LYFT - NASDAQ

Good afternoon, and welcome to the Lyft First Quarter 2024 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 first quarter of 2024. On the call today, we have our CEO, David Risher, and our CFO, Erin Brewer; our President, Kristin Sverchek, is here for the Q&A session. 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 implied 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 beliefs as of today, and we disclaim any obligation to update any forward-looking statements, except as required by law. Our discussion today will also include non-GAAP financial measures, which are not a substitute for our GAAP results. Reconciliations of our historical GAAP to non-GAAP results can be found in our earnings materials, which are available on our IR website. Additionally, today, we're going to discuss customers. For rideshare, there are 2 customers in every car. The driver is Lyft customer and the rider is the driver's customer. We care about both. And with that, I'll pass the call to David.

Thank you, Sonya, and good afternoon, everyone. Thank you for joining us. We had a great start to 2024 with very strong first quarter results. Rides and gross bookings both grew by more than 20% year-over-year, and we delivered another quarter of positive free cash flow. We are on track to deliver full year goals with a higher level of free cash flow that we initially shared. We're executing well, and we're demonstrating that customer obsession drives profitable growth. Since taking on the CEO role just a year ago -- over a year ago, I've really been amazed and proud of what we've accomplished. On these calls, we talk a lot about progress in terms of Lyft's performance metrics. But today, I'd like to talk about that progress in terms of what customers experience and how that informs why they choose Lyft. Let's start with drivers. We are improving the ways we provide drivers with what they want, good earnings opportunities along with more transparency and more control over their time. The result, these drivers are earning more. In Q1, the median U.S. driver earned $31.10 including tips and bonuses for every hour of engaged time. And after taking into account the driver's estimated expenses like maintenance, gas and vehicle depreciation, that's around $24.25 per engaged hour. On both a gross and net basis, median driver earnings are higher than they were in the second half of 2023, as we discussed in our white paper on the topic issued a few months back. One reason is that Lyft drivers have more information than ever when choosing their rides. This is significantly reduced ride cancellations by nearly 50% versus a year ago, and that increases the time they spend earning. Drivers can also plan ahead more easily with scheduled rides. It can balance other obligations using our proprietary state within the area filter, they can tap into priority mode to stay busy during off-peak periods, and drivers now have access to a more streamlined process to appeal being deactivated, which addresses a long-standing pain point by getting them appeal results faster. Our goal is to lead the industry on making it great to drive with rideshare and it's resulting in a great -- greater driver preference. For example, thanks to the new earnings commitment that we released, Lyft drivers now know they will always earn at least 70% of the riders fare each week after external fees. Here's the punch line. Since the launch in February, drivers perception of pay fairness has improved significantly with 75% telling us they have a better understanding of their earnings. The data shows our commitment is helping us attract and retain drivers and increase driver hours. Additionally, following our nationwide rollout of Women+ Connect in the first quarter, women and nonbinary driver activations increased by nearly 24% year-over-year. This has continued to be one of Lyft's highest-graded features and most drivers do tell us who use it tell us feel safer when driving, which is super important, one of our key objectives. As a result of all of these moves, Lyft had more drivers use our platform in Q1 than we've had in about 4 years, and driver hours have returned to 2019 levels. And I can tell you, in addition, that over these past few weeks, driver hours have reached new all-time highs. That is the result of our customer obsession for drivers. Now let's talk about riders. Over the past few quarters, we focused on giving them far more reliable -- far more reliable rideshare experience with better -- with more and better products to choose from, for exemple, pickup times in Q1 were the fastest they have been in 4 years. By the way, if you're interested in more examples, please ask me about that during Q&A. Meanwhile, thanks to a ton of behind scene work, riders are now experiencing far less of something they really don't care for Primetime, which many people know as surge pricing. This means prices for riders have become more stable and more predictable, and that leads to greater repeat use. A good example of where you can see our rider and driver obsession really working well and coming together is in Canada. Over the past year, we've brought our focus on customer obsession to this market, and it's already paying off. For context, Lyft operates in 5 of Canada's largest cities as well as in about 13 smaller ones. As we have begun to apply our customer obsession to those markets, we've doubled rides and more than doubled new rider activation and driver hours, Q1 year-on-year. These results tell us a couple of important things. One, drivers and riders are hungry for choice and our customer-obsessed approach. And two, there is opportunity for us outside the U.S. over the long term. Finally, I'd like to update you on Lyft Media, which offers a unique value proposition to brands as they look for new ways to connect with customers. Lyft Media had a great quarter, with revenue growing by about 250% year-over-year. And we really like the mix we're seeing with about half of our business coming from repeat customers like NBCUniversal. We've also added several new customers including

