conversion rates are improving the most. So we are gonna do something a little crazy. We are going to open up a can of whoop-ass on primetime. We are starting with innovations focused on those who use it every day, commuters, reliable pricing is particularly important to them because they know what their ride should cost and hate it when prices change. For those riders, we are piloting a new feature called Price Lock, letting a rider purchase a monthly subscription that caps the price for a specific route at a specific time. Primetime won't ever completely go away. It's an important way to match supply and demand when demand spikes quickly. But with innovations like Price Lock, we can chip away at how often it occurs and hopefully take what I'm willing to bet is, again, rideshares least liked, most hated feature and turn it into a reason to choose Lyft. Next, I wanna switch gears and touch on Lyft Media, which continues to perform well, with revenue up more than 70% compared to a year ago. In Q2, we signed deals with 44 new brands, including T-Mobile and Activision, and re-signed several more, including Amazon, Fidelity, and NBC Universal. Our in-app video ads continue to drive interest from brands to power this growth. Case in point, our in-app media revenue grew more than 10 times year on year. For all our partners, measuring return on ad spend is critical when they sign and re-sign, and consistent with our roadmap, we're continuing to roll out these capabilities for our in-app video ads. This quarter, we've begun working with three major partners, including Google Campaign Manager. And next quarter, we'll integrate even more. We have a leading team and are building the right tools to scale this business. Finally, given recent chatter about autonomous vehicles, I wanna spend a few minutes outlining how we think of them. In short, AVs represent an enormous opportunity for Lyft. We believe that the best way for autonomous vehicles to commercialize at real scale, and the best way to monetize this technology is through networks where the vehicles can be put to use. Lyft has that network today. To understand why we're so bullish on AVs, you have to remember that a rideshare network is far more than the app you see. On the demand side, Lyft platform gives access to 40 million riders each year in the US and Canada. And on the supply side, it includes a vast set of capabilities in onboarding individually owned vehicles to our platform, making sure every vehicle and ride are properly insured, and offering customer service when things go wrong at scale. And when it comes to fleet management, our Flex Drive subsidiary has given us deep expertise in the easy onboarding, offboarding and servicing of tens of thousands of fleet vehicles over the years. All of this is why in markets like Las Vegas, we've been able to facilitate over 130,000 AV rides so far, and we're just getting started. Bottom line, our aim is to be the easiest and best way for partners to commercialize AVs. Doing so will help us grow ever faster as AVs come online in the years ahead. Okay, back to 2024. We remain on track for the rest of the year as we continue working towards a long-term healthy business. Q3 is the heart of summer travel season and the start of back to school and back to work, which means good things for the price slot commute customers I just mentioned. Erin will share more on what we expect in the back half of the year in just a second. At Investor Day, we said our next phase of growth is here, and the opportunity we see is great. We are thrilled to have achieved gap profitability this quarter, and so I wanna close by reiterating our long-term foundational thesis, customer obsession drives profitable growth. I'm pleased with the progress we've shown and confident in the road ahead. Over to you, Erin.

