Lyft, Inc. (LYFT) Q4 2021 Earnings Report, Transcript and Summary

Good afternoon and welcome to the Lyft Fourth Quarter 2021 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Sonya Banerjee, Head of Investor Relations. You may begin.

Thank you. Welcome to the Lyft earnings call for the quarter ended December 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, Elaine Paul. A recording of this conference call will be available on our Investor Relations website at investor.lyft.com shortly after this call is ended. I’d like to take this opportunity to remind you that during the call, we will be making forward-looking statements. This include statements relating to the expected impact of the continuing COVID-19 pandemic, the performance of our business, future financial results and guidance, strategy, long-term growth and overall future prospects. We may 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-Q for the third quarter of 2021 filed on November 4, 2021 and our Form 10-K for the full year 2021 that will be filed by March 1, 2022 as well as 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 the list 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 may be 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. I would now like to turn the conference call over to Lyft’s Co-Founder and Chief Executive Officer, Logan Green. Logan?

Thanks, Sonya. Good afternoon, everyone and thank you for joining our call. 2021 was a big year for Lyft. The operating environment improved as people got vaccinated and communities reopened. As a business, we have strengthened our financial position and continued investing in growth initiatives. We also expanded our industry leading autonomous vehicle partnerships and set ourselves up to win that long-term transition. I am proud of the team for what we have accomplished together and I am excited to build on our momentum. Let me take a moment to welcome our new CFO, Elaine Paul. We are thrilled that Elaine has joined our leadership team. Her expertise building best-in-class disruptive businesses is essential as we enter our next phase of growth. Elaine has already had a big impact in her first month. She brought incredible energy to the team. She is diving deep on the details and she is identifying opportunities to build more scalable systems and processes. Elaine will review our financial results and share our outlook shortly. Brian Roberts remains an adviser to Lyft until June. Brian’s contributions over 7 years here have been exceptional. He helped build our business and the industry. We are grateful to Brian for his leadership and wish him continued success. Turning to Q4, we had a solid quarter and ended 2021 in a stronger position. Rideshare rides in the fourth quarter reached a new COVID record and we achieved revenue growth, up 70% year-over-year. Revenue per active rider contribution margin and adjusted EBITDA reached new highs, supported by supply improvements and ride growth. For the full year, we grew revenues by 36% versus 2020 and we were adjusted EBITDA profitable on an annual basis for the first time, another key milestone for our business. Supply growth led to better service levels in our marketplace. Total active drivers in the fourth quarter grew by 34% versus Q4 last year and drivers continued giving more rides on average than they did in 2019. New driver activations were also strong, up nearly 50% year-over-year. And between Q2 and Q4 of 2021, ride ETAs improved by roughly 30% across all of the markets we operate in. We will continue working hard to deliver the best possible experience for riders and drivers. Let me talk about Q1. In January, the Omicron variant had a significant impact on ride volumes. The rapid surge in infections was correlated with reduced demand for rideshare. However, since the spike in the U.S. has now peaked, we expect demand will begin to recover. In fact, in the last week of January, we saw a pickup in rideshare rides that we see as a positive signal. Ultimately, given the expected impact of Omicron on Q1 and the unknown shape of the recovery, which could carry into Q2, our near-term revenue growth acceleration will likely be affected. On our last earnings call, we said that we expected revenue growth for full year 2022 to accelerate versus 2021. We are cautiously optimistic that this will continue to be the case. The demand rebound is a matter of when, not if. We are getting better and better at managing these temporary COVID-related spikes and this time around, driver supply has remained healthy. So, when we come out of this period, we expect to be very well-positioned. Now, let me turn the call over to Elaine.