Thanks, David. Good afternoon, everyone, and thanks for joining us today. I'll start with my usual reminder that unless otherwise indicated, all income statement measures are non-GAAP and excludes select items that are detailed in our earnings materials. Before I dive into our results for Q1, I want to take a moment to reflect on how far Lyft has come over the past 4 quarters. We've established a strong foundation for profitable growth. Our cost structure is in the right place. We've delivered 4 quarters of positive adjusted EBITDA totaling nearly $260 million. We've better aligned our financial disclosures with our strategic priorities, and we've begun to generate positive free cash flow. All of this progress and momentum tracks with the directional guidance we've provided for the full year 2024, including an improved outlook for free cash flow conversion for the full year and it sets the stage for our Investor Day next month. Q1 was another solid quarter, consistent with our expectations. We executed well and more drivers and riders chose Lyft. The result was more rides and better service levels. In particular, driver hours increased by more than 40% year-over-year and ride frequency, referring to the average number of rides per active rider was the strongest it's been in 4 years. We also saw continued sequential momentum from Q4 to Q1 in driver hours, ride intents and frequency demonstrating that we continue to improve execution quarter by quarter. Now let's turn to our performance for the quarter. We supported 188 million rides and 21.9 million active riders. Total rides grew 23% year-over-year, reflecting strong demand across use cases. Growth in early morning commute and weekend evening trips was particularly strong, which is a continuation of the trends we saw in the back half of 2023. Active riders grew 12% year-over-year, reflecting an improvement in rider retention along with an increase in new riders. Gross bookings were approximately $3.7 billion, up 21% year-over-year. This reflects strong rides growth, partially offset by lower total prices year-over-year, reflecting lower levels of Primetime given the significant improvements in the health of our marketplace. Revenue grew to $1.3 billion, up 28% year-over-year, reflecting those same dynamics. As a percentage of gross bookings, revenue increased year-on-year and sequentially, reflecting lower incentives per ride. So let me provide some additional color here. David talked about how Lyft is leading our industry in transparency and choice for drivers and how that is translating into greater driver preference for Lyft. We see that in the number of drivers choosing our platform and the growing number of hours they're spending engaging with our app. In Q1, the median U.S. driver hourly earnings, including tips and bonuses, increased sequentially on both a gross and net basis. And we talked a lot about our focus on operational excellence. Another great example of that is how we're helping drivers anticipate rider demand. So they can be at the right place at the right time to be able to optimize their earnings. In our business, the combination of increasing driver preference and increasing drivers visibility into rider demand is incredibly valuable. It means we can be more targeted and efficient in how incentive dollars are spent, even as drivers earn more. The result is healthy profit growth while operating competitively with laser-like focus on customer experience. Now let's turn to our Q1 expense. Cost of revenue was $747 million, up nearly 40% year-over-year, driven by higher ride volumes along with higher per ride insurance costs, which reflect last year's third-party insurance renewals. Operating expenses were $500 million, up roughly 8% year-over-year. As a percentage of gross bookings, operating expenses were approximately 14%, an improvement of nearly 2 percentage points versus Q1 2023 driven by our lower fixed cost structure versus last year. Adjusted EBITDA was $59 million, which as a percentage of gross bookings was 1.6%. Relative to Q1 of last year, our adjusted EBITDA margin has more than doubled as we benefit from efficiencies in our marketplace and operating expense leverage. We ended Q1 of 2024 with a solid cash position with unrestricted cash, cash equivalents and short-term investments of approximately $1.7 billion. In the first quarter, we generated positive free cash flow of $127 million, and we continue to take a prudent approach to managing our balance sheet. In Q1, we took advantage of favorable convertible debt market conditions to raise approximately $460 million of new convertible notes that will come due in 2029. We used the majority of those proceeds to retire a portion of our bonds coming due in 2025. Turning to Q2. We're off to a good start. We continue to see strong demand for rideshare from drivers and from riders. And as the weather has gotten better, we've seen more bike and scooter usage, which is additive to both rides and active riders on a sequential basis in Q2. As the quarter progresses, we'll continue to focus on great execution to connect customers with the experiences they love, from music festivals to pride celebrations and more. Additionally, with graduation season and summer travel just around the corner, we're focused on enabling a great airport experience to capture more of these rides. Now let me review our outlook. For the second quarter of 2024, we expect gross bookings of $4 billion to $4.1 billion, up 16% to 19% year-over-year. This assumes rides growth of approximately 15% year-over-year. We expect adjusted EBITDA of approximately $95 million to $100 million and an adjusted EBITDA margin as a percentage of gross bookings of approximately 2.4%. Turning to what we expect for full year 2024, our first quarter results and our second quarter guidance inform our perspective on the year. We continue to expect total rides growth in the mid-teens year-over-year with gross bookings to grow slightly faster than rides also on a year-over-year basis. We expect an adjusted EBITDA margin as a percentage of gross bookings to be approximately 2.1%. Turning to free cash flow. We remain on track to generate positive free cash flow for the full year. Given our improved visibility into the first half of the year, we now expect at least 70% of adjusted EBITDA to convert to free cash flow for the full year 2024. As a reminder, you should expect our quarterly free cash flow conversion levels will vary, driven primarily by the timing of certain payments. To give you some perspective on the cadence of our cash flows, based on what we see right now, we expect our free cash flow for the full year will be weighted more toward the first half of 2024, as in the second half of the year, particularly in Q4, we expect to incur cash outflows related to our third-party insurance renewals. With that, I'll bring our prepared remarks to a close. Over the past year, we have made significant progress building a customer-obsessed and financially healthy business. The team continues to execute against high standards, and we see a lot of runway to drive profitable growth. We look forward to seeing you all at our Investor Day. And with that, operator, we're ready to take questions.

[Operator Instructions] Your first question comes from Nikhil Devnani with Bernstein.

I wanted to ask about growth in your investment cadence. You're probably growing bookings 19% to 20% in the first half of the year. So my question is whether there's any reason that should slow down in the second half, particularly if you're investing behind it? And that's my follow-on as well. It looks like sales and marketing stepped up a bit in Q1. Was this just a one-off because you had the take rate capacity? Or is this our new normal on the investment intensity of the business going forward? Just trying to put your top line into context with your marketplace investments.