Thanks, David. Good morning, everyone, and thanks for joining us today. As David mentioned, we saw strong results in the second quarter, including our first gap profitable quarter, and we generated significant free cashflow. At our Investor Day, I highlighted how operational excellence drives growth through more driver hours, more riders on the platform, and riders choosing Lyft more frequently. In short, operational excellence underpins the health of our marketplace, and in Q2, we fired on all cylinders. In the second quarter, we had more active riders than ever on our platform, and driver hours hit a new all-time high. Service levels in the second quarter kept improving. Average ETAs were more than 10% faster than a year ago, and the fastest in four years, and the average prime time, as measured by the average surcharge added to a ride, declined by more than 25% quarter over quarter. Why is this important? It means we continue to perfect our ability to help drivers know when and where they can choose to drive. That's great for drivers and for riders, and also for the long-term health of our platform. Now, let's turn to our performance for the quarter, which is consistent with the outlook we provided on our Q1 earnings call on May 7th. I'll start with my usual reminder that unless otherwise indicated, all income statement measures are non-GAAP and exclude select items that are detailed in our earnings materials. We supported 205 million rides and 23.7 million active riders. Total rides grew 15% year over year, and active riders grew 10% year over year, driven by improved retention and higher frequency. Gross bookings exceeded $4 billion up 17% year over year. This reflects strong rides growth, competitive prices, and lower levels of prime time, given the even faster than expected improvements of the health of our marketplace. Revenue exceeded $1.4 billion up more than 40% year over year. Cost of revenue was $812 million up 37% year over year, driven by higher insurance costs as compared to the prior year and higher ride volume. Operating expenses were $556 million or .8% of gross bookings, which was slightly higher than in the first quarter of 2024, mainly driven by sales and marketing, specifically incentives tied to rider engagement. Let me take a moment here to remind you about the way we think about investments in contra revenue and sales and marketing incentives. At our investor day on June 6th, we shared how we're delivering seamless, dependable customer experiences, which means continually helping drivers know the best time and places to drive to enable them to meet their goals. That in turn continues to drive preference, engagement, and retention with our customers and unlocks more efficiencies in the marketplace. Part of running a dynamic marketplace means that we are constantly trading off between contra revenue and sales and marketing incentives to optimize the balance of the marketplace. Therefore, it's worth noting that on a combined basis, contra revenue and sales and marketing incentive expenses declined double digit on a per ride basis compared to Q2 of last year. Turning out to adjusted EBITDA. In the second quarter adjusted EBITDA was $103 million, which is a percentage of gross bookings was 2.6%, up from .2% a year ago, driven by efficiencies in our marketplace and further operating expense leverage. Gap net income in the second quarter was $5 million. This marked our first profitable quarter on a gap basis, reflecting our focus on operational excellence and cost discipline. This is a very important milestone for the company and consistent with our focus on long-term profitability and sustainability. On that note, as I discussed at our investor day in June, we are confident in our ability to achieve sustainable gap profit in the early phase of our long-term planning horizon of 2025 to 2027. Progress won't necessarily be linear, but the overall trajectory is moving to sustainable gap profit. We ended the second quarter with a solid cash position with unrestricted cash, cash equivalents and short-term investments of approximately $1.8 billion. We generated $256 million of free cashflow in the second quarter and a total of $368 million of free cashflow over the last four quarters. Turning now to Q3. We're off to a good start. The team is hard at work on supporting summer festivals and new back to school and commute activations and focusing on delivering a seamless experience to drivers and riders. For the third quarter of 2024, we expect gross bookings of approximately $4 billion to $4.1 billion, up 13 to 15% year over year, growing slightly faster than rides. We expect adjusted EBITDA of approximately $90 million to $95 million and an adjusted EBITDA margin as a percentage of gross bookings of approximately 2.3%. We are reiterating our expectations for the full year 2024 and continue to expect total rides growth in the mid teens year over year with gross bookings to grow slightly faster than rides on a year over year basis. We expect an adjusted EBITDA margin as a percentage of gross bookings to be approximately 2.1%. This outlook includes our current estimate of the impact of third party insurance contract renewals, which will mostly take effect in the fourth quarter. The final stages of the negotiations are still underway, but at this point we have good visibility into the outcome. Consistent with our expectations, we believe that the rate of premium increase year over year will be slower than the prior year, reflecting the ongoing work we've done to bend the insurance cost curve through product and safety initiatives aimed at reducing accident frequency and improving settlement outcomes, which our partners are recognizing in our renewal discussions. Turning to free cashflow, we're on track to generate positive free cashflow for the full year. And given our strong progress in the first half of 2024 and our increased visibility, we now expect that more than 90% of adjusted EBITDA will convert to free cashflow for the full year 2024. This means we will reach our long-term conversion target of more than 90%, which we articulated at our investor day in June, well ahead of schedule. With that, I'll bring our prepared remarks to a close. We had a solid second quarter and we have strong momentum going into the back half of the year and beyond. We remain focused on building a long-term healthy business. Our focus on operational excellence, product innovation and partnerships and media will continue to grow preference, engagement and retention with drivers, riders and our partners. Operator, we're ready to take questions.

Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. To withdraw your question, press star one again. If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question comes from the line of Doug Ameth with JP Morgan. Please go ahead.

Thanks so much for doing the questions. I have two. First, can you talk more about how the economics will work on price lock and what kind of use cases you anticipate and generally what gives you the confidence in rolling this out and does it play into the three-queue outlook, if at all? And then also if you could talk a little bit about just balance on the marketplace, record high supply and driver hours. If you talk more about the transition that you're making as you shift incentives from drivers to riders and the impact that you're seeing there. Thanks.

Yeah, hey, Doug, it's David. Maybe Aaron and I will tag team on this one. Aaron, why don't you take the second part and then I'll talk a little bit about price lock. You take the first, yeah, the second part. But Doug, your question was around driver, rider or contra revenue versus marketing and so on and so on. Yeah, I think that's Aaron's.

Yeah, yeah, sure. Happy to take that. As we mentioned in our prepared remarks, we've been extremely pleased with the progress that we've made and it's been a concerted effort over the last four quarters. If you think about the effort around driver earnings commitment, for example, along with many other initiatives that have helped really increase driver engagement on the platform. And then also you've seen us continue to invest on the rider side and against specific activations for product launches. And we've seen great progress there. We've seen new riders increase. We've seen retention increase. And so we've been really pleased with the outcome of those investments, which gives us confidence as we think about investments for the future.

