Lift, Inc. (NASDAQ: LIFT) Q1 2019 Earning Conference Call May 7, 2019 5:00 PM ET
Catherine Buan – Vice President Investor Relations
Logan Green – Co- Founder and Chief Executive Officer
John Zimmer – Co-Founder and President
Brian Roberts – Chief Financial Officer
Conference Call Participants
Stephen Ju – Credit Suisse
Brent Thill – Jefferies
Doug Anmuth – JPMorgan
Mike Olson – Piper Jaffray
Eric Sheridan – UBS
John Blackledge – Cowen
Ron Josey – JMP Securities
Andy Hargreaves – KeyBanc
Michael Graham – Canaccord
Justin Patterson – Raymond James
Tom White – DA Davidson
Good afternoon ladies and gentlemen, and welcome to the Lyft's First Quarter 2019 Earnings Call. At this time, all participants are in a list-only mode to prevent any background noise. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to turn the conference over to Catherine Buan, VP of Investor Relations. You may start
Thank you. March 31, 2019. I am Catherine Buan, VP of Investor Relations at Lifting
Joining me today to discuss Lifting results are Co-Founder and CEO, Logan Green; Co-Founder and President, John Zimmer; and Chief Financial Officer, Brian Roberts. Logan and John will give an update on our business and key initiatives, and then Brian will review our Q1 financial results and outlook. This conference call will be available via webcast on our Investor Relations website at investor.lyft.com
We would like to take this opportunity to remind you of this call, we will make forward-looking statements including statements to the expected performance of our business, future financial results, strategy, our partnerships, and expected launches of products and services, long-term growth and overall future prospects. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors included in our final perspectives for our initial public offering filed with the SEC on March 29, 2019 and the risk factors included in our Form 10-Q that will be filed before May 15, 2019. 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 as of today we are obligated to update them except as required by applicable law.
Our discussions today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release and supplemental materials, which was furnished with our Form 8-K filed today with the SEC and may also be found on our Investor Relations website at investor.lyft.com
I would now like to turn the conference call over to Lyft's Co-Founder and Chief Executive Officer, Logan Green. Logan?
Thanks, Catherine, and thank you to everyone for joining today's earning call. Q1 was an incredible kick-off to a big year for lifting. We achieved a record first quarter with $ 776 million in revenue, representing a 95% year-over-year growth rate. At the same time, adjusted EBITDA margin improved significantly to a loss of 28% versus 60% the year before representing an absolute 32 percentage point improvement year-over-year.
On the back of strong execution and momentum, we're excited about our investments and initiatives this year that will drive future growth. Our momentum was driven primarily by three factors. The first was product innovation. Second was market growth; The first factor, product innovation was highlighted by the rollout of the Lyft matching platform. In Q1, we rolled out a service that we've been working on for over a year called the Lyft matching platform. This handles every single driver and passenger pairing on Lift. The results have been significant, better matches resulting in more rides with fewer cancellations leading to incremental revenue and margin improvement.
The real magic is unlocking entirely new product experiences such as Shared Saver. This is a new and improved version of shared rides that allow riders to get and even better price by walking a few blocks or waiting a few minutes. For example, if two riders are two blocks away from each other and are heading to the same place, Shared Saver would ask them to walk one block and meet on the same corner. This would allow a driver to pick up both riders without any additional detour. Shared Saver is now available in three markets with more coming soon.
Additionally, we have grown high value modes, Lux, Lux Black, and Lux Black XL, twice as fast as the rest of our business year-over-year . This is particularly exciting given the higher margin profile of these rides. Those are just a few of the big wins from Q1 and we expect to continue further gains in the year ahead.
The second factor was continued market growth. The overall market for transportation-as-a-service continues to grow as more and more users turn to Lyft. The world is at the beginning of a secular shift away from car ownership towards transportation-as-a-service and ride-sharing is just the tip of the iceberg. Transportation-as-a-service is replacing car ownership for the growing portion of the population.
In fact, according to our most recent economic impact report, 35% of Lyft users do not own a car at all. As part of this trend, we saw active riders grow to $ 20.5 million, up 46% in Q1 versus last year. That said, it's still just the beginning. No matter how you size the market, it's just a small fraction of all vehicle miles traveled.
And now I'll turn it over to John to review the third factor behind Lyft's growth, our strong focused execution.
Thanks, Logan. I want to highlight three areas of execution that are helping us grow at scale. One, we are singularly focused on transportation; two, we are investing in our driver community; and three, we are successfully executing on our enterprise strategy we call lifting business. It is our singular focus on consumer transportation that has allowed us to go deep and build competitive advantages along the full stack of offerings.