Yes. Nikhil, I'll start with that. I'll probably start by just kind of going back and reframing our full year guidance for top line growth for 2024. So starting with rides. We reaffirmed our guidance for mid-teens rides growth year-over-year versus 2023. And I'll just reiterate here that mid-teens is a range. For the second half of the year, we expect rides growth to be approximately 15%. And then again, on the gross bookings side, no change to our outlook for the full year. We expect gross bookings to grow slightly faster than rides. So hopefully, that gives you a little bit of a sense for the first half back half cadence. And then the second part of your question with respect to sales and marketing, I might just start by framing this. We've anchor on growing our gross bookings and then growing our adjusted EBITDA as a percentage of gross bookings. And within that, as it relates to the way that we deploy total incentives, as you know, the marketplace is dynamic. So we will make trade-offs between contra revenue and sales and marketing incentives in a given period of time. And in Q1, there's a continuation of us just seeing good opportunities to invest behind some of the areas of growth in the business. And so that does have an impact on our sales and marketing line in Q1 '24.

Your next question comes from Eric Sheridan with Goldman Sachs.

I wanted to step back and ask maybe a bigger picture question of -- David, you've talked before about realigning brands and product innovation and away from price. Maybe can you frame up some of the key initiatives you're most focused on to move the needle inside the mobility business as you look out not only to the remainder of this year, but out towards a multiyear view about repositioning brand and product?

Sure. It was Eric, right? Yes. Great to hear from you, Eric. Yes, let me take a big picture approach and then I'll kind of zoom in on some of the particulars and reflect a little again on Q1 and the rest of this year to start. So it's so interesting to see what the growth drivers are of our business. One thing we should say is there is some -- there's still some secular growth going on, right? And we just -- and we see it every day, right? We see more bosses trying to get their employees to come back to work. We see concerts being super exciting to people. It's really interesting when you look at some of the drivers of growth in Q1, we saw commute, obviously, strength there, but we also saw what we call internally party time which is basically after 5 on Friday and Saturday night. That was up 26% year-on-year. And so what that shows you is that people are getting out. And it's not just a post-COVID thing. It's a connecting -- I've got a whole thing I can talk about, but the importance of bringing people together and how important that is for sort of mental health and sort of societal well-being. So anyway, that's great to see. And then when you look at what Lyft actually does, there are a couple of things, I think, that are super important before I even get to brand. I think first is around operational excellence. Now we gave -- we provide and sort of support about 2 million rides every single day, right? So that means that even small differences in how fast pickup happens, or exactly what pricing is or -- so on and so forth, has an enormous, enormous impact. And so that also drives growth, primarily by the way, in repeat, like we're actually seeing great indications around loyalty, people who are regular Lyft users using us more often, it's actually where we see quite a lot of growth. So that shows -- and people -- that makes sense, right? Because if you've taken a Lyft ride and you've gotten picked up, our ETAs now are basically as fast as they've ever been. They're faster than they were about 4 years ago. And we're down to sort of like the -- anyway, very fast. I can tell you more about that if you interested. So -- so that operational excellence is a big, big deal because it pays dividends every single day, particularly for repeat use. And then on top of that, you can layer real innovation for new segments or new use cases. So these will be familiar because I've talked about them before, but Women+ Connect is incredibly important to us, incredibly important to us. We have -- one of the stories I heard recently was a woman saying, "I can now finally take a nap in the Lyft." A nap in a Lyft, something that men have enjoyed for years and women haven't so much. So -- and we can see what that does both on the rider side, but also at the driver side, something like 24% of our new -- I think we've got about 20,000 new Women+ Connect drivers just in the last couple of months. And it's some of 24%, maybe even 26% of a meaningful percentage of our new applicants to be drivers are women higher than we've seen in the past. So that's awesome. And then, of course, our 70% earnings guarantee, also incredibly important to drivers. So those sort of innovation levers really do drive incremental growth. And then we have these partnerships, right? Partnerships is an incredibly important part of our strategy. It represents around 20% of our rides right now, and it's everyone from Chase, you can get Sapphire 10x points on if you're a Chase Sapphire member or Delta, we're one of only 2 partners that allow you to earn Delta SkyMiles on our platform. So that's also very important. And then we come to brand, which is a start, which is we are very conscious that we're in a very, very nice position with our brand, people -- and I drive myself. And when I drive, I ask people why they use Lyft and a good percentage of them say, "Every single time, I just like you guys better. I like you guys better." Now we have some work to do internally on how to crisp up the messaging around that, if I'm honest. So there's more work we can do there. But at the end of the day, we're going to have a very, very nice position there. And I'll end by saying I was in Canada a couple of weeks ago visiting our Toronto team and I visited with a number of different people, including some drivers there and political figures and so on and so forth. And they were so enthusiastic about our arrival because they kind of like us. They like what we stand for, they like our values, and they like the choice they're going to get. So it's a very long answer, but it really is exactly the way we think about it. Our strategy, we really see is working. Our strategy is working. Customer obsession drives profitable growth. And we see a lot of opportunities all across North America over the coming years. In some ways, I feel like we're really just getting started there.

Your next question comes from Mark Mahaney with Evercore.