Thanks, Logan and good afternoon everyone. Let me start by saying my first month at Lyft has been incredible. I spent a lot of time diving into the details of our business and engaging with the leadership team on key growth initiatives. I joined Lyft because of the people, the mission and the significant potential that I saw 1 month in I am even more exhilarated by this company and our opportunity. There is a lot of exciting and important work to do, but a few things are already very clear. The business fundamentals are strong and there is a lot of runway ahead. We will build a much larger company as we attack the massive addressable market in front of us. I am looking forward to having a transparent relationship with our investors, analysts and other key stakeholders. Now, let’s talk about Q4. Rideshare rides in the fourth quarter reached a new COVID high. October with Halloween was the strongest month. As expected, November and December ticked down from October, but rideshare rides in both months increased by more than 30% versus last year. On the supply side, we were pleased to see the continued impact of our investments and signs of organic tailwinds. Active drivers, which the COVID saw in the fourth quarter and new driver activations, remained robust, up nearly 50% in Q4 versus last year. By growing supply, we were able to support an improving marketplace balance and a higher volume of rides. As a result, we reported Q4 revenue of $970 million, up 70% year-over-year and exceeded our guidance range of $930 million to $940 million. For the full fiscal year, we achieved revenue of $3.2 billion, an increase of 36% versus 2020. The number of active riders in Q4 increased by 49% year-over-year to $18.7 million. New rider activations increased by 42% over the same period. On a sequential basis, active riders declined by 1 percentage point. Keep in mind, bike rides reached an all-time high in Q3 and there are some riders who only used bikes and scooters that we lose in colder weather. Revenue per active rider in Q4 reached a new all-time high of $51.79. This is an increase of 14% versus Q4 ‘20 reflecting a larger mix of longer higher revenue rides and improving service levels. The airport used case continued to recover with airport rides in Q4 ‘21 more than doubling year-over-year. Before I move on, I want to note that unless otherwise indicated, all income statement measures are non-GAAP and exclude stock-based compensation and other select items as detailed in our earnings release. A reconciliation of historical GAAP to non-GAAP results is available on our Investor Relations website and maybe found in our earnings release, which was furnished with our Form 8-K filed today with the SEC. Contribution margin in the fourth quarter was 59.7%, which represents a 4.2 percentage point increase from Q4 of 2020 and exceeded our outlook of 59%. The outperformance on revenue and contribution margin relative to our guidance helped drive strong Q4 contribution of $579 million. As a reminder, contribution excludes changes to the liabilities for insurance required by regulatory agencies attributable to historical periods. In the fourth quarter, there was adverse development of $122 million net of reinsurance, which we attribute to the continued impact of COVID on legacy insurance claims, specifically higher healthcare and vehicle repair costs. Inflationary pressures being seen across the economy are also broadly affecting the auto insurance industry. To be clear, virtually all of our Q4 adverse development is associated with the legacy third-party claims administrator. The related claims, which date back to 2018, also predate the risk transfer structure that now exists. It’s also worth noting that this amount of adverse development is net of our reinsurance coverage, which offsets claims in excess of the deductible. As a reminder, for the current insurance policy year, we’ve transferred a significant majority of our auto insurance risk to best-in-class carriers. So we retain less surface area if inflationary pressures persist. Let’s move to operating expenses. Operations and support expense for Q4 was $104 million. That represents 10.7% of revenue and is down from 16.4% last year, a 570 basis point reduction year-over-year. The improvement is a reflection of operational efficiencies and leverage against top line growth. R&D expense in Q4 was $100 million, down approximately $30 million year-over-year, reflecting a full quarter impact of the sale of our Level 5 self-driving division, which closed in Q3. As a percentage of revenue, R&D expense declined to 10% in Q4 from 23% in the year ago period. Q4 sales and marketing was $113 million, 12% of revenue, down from 14% last year and roughly flat with Q3. Within sales and marketing, incentives were just 3% of revenue. G&A expense in Q4 was $217 million. That represents 22% of revenue and is down 11 percentage points versus Q4 of last year with the leverage largely driven by top line growth. In terms of the bottom line, our Q4 adjusted EBITDA profit of $75 million was in line with the top end of guidance, which was between $70 million and $75 million and an 11% improvement versus Q3. We ended 2021 with unrestricted cash, cash equivalents and short-term investments of $2.3 billion. Before I move to our outlook, it’s important to note that COVID trends are impossible to predict with any certainty. Future conditions can change rapidly and may affect our guidance. With that, let me share our current outlook. As Logan mentioned, Q1 is being impacted by Omicron. For context, prior to Omicron, we were anticipating strong sequential rideshare ride growth in Q1. This was based on the demand trends we saw in Q4. However, given the impact that Omicron had on rideshare volumes, we now anticipate rideshare rides will be down slightly in Q1 versus Q4. In addition, the first quarter of every year always has rideshare ride mix headwinds, with shorter rides and less use of bikes and scooters. Given these factors, we expect revenue in Q1 of between $800 million and $850 million. This implies year-over-year growth of 31% to 40%. On a sequential basis, this outlook suggests a decline of $120 million to $170 million in revenue versus Q4 or 12% to 18% quarter-over-quarter. In terms of profitability, we expect Q1 contribution margin to be approximately 56.5%. We expect Q1 adjusted EBITDA will be between $5 million and $15 million versus the $75 million in Q4. This assumes a sequential headwind of approximately $65 million to adjusted EBITDA versus Q4 that is driven by the quarter-over-quarter revenue decline. Let me take a moment to address driver supply. We are pleased with the improvements we have seen over recent quarters and we continue to believe the most severe period of dislocation is behind us. Driver supply so far in Q1 has been resilient and the marketplace has reached an improved balance partially due to softened demand. We remain confident in our ability to manage this issue as we progress through the year. Turning to the full year, we expect the impact of Omicron on Q1 and the unknown pace of the recovery, which could weigh on Q2, will affect our near-term revenue growth acceleration to some extent. For full year 2022, we are cautiously optimistic that we will grow revenues faster than the 36% achieved in 2021. We expect this growth for a few reasons. First, rideshare volumes in Q4 ‘21 were the highest they have been since COVID started, but we are still more than 30% below the Q4 ‘19 level. Second, the other side of the Omicron wave will likely create more opportunity for demand across our network. Throughout the pandemic, we have seen pent-up demand for mobility that gets released when people have the chance to get moving. As people can go out safely and have more places to go, whether to bars, restaurants, sporting events or concerts that’s exactly what they do. To sum things up, first, we had a solid fourth quarter and ended 2021 in a much stronger position relative to where we were at the start of the year. Second, we are confident in our ability to navigate near-term headwinds and position ourselves for a recovery and demand. Third and most importantly, we are going to build a much larger company by attacking the market opportunity in front of us. We continue to see exciting opportunities to lean into growth, to deliver solutions that serve and expand our addressable market. We are also committed to disciplined capital allocation and to improving our profitability over time. Our investment decisions will continue to be guided by our financial North Star, which is to maximize long-term free cash flow growth per share. With that, let me turn it over to John to provide key updates on the business and our strategy.

