Good afternoon, ladies and gentlemen, and welcome to the Lyft First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode to prevent any background noise. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Shawn Woodhull, Head of Investor Relations. You may begin.

Thank you. Good afternoon, and welcome to the Lyft earnings call for the quarter ended March 31, 2020. This is Shawn Woodhull, Head of Investor Relations. Joining me today to discuss Lyft's results are Co-Founder and Chief Executive Officer, Logan Green; Co-Founder and President, John Zimmer; and Chief Financial Officer, Brian Roberts. Logan and John will give an update on our business and key initiatives, and then Brian will review our Q1 results and share some commentary regarding our outlook. This conference call will be available via webcast on our Investor Relations website at investor.lyft.com, and a recording will be available at the same location 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, including statements relating to the expected impact of the COVID-19 pandemic, the expected performance of our business, future financial results and the guidance, strategy, long-term growth and overall future prospects. 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-K for the full year 2019 that was filed with the SEC on February 28, 2020, and the risk factors included in our Form 10-Q for the first quarter of 2020 that will be filed by May 15, 2020 as well as risks associated with the current uncertainty and unpredictability in our business the markets and economy. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this 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. Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results, maybe found in our earnings release, which was furnished with our Form 8-K filed today with the SEC, and may also be found on our Investor Relations website at investor.lyft.com. I would now like to turn the conference call over to Lyft's Co-Founder and Chief Executive Officer Logan Green. Logan?

Thanks, Shawn. Good afternoon, everyone, and thank you for joining our call today. While Brian will briefly discuss our first quarter financial results, most of our remarks today will address the state of the business and our future plans in the context of the current environment. The COVID-19 pandemic and its effects are virtually unprecedented in modern times. The virus is testing our everyday way of life and is having a profound impact on our customers and our business. Here are the facts. In mid-March, we began to experience a sharp decline in rides as various authorities across North America issued guidelines and orders for residents to minimize time spent outside their homes and apartments. For the month of April, rideshare rides were down 75% year-over-year. Ride levels appear to have stabilized, seeming to have reached a bottom in the second week of April. We have since seen three consecutive weeks of week-on-week growth. But clearly, this is from a low absolute ride base, and rides last week were still down more than 70% year-on-year. We cannot predict the trajectory or timing of the eventual recovery, but it is clear that macro trends will continue to negatively impact our business. Even as shelter-in-place orders and travel restrictions are modified or lifted, we anticipate that continued social distancing altered consumer behavior and expected corporate cost-cutting will be significant headwinds for Lyft. The strength and duration of these headwinds cannot presently be estimated. These are the hard truths we're facing. Now here's how we've responded to the crisis. First, we acted quickly to ensure the safety of our team, establishing new policies and programs that support our employees during this unique time. Next, we took care of our customers. Then we took care of our business. And of course, we support our…

Thanks, Logan. For Lyft to emerge stronger from the current crisis, it is critical that we adapt our business and our approach to best match the evolving world. To this end I want to highlight some of the efforts we have underway to: one, help drivers; two, lean into our enterprise business; and three, protect users on our platform. For drivers we are focused on earnings, especially during this critical time. Given the significant reduction in rides, we paused driver onboarding and established a wait list for new drivers in late March. This helps maximize utilization and earnings for existing drivers on the platform. With rideshare trips down, we moved quickly in recent weeks to launch our Essential Deliveries program that Logan mentioned earlier. In addition to helping fulfill critical community needs, such as delivering meals for children, who normally receive free or subsidized lunches at school, this program is connecting drivers to important earning opportunities. Drivers on our platform are able to opt into this program for contactless deliveries. We are building this program with both national and local partnerships and we'll continue to explore avenues to expand beyond the initial 11 launch markets. COVID-19 highlights how Lyft has become essential for modern transportation systems. Governors and mayors have recognized this and many have partnered with us as a critical link for non-emergency medical transport, food banks and other essential needs. The economic impact of this pandemic will also highlight the unique value and importance of flexible work. When the economy opens up again, ridesharing will be the first place many people turn to earn. We have long supported policies that allow for this flexibility along with portable benefits. The challenge historically has been that outdated labor laws prevent this. However, the recent CARES Act demonstrates that this is…