Two questions. David, there's been some controversy recently about the Tesla autonomous vehicles and the impact that could have on ridesharing companies like you and Uber. Just your latest thoughts on how investors should -- investors should think about the autonomous risk rideshare companies? And then I think you teased in your earlier prepared comments about providing more rideshare improvements in addition to the faster pickup times, any others you'd roll out in terms of how the experience has gotten better for either drivers or riders?

Yes, sure. So on the first, I would actually characterize it a little differently. I wouldn't say -- okay, I understand why you asked the question the way you did around Tesla, but I wouldn't actually qualify it as more of an opportunity than a risk. And here's what I mean by that. So autonomous cars, let's step back [indiscernible]. Autonomous cars are definitely coming, right? And if you're in San Francisco, you know it, you see it every day. Sometimes you see good things. Sometimes you see things are a little bit strange. But at the end of the day, they're clearly on the scene. But it's one thing, and I say a very expensive one thing to build a an autonomous vehicle, very, very expensive. It's expensive to build it, billions of dollars of R&D. It's expensive to operate it. These things are not free to operate. Absolutely not. They break down, they have repairs, they have shadow drivers in the back all sorts of things. So that's expense that somebody's got to bear. And then it's also very expensive to build a rideshare platform. And I think it's maybe tempting or maybe it's -- I don't know, easy, let's say, to hear someone say, "Oh, well, you just build an app. And you think, well, that's a rideshare network." Well, no, that's not a rideshare network. A rideshare network involves conversations with every airport in the United States to figure out how did you pick up and drop losses every municipality in the United States. It's pricing 2 million times a day. It's picking things up 24/7 even in bad weather, even when it's snowing. It's figure out how to do supply-demand management such that you get cars in the right place at the right time and so on and so on at quite a large scale. And this is obviously expensive. We spend a lot of money on it every single year, as you guys well know. So -- so when I look at it that way, and I look at -- and then here's where I'll kind of finish on that. If you think of autonomous, here's maybe the way I might break it down. Somebody has to build that technology, right? And they're companies that are just focused on that. Somebody then has to build the cars, either bring their own homegrown technology in the car or take somebody else's technology. That's the second thing. Then somebody's got to own these cars, right? In the Lyft business model, of course, we don't typically own the car. That's -- drivers own their own car, which is great. I mean it's very capital efficient for us. We can put 2 million rides on the road every day and not effectively own a single car assets. That means we don't have to spend hundreds of million dollars in depreciating assets called cars. And then someone has to build the network and operate the network, and that's what we do. So if I look at it in that context, I get excited about autonomous cars because I think great, it's going to be another way for people to get around. You can sort of think of it as another car that we could run into our network. And personally, if I were sort of running the world, I would sort of think of companies specializing maybe in one of those areas. And the companies that try to do more than one of those areas might find it very expensive and maybe not such a great use of capital and resource focus. So that's sort of general thought there. And you definitely ask another question. Oh, yes, yes, yes. I mean so this is where as the CEO. Man, I'd love to talk about stuff coming out, and I'm just completely unable to. But what I can tell you is this. So frustrating. Just keeps me up anyway, but what are you going to do? So -- but here's what I can tell you. So if you look at, for example, our on-time pickup promise, this is another innovation that I just think we're super proud of. So when we launched it last year, you remember the promise. The promise is if we're more than 10 minutes late to pick you up for an airport ride, we will pay you up to $100, no questions asked. Now we've done 2 things since then that are both pretty amazing. The first is it is now available in just about every major airport in the country. When we launched it, we were in the subset now or in just about every major airport. Second of all, we look very closely at that remediation rate, right? What percentage of rides end up not going well? When we last talked about it, that number was about 2%, now is sub-1.5%. And that shows you how operational excellence can drive so much value. And by the way, when we do end up paying this 1.5% of the time when we do end up paying, those riders end up taking another Lyft in the next couple of weeks more frequently than people that, that hasn't happened to. So it's just, I think, a good example of how the innovation we're doing really does pay back for riders and drivers in this case, giving drivers more business and riders more reliability. So you can expect to see more of those. We mentioned in the earlier remarks, some -- as we go into the summer, some other interesting things with airports. Yes, this is why I just have to stop talking or else I'll get myself in trouble. But that I hope gives you a little flavor on what we're working on.

Your next question comes from John Blackledge with TD Cowen.

Two questions. First, you specifically mentioned Canada's strong growth. Just curious, any other geos you would call out that drove the better-than-expected results? And then the second question, just coming back on the free cash flow conversion. Just any further color on what drove that uptick to 70% from initially 5%?

Yes, let's tag team on this one. On the first, really nothing to report. We're still seeing the West Coast is still kind of growing nicely just because in a sense it was held back a little more than some of the rest of the country. But no, we're really actually seeing nice growth kind of across the board, nothing significant there.

I'll talk out free cash flow and sort of what drove the update to our outlook. So fundamentally, as we went through Q1 and here at the start of Q2, we began to get better visibility into the expected payments that we'll make related to our legacy book of insurance and that coming in a little bit better than we had initially anticipated in our original plan when we talked about full year free cash flow conversion. So that's what's really behind the change in our improved outlook for the year, a little bit better visibility into Q1 and Q2.

Your next question comes from Ken Gawrelski with Wells Fargo.

I want to touch on pricing and industry pricing. First, could you reiterate your strategy with respect to overall pricing and how you view that. And David, maybe could you just talk about any changes there may have been in the pricing environment in 1Q into 2Q, there's been some speculation that one of your -- that your competitor may have raised prices in conjunction with the annual insurance renewal at the end of 1Q. And then maybe on that same point, more broadly, could you talk about the elasticity that you see -- as maybe you could see this in your various modalities? Investors often debate the elasticity in this industry. And we would love to hear your -- any highlights or key anecdotes that you could provide?