Thanks, Elaine. I am excited for the new year and ready to execute on our broader business opportunities. In 2022, we have three key areas of focus: first, accelerate our core; second, expand emerging and new products; and third, invest in our innovation stack. I am going to address each and explain how they matter. First, we will accelerate our core by continuing to introduce solutions that allow us to grow riders and increase ride frequency. The airport use case is a great example. We are working hard to improve the entire day of travel experience to deliver the most value to Lyft riders. To that end, we recently launched our expanded Delta partnership with an exclusive set of features. Since 2017, Lyft riders who have chosen to link their SkyMiles account have earned more than 2 billion SkyMiles, while riding with Lyft. Now, Lyft riders can also access real-time Delta flight information in our app. This means riders can stay up to date on their flight status with access to terminal and gate information directly in the Lyft app. This is a first of its kind experience only available through Lyft to simplify our riders’ journey and give them access to information they can use to make decisions about their travel. The partnership has already been impactful and early consumer feedback has been very positive. Second, we are working hard to expand emerging and new products, including our bikes, scooters, rental cars and vehicle services. These products are valuable on a standalone basis that as part of our network, they deliver compounding value, serving as additional entry points to our network, facilitating cross-platform usage and making our network more sticky. Consider that in each quarter of 2021, the number of riders using our bikes and scooters in addition to rideshare consistently grew faster than rideshare-only riders. For bikes, in particular, 2021 was a record year for rides, with volumes up more than 40% versus 2020. In fact, in 2021, Citi Bike in New York was the 25th most ridden transit network in the United States. To put this in context, last year, more people took rides on Citi Bikes than on BART, the Bay Area’s Regional Transit system. And as a reminder, in most of our markets, we have agreements with the Citi to be the exclusive bikeshare provider. We will continue to invest in these systems, expanding our physical footprint and upgrading the infrastructure as well as adding charging capabilities to our docking stations, which can improve both uptime and costs. Our corporate bike share sponsorships, which includes Citibank in New York, Nike in Portland and MasterCard in the Bay Area, among others, generate revenue and demonstrate these systems significant inherent value. Let me spend a moment on Lyft Rentals, which is simplifying the rental car experience for consumers. There are two parts to our strategy. One is our first-party rentals, where we own the full stack experience and second is our third-party nationwide integration was fixed, which makes finding, reserving and getting to and from a fixed rental lot easier than ever. Reservations for our first-party rentals doubled in Q4 ‘21 versus the prior year. This is a reflection of the focus we have put on building out our offerings and making them more discoverable by our riders. Our third-party integration has also been very successful driving nearly half of all rental reservations booked through our system. Looking ahead, we expect to continue to grow Lyft Rentals by optimizing our first-party footprint and evaluating new partnership opportunities to add more national coverage. Our third focus in 2022 is investing in our innovation stack. This refers to the R&D investments we are making and all of the work we are doing to advance the technology that underpins our entire network. One great example is Lyft Maps, our in-house mapping platform specifically built for our transportation network. We are building Lyft Maps to be able to optimize the entire Lyft experience. This includes tapping into data collected from Lyft ride to detect street closures and traffic delays and using that information to improve our overall routing capability. We can also optimize pickups and drop off to save drivers’ time, help position them for the next ride and avoid unnecessary tolls. We began rolling out Lyft Maps last year in select markets and it has already powered more than 3 million rides. We are also partnering with Google to make the Lyft app and our proprietary mapping platform available on car displays that have Android Auto. This integration has been highly anticipated by our driver community at a frequent top request. If you take enough rides to ride, it’s easy to see why this is so helpful. Many drivers end up with multiple phones on their dashboards or other complicated setups to try to achieve the same outcome. Launching this summer, we expect the integration to make it easier for drivers to accept rides and to improve the overall rider and driver experience, and we will continue working to accommodate other platforms to alleviate this pain point more broadly. Our investments in our network innovation stack with advancements like Lyft Maps add value today and help us build critical infrastructure and capabilities for the future. This becomes clear as you look at the work we’re doing with autonomous vehicle partners. The Lyft Network is a continuously improving product, stemming from a decade of engineering investment in billions of real-world rides. As a result, AV providers are increasingly working with us to help advance and commercialize their technology. The latest proof point is the launch of our autonomous ride share service along with Ford and Argo AI in Miami. Ford AVs are powered by the Argo self-driving system and can be dispatched, matched and routed to Lyft riders. This is the first time AVs are available for ridesharing in Miami. Ultimately, we expect this partnership to scale to 1,000 vehicles across multiple markets by 2026. For every additional component we add to our network, we continue to see more and more compounding benefits. Operator, we’re now ready to take questions.