Thanks John and good afternoon everyone. Before I get into specifics regarding our Q1 performance and outlook, I want to start by stressing that while COVID-19 poses a formidable challenge, we believe we are well positioned to navigate this crisis. As Logan indicated, we have a strong balance sheet ending the quarter with $2.7 billion of unrestricted cash, cash equivalents and short-term investments. Our business model is highly resilient given approximately two-thirds of our costs are variable in nature. For example, the costs associated with primary auto insurance risk the single largest cost recorded in contribution margin is virtually 100% variable. In addition, we are taking decisive actions that will position Lyft to be stronger and profitable in the long-term. We are treating this crisis as a catalyst to shine an even brighter light on every expense and investment line to drive savings and efficiencies to better position the company for the future. So, let me begin with the first quarter. Our Q1 revenue trend was exceeding our expectations until the middle of March, when we began to experience a sharp deceleration in rides as local and state governments initiated measures and restrictions to prevent the spread of COVID-19. Rides on our rideshare platform fell nearly 80% during the week ending March 29 relative to the week ending March 1. We ultimately closed the quarter with a revenue of $956 million up 23% from the prior year. We achieved a record high revenue per active rider in Q1 of $45.06, an increase of 19% year-over-year. Revenue per active rider benefited from healthy engagement in advance of widespread shelter-in-place orders. There was also a COVID-19-related impact, which benefited this metric, which I will explain shortly. Active Riders increased 3.5% from the year ago period to 21.2 million, but declined from Q4,…

Thanks, Brian. While the pandemic has upended our daily routines, and strained societies around the world, it is also highlighting the underlying strength in our community. We are grateful for our driver and rider community, partners and team members, who are working to deliver solutions to a rapidly evolving situation. During these difficult times, we will rely on the strong foundation that we've built over the last decade working together. And we will continue to take disciplined actions that further strengthen our position. We will take care of our customers, our business and our community. And we will emerge stronger from the adversity. We're now ready to take questions.

[Operator Instructions] Our first question comes from the line of Stephen Ju of Credit Suisse. Your question please.

So thank you. So Logan, it seems like states are reopening and letting people go outside step-by-step now. But does that -- but that doesn't necessarily mean that people are indeed going outside. And you talked about I guess a directional recovery in the aggregate. But what are you seeing in terms of consumer behavior, in those quarantine-lifted cities? And as we start to come out of this, do you think you will have to take on incremental costs for cleaning and sanitizing et cetera to increase consumer confidence in using the platform? And Brian I think, talked about reducing the headcount by about 17%. Is that enough or not enough? Granted some of this is a judgment call, based on what you think the potential recovery should look like and by when. But if the quarterly EBITDA loss rate is in a down 75% scenario, it's about $360 million. Should we think the absolute cash burn rate on an annual basis is about, $1.5 billion or so? Thanks.

Thanks for the question. Brian, can you give some color on the, individual markets?

Sure. So let me start with just some trends. And Stephen, let me start at the sort of system level. And then I'll go to city-specific details. So as we mentioned, overall, rideshare rides were down 75% in April. The week ending April 12 was the low for the month. So rides last week, so I'm referring to the week ending Sunday, May 3, rides were up 21% from that low. I think it's also important to understand April's entry and exit ride volumes. So between the week ending April 5, and the week ending May 3, rideshare rides system-wide increased 13%. And I also want to just provide some color in terms of the most recent week. So for the week ending May 3, total rideshare rides grew 7% week-on-week. Now, keep in mind all this growth is off a low base since for the month of April rides were down 75% year-over-year. And as Logan mentioned, even in the most recent week we're still down over 70%. And then keep in mind that, in terms of any sort of year-over-year growth comparisons we have virtually turned off coupons. There are no shared rides and there are almost no airport rides. And just so you have some additional data points in April airport rides were under 2% of total rideshare rides. And this is down from about 9% in Q3 and Q4 of last year. In April, we had zero shared rides as we paused the offering and this is down from about 17% to 18% of rights in Q3 and Q4 of last year. Now, let me provide some city-specific details to help answer your question as well. We are seeing what maybe beginning signs of a recovery in certain cities. But I want to caveat again this…

Thank you.