Thanks, Ken. I'll start off here and sort of talk about pricing and what we're seeing. So you asked -- you started your question just by wanting us to reiterate what our philosophy or approach is around pricing. And that's really that our goal is to operate in a healthy and competitive way. That's how we think about it, bottom line. In Q1, we did see some higher pricing in the back half of the quarter. However, I think what's important to understand is that was partially offset by lower prime time David talked about it in his prepared remarks quite a bit, really driven by the health that we're seeing in the marketplace. So when you net the 2 of those together in Q1, the impact of pricing was really quite modest. It's important to remember that the price of rider experiences is the combination of many factors, right? It's mode, it's mix, it's distance. It can also include Primetime depending on the supply conditions in a certain geography at a certain time. And I think it's important to remember that prime time coming down is a good thing. It means that there's more stable, more predictable price to the rider and that translates into more rides. So on a full year basis, again, we talked about gross bookings growing slightly faster than rides, nothing has changed there. Nothing has changed in terms of the way that we contemplate, what informs that assumption. It's a number of variables, including ride type, ride mix, the growing mix of non rideshare businesses and then competitive pricing, which is the foundation of our philosophy. And David, I don't know if you want to add the second part?

Just a little bit. I mean that is for sure 90% of it right there. One, I would say, strategy we have is that any time a rider opens the app, they can find a ride that works for them, right? And so it could be a standard ride. Of course, that's the majority of the business. It could be a wait-and-save ride, which I think is just a -- I love it because it allows people who want to price shop to sort of price shop right within our app and to save a little bit of money by giving up a little bit of time. And that actually works really well for a lot of people. It's a lot of people -- some people are busy all the time. Some people have got a little bit more flexibility, and they trade that for a little extra money. So that's great. And then we have various other modes that are sort of higher value, Extra Comfort, which is actually a relatively new mode, and then we have what we call the high-value mode, kind of the black side of things. Interesting, this is a little bit of a side point, but you might find it interesting. It's actually in our high-value modes that have grown slightly faster than the rest this quarter, which I think is just sort of an interesting commentary on, I don't know what, how people want to spend their money. But the real point here is our price -- sort of strategy is just like any retailer, let's say, with multiple -- or maybe manufactured with sort of multiple product lines, we want to have something that kind of works for everybody. And so we work the whole mix. And then the end where Erin ended, in some cases, our job is to try to bring prices down, right, most notably around Primetime. Any time we have Primetime, it's a defect, right? It's a defect. It means that we didn't have exactly the right number of drivers where we needed them at exactly the right time. Some of them are unavoidable, right? It's very hard to predict a flash storm, for example, that's quite hard to predict. But there are other things that are not so hard to predict. And so as we improve our forecasting internally, which is actually an enormous effort. You don't talk too much about it externally, but enormous effort. We do it so that we can actually bring prices down in a funny way because what we want, of course, is riders and drivers to match at the highest volume they can and that clearing price tends to be sort of our standard price at every mode.

Your next question comes from Michael Morton with MoffettNathanson.

Could you talk a little bit about the opportunities around take rate and then maybe a deeper dive into the drivers behind it? You've spoken in the past about the health and efficiency of the marketplace being one driver, but would love what you could potentially quantify or maybe impact the contribution of the advertising business currently or going forward? And then if I could sneak in one just like an accounting one. For G&A, it was just a tad higher than expected and would love to hear if there was any onetime in nature related, maybe legal contingencies or insurance accruals? Or is this a reasonable run rate for the year?

Michael, this is Erin. I'll talk a little bit about revenue margin and then your question on G&A, and I'll ask David to join me and talk a little bit about the media business. So as it relates to revenue margin, again, this is really the healthy outcome of operating competitively with a focus on customer experience. So on the call, we talked about how we're working to increase drivers preference for Lyft and then help them maximize their earnings by helping them identify when and where rider demand is going to be. And this is why drivers are earning more. And -- and that is really driving why we're able to be more efficient with rider -- with -- sorry, contra revenue incentives per ride even as drivers earn more. To give you a little flavor of how we see this playing out in Q2, we think that revenue margin will be reasonably similar as I talked a little bit about in my prepared remarks. We are entering the quarter continuing to be healthy marketplace trends. And then, of course, in the second quarter and into the third, we see an increase in bike and scooter usage building in Q2 and then really peaking in Q3. And that brings along with it a higher revenue in. So hopefully, that reemphasizes a little bit of our prepared remarks and gives you some color for what we see here in Q2. As it relates to the G&A line, there's a good portion of that G&A line that's fixed. There is a portion where there are some corporate expenses and can be some accruals, for example, that can occasionally result in some lumpy behavior. And that's really what you're seeing between Q4 and Q1, the change in the tax accrual in particular is fundamentally what's driving that. And then I'll turn it over to David to address your -- the third part of your question around media.