Then on price lock, I'll get to the economics in a second, but first, what's the basic value proposition? So as Aaron just said, on drivers, we've got great supply and they really like what they see with transparency, with consistent earnings and so forth. So then the question becomes on the rider side, what can we do to make the product even better and the service even better? And people just don't love the variability, right? They don't love the idea. In fact, actually I'll tell you a very specific story super briefly. So there was a woman I picked up as a driver myself a couple of months ago in Sausalito. And she said like every morning she'll wake up early and see whether her commute from Sausalito into San Francisco is $25, 30, $35, you know, even more. And if it's 20 to 25, she'll definitely take a lift. If it's more, sometimes she will, sometimes she won't. If it's too much, she'll drive and so forth. So people really don't care for it. So price lock, the idea is you pay a subscription fee. We're still trying to figure out the exact economics of it. You know, it'll definitely be under five bucks a segment for sure. And you lock in a price and that price is meant to both save you money, but also maybe more importantly, give you predictability over time. And like anything else, it'll be something that takes a couple of quarters to sort of work its way through the system. It's definitely in our forecast, our outlook. Of course, because we're driving down PT, that has a little bit of an impact on bookings, right? Because PT shows up in bookings, but that's okay. Cause that's how you drive growth as you get your prices to a more consistent way. And then we like the economics of it, medium to long-term. And you know, stay tuned, we're super excited about it. We've been in testing mode for about a month now. It's available to everyone right now. If you open up your Lyft app, look at it, it's right in the menu, the little hamburger menu and lock in your price. I think you'll like the experience.

Thank you. Our next question comes from the line of Ken Goralski with Wells Fargo. Please go ahead.

Yes, thank you so much. Couple for me, please. First, I appreciate the color on insurance. Although I think if I recall the 17% increase per ride that you announced for the last renewal, could you just give it a little bit more color? You said it will moderate from there. And I know the negotiations are not complete, but maybe there's a lot of room there between 17 and kind of 1% or so. So if you could give us a sense of just the kind of magnitude of a moderation there. And then maybe just a second, if you could just touch on what you're seeing on any kind of cyclical elements, either through restaurants or that kind of entertainment side from a ride case or airport rides. If you could just talk about any impacts you might be seeing there, given the plethora of weaker consumer data points. Thank you.

Hi, Ken, thanks so much for the question. I'll start off with the first one around insurance. And let me just start off by saying we have a great team and they are doing a great job with respect to our insurance portfolio. I've been really impressed to see the progress that we've made. And you heard a little bit about our roadmap on product and safety initiatives aimed at reducing accident frequency, both what we achieve to date and what we expect to achieve going forward as we highlighted at our investor day. And we also talked about the importance of our partners and how critical our partners have been to us over the years, how closely we work with them and extremely pleased to see that recognition and that progress. And it's getting reflected in our renewal rates. So I'm not gonna give you a specific number, Ken, because we are in the final stages here. But if you think about it in context of last year, so last year in the fourth quarter of 2023, we talked about insurance costs increases. We talked about it on a sequential basis. We said from Q3 to Q4 last year that it was about $100 million, which if you take it sort of straight over the rise was about 15%. And so we fully expect that to be lower. It is embedded in the reiteration of our full year guidance that we outlined today. So just bottom line, really pleased and we're on a very good path. Kudos to the team here at Lyft.

And then Ken, on your question, sort of consumer sentiment. So big picture, we're seeing strength across the board. That's the big picture. And it's interesting. I mean, we all read the same newspaper articles and so forth. I think maybe people are a little attuned to pick up bad news, but frankly, we see people going to concerts and events and so forth and so on. So the sorts of things that people do when they're actually feeling pretty good about their prospects rather than the other way around. I'll give you a little bit more data on a couple sort of sub segments. So for example, we call party rides kind of Friday, Saturday night rides late night after, I think it's after five o'clock through midnight or maybe later, depending on your definition of a party. Anyway, and there we saw, I think about 19% growth year on year, which obviously is a little faster than some of our other segments. Then when you sort of go a little bit deeper, you start to see some regional differences. For example, on the West Coast, there's still actually a little bit more commute action and growth than in the rest of the country, because again, it's sort of growing off of a base was a little bit depressed, post pandemic. So, but these are frankly, fairly minor variations and the grand scheme of things where we're seeing growth across the board. I'll mention, I will mention airports. And again, airports are quite interesting. Now, they're always seasonally higher in Q2 than in Q1, just because travel is beginning. I will say that non airport rides grew a little bit faster than airport rides this quarter, but again, it's really nothing significant. We're seeing pretty good strength across the board and a lot of people, they rely on ride share and it doesn't really change too much of these from what we can tell.

And Ken, I might just jump in and out. I know your question is around use cases, but obviously talking about our guidance for gross bookings growth of 13 to 15% year over year for the third quarter. And as a reminder, we talked about gross bookings growing slightly faster than rides. I just wanna highlight in our prepared remarks, we talked about prime time coming down significantly in the second quarter, even faster than our expectations. And we see that continuing into the third quarter. Remember, that's a really good sign of the health of our marketplace and consistent with our focused efforts over the past year to drive preference with drivers. Prime time coming down will have an impact on gross bookings per ride. And so again, consistent with what we said before, we expect gross bookings will grow slightly faster than rides, probably emphasis on the slightly given that dynamic of gross bookings per ride, but really, really pleased with the dynamics and the health of the marketplace. You heard us talk about some of the all time highs in the second quarter. So we feel like we're in good shape there.

Helpful caller, thank you so much.

Our next question comes from the line of Michael McGovern with Bank of America, please go ahead.