Thank you. Our next question comes from Mark Mahaney from RBC.

Actually, I think there were a couple more parts to that one. I can take on the part about the health safety. And then I can pass it back to Logan just to fully answer your question on – I believe you also asked about the layoffs. So just first on health safety as we mentioned obviously the safety and health of our drivers and riders is critical. And we'll continue to fund these efforts in a thoughtful way. And we'll be announcing our health safety program in the next week, so that as governments continue to ease the stay-at-home orders, we'll be putting out new policies commitments and products that will address the needs of our community during this time. We'll be following CDC and local guidelines in addition to products and policies that we're going to be putting forward. And so I believe as you know we'd purchased and started to distribute hundreds of thousands of bottles of hand sanitizer and masks, to protect drivers and riders. And we've incorporated key safety and public health update alerts into our driver and rider apps on the website.

Thank you. Okay. Great. Great. And then just to cover a few parts of the question. So to cover the question about the reduction in force and was that sized to be enough. So this was a very significant reduction in the size of our team. Nearly 1,300 team members were impacted between the workforce reduction and the furloughs and the layoffs were determined within the context of an overall plan for navigating through the crisis that we outlined, which factors in pay reductions, the variable nature of our cost base and additional cost-cutting measures including reductions in professional services and office expenses. So like Brian outlined before, in total these steps are expected to generate annualized savings of approximately $300 million in our fixed costs by Q4 and that's in addition to the $250 million in 2020 CapEx that we described as well. So we do believe these are significant and sufficient actions to strengthen the business and ensure that we emerge stronger on the other side. So at this time, we do not expect further adjustments to the employee base. So with that let's move to the next question.

Thank you. Our next question comes from Mark Mahaney of RBC. Your question, please.

Thanks. Two things. One has this crisis caused you to rethink additional revenue streams in particular delivery of products from retailers or whoever -- the use of the driver fleet that you have to deliver products? And then secondly, could you talk about what you plan to do about shared rides in the future? I think, you said it was roughly mid-teens of all your rideshare rides were shared rides. Is that something that you plan to delay for quite a substantial time for health reasons? Is it a category that you think you'll -- just your thoughts on how long it will take you to bring that offering back to market. Do you think that there'll be really depressed demand for that for a year just given the distance concerns of people? Thank you very much.

Yes. Thanks. John do you want to cover delivery and I'll take shared rides at the end?

Sure. Hey, Mark. So we -- in terms of delivery, we're focused on the programs that we've launched around Essential Deliveries and we're going to be evaluating any future opportunities based on how those perform. And then for clarity anything that we do or would do, we have no interest in launching a consumer food delivery service. And so we will not be doing that.

Great. And then on shared rides, we're closely following the CDC guidelines and regularly communicating those to riders and drivers. And not operating shared rides at the moment was part of the CDC guidance. And as municipalities and governments consider reopening plans, we'll keep monitoring the situation and begin to relaunch shared rides based on official guidance from both federal and local authorities. There is one product that we recently launched that's worth mentioning. So we launched a new product called Wait & Save and this -- it's a new low-cost product that allows us to optimize the marketplace by being more efficient with matching drivers and riders. So what we do is we lengthen the match window so it takes a little longer to be matched with the driver, and that increases the chances that we can match a rider with a nearby driver and reduce the time it takes for them to ultimately get to the pickup. So that is a new low-cost mode that we've rolled out and is somewhat taking the place not one-for-one, but somewhat taking the place that shared rides had served.

Okay. Thank you, Logan. Thank you, John.

Thank you. Our next question comes from Doug Anmuth of JPMorgan. Your line is open.