Yes. And I'll take -- it's Michael, right? Yes. So let's talk about 2 things kind of as they intersect. One is media and then we'll go back to drivers because I think that's a great place to sort of settle on. So on the media side, it's -- so it's such an interesting business. And the reason is because there are only so many meta ads and Google AdWords and so forth that you can buy before you've sort of saturated that channel. And so brands who increase and TikTok appearances and so on. So your brands are so interested in trying to figure out new ways to connect with their consumers, their own customers in different ways, right? Because again, same old, same old, well, everyone starts to get a little tired of that. So what's so interesting to us is looking at the ways that the brands who have come to us are being results over fairly short periods of time, such that they are already returning even though this business is still relatively new. And I'll give you just a little bit of color, and then we'll tie back to the driver in a second, but a little bit of color. So you served -- there are multiple ways you could be served up an ad in a Lyft experience. It might be on a tablet, it's in the car, but most likely it's on the app. And typically, you -- a 15-minute ride. People actually check their app about 9x, right, sort of the -- I guess to say adult equivalent are we there yet kind of thing. So anyway, you're looking and then the question is, well, what are you doing? And the answer increasingly as well, if we can serve you an interesting relevant ad, and it has to be both of those things, then you'll actually tend to watch it, which is why -- and then often, you'll act as a result. So our click-through rate, I think I'm getting this right, it's about 10x the average. We just introduced video ads, too, and those are particularly interesting to people because it's short-form video when well done, turns it to be incredibly engaging. So -- all that's a long way of saying, I think there's a lot of -- and then of course, we have first-party data, right? We know where you're going as a rider. And so you may have seen some of the tests we're doing now, a number of tests we're doing in the background that kind of know either where you're going or the type of place you might want to go and maybe it'll give you a coupon to go there. So as I was saying, I think there's a lot of opportunity here. I think it's quite accretive. I think it's a good customer experience, a good partner experience for sure. They're getting good value. And then to the driver point, we pay our drivers when advertising happens, particularly when it's on a tablet, but more generally, it allows us to have more margin to sort of play back to drivers. And so -- and that's simply one of many ways an [indiscernible] drivers and stop. We're so focused now. And I think this really is sort of a manifestation of our customer-obsessed strategy of saying, how can drivers earn more? How can drivers earn more, right? There is a ceiling, right? The ceiling is called the fare, the rider pays, right? Well, I guess, plus media if you want to go crazy. But we have to take a little bit of money to operate the platform. We've got to pay insurance and so forth. So then the question is well, how can drivers earn more? And the answer is they can get more rides, those drives can be more profitable for them because maybe media or other sorts of things, they could be positioned closer to riders as opposed to long pickups because the pay tends to favor them a little bit that way. We can negotiate on their behalf for better gas prices. We actually do this. We've got a program that gives you $0.25 up to $0.30, I think, off a gallon of gas for certain things. So there are all sort of things we can do that increased drivers, both gross and net earnings and we are really taking a sort of a whole of company approach to make sure that we can do that because we know the more drivers we have and the happier they are, the better preference they have, the more they'll come back. So I know we covered a whole lot there, but I hope that gives you some insight.

Your next question comes from Doug Anmuth with JPMorgan.

Just given the strong supply in the marketplace, can you just talk about how you think about the efforts to drive the 40 million annual users higher versus increasing frequency among the quarterly active rider base that's roughly half that number? And then separately, you've often highlighted partnerships, and I know that remains a key priority for '24. We've seen some industry activity on that front. Just curious how you're thinking about opportunities in adjacent categories?

Yes. Maybe I'll take that one, and then Erin and I can tag team on that if we want to. So -- okay, I remember the partners. Oh yes, yes. So a couple of data points. So on active riders, so you're absolutely right, Doug, of course, to sort of distinguish between a new rider and an existing rider and kind of what that looks like? And just to emphasize one quick point. We mentioned it briefly, our active riders -- total active riders are up about 12% year-on-year, which is the strongest growth rate we've had in 6 quarters. So -- so that's great news, right? Because that shows that we're an attractive proposition to people day in day out. That's awesome. Now where we have actually seen more -- so -- and both matter, right? So new and existing, they both matter. There's-- you don't get to choose just one out of 2. Our focus strategically over the last year has actually been more on driving frequency. And the reason that is true is because this is something actually [ Scott Cook ] at [indiscernible] said years ago. He said, "First, you have to -- first, you have to work on the -- do the right thing, and you have to do it right." So doing the right thing meant, getting driver pay, right, getting pricing right, getting ETAs down to a great point and so forth. Because if you don't get that right, then you're going to bring a bunch of new people on the platform and they're just going to churn out. So we've done exactly the right thing. We've really focused on that operational excellence to get to the point where we are providing a very, very good experience. I'd say, objectively significantly better if you look at ETA times and so forth than a year ago. So -- and we've seen the results. Our frequency is increasing quite significantly, which is wonderful. It's a really good indicator, early indicator when your heaviest users are using even more than you're doing something right. And they're the ones that have the most exposure to what you're doing. And so then over time, the focus can kind of broaden to how can we start to attract new people to the platform. And there are many ways to do that. Some of them are very familiar to all of us, the referral bonus and so on and so forth. Others are maybe a little more innovative and those are some things we're sort of cooking up in the background. But that leads me very naturally, I think to your second point around partnerships. I think here's another -- I guess I'm full of chestnuts today. So I used to spend a lot of time in Africa and Africa, a lot of the countries there have this sort of saying that says, "If you want to go fast, you go alone, but if you want to go far, you go together." And so order for us to go far in our customers' lives, riders' lives in particular, I would say, partnerships really matter, right, because people have complicated lives. They take airplanes, they all sorts of other things. And so we will continue to invest in our partnership strategy. It's been one that we've been working on for years, and you'll see a lot more. I don't have anything particular to announce there, but I would certainly say, again, just sort of almost schematically partnering with someone who is a values aligned and kind of customer-obsessed aligned partner can be really helpful because it can mean that we can get new riders that way.