Hey, thanks for taking my question. I was curious for Pricelock if there might be some effect of having kind of a headwind to wait and save mix because of that price cap. And are those two products kind of overlapping a little bit in that lower price point segment category? And to that end, I'm just curious what wait and save mix looks like at this point and kind of the unit economics of that lower price point offering and any impact that that's having?

Yeah, it's a good question. They don't really compete with each other. And it's, yeah, so wait and save has been stable. And even during our tests and stuff, it's actually a great product. We continue to love it. And it's great for when people want to deal. It turns out for commute, the variability around waiting isn't so much what people want, right? They kind of need to get to the office at a certain time. And so I wouldn't say the two compete with each other per se. I really do believe Pricelock is sort of an unlock of a, it just takes the frustration away. And I think if you want to think about it maybe competitively, I think what a lot of people do do in the morning is they'll check multiple apps. And we want to give them frankly, less reason to check the other guy and more reason to say, you know what? I've made an investment and it's relatively small, as we say, couple up to three to five bucks and like that. And that's going to give me consistency. So I think wait and save is more about sort of trading off time and money. This one is actually more about paying a little bit of money and subscription fee to get a very, very consistent experience, day in and day out for 30 days.

And Michael, I'll just add on to that and emphasize that as you think about our overall mix, if you will, of our modes, that that has remained stable. We are not seeing changes there. And then all of our modes contribute to the growth and our profitability.

All right, thank you.

Our next question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead.

Great, thanks for taking my questions. I have a couple. The first one, if you sort of go back to the analyst day and the multi-year bookings guidance in the mid-teens, as you're sort of thinking through prime time coming down and now price lock, has anything changed about sort of your visibility and kind of the drivers of that mid-teens growth? Then the second one, Aaron, this is sort of a, it's kind of a math question on the CAGR. As we're thinking about this 24 to 27 bookings CAGR in the mid-teens, a lot of times CAGRs, they started a higher number and they go on to a lower number. The way you guys built this out, is it more sort of like you see a lot of drivers to just consistently stay in this mid-teens range each year as opposed to sort of decelerate over the course of those years and end up at a multi-year CAGR in the mid-teens? Can you just help us in kind of the trajectory that you've drawn up on that CAGR?

Yeah, sure Brian, I'll start and then I'll turn it over to David to chat more about some of the long-term growth drivers we articulated at Investor Day. So as it relates to the trajectory, I would say overall, we've thought about it as relatively steady. Now you have to understand that given that there will be points along the way. For example, you heard us really talk and dig deep into partnerships and our strong ability to partner and the runway that we felt like we had to grow partnerships, that's just one example. And so you can imagine along that trajectory of that multi-year plan that in any given period of time, maybe as a partnership ramps up that you could see a different cadence there. So I'm just giving you a little bit of color to emphasize that it's not always an incredibly straight line, but no, we did not envision it with a particular slope at the front or the backend. So I would say stepping back, you can think about it as relatively steady.

Yeah, and I'll piggyback on Erin's comments and maybe even zoom out a little bit. It's so tempting to sort of think about short-term things and so forth, but we're really thinking about this business in a long-term way, we really are, right? Remember one other thing you said at Investor Day is there are 160 billion, billion rides every year that people take in private vehicles in North America alone. So we're very focused on what are the fundamental drivers that are gonna get more people not using their personal vehicle because it's hard to park, because it's complicated in their lives, why not? Let someone else drive at a good price, pick me up exactly on time, take me where I wanna go and so forth. So that's really our focus. And that's why we're so excited to see our service metrics so great, quickest pickup times we've had a long time, great pricing, great service levels and so forth. So then, so given that context, as Erin just said, like we're not really thinking of a deceleration over time or anything like that, we're thinking, gosh, this is a gigantic market and we're super, super well positioned for it. Then zooming in or clicking on one level, if you think of Investor Day, again, we talked a lot about customer obsession and certainly around innovation, new products like Price Lock, which really takes some of the pain away and make it an even better value proposition. We think about our partnership strategy again, as Erin just mentioned, and we're seeing great, great momentum there, particularly on the media side. As a quick aside, we just resigned with Disney, which I think is wonderful. We're the official rideshare provider of Walt Disney World Resort and it's a great experience. And they just resigned for another bunch of years. It actually includes a media buy, which is fantastic. And they're a company that doesn't partner with companies that don't have a similar view around customer obsession and growth. So anyway, that whole kind of partnership piece, super, super important in our media business. Anyway, I'm kind of expand a little bit beyond what you said, but we feel really good about how we're positioned and we just keep looking a couple of years out, as Erin just said, we've got, we're very confident in our guidance, not just for the year, but frankly for the next, through 2027.

Thank you.

Our next question comes from the line of Brad Erickson with RBC Capital Markets. Please go ahead.

Hey, thanks. I have two. First, can you just expand on that point with prime time coming down? And I think you mentioned price lock too. They think the, I guess the implied guidance for Q4 aims to kind of improve off of what you just gave for Q3. Why would that be the case if that's the right inference or why wouldn't it? That's the first question. And the second on the topic of AVs, can you just talk about the tech that you have in place to work with maybe different partners over time? Is there anything platform-wise need to be built for that or is an easier lift if and as those players come to market and any partnerships we can kind of think about there?