For example, we have exclusive bikeshare operating contracts in major cities, is exclusive contracts to run bikeshare programs, span of cost key cities including New York until 2029, Chicago until 2028, San Francisco until 2027, and Boston through 2026. We are now starting to bring together our customers' full transportation experience.
Just last week, many New Yorkers received the ability to book Lift your own city bikes directly in the Lyft app, and we'll be expanding access to more users in New York as well as other markets in the weeks ahead. This focused execution allows us to continue delivering the best unified transportation experience for our customers.
Next, I want to tell you about how we are investing in our driver community. When you take care of drivers, they deliver a better hospitality experience to riders. From day one, we have pioneered key innovations and investments for our driver community. First with tips and later with same-day pay, and more recently Express Drive, our flexible vehicle rental program. In Q1, we introduced two new important programs, Lift Direct and Lift Driver Centers
Lyft Direct is a no-fee bank account and debit card tailor-made for our driver community. Drivers are able to instantly access their earnings after each ride, plus they get cash back on everyday purchases including gas and groceries regardless of their credit. Additionally, the card includes access to financial planning tools and goal setting features. Next, we have opened our first Driver Centers, offering significant discounts on maintenance, repairs and car washes. This is a great example of how we use our scale to save drivers money and increase their loyalty to Lift
Last, I want to talk about Lifting business, our enterprise channel. Our partnership covers several categories including corporate partnerships for employee travel, healthcare partnerships for patients to and from medical appointments, national partnerships with airlines such as Delta, SouthWest and JetBlue, university partnerships for student travel with major universities like USC and UT Austin, and financial partners such as Mastercard and many others.
In Q1, we saw continued growth in all of these categories. Specifically, corporate partnerships for employee travel are even faster than less overall business. We have seen some great results from the Certify Spend Smart quarterly report, which analyzes the most recent business expense transactions and vendor ratings data to provide valuable insights on the corporate T&E industry.
For the fifth quarter in a row, Lyft was the top -rated ride-hailing service with an average rating of 4.9 stars according to Certify's Five Star Customer Rating System. And that has resulted in significant momentum. Since Q1 2017, Lift has increased its share of employee ride-hailing expenses from 9% to almost 22%. Lift is now with American Airlines and Delta as the fourth most expensed vendor for business travelers. This is up from number five in Q4 2018, a further indication of Lyft's momentum and the enterprise space. This momentum with corporate T&E spending is significant, because it indicates that our awareness and brand preference is strengthening with many of the most important companies across the country. Their decision to choose Lift is often driven by alignment with our corporate values for sustainability and social impact work, which is a key differentiator.
In November, Forbes cited a study of 1000 Americans. In it, 87% of consumers will buy a product, because they are responsible for issuing them. 88% will be more loyal to a company that supports social or environmental issues, and 92% will be more likely to trust a company that supports social or environmental issues. We see this play out in many areas of our business. In particular, our enterprise channel, where corporate social responsibility is a strategic initiative for the companies we partner with.
There is one thing we are excited to talk about. Today, Waymo announced that they are working to deploy Waymo vehicles on the lift platform. We expect this deployment to start this quarter Q2 and reached 10 vehicles at Q3 signifying an important step in bringing world-class self-driving technology together with our leading transportation network.
With that, I'll hand it over to Brian for our financial results.
Thanks, John and good afternoon everyone. Our first quarter results demonstrate our strong execution and focus on delivering growth while improving operating leverage. Total revenue for the quarter increased by 95% year-over-year to $ 776 million driven by an increase in the number of active riders and the revenue generated on our platform per active rider. The number of quarterly active riders increased by 46% year-over-year to a record $ 20.5 million, primarily due to the wider market adoption of ride-sharing and our initiatives to attract and retain riders. We also believe that the publicity and attention surrounding the company's IPO contributed to the strong increase in a number of quarterly active riders.
As we continue to drive usage and monetization of our platform, revenue per quarterly active rider increased 34% year- over-year to $ 37.86. Before I move on, I want to note that the non-GAAP income statement measures that follow in my remarks exclude $ 894 million of stock-based compensation and related payroll tax. Our restricted stock unit awards are our issues having a time based vesting condition in a liquidity event related performance condition. upon the effectiveness of our IPO, our issues that previously had the time-based vesting condition also with the second requirement immediately triggering the stock-based compensation expense. A reconciliation of GAAP to non-GAAP results may be found in our earnings release.