Great. Thanks for taking the questions. I have two. First, just hoping you could talk more about your driver network. Can you tell us if you have an idea of what percentage of drivers have remained on the road during the crisis in some capacity? And then what steps are you taking to ensure that they come back as things normalize? And then second, just wanted to ask about AV spending and whether there's anything that's included in the $300 million that you mentioned? Thanks.

Yes. Brian, do you want to take drivers? And I'll come back and take AV.

Sure. So when rides dropped beginning mid-March in terms of the data we provided roughly down 80% between the beginning of March and the end of March both supply and demand dropped. Those have a natural way of rebalancing. And so I think right now we are seeing -- utilization initially dropped as you can imagine. But now we're starting to see utilization tick up which then helps drive up higher earnings which then attracts more drivers onto the platform. Let me pass it back to Logan to talk about autonomous.

Great. So in terms of autonomous the -- our autonomous group, the Level 5 group was impacted by the cost reductions and reduction in force. They were done across the company. So our investments in AV are critical to Lyft's future and we expect that they'll deliver strong returns in the long run despite COVID. One interesting thing that's becoming really clear about AV programs is that the progress the teams are making is not necessarily directly tied to dollars invested in the program. And we've taken a really efficient approach from the beginning of our program and will continue to do so. We think long-term we have a really unique opportunity when it comes to developing self-driving technology. An important point that we made before is, we believe that autonomous vehicles will first draw on ridesharing networks. So the first generation of driverless vehicles will only be able to serve a small percentage of total trips due to technical limitations. So it'll be critical that those vehicles are rolled out on a platform like ours that can serve 100% of customer ride requests and allow AVs to provide the rides that they can and be supplemented by traditional vehicles. And another piece to point out is during the COVID crisis, every AV program including ours has had to pull back on on-road testing. And so what we've done is, we've moved over to put a focus on simulation. And that has always been a critical part of our program, but now is what we're leaning on as the primary way to continue improving our autonomous vehicle.

Great. Thank you both.

Our next question comes from Eric Sheridan of UBS. Your line is open.

Thanks so much for taking the question. Maybe two follow-ups if I can. Mark had asked about shared rides. Can we broaden that out a little bit to think about the way, in which you think about your product portfolio both as we go through the current situation and as shelter-in-place unwinds on the other side of COVID-19, how you might think about aligning your product portfolio against consumer desires in the marketplace maybe even specifically a comment on bikes and scooters? And then one other thing with respect to insurance cost going forward. Just wanted to know, if you could dive a little bit deeper into the fixed versus variable nature of that as you see the current side of drivers on the road versus drivers and supply coming back on the road again on the other side of COVID-19? Thank you so much.

Thanks. John, do you want to weigh in on bikes and scooters? And Brian then you want to take insurance?

Yeah. So I think our approach of having multiple modes that serve multiple use cases pays off really well in this environment because of the flexibility it provides. So specifically with bikes and scooters, obviously, you don't need to be present with another person when you're using a bike or a scooter. And so we're seeing that be a really important mode for essential workers and those that are out and about at this time. We've, obviously, upped the cleaning programs on those bikes and scooters as well. And overall our bike strategy has been focused on a single operator, which is serving us well. What that means is that in markets like New York City, we own and operate Citi Bike and we're the exclusive provider of bikes in that market. It's allowed us to partner with the local government to provide the best service for New Yorkers get rides to essential workers who need it. And so we're going to continue to lean into our largest markets and we're going to continue to lean into the densest markets. So you also saw -- or you may have seen that we exited three scooter markets a few days ago. And the reason was that the density in those markets was not as high. And all the markets we remain in we see a clear path to profitability for our bikes and scooters.

Thanks John. Eric, let me address your insurance question in terms of fixed costs. As we mentioned about two-thirds of our costs are variable in nature. And what I would say is the cost associated with primary auto insurance risk and transaction processing, which are the two -- our two largest Q1 expenses recorded in contribution margin, they're virtually 100% variable. So to answer your question, we -- as rides drop obviously then our primary auto insurance drops.

Thanks so much.

Sure.