Thanks. Why don't we start with an AV question a little bit. We'll just do this in reverse order just for fun. So I want to talk about AVs for just a minute because it's such a hot topic. So to answer your question directly, there is an enormous amount of tech that we already have built, that we've already used, and that we'll continue to leverage in new ways. And let's break it down for a couple of seconds. So we have this very large platform, we do two million rides a day. In order to make those two million rides a day happen, of course we have to bring drivers onto the platform all the time. Every one of those drivers, we have over one million active drivers over the course of the year. Every one of those drivers has a car. Every one of those cars needs to be, and drivers need to be onboarded in various different ways, different checks and so on and so forth to make sure they qualify. And then obviously a whole bunch of support along the way. They have to get paid, they have to get insured. They've got to make sure that they've got demand 24 hours a day, seven days a week. So these are all sort of the things that we built into the general lift platform. And then specifically when it comes to AVs, and we've done, as we said, about 130, or actually over 130,000 rides in Las Vegas alone, it's all about sort of API level integration with autonomous vehicle vendors. That sort of integration is quite technically difficult. It all looks simple on the app, but behind the scenes, all sorts of back and forths are happening. But we have a lot of experience doing that. And as I said, we've got, so anyway, we'll build on exactly that experience. And then the last thing I'll say is, when you look at how AVs are likely to enter these sorts of platforms, some of them will be owned by individuals, maybe putting their car on the platform after hours when they're not being used. And some of them will come in the form of fleets. Entire companies that'll buy up AVs, maybe just like a rental car company might do today, buy up a bunch of cars and then need to get them utilized. And by the way, they need to get them utilized a lot, probably, I don't know, 18 hours a day or something like that to make sure these things actually pay off. But anyway, fleet management is its own area of expertise and specialization. Again, you've got to figure out how to keep cars serviced when they go offline. You basically want your cars utilized all the time, but things break down, accidents happen, even with AVs, which will probably be safer, people will bump into them, all these things. And so fleet management is the whole thing. And we have this flex drive subsidiary that we've had for years and have onboarded and off-boarded and serviced and worked with tens of thousands of vehicles over that course. I think we've got about 15,000 vehicles kind of online right now. So you put all these things together and you realize that we are very, very well positioned and we're in very active conversations with all the partners you would expect who are very interested in figuring out how can we take this tech, I mean, everyone from the OEMs to the ADAS guys, the people who are actually developing the tech and commercializing and were their best bet.

Thanks. And Brad, I'll take your question on Q4 in the full year. I'll start with the full year. Just as a reminder, our full year directional commentary, we talked about rise growth in the mid-teens and obviously that's a range. And then we talked about gross bookings to grow slightly faster than rides. And I provided some commentary on what that means for Q3, given the dynamics that we're seeing in primetime, but also as a reminder, the third quarter is a big season for bike rides. And so that has an impact as well. As you think about then Q4, the dynamics, I think you asked specifically about rides. I think it's reasonable to expect a slight increase in rides in Q4 because we also again have the dynamic of that being a lower seasonal period for bike rides given weather. And then that implies just a slight uptick on the ride share side of things. So hopefully that gives you some color to your question.

Yeah, that's great. Thanks.

Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Thanks so much for taking the question. I guess we've talked a lot about the operations of the business. One quick one on capital allocation. At Investor Day, we talked about trying to limit dilution from stock-based comp over time, and then potentially maybe looking at your balance sheet as another tool for driving equity value. Would love to get any updated thoughts you have on either the mixture of finding the right balance between growth investments for the long-term and potentially using assets on the balance sheet to be aimed more at equity creation. Thank you so much.

Yeah, thanks for the question, Eric. You asked about stock-based comp. And so we remain on track with our target for 2024 of 340 million related to that. So we feel good about that. No change there. And as it relates to overall capital deployment thoughts, we are investing in areas that drive profitable growth. And at the same time, we're very focused on taking a prudent approach to managing our balance sheet. Nothing specific to announce today, Eric. As we generate higher levels of free cash flow in future periods, it certainly gives us more optionality. So again, hopefully that gives you some color on our thoughts. Not a lot of updates from what we articulated at Investor Day.

Thank you.

Our next question comes from the line of Stephen Ju with UBS. Please go ahead.

Okay, great. Thank you so much. So David, frequency of usage and getting your customers to come back again and again is something that's been on your mind. So it looks like on the latest results, and I think so far this year, we're looking at monthly rise. That's probably about 15 to 16% below where Lyft was in 2019. I know there's a lot that goes into this between -to-day execution, as well as new product rollouts. So can you tell us where the majority of Lyft's engineering resources are being placed to drive that greater utilization? I mean, not that we need explicit disclosure on what products you may be making, but rather some perspective on, we're planning these many releases during the first half of 25, second half of 25, so we get a better sense of the roadmap from here. Thank you.