Your next question comes from Benjamin Black with Deutsche Bank.

Great. Obviously, there have been quite a few moving pieces related to sort of the regulatory backdrop. You have [indiscernible] in Massachusetts, Minneapolis issue? And then obviously, the looming Supreme Court decision on Prop 22 in California. So I guess the question is, how do you feel positioned for these upcoming challenges? And sort of what's your strategy if potential reclassification is required? And then just one on mix and mode. I think you mentioned this as one of the potential drivers of improvement to your gross margin profile over time. Just can you dig into a little bit of the progress there? Can you give us some examples of some of the strategies that are showing sort of notable progress?

Kristin, our President will start with the first, and then we'll tackle the second separately.

Sure. Hey there, this is Kristin. Happy to answer your question, and I'll take each of those in turn, Massachusetts, Minnesota and then California because we really have a particular strategy designed specifically for each market. In Massachusetts, we will have a trial starting with the Massachusetts Attorney General in another week. But in parallel, we have 2 potential paths that we're driving a legislative proposal and a ballot initiative as well. And so we really think that we have multiple options to continue operating in that market because we both have the legislative path, and we have the ballot initiative. And so -- in that market, we really want to focus on drivers voices being heard and supporting drivers voices who tell us that they prefer independence and flexibility to traditional employment. In Minnesota, we're working closely with city officials and state officials to find a solution. We're optimistic that we'll be able to do this. If we can't do this, we will be forced to stop offering rideshare services on July 1 but that would only be because we wouldn't be able to deliver the customer experience that drivers and writers want and expect with respect to the current rates proposed. However, we will still keep looking to work toward a new rate structure. And then in California, just a reminder there in California, the California Supreme Court is hearing all argument in a couple of weeks on the very narrow issue of whether Proposition 22 is consistent with the California Constitution. So that initiative itself is not about reclassification. It's just about whether the ballot that was passed a few years ago, overwhelmingly is constitutional. And so in that case, we don't have any immediate change to drivers independent contractor status, and we will just continue again to listen to customer voices. We know that drivers value Prop 22 deeply. And we also heard from the California people in 2020 that they value driver independence with respect to passing Prop 22 by a wide majority.

Thanks, Kristin. And then on your second question, Benjamin, about mode mix. I guess what I would say -- because I think you're maybe looking for specific examples. I think one of the ones that -- I'll mention 2 very briefly. I wait and say, if I've mentioned before, nothing really new to add there, but it's a significant and important part of our business. And I -- as I said before, I like it because I think it gives people a way to save a little bit of money, which -- who doesn't like that. On sort of the exact subside, we have actually a new mode that we launched a couple of months ago and there's still kind of fine-tuning called Extra Comfort. I think what's so interesting about Extra Comfort, it's a nicer -- slightly newer car, slightly nice for a car with a more experienced driver. And I think you can sort of, by analogy, you can think of it as a kind of [ Comfort+ ] type kind of upgrade on an airplane in between the business class and the economy. And if you look at what airlines have done is actually quite successful for them. And it's because customers like it, right? They like the extra leg room in that case and priority boarding and these sort of things. And so we're thinking along the same line, how can we create something that has that kind of value for our riders every day. And we've seen nice kind of early adoption of it. It's still -- it's a relatively small mode in the grand scheme of things. But I think it's one we can build out as a sort of affordable everyday luxury. I'll tell you, interestingly enough, one of the highest use cases is actually going to the airport because it's a time where you've already got a lot of stress in your life. And so you sort of want the kind of quiet or bigger ride, a little bit more space for luggage and so forth. So I think it's an area again when I talk sometimes about, let's say, innovation being a little bit stale in this category. I'm not saying this is the most innovative things that we're working on. But I think it gives you a sense that there is -- there are new customer use cases that we can develop for and new modes and I think Extra Comfort is good example. So I recommend anyone on this call to download Lyft immediately and -- but Extra Comfort for your next ride.

Your next question comes from Stephen Ju with UBS.

Okay. So David, Erin, I wanted to tie your comments about use cases to your prior comments about frequency. So just doing a simple math of, I guess, rides divided by active users. It seems like folks took about 8.5 rides during the quarter. I think prior to the pandemic, I think it was probably 9.5 or so ballpark. So can we talk about the use cases like shared rides that are probably no longer in the picture and how much that impacted frequency? There might be some lingering regional considerations you may have to think about. But I guess, more importantly, looking forward, how some of the existing use cases can perhaps now grow faster? Or what new use cases you may be looking at? So I'm looking for reasons to why we should believe the frequency that we're seeing prior to pandemic? Should that be a ceiling? Or should we be thinking that it should be much higher than that?