Let me move to contribution. in the first quarter, contribution margin reached a record 50% up from 35% in the same period a year ago. This increase can be attributed to strong revenue growth and our successful delivery of expenses in the first quarter. These expenses include insurance required to under TNC regulations, transaction processing and hosting. all three cost decline as a percentage of revenue relative to the year-ago period as well as the fourth quarter of 2018. the historical change to insurance reserves is excluded in the calculation of TNC insurance expense for all periods.
Let's move to operations and support. First quarter operations and support was $ 133 million or 17% of revenue compared to 15% in the same period a year ago. The increase as a percentage of revenue was driven by investments in bikes, scooters and express drives. Just as a data point, if our bikes and scooter initiative were excluded from our P&L operations in support of a percentage of revenue would have been lower in the current period than in the same period a year ago.
R&D expense was $ 108 million or 14% of revenue compared to 16% from the same period a year ago. Our investments in R&D are feeling key improvements in our core platform and autonomous future. The current period includes a $ 14 million reimbursement from our autonomous code development partner. Without the reimbursement, R&D adjusted would have been 16% of revenue compared to 16% from the same period a year ago.
As we gain scale and drive brand preference, we are delivering our investments in sales and marketing. In the first quarter, sales and marketing were $ 227 million or 29% of revenue down significantly from 42% in the same period a year ago. This was achieved while the company achieved 95% year-on-year revenue growth.
our adjusted EBITDA loss for the quarter was $ 216 million compared to a loss of $ 239 million a year ago period. Adjusted EBITDA margin improved significantly to a loss of 28% versus 60% in the prior year representing a 32 percentage point improvement year-over-year.
Moving on to cash balances. We remain in an extremely strong cash position. As of March 31, lift over $ 1 billion of unrestricted cash, cash equivalents and short-term investments. on a pro forma basis for the $ 2.5 trillion or not proceeds from our IPO, which closed in the first part of April. we have $ 3.5 trillion with no debt.
So, moving to guidance. Let me start with revenue. for the second quarter of 2019, we anticipate revenue will be in the range of $ 800 million to $ 810 million representing a growth rate of 58% to 60% year-over-year. This strong growth is being achieved in light of a difficult comp as we lap the industry wide pricing increases introduced in the second quarter of last year. for the full year 2019, we anticipate revenue will be in the range of $ 3.275 billion to $ 3.3 billion representing an annual growth rate of 52% to 53%.
Now, moving to operating leverage. We are pleased with our success delivery costs in the first quarter. We now believe that the strength and efficiency of realizing a ride-sharing business will help offset even larger amounts of our strategic initiatives than we originally expected. We anticipate our adjusted EBITDA loss will be in the range of $ 270 million to $ 280 million
for the full year, we anticipate our adjusted EBITDA loss to be in the range of $ 1.15 To $ 1,175 billion, which includes the impact of investments we are undertaking in autonomous bikes and scooters and driver centers. We are encouraged by our strength of our core business and see a clear path to profitability in ride-sharing. We anticipate the 2019 will be our peak loss year as we then move steadily towards profitability on a consolidated basis.
All right. thanks, Brian. To conclude, we had a great first quarter and were excited for another big year. Our results continue to demonstrate the strength of our scale platform, successful execution on our strategies and discipline towards our financial plan. These are the early days for our company and industry, and we are all excited by the new innovations and impact that will deliver to the market. We are proud of the momentum and even more excited by what lies ahead.
Before I move to Q&A, I want to tell a quick story to explain why we are so inspired to bring our mission to life. One of our riders is 76 years old and lives on her own in New York City. She has recently been diagnosed with kidney failure and did not have a family to take her to the many appointments she has every week. Her story is not unique. Every year, 3.6 million Americans missed medical appointments due to the lack of transportation, which leads to bad health outcomes and a $ 150 billion loss for the healthcare ecosystem lift. Lyft has established partnerships with the largest healthcare systems in the United States to best serve patients across the country and with our healthcare platform and the incredible driver community; Patients like this are now able to get the care they need. This is just one among many impacts that motivate our work.
And now, I like to open it up for questions. Operator?
Thank you. [Operator Instructions] Our first question comes from the line of Stephen Ju with Credit Suisse. Your line is now open
Okay. Thanks guys and congratulations. So, one of the questions they'll get asked for, during the IPO process was around the addressable market and how users can use ride-sharing in general versus the choice of owning a car. I think you talked about 45% or Lift users not owning a car. So, anything you can share about the years you have observed over the years, which might have just started with that airport ride at first, but then, get used everyday to get them from – to and from work . And secondarily, how long does it usually take before they go from every now and then to every day.
Yes. Thank you. So, this is John. Brian can comment on the trends we see year-over-year in rider's frequencies. Nothing to share on the cohorts other than just say, there is an increasing number of users, the most recent estimate was 300,000 that got rid of their car because of Lyft. And so are those trends that we see continuing to increase.