Yeah, thanks, Stephen. Thinking about how best to answer that. I mean, I guess, again, maybe I'll start sort of big picture for a second and then zoom in. So when we look at overall allocation of resources, we're always looking at, quite specifically on the rider side, well, okay, first on the driver side, how do we make sure we've got great driver supply? There's almost no such thing as too good driver supply, so it's always something we're looking on because we wanna make sure as many drivers are driving as possible for past pickup times and so forth. And so there, maybe I'll stick on that for a couple of seconds. If you look at our cadence, we did a very large release earlier this year, the 70% earnings guarantee, which as we said before, has been very, very well received and really sets us apart. I actually literally had a Lyft driver last night who commented on how much he appreciated that. So anyway, and you can expect, even now, we're actually rolling out some additional features around giving drivers additional visibility into how much they're gonna make every time they accept a ride and so forth. So that's sort of a rolling thing, but you can expect sort of another kind of release to come on the driver side, to give drivers even better ways to earn and so forth. We actually just launched, as a quick aside, something called Lyft Direct, a new version of a kind of a co-branded credit card, debit card actually, that allows drivers to have a high yield savings account and get paid immediately and so forth. So that's kind of a continuous thing. We're always working on the driver side, but there are kind of a couple of chunky things that happen every year. On the rider side, we're coming through summer, of course, but then, and so things like the on-time pickup promise for airports is quite important. That's a very powerful feature. But then you can expect again, something in the fall, really focused on commute. Now in this case, we've really already talked about that, that's going to be price lock, and it's a huge focus for people who are commuting. So I don't know. So I guess maybe zooming out then on the rider side, we're always looking at a combination of how do we get new riders on the platform? And then how do we increase their frequency? And in both cases, we have all-time highs on the new rider side for sure. And then frequency, we've kind of gone up queue by queue as well. So I don't know. I know it's maybe a little bit vague, but it's kind of a, customer obsession sort of means having some big chunky things, but also just continuous improvements every day to make the service better. And we feel like we've got a pretty good, we've got a good roadmap ahead and good balance between all that. Thank you.

I might add on to that a little bit, Steven, to give some context, growth in active riders has been greater than 10% every quarter over the last quarter, over the last four quarters, excuse me, while frequency has also been growing sequentially every quarter. And we touched on retention as well going up. And so I know your question was largely around engineering, but we continue to see opportunities to make really smart investments that drive rider preference, retention and engagement. And I think some of that trajectory and the stats that I just listed off gives us a lot of confidence in our framework for those investments going forward.

For sure. Thank you.

Our next question comes from the line of Tom Champion with Piper Sandler. Please go ahead.

Hi, this is Jim on for Tom. Thanks for taking the question. Just one on advertising. So we saw the 10X increase for the in-app revenue. Can you just talk about what's driving that and how we can think about the scale of that revenue? I'd assume that's off a lower base. Thank you.

And sorry, just to clarify, Jim, off a lower base, lower than, lower than what?

Yeah, I mean, just kind of explaining like what's driving the 10X increase and how to think about the scale of that revenue. Yeah, for sure.

So, yeah, I won't give you too much specifics on the particulars there, but I can tell you is this, so we're super optimistic about this business and that growth is kind of the reason why. Brands are always looking, and this is like a forever statement, always looking for new ways to get to their customers. And the world changes, right? 100 years ago, it was maybe billboards on the road, and then it was radio advertising, then TV advertising, and sort of clicky type advertising, early internet days, and now much more sophisticated. So that's just a sort of forever thing. But the most important thing for targeted advertising is the targeting and the data. You've got to figure out, because everyone always knows, like as John Wanamaker famously said, I know half my advertising works, I just never know which half. So increasingly, it's all about the data, and we have an enormous amount of data, right? Every time a rider gets in the car, they're literally telling us where they're going. Are they going to the drug store? Are they going to the supermarket? Are they going to 7-Eleven? Are they going to McDonald's? Are they going to the airport? What airline are they taking? Because we know where they're getting dropped off. So all of these things give us an enormous amount of first-party data that then we can then go and turn around and say to marketers, is this data of interest to you, either as a brand play or as a sort of more, almost kind of call to action transactional play, right? When the person gets out at the drug store, maybe you prefer they buy Colgate over Crest or whatever it might be. So anyway, long way of saying, if you've got a big audience, and we do, obviously, 40 million riders, if you've got a way to get data, and then if you've got a way to measure the effectiveness, and again, we do, and we're signing up platforms every month now to give additional visibility into the effectiveness. And then if you have engagement, you're going to get growth. And our engagement scores are super high. I've seen, there are different ways to measure engagement versus individual benchmarks, but we compare really, really well to a lot of others. And you can kind of imagine why. You literally have maybe a 15-minute trip, on average in a trip, you might check your app six or seven times. So we have really, and then these new video ads that we've just sort of put on the platform, and now I'm getting to some of the things that are really driving growth. You have new partners, plus you have a new ad unit, in this case, the video ad unit, and it's performant. You start to see growth, and we're seeing not only growth from existing partners, but even existing partners are signing on again, and then I'm talking about ad partners, and then new ad partners are coming on as well. So it's kind of an all of the above thing. We've talked about this as a very, very large business. I, to be honest, I forget the, sometimes I say one number, sometimes I say different numbers, and I could get myself in that little trap this time. But we expect it to be a very, very large business, and we're investing behind it and really liking, literally quarter by quarter, what we're seeing. Great, thanks, David.