Oh, yes. No, it's no ceiling. And because it's -- no, no. The whole -- the thing about our -- I keep saying our strategy is working. And what I really mean by that is the more we understand what it is our riders and drivers want, the better we can -- every single day get them that even ahead of their own recognizing it. So let's take the data you were just using. So right now, you're right. Actually, a person who uses rideshare 10 times a month. That's actually quite a heavy user already, right? So let's just start from the fact that a lot of people -- because with any distribution, obviously, you've got tails on both sides, a lot of people who may be using it once a month. Maybe they only use it to go to the airport, for example. So gosh, there are a whole lot of other parts of their life that we can -- without really much creativity at all, simply by reminding them of our existence, we can grow into. And that will just increase frequency just mathematically. And then if you look at the other end, right, if you look at people who are already heavy users, what's a typical heavy user, what might be someone who commutes to the office a couple of times a week. Well, today, maybe the switch between us and the other guys. So maybe there are things we can do to make it easier for them to take more rides on Lyft versus doing something else. As an example, right? And of course, then there's a secular thing, right? As more and more offices, I think, come to realize that there's real value in having people in the office at least a couple of days a week. If you look at the distribution there, there's still quite a few people and maybe some people on this call fall in this category who are only going in the office once a week or maybe even less than that. And I think there's a lot we can do both to work with companies to make it easier for them to partner with us as we do with LinkedIn, for example, or Starbucks, as an example, Delta Airlines example. These are all companies in various different ways, Amazon, that we work with part of their kind of commute strategy to help their employees come back to the office in a way that's more productive than sitting in traffic driving for 45 minutes. So that's just a very long way of saying, I think there are a lot of use cases that we're sort of just scratching the surface hub. And honestly, I would be very, very disappointed in us as a company, if we -- over the next weeks, months, years, can come up with other ways to get people using rideshare in new ways.

Your next question comes from John Colantuoni with Jefferies.

I wanted to start with a strategic one. As autonomous and robotaxi initiatives continue to move forward. Talk about how Lyft is considering approaching balancing autonomous partnerships while maintaining its focus on maximizing driver satisfaction and earnings? And second question, I believe Erin mentioned second quarter guidance assumes 15% rides growth during the prepared remarks, which is a few hundred basis points below the expectations for bookings growth. Can you talk about what's driving the gap between bookings and rides growth in the second quarter? And also walk through how that slowdown in trips growth versus the first quarter breaks down between market share verses broader industry trends?

John, it's David. I'll take the first part of your question and then Erin will tackle the second. So I think maybe the first thing to say is, again, as I mentioned before, autonomous vehicles are going to happen, right? So this is not one of these things where you can sort of decide whether or not they're going to be part of the future. They will. There are too many logistic forces going in that direction for them not to happen. So then the question for us becomes how do we incorporate them into our network. And the nice thing is that we are going to continue to grow as we've been talking about for a long, long time. So there will be all -- and so it's, I think, 100% easy to predict that our network will turn in over time, and now we absolutely are talking about years into a hybrid network, right, where we'll have some driver driven cars and some autonomous cars. I think that's actually very stable for a long, long time, long, long, long time, far beyond the sort of [indiscernible] horizon that we can easily see because there will be riders who only prefer one or the other. There will be parts of the country or even parts of cities that aren't well suited for autonomous, airport being sort of an obvious example or right after a concert, those are very difficult times. There may be seasons where autonomous works better or worse. Autonomous in the snow is quite improving and so forth and so on. So I think there's every reason to believe that this will be sort of a coexistence. And then the question is, will it be a peaceful coexistence or sort of an angry coexistence. I think it will be a peaceful consistence. I think drivers will say, great, there's still a lot of demand for my services. I think there will be other -- and now I'll get a little bit weird to say like, who knows what happens in a couple of years. Maybe there are autonomous cars that in the front seat instead of a driver is -- I always like this example, a cartender, someone is literally making you a drink as you go to your party one night or whatever it is. So I think there are all kinds of interesting -- I think human beings are quite good at coming up with new fundings to employ themselves, keep themselves busy, entertain themselves and so forth. So I don't -- even when I talk to drivers today, I honestly don't feel a lot of anxiety of these robots are going to take my job. Part of them say, "Well, gosh, we've got pretty good sensors on them. So my eyes are 60 years old is [indiscernible]. And they're a pretty good driver. So by the time they're around, I'm going to be long gone and I'm glad someone's going to be driving me around." So I don't know. I think this is -- I think this is going to be fine. I really do. And we're going to continue to focus for drivers and making sure it's the best driving experience absolutely possible. Absolutely possible. How do you earn the most. How do you have the most satisfying experience. And I think that's a great strategy. It's going to be very durable for many, many years.

John, this is Erin. It's hard to follow the visual of a cartender, but let me attempt to do that and just go over our Q2 guidance for rides in bookings. So starting with rides in Q2, we expect rides growth of approximately 15% year-over-year. That implies about 9% quarter-over-quarter. And then for bookings, our guidance is for $4 billion to $4.1 billion year-over-year. That implies growth of 16% to 19% on a year-over-year basis. And on a quarter-over-quarter basis, that's 8% to 11% growth. So hopefully, that sort of clarifies that dynamic both on a year-over-year basis and quarter-over-quarter for rides growth and gross bookings growth that we expect in the second quarter.

This will end our Q&A session. I will now turn the call back over to Lyft's CEO, David Risher for closing remarks.

Yes, thank you so much. I really appreciate your questions and your support over the years. Look, this is just about my first year, you know this. Really just quite an extraordinary opportunity. And I just want to mostly end by saying thank you for your patience with us as we clarify and articulate strategy and a huge, huge, huge thanks to Lyft's team members. We have 3,000 people who wake up every single day, obsessing over drivers and riders and I just couldn't be proud of what we've accomplished. So thanks to all. And we hope to see everyone who can at Investor Day, either virtually or physically. Thank you all.