[Operator Instructions] Your first question comes from the line of Doug Anmuth with JPMorgan. Please go ahead.

Thanks for the taking questions. Just when you think about potentially accelerating growth above 36% in ‘22, how are you thinking about the mix of active riders and the revenue per active rider? And then just on driver supply, I know you said it’s more stable through Omicron. How are you feeling about the overall driver supply levels just relative to increasing demand as you go through the year? Thanks.

Yes. So this is Logan. I’ll jump in on. We are – our core focus is taking care of our customers. So we are most focused on providing the best possible customer experience and ensuring great customer experiences lead to great retention, lead to more rides. So that’s our core focus. We are additionally always looking at and investing and planting new seeds to expand the number of use cases for using Lyft. And you’ve seen us expand we launched a really innovative product last year called Priority Pickup. So when somebody is in a rush and we have the ability to dispatch closer driver will provide a really magical experience with our Priority Pickup product. Now it comes out of premium. So it’s perfect for the moment where those few minutes really matter, but it’s a really special experience when it works. And we’re expanding outwards into different use cases such as what John was talking about with rentals. So that Lyft can be top of mind for any kind of transportation trip that somebody is planning. So we additionally are always focused on activating new riders. So every year, 4 million people in the U.S. turn 18. And so we have a lot of investment in energy, always on in terms of providing a reason for somebody to use Lyft for the first time. So we’re both focused on kind of expansion of the Active Rider pool and driving more revenue per active rider. In terms of the second part of the question, on supply, Elaine, you want to jump in?

Absolutely. Thank you, Logan. Hi, this is Elaine. In terms of driver supply, the supply demand dynamics in our marketplace have certainly been improving. Total active drivers reached a COVID high in Q4, and new drivers grew nearly 50% year-over-year in Q4. Even in Q1, despite softened demand, driver supply has been resilient. We’ve seen early signs of organic driver supply growth. At some context, don’t forget the enhanced federal unemployment benefits sunset in September and the child tax credit rolled off at year-end. So there are folks who want to get back out and earning money. As rideshare demand rebounds, we may see people shift from delivery to rideshare where earnings tend to be higher based on historical studies, although exact comparisons are difficult. We’re confident in our ability to manage supply, and we feel very well positioned for the recovery and demand.

Great. Thank you, both.

Thank you.

Your next question comes from the line of Stephen Ju with Credit Suisse. Please go ahead.

Thank you so much. So, Logan or John, I think there is a perception among investors that Lyft is perhaps ceding market share. But there is probably perhaps an underlying dynamic that is more due to your regional exposure. So can you talk about what you may be seeing in terms of relative share shifts back and forth with your competitor or lack thereof? And I guess, John, a clarification question on your maps commentary earlier. Is what you’re looking to do primarily routing software based on traffic data that Lyft is collecting as opposed to spending to create your own version of maps because it seems like both of the OS owners and particularly Google have already invested a significant amount of money to have the best maps – apps out there? Thanks.

Yes. So on – in terms of the competitive position based on third-party data, our market share is relatively consistent with where it was pre-COVID and our service levels, which we track closely, key service levels being pickup times and price have been competitive. So in 2021, we made significant investments in driver supply, as we’ve talked about on some of the prior calls, and we’re seeing those investments continue to pay off. So there is, as you mentioned, there is sort of a regional difference where we over-index on share relatively on the West Coast. And I’m sure you follow on the data. The West Coast has been sort of more cautious about COVID and was a little slower to reopen. So there is definitely kind of an element there. But when you look at the share kind of pre-COVID to now, it is effectively flat.