Our next question comes from the line of John Colantoni with Jeffries. Please go ahead.

Great, thanks for taking my questions. So Canada trips doubled. If we sort of just make a simple assumption that Canada was, let's say, 5% of trips last year, that math would imply that US trips grew closer to 10% in the second quarter. So it looks like growth is decoupling from Uber a bit more in the second quarter than in the prior three quarters. Any details you can provide on supply, pricing, or timing of the product roadmap that could help explain that moderation of market share? Maybe on the flip side, can you just talk to what drove the strong performance in Canada, and if there's any learnings that you can bring over to the US market, thanks.

John, I'll take the first part of that question and then turn it over to David to chat more about our efforts in Canada. As a reminder, we don't break out the different geographies. So I wouldn't comment, but I think your estimates around Canada might be a little bit high. Maybe the broader point is we don't see any change in our share, so we feel good about where we are there.

Yeah, 100%, 100%. There's no, I think the math isn't quite right there, but what we're definitely seeing growth in Canada, I think it's just maybe a bit smaller than what you're thinking in total. And what's driving that, so I was actually just in Toronto a couple of, I guess it was a couple months ago now, and what we're seeing is that riders and drivers are loving our customer-obsessed approach. Canada has really been kind of a one-player market there, and it's really great when the second player comes in and starts to innovate around all kinds of areas and frankly give people a choice and a new option. So seeing super good growth, I think we've mentioned this already, but if we haven't, Toronto I think is now our eighth largest market, so that's great. It's only a single city, let's be clear, and there's a lot more to go in Canada, but the fact that we've gotten to such a strong position in a fairly short period of time gives us a lot of hope. But again, to be clear, there's not really sort of a, you wouldn't see this in the big picture and certainly not in a way that would suggest that our domestic growth is growing any more slowly than what we've

said, or yeah. Great, thank you.

Sure. Our next question comes from the line of Nikhil Devnani with Bernstein. Please go ahead.

Hi, thanks for taking the question. I wanted to follow up on the investor-day growth targets. Is there any incremental commentary you can provide on faster growing modes or markets that might help you sustain the 15%, whether it's smaller cities or suburbs, however you want to cut it. But I think the challenge investors are having is that the bigger you get, the assumption is that it's harder to sustain the growth unless you have a product cycle or expansion markets to point to. And so you've kind of alluded to this, excuse me, with Canada, weight and save in the past as well, but could you maybe contextualize how big some of these faster growing verticals or sub-markets can be and are for you? And then my second question is around insurance. Erin, it looks like accruals have started to increase a bit. So has there been a change in strategy to self-insure some more? Thank you.

I can start with the insurance question and then I'll turn it over to David to lead the first part of your question. So Nikhil, in our most recent renewal cycle, I would say there was a slight mix shift as it relates to our mix of third party versus self-insurance. It wasn't significant, but a slight shift. And we are always looking at that mix to optimize our overall portfolio and making choices accordingly. So a slight shift.

And Nikhil, I'll say a couple of things about overall growth. I guess, so again, just remember the 160 billion rides, like that's a real number. So there's a lot of space to grow even within that, even before we talk about expanding beyond the sort of existing TAM. So maybe let's think about it in a couple of ways. So there's certainly geographical expansion, as you say, and that's part of what we're seeing in Canada and why we're excited about it. Of course, that could potentially open up opportunities in the future. We won't comment on that, but it certainly gives us some interesting data, let's say, to use. Then there are new segments, right? Even within the existing markets. And some of these are gonna take a while to really explore. I mean, I can even look back at what we launched last year, for example, Women Plus Connect, which we talk about quite often. When I look today at our driver's supply, right? So Women Plus Connect is a product that allows women riders and drivers to choose each other. And when I look at our driver's supply, our women driver's supply is actually growing quite nicely. We're now up to about, I think it's about 29% of new applicants are women. And remember women drive about 23% on the platform. So that's obviously nice growth. So what that allows you to do over time is it allows you to unlock a very potentially very, very large market. People, women who feel maybe a little less comfortable driving with ride share, or riding with ride share right now, driving or riding either side. And this opens it up. Now, consumer behavior takes a long time to change. This is not the sort of stuff that you flip a switch and all of a sudden you see gigantic numbers, but you're talking about half the population here. So that's not small. So we look segment by segment by segment and see a lot of opportunities. As we talked about commuters as well today, where commuters were really under penetrated compared to the value prop. I mean, people might take this two or three times a week, but the us there is sort of the royal us. They might take ride share two or three times a week. And we want frankly a bigger share of that. And we think we've got a better product. And then we think of our partnerships. So, and again, we talked about this and investor day. Partnerships is it's just an incredible sort of DNA level expertise that we've developed over the years. And you've heard some of the same names over and over again, and that's not an accident. It's because the Disney is with the world, the Delta Airlines, the world, the chases of the world, the Hilton's of the world. These are some of the world's biggest and best brands. And look, Delta is having a little bit of a tough day right now, but at the end of the day, the US is biggest carrier and we've got one of the very small number of relationships they have with their Sky Miles partnership. And that's something that over time will be growing even more. Same with Chase, Chase Sapphire, incredibly important part of Chase's portfolio, their credit card portfolio, and they're making huge investments there. And as they invest in that, that helps us as well because we get riders that get points on Chase. So I think each of these, it might sound a little bit like more of the same, but what it's really meant to say is when we see something that's working, we double down on it. We go deeper, we try to go bigger, try to really figure out kind of where the growth is coming from. And we just don't see any particular limits to the sort of market size that we're kind of addressing. And so, feel pretty confident about our targets.