Thank you. Our next question comes from Benjamin Black of Evercore ISI. Your line is open.

Thanks for the question. Perhaps a follow-on here. Really would be curious to get your thoughts and your expectations for a recovery, obviously, not the timing but perhaps the structure. So do you expect that the shared shifts from -- to ridesharing from other forms of the transportation? And perhaps relatedly, which trips do you think will return first? I'm thinking corporate versus airport versus leisure, daily, commute and events. And then perhaps one for Brian. You mentioned initiatives aimed at lowering the frequency and severity of incidents that were key to some of your insurance cost leverage. Could you expand on those and perhaps tell us how much runway you have left there? Thanks.

Sure. So this is Logan. I'll say it's really difficult for us to speculate on how consumer behavior might change on the other side of the crisis. I think, obviously, the recovery will be shaped by government recommendations and progress made on treatments and vaccines. I think there's a couple of trends to watch. We believe that affordable transportation is going to be critical for consumers. A lot of people are going to be navigating a challenging economic environment. And we believe that that means people will be reconsidering high fixed costs and owning a vehicle is a very high fixed cost to maintain. We do think that consumers may also choose to avoid public transportation in favor of ridesharing and bike and scooter sharing. And in terms of personal car use, I think it's worth noting that car ownership rates in some of our biggest markets like New York City, San Francisco, Chicago are already well, well below the national average. So for example, New York has 250 cars per 1,000 people, while San Francisco and Chicago have about 450 cars per 1,000 people, which are both well below the national average of 700 cars per 1,000 people according to census data. So as it sort of relates to exactly what type of trips people take, we definitely can't speculate on that. But we do think that Lyft is going to play an incredibly important role on the other side. And we don't think that the crisis will impact this long-term secular shift away from car ownership and towards transportation-as-a-service.

Ben this is Brian. Let me touch on some of the questions around insurance. What I would say first of all, we are very proud with some of the achievements we've made in terms of leveraging this cost. As I mentioned earlier, the contribution margin increased over 700 basis points year-over-year. Two-thirds of this improvement was from reducing the cost of insurance required by regulatory agencies as a percentage of revenue. So I think we've put up a very strong track record. I think on a go-forward basis, we continue to invest in that team in terms of how do we increase safety on the platform. And so when Logan and I were talking about initiatives to increase our unit economics, insurance is definitely front of mind in terms of the investments we're making to help lowering the insurance costs even further. And then separately, we're also leaning into our world-class partners including State Farm Travelers and Progressive to help us reduce costs. Our current primary auto insurance policies expire at the end of September and we will continue to consider the best options to reduce future volatility as well as lower our overall costs. So we remain bullish that we have a long list of opportunities still to help leverage the cost of insurance.

Okay. Thank you.

Thank you. Our next question comes from Edward Yruma of KeyBanc. Your line is open.

Hey, good afternoon and thanks for taking the questions. I guess first on the new Wait program, do you think it'll have the same economics to Lyft as shared rides? And then two as a follow-up, clearly you guys have been able to successfully pull back on driver promotions. As you reramp back up, do you think that promotions will return to the consumer environment? Or do you think that you and your major competitor have finally achieved kind of some degree of equilibrium when it comes to demand? Thanks so much.

Yes. Great. Just on Wait & Save, it's a very new program. We're in the first couple of weeks of testing it. So we will make sure that it operates with an economic profile that is very positive for the business, but it's too early to comment on anything specific. Brian, would you want to weigh in on driver equilibrium?

Yes. So we've said consistently that our strategy is to focus on profitable growth not growth at all costs. And so ultimately we want to win on product innovation, customer experience and brand preference not coupons. And what I would say, since rides began to decline significantly in mid-March we've virtually turned off all rider coupons and we're not alone. Companies in the rideshare industry are also adjusting spend. There are third-party data providers reporting that coupons have virtually disappeared across the industry. So given the current economic times, the industry appears to be focused on reducing losses and preserving cash. I know we are. So we're going to continue to lean more into innovation experience in brand versus coupons. We think this is good for the industry.