And then on maps, you’re asking kind of what’s the primary use of the software we’re creating and kind of whether we use our own traffic data and then kind of maybe how that compares to the fact that Apple and Google have great products already out in the market. We’re – I’d say we’re incredibly excited about this work. The team has been heads down for several years. We have very specific use cases. When you build a product like Google Maps, you build it for many different types of usage cases, people walking, people driving, people not earning income driving primarily. So the fact that we’re building kind of Lyft Maps for Lyft, we’re seeing our ability to add value for drivers be realized. So one exciting stat we’ve seen already is that for – we’ve brought it to – we started rolling it out to our drivers as a navigation product. And 50% of drivers prefer using Lyft Maps to Google Maps or to what they were using before. Given what you said that they have spent incredible amounts of money in years building great products. We are extremely happy to see that 50% already prefer this product. And we feel like it’s like the true battleground for building a great map product is the people using your maps are earning money on it. They are only going to use it if it helps them and so quite optimistic about the work there. It does incorporate our own traffic information. There is also data around which doors and street corners people exit venues from that we can be much more specific about. What side of the street the passengers on. So there is lots of specific use cases that we believe we can do better than the alternative.

Yes. And just to weigh in on a couple of other specifics. It’s different for us, like John was saying, people are earning money. And there is a lot of money on the line for Lyft on every ride. So we are able to route drivers along safer routes. That is not something we carry, obviously, you see the number is a serious overhead for our insurance costs, and we’re able to make Lyft rides significantly safer by routing drivers along the safest routes. Additionally, because we have so many drivers on the road, and they are able to send us back higher fidelity data, there have been sort of a growing number of times we’re able to detect things like road closures sooner. And it is incredibly valuable for us to understand when and where our road closure shows up. Just as a small example because if we route the wrong driver, we waste valuable time and money for Lyft. We deliver a bad rider experience, etcetera. And I think the broader kind of consumer-focused mapping companies don’t have the same sort of dollars on the line and don’t necessarily kind of optimize for the same things that we are in our business. So not only is the team just built an incredible product and unlocked a lot of value from it. But there are just, I think, a ton of sort of specific areas where we can tailor to our business to unlock great experiences and great value.

One last thing is that as you think about the future with autonomous vehicles, this is a really important building block. And what I love about what we’re doing with the business is that we can build phenomenal products for drivers, whether that’s the mapping software, whether that’s vehicle services or fleet management. And then we could position those for the consumer, the rider and then ultimately the autonomous vehicle to make sure we optimized for cost of operations as well as revenue per mile. So it all adds up to both helping in the near-term and for the long-term.

Thank you.

Your next question comes from the line of Alex Potter with Piper Sandler. Please go ahead.

Hi, guys. Thanks for taking the question. I have two here. So the first one, obviously, the revenue per active rider was up pretty materially versus last quarter. You mentioned longer distance ride. I’m curious if you have a guess regarding why that might be and the degree to which you think that can be sustained? And then the second question is just on delivery. You had historically played with potentially doing a delivery pilot, haven’t gotten much of an update on that front. I’m just curious to the extent to which that ranks anywhere on your priority list? Thanks.

Great. Elaine, you will take the first one and then this is John, I will take the delivery question.

Thank you. We were very pleased that revenue per Active Rider reached a new all-time high in Q4 of $51.79. This record revenue per active rider was supported by two things, an increase in rideshare revenue per ride and a pickup in ride frequency versus Q3. So it’s really a factor of both price and quantity. The higher rideshare revenue per ride is a reflection of ride mix, and you mentioned longer trips. This includes longer trips and more use of high-value mode like, Lux, which is typical in the fourth quarter of the year. The longer trips, a good example of that is airport, the airport use case. Airport rides are longer, higher revenue per ride and in the fourth quarter reached 9% of ride volume, which compares really nicely and favorably to 9.4% in Q4 of 2019. All of those dynamics in terms of the rideshare mix impacted the revenue per ride. And then as we said, a pickup in large frequency also drove the new all-time high.

And then I’ll take the question about our delivery update. So we remain excited by the traction we’re getting. The delivery team has done a phenomenal job building and focusing on quality, making sure that the merchants that we work with have delivery success. I just want to make sure it’s clear. Our focus is on a B2B product offering, not a consumer-facing marketplace. As we’ve said for many years, we’re a transportation-focused company. We want to have one main consumer that we’re building for. And again, we will not know the consumer-facing marketplace for groceries or food. We are live in a number of pilot markets. For competitive reasons, it doesn’t make a lot of sense for us to say too much. Other than that, we’re happy with the progress. We’re quite excited about non-perishables like supporting auto part delivery for companies like NAPA Auto Parts. We’re also excited about a partnership we announced with Olo, which enables local delivery for merchants. We have a product called Olo Dispatch. We really feel strongly that because we are one of, call it, three-or-so national networks of driver communities that have national coverage, but we’re the only one not competing with the retailer for that end consumer. So still remain excited by the opportunity there. We’re being methodical about how we come to market and don’t want to share too much for competitive reasons.