Yeah, I would say at Investor Day, David, one of the things that at least folks shared comments with me was a new appreciation for the depth of our partnerships. And we emphasized obviously our existing partnerships and just the opportunity to continue to penetrate those. And that's not even mentioning partnerships that may come in the future. I think the only other area, Nikhil, that I would point to is healthcare and our business there as a market leader in the non-emergency medical transportation space. We continue to see incredible growth there and unlocking new states and new partnerships and continue to remain bullish on the opportunity there.

Yeah, super good point. And we have a great leader there as well, Buck, he's crushing it. Thank you both.

Our final question comes from Bernie McTernan with Needham and Company. Please go ahead.

Great, thanks for the question. David, solving for pricing has certainly been a focus with the company. First the price cuts, now lower prime time. And so if you look out over the next couple of years, do you think we're at the peak drag from pricing right now or is that still in the future? And then how to think about those positive offsets like things from higher conversion, how long does it take for higher volume to outweigh the pricing headwind and maybe what are you seeing in your best markets right now like Baltimore, Phoenix and Orlando is that pricing headwind being offset by volume already? Thank you.

Yeah, it's a great question. I mean, people are certainly price sensitive, right? And we all know that we see it every single day, literally millions of times a day. And so we put a lot of energy in to figure out how to, and it's two things, it's lowering pricing when we can and it's reducing variability when we can. And those things are both very important in the pricing equation. The lower price, of course, everybody likes that. The lower variability, again, people really dislike variability. One of the best, so we have a couple, let me just talk about this for a second. I know it's our last question, but it's a really good and important one. We have a couple of strategies there. So we have some products like Wait and Save, which give us some additional flexibility to match rider and driver in a way that improves the, even though it's a good discount for the rider, it also allows us to work the economics of it such that we can choose among different drivers and who's the least costly to serve the rider and so forth. So we need to make sure that as we, as Aaron said, every one of our nodes needs to contribute to profitability here, so we're very focused on that. Same with price lock, right? There's obviously an offset, right? You're gonna pay a little upfront fee, you're gonna pay a little bit less and we have to make it up in volume and that's exactly what we're seeing in our early markets, but there's a lot more to go there. We're super early. And then I'll come back to the partnership side. There's so many ways where I think our partners can help us offset a cost such that the rider ends up paying less. And this happens today. We have a lot of various different offers from different partners that we kind of cycle through the platform. Maybe you'll have seen some of them. Sometimes it'll be extra points on your credit card, but sometimes it'll literally be a discount that a partner funds because it really helps drive traffic to their site. And I think that last area is, and again, to Aaron's point, we have real expertise in partnerships. That's an area where I think we'll see us continue to invest, lowering prices across the, we like where our pricing is and frankly our riders generally do too. It's giving us really good growth, all time highs. We've said all that before. So that's maybe not the biggest focus. The biggest focus now is what are some other innovations we can do like with partners to have maybe partners pick up some of the cost of a ride in a way that'll reduce the price for a rider, but keep the economics and not enter into some crazy unsustainable thing that sometimes businesses do that just doesn't work.

And remember, Bernie, the price a rider experiences is a combination of many factors, mode, mix, distance. We talked about prime time and the impact here on Q2 and Q3, but remember, that's a great thing for the health of our marketplace over the long-term. At the end of the day, market prices are dynamic, just as David described, and our goal and what we're doing is operating in a healthy and competitive way.

This will conclude our question and answer session. I will now turn the call back to Lyft CEO, David Risher for closing remarks.

Thank you all. I wanna say thanks to two folks, to two groups. Thank you for being our investors over the long-term. We've reached gap profitability. I'm super excited about that, but we've got a lot more to come and we're just as excited about that. And so for that, I'll thank the team. I mean, the team just worked crazy hard to get us where we are, but also to set us up for the long-term. We really love how strong our marketplace is. We love how our riders and drivers are responding to our customer obsession. And so that's that. So for each of you, I recommend check out Lyft, open up your app, sign up for a price block, let us know how it works for you, and we're super excited to see you all next time. Thanks for your interest and following us in our progress.

This concludes today's conference call. Thank you for your participation. You may now disconnect.