Got it. Great to hear. Thanks so much.

Sure.

Thank you. Our next question comes from Brent Thill of Jefferies. Your line is open.

Hey, Brian. I know there's a lot of curiosity about the liquidity position with cash and if you need to raise capital. But if you could just maybe give us your perspective on how you feel the balance sheet looks right now? And any other color will be super helpful? Thank you.

Sure. So look as we mentioned, we do have $2.7 billion of basically cash. So we feel we're in a very strong position. We made some pretty decisive decisions to reduce the cash burn for this year in terms of the $300 million of fixed costs we're taking out as well as we're funding new initiatives to improve unit economics, which would be on top of the $300 million. And then finally, we did lower CapEx from $400 million down to $150 million. So, all of those initiatives will obviously help us preserve cash. So we believe we are sufficiently capitalized to reach free cash flow breakeven. So we don't think we need to raise capital, but look we're always willing to be opportunistic. I will call out our long-term debt stands at a whopping $82 million right now.

Thanks.

Thank you. Our next question comes from Brian Fitzgerald of Wells Fargo. Please go ahead.

Thanks guys. So I want to ask a follow-up to Mark's question on Essential Deliveries. Could you give us a sense for how that ramped in those 11 cities? And then there are two sides of that force. So you need people to have stuff delivered in addition to having drivers. And how many drivers have opted into that? What are the gating factors finally in terms of expanding that beyond those 11 markets? Thanks guys.

Thanks. John, do you want to give some more color on delivery?

Sure. I'm not going to comment on the specific ramp other than to say that on the driver side, there was a large interest and large opt-in to do that. I think for obvious reasons people are looking for earning opportunities and appreciate the contactless nature of that. I think the big determinant will be the partnerships that we establish with those that need deliveries essential deliveries at this time.

Thank you. Our next question comes from Itay Michaeli of Citi. Your line is open.

Great. Thank you. Good afternoon. Just two questions. First going back to AV wondering, how you're thinking about potential for Lyft to pursue deeper strategic partnerships as a way to create more cost savings with some of your peers kind of targeting deployments by 2022? And then secondly for Brian, I think you mentioned kind of a lower breakeven. And just given the improvement in contribution margin and cost savings, any thoughts around beyond 2020 what kind of quarterly revenue is required to reach EBITDA positive?

Good. Thanks for the question. So partnerships have always been a fundamental part of our approach to AV. We clearly entered the space as a second mover and we know there are a lot of great programs out there led by incredible teams who invested significantly more than us and have been at this a lot longer. So for example, we have a great partnership with Waymo, that's operating in the Chandler Arizona area. And we have a wonderful partnership with Aptiv, that's been running for some time in the Las Vegas area. And we continue to talk to many folks across the industry, so that is and will continue to be a major part of our AV strategy. Brian, do you want to take the next question?

Sure. It's hard for us to speculate. Obviously, our operations are going to be impacted by COVID-19. And so when we're trying to think about ride volumes, it's highly uncertain and we just can't predict today. We've talked about the prudent steps that we've taken in terms of reducing our costs and CapEx. If we successfully execute on our stretch initiatives to improve unit economics, given our new lower fixed cost structure, we believe we can achieve adjusted EBITDA profitability at a ride volume roughly 15% to 20% lower than what was required in our previous forecast to achieve profitability. Now in terms of estimating the date of our first profitable quarter, this is ultimately tied to future ride volumes, which we obviously cannot predict at this time. Again, we lowered the ride threshold required by 15% to 20%. So, if there wasn't COVID with our new cost structure, we believe that we would have been profitable earlier than our original guidance. So, to answer your question, the actual timing will depend on the speed of the recovery. It could be earlier or later. Again, it's going to be tied to ride volumes and the bounce back.

Great. Thank you very much.

Sure.

Thank you. That concludes the Q&A portion of the call. I'll turn the call back to management for closing comments.

All right. Thank you all for joining us for this call today. We hope that everybody is staying safe and healthy during this time, and we look forward to talking to everybody again next quarter. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.