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

Thanks so much for taking the questions. Maybe if I can do two and congrats, Elaine, on the new role with the company. On the two questions, both shorter term in nature. But in terms of Q1 on the demand side, can you help us better understand how much of an improvement versus what you saw in January is sort of informing the view in terms of how Q1 evolves? Or are you keeping a fairly conservative view on variant and how it impacts demand all the way through Q1, and that’s what informs the broader top line guide. And then going further down the P&L, incremental EBITDA margin that seems to be implied in terms of Q4 over Q1 seems weaker than some of the incremental margin we’ve seen as you build momentum in the business from Q2 to Q4 in 2021. Can you unpack a little bit of some of the drivers of the incremental margin as well in Q1 versus Q4? Thank you.

Yes, absolutely. So let me be clear. Omicron has had a significant impact on our business in Q1. And were it not for Omicron, we would be projecting strong sequential quarter-over-quarter ride growth and revenue growth. What you see reflected in our Q1 guidance is reflective of Omicron having us predict that rides will be down slightly quarter-over-quarter. That being said, we are seeing some positive signals. There is news in the marketplace that mask mandates are being rolled back. And in our own business, in the last week of January, we saw an uptick in lives that we see as a positive signal. Nevertheless, the impact of Omicron on Q1 is leading us to our guidance of $800 million to $850 million in revenue in Q1 and adjusted EBITDA of $5 million to $15 million. Omicron and the pace and shape of recovery, while we’re seeing the positive signals, the pace of recovery is uncertain, and that’s why we express some caution entering into Q2. However, for the full year, we remain confident and cautiously optimistic that we can drive increased year-over-year revenue growth. We achieved 36% year-on-year revenue growth in 2021, and we’re cautiously optimistic that we can exceed that in 2022. Moving to your question about the incrementals, in Q1, we are forecasting adjusted EBITDA of between $5 million and $15 million, and that compares with $75 million in Q4. You asked about the sort of incremental margins on what we’re seeing. That decline quarter-on-quarter at the midpoint, $65 million is out of our projected decline in revenue of $120 million to $170 million. So you see that flowing through to EBITDA and an incremental margin of $0.45, in line with what we’ve seen in the past.

Thank you. Your next question comes from the line of Ed Yruma with KeyBanc Capital. Please go ahead.

Hi, thanks very much for taking the question. I guess as driver supply continues to normalize demand picks up. As you think about the medium term, you guys have very successful at kind of keeping a lid on promotions. Do you think that there is some build back that will have to occur as the driver and rider supply gets no greater equilibrium or do you think that the industry has finally found a more rational promotional level and that you and your other competitor can kind of maintain pricing discipline? Thank you.

Yes. This is Logan. I think on the riders side, we certainly hope to and plan to maintain a much lower promotional level. I think that was kind of a sign of the early days as we are building scale correlated to hitting critical mass in a market where you could sustain competitive pickup times. And we feel like we are well past that point. We have made a lot of marketplace improvements to where we are able to operate effectively and maintain those lower ETAs in really all conditions.

Yes. One thing I would just put on that is that all of the back and forth of COVID, so whether it was spikes of – demand spikes of supplier imbalances forced us to build even better, sharper tools throughout all those periods, which are more affordable to run in a more stable environment. And so just to piggyback on what Logan is saying, not only is the market and are the players way more rational after that early period of building, we have better tools within the marketplace to manage the demand and supply changes.

Yes. And then on the driver side, I would just call out that, that is really a product of supply and demand balance. So, driver incentives are really very dynamically driven based on the current balance in the marketplace, and we try as best as possible to stay ahead of it. But COVID sort of creates conditions that are prone to spikes and demand can turn on a dime and supply can’t. And so as you get a demand spike in the market, you are going to see sort of – automatically, you are going to see higher prime time for riders and that money is going to be turned around and recycled and given right back to drivers to incentivize them to drive more and drive in the right times of places. So, that is really kind of impossible to give guidance on that side. But the riders side is much more kind of an element that we control.

Thanks so much.

Thank you. Your next question comes from the line of Brian Fitzgerald with Wells Fargo. Please go ahead.

Thanks guys. A couple of questions, can you talk about the elasticities you are seeing with programs like Wait & Save, trying to gauge the rider sensitivities to time and cost there. Perhaps we are not as busy to get to some place in such a prestigious amount of time. And then for John, follow-up to Stephen’s question on maps, can you tell us where it’s deployed and what the rollout cadence looks like for 2022 or are you keeping that under wraps?

Alright. Yes, we have seen – we have rolled out sort of scaled up Wait & Save early on in the pandemic. It took the place of shared rides in most markets as the sort of predominant lower-cost mode. We have seen – it’s really resonated with customers. It’s – but – by far, the sort of primary classic products still makes up the vast majority of our volume. But there is a really important segment of riders and riders at certain times, right, there are plenty of times where a rider who cares about the fastest ride at one moment in their day is very happy to wait an extra few minutes during a different sort of moments in their day. And so it’s also unlocked a more effective way for us to utilize drivers. So, Wait & Save helps us sort of net-net, keep drivers busier, because we can wait until we have a driver closer by to send them to a particular pickup. So, we have been really pleased with how the Wait & Save product has performed and the response we have seen from riders. And we are continuing to look at ways to innovate on that and to improve on the product.

For maps, yes, we are not going to share specifics on where it will be and when. But obviously, we are incentivized with the savings we see when we do roll it out to go as fast as we can while providing a great experience for drivers and riders.

Thanks, Logan. Thanks, John.

Thank you.

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

Thanks for taking my questions. I have two maybe somewhat bigger picture. First, I want to be curious to hear about philosophically how you think about subscription offerings or loyalty programs or any mechanisms that you think are going to be important to driving higher lifetime value and more stickiness among your riders? Then the second one, maybe you can help us understand about the number of new riders to the platform throughout 2020, 2021 who are never with you before. How is their behavior different from your older cohorts, agents of the previous cohort behavior? Thanks.

Yes. So, this is Logan. On the first question, we think a lot about kind of the role that the membership program can play. And I think when you look at how other companies have adopted them and great lessons to learn. They are, in a sense, I see there is like has to become a more customer-centric company. And as you build a membership program, it really gives you – I think you start to look at the whole business through a different lens. You start to look at member acquisition, member retention. You start to look at not just sort of the customer experience on a transaction-by-transaction basis. Did we win that transaction, loses that transaction. But you start to look at sort of the cumulative sum of experiences that members have and all of the touch points they have with the company over a prolonged period and really focused on making sure that every one of those touch points is a positive experience that keeps them coming back as a member. So, from a philosophical perspective, I think they can be great tools. And we launched our membership program, Lyft Pink, just about 2 years ago. And obviously, during the pandemic, we have not leaned into promoting the program very heavily. We have continued investing in it, continue building it. But sort of at moments where the market is predominantly supply constrained, we have not leaned as heavily into the program. But it’s still something – long-term, we are very committed to and optimistic about, right. And as we think about kind of the framing for Lyft Pink, we look at it as an opportunity to bring together all of the best experiences that Lyft has to offer across our entire transportation network. So, from our rideshare benefits, to free bike and scooter unlocks to upgrades for car rentals through even our partnership one of our larger partnerships with Grubhub provided free delivery through the Grubhub network. So, it’s something we are excited about and we will continue to invest in.

Great. To address your question about riders, total active riders grew 49% year-over-year reaching 18.7 million in the fourth quarter and we have seen strong new rider growth in 2021. In Q4 new riders were up 42% year-over-year. It may be helpful to provide a little context on use cases across riders. Off-peak and early morning weekdays have been resilient since the start of COVID. And through 2021, we saw an improvement in nights out and weekend use, and we believe there is more to come.

One of the other kind of like thoughts around these cohorts and where people and how people changed their transportation behaviors is that one thing we see at times and we would like to see more of is that the peaks get smoother. So, there is more off-peak times. Peak periods of rides are less profitable rides for us because we have to manage a marketplace that at 9 am everyone wants to ride at the same time. So, with kind of the spreading out of commute behavior, with the change in kind of when people are willing to go, not only will the products like Wait & Save help us, but also just having more of that off-peak time allows us to better manage the overall marketplace.

Thank you. Your next question comes from the line of Mark Mahaney with Evercore ISI. Please go ahead.

Thanks. If I could ask two questions was – did you see a drag from Omicron on active riders in the December quarter? I think you have talked about different use cases, but did that cause was like factors why active riders declined sequentially in the December quarter. Could you tell that there is a real falloff in that last eight days of the quarter when it seemed like Omicron really sort of took over? And then secondly, if rides are 30% below pre-COVID levels still, where do you think drivers supply is versus where you were pre-COVID, is it more or less than that? Thank you.

Thanks for that. I will take the first question. On active riders, we were down 1% in the fourth quarter versus the third quarter from $18.9 million to $18.7 million. Last year, we saw a similar trend. As a reminder, some of that comes from bikes and scooters. Bikes and scooters is seasonal, and we see dips in Q4 and in Q1, largely related to weather. The active riders stat of $18.7 million is up 49% year-over-year. And again, I would point everyone to the revenue per rider is an all-time high of $51.79. So, in terms of active riders, it’s quite consistent with what we have seen in prior years, Q3 to Q4, and some of that is due to the seasonality of our bikes and scooters riders. With respect to your question on Omicron, as we all know, Omicron started hitting in the latter part of December. And so we do think that, that had some impact on demand, and then we saw that really impacting our business starting in January.

Alright. And on the driver side, in the fourth quarter, active drivers grew by 34% versus Q4 last year. The key thing with drivers that sort of makes an apples-to-apples comparison not as interesting is just how much marketplace efficiency we have unlocked. And as COVID hit over the last couple of years, there has just been a top priority for us to focus on optimizing every second of every driver’s time. So, that includes things like the new products we have launched, Wait & Save on sort of economy and probably pickup on the premium and mapping investments and the sort of algorithmic work that we have done on dispatch and pricing to collectively help drivers be as fully utilized as possible and put every second of their time that they give us on the platform to the best use possible. So in total, drivers are being much more highly utilized now, and that is kind of a fundamental value unlock that will scale. So, we can scale our supply side of the market much more efficiently as we go forward.

Another stat just to highlight, I am not sure we have said it on the call is that ETAs from Q2 to Q4 improved by 30% and so that also demonstrated a great improvement in the service levels.

Thank you. Your next question comes from the line of Ygal Arounian with Wedbush. Please go ahead. Pardon me. Your next question comes from the line of Ygal Arounian with Wedbush. Please go ahead. Your next question comes from the line of Deepak Mathivanan with Wolfe Research. Please go ahead.

Hi guys. Thanks for taking the question. So, just a couple of ones. Just to follow-up on Eric’s questions on incremental margins. Is the right way to think about incremental margin as volume rebounds say in 2Q, 3Q and 4Q to be in the kind of 40% to 45% range in terms of flow-through into EBITDA? Any color that you can provide in terms of levels we can expect through the year will be great. And then second question, just apologies if I missed it. Any reason why G&A was up in 4Q pretty significantly quarter-on-quarter, how should we think about going forward? Is this sort of like the new run rate? Anything you can share would be great.

Absolutely. Yes, in Q4, G&A was up, it was largely driven by incremental G&A expenses unique to the fourth quarter. One was incremental spend around policy of $20 million, and that policy was against flexibility and independence for drivers as well as California Clean Air. And two, there were some incremental professional service fees that we have incurred in Q4. We anticipate that G&A expense will come down 15% in the first quarter. So and the answer to your question, we don’t expect that to be a new high, and in fact, it will be adjusting down. In terms of the go-forward profitability and incrementality, we are not giving outlook beyond Q1 at this time on adjusted EBITDA. And that’s largely because of the uncertainty around the shape and pace of recovery of Omicron and how that will impact top line and bottom line in the near-term. That being said, we are committed and we remain committed to being adjusted EBITDA profitable and to improving our overall profitability over time. It’s also important to note we are guided primarily by our financial North Star maximizing the long-term free cash flow growth per share. We are justifying as operating cash flow with CapEx.

Thank you. Your next question comes from the line of Nikhil Devnani with Bernstein. Please go ahead.

Hi. Thanks for taking my question. Just sticking with the incremental margin theme, the Q1 EBITDA outlook implies some margin compression from about 8% to 1%. I expect it to only be down a little. So how much is this, is pricing deleverage here as supply and demand normalizes? And just can you remind us how important pricing is to the margin improvement story in 2022? Thank you.

Yes. Thanks for that. Yes, in terms of our margin in Q1, we are projecting revenues of $800 million to $850 million in Q1 revenue. That’s up 31% to 40% versus Q1 of 2021. Relative to Q4, that implies a revenue decline of $120 million to $170 million, and that is down 12% to 18%. At the same time, we have noted that rides will be down slightly. The disproportionate – the relative disproportionate decline in revenue quarter-over-quarter is driven by the revenue per ride. In terms of the impact on EBITDA, we have given guidance of $5 million to $15 million. So, at that midpoint of $10 million, it implies decrements to EBITDA of $65 million. And as I mentioned, that’s largely flowing through at about $0.45 per dollar of revenue. And in terms of why we see that decrease in revenue per ride, it’s largely due to seasonality. The first quarter of the year tends to have more short rideshare trips, including a step down in airport rides as a percent of total to seasonal low and less use of our high-value modes like Lux. And this has an impact per ride, which is disproportionately impacting revenue and is flowing through to the bottom line. In terms of pricing and revenue pricing per ride and revenue per ride impacts on profitability, we still see significant leverage in our model. And with top line growth and with rideshare growth, we see the ability to continue to achieve leverage. And the bottom line is when supply-demand dynamics are more in balance, this can lead to better service levels, normalized prices, and that’s good for our business and good for volume.

Alright. And with that, we will call it a wrap. And I really want to thank everybody for joining our call today and look forward to talking with everybody soon. Thank you.

Thank you.

And this concludes today’s conference call. Thank you for participating.