Yes. To talk about it at a high level, we – is much more than just a ride-sharing company. And we are going after in the – in the U.S. Alone, the consumer transportation market is $ 1.2 trillion and of that $ 1.2 trillion, over $ 1 trillion is spent on car ownership. And we see this once in a generation opportunity to move this trillion dollar plus car ownership market to the world of transportation-as-a-service. And I think we've seen this in other industries like entertainment or companies like Spotify, Netflix, or you have industries, businesses like the cloud. when you can deliver a product-as-a-service instead of requiring folks to own it, you can often deliver a better customer experience at a lower price point.
And so that bit is flipping for more and more of our riders and our customers. predominantly, we see the largest pickup of that and really dense urban areas today, where somebody lives and works within a city. Lifting is often the most convenient and the most economical choice, especially when you are looking at high insurance rates, high cost of parking in a major city. We see people sort of switch wholesale and get rid of their cars. When you look at the suburbs, you're seeing trends of families going to two households to one car household.
And we think as the array of services we offer, continues to expand some of the opening remarks that we were talking about Shared Saver, lowering the price point further. We are also talking about the introduction of bikes and scooters. And there'll be more to come. So, if we are introducing more products that suit more use cases, I think we're going to continue to see an acceleration of that trend towards a service over ownership.
And just to add a data point , a Lyft's history, we've never had a down quarter in terms of the quarterly active riders. And so in the most recent quarter, we grew 46% year-on-year, 10%, quarter-on-quarter to $ 20.5 million, so the growth is very strong.
Thank you. 19659081] Operator
Thank you. And our next question comes from the line of Brent Thill with Jefferies. Your line is now open
Good afternoon, for Logan and John, if you could maybe expand a little bit on the Google Waymo partnership, in terms of the near focus and where are you going to be rolling out first, that will be great. And any quick follow-up for Brian, just maybe talk a little bit about your pathway to profitability. There have been a lot of questions around the investments you make this year. I think you said, you continue to believe that the losses will trend lower and if you could just provide little more color, that would be helpful.
So, on the Waymo partnership, if we mentioned in Q2, Waymo and Lyft would be launching this new public partnership and their Waymo self-driving vehicles will be integrated into the Lyft platform in Phoenix. So, in the Phoenix Metro area and we expect it to be about 10 vehicles by the end of Q3 that will serve thousands of look passengers over time. There will be a safety driver in these vehicles. And so this is the first time that Waymo provides self-driving vehicles to a partner outside of their own service. The way it will work for a passenger is though able to book that ride in the Lyft app and if the Waymo vehicles are nearby to service their origin and destination, they would have the opportunity to be matched with that vehicle.
So, just to follow up in terms of the question on the path to profitability. We are one of a $ 1.2 trillion market opportunity. We just announced a quarter with 95% year-over-year revenue growth. Our core ride-sharing today drives our P&L and is trending strongly. We also make investments in autonomous bikes and scooters and other strategic initiatives, because we believe we will strengthen the core business and create long-term shareholder value.
Now, in terms of the path to profitability, our strong results today demonstrate not only world-class growth, but also our success deliveries and contribution margin jumped to 50% from 35% in the same period a year ago. Non-GAAP sales and marketing declined from 42% to 29%. now, the investments in autonomous bikes and scooters and driver centers had the underlying improvements in core ride sharing, but even with the investments, adjusted EBITDA margin improved to a loss of 28% from a loss or 60%, to 32 percentage point improvement year-over-year as absolute adjusted EBITDA improved in the first quarter
So, we are definitely encouraged by the strength of our core business and see a clear path to profitability in core ride sharing. We have teams across the company dedicated to initiatives that will help us grow more profitably in the core ride-sharing business at both bending cost curves and increasing the efficiency of growth suppliers. And finally, as mentioned in my prepared remarks, we anticipate that 2019 will be our peak year as we move then steadily towards profitability on a consolidated basis.
Operator  Thank you. Our next question comes from the line of Doug Anmuth with JPMorgan. Your line is now open.
Thanks for taking the questions. I wanted to ask two. Just first, you see leverage and incentives as a percentage of revenue over the past couple of years. There has been a lot of discussions just about the degree of promotions and incentives in 1Q. Can you just give us your view of the current incentive environment? How do you think it compares to previous periods? And then secondly, Brian, you've talked about bending the cost curves. Can you give us some more details about insurance and how you can reach the cost curve and move towards the 70% contribution margin they are thinking about long-term?
Absolutely. So, let me start with your first question. Again, we grew revenue in the first quarter, 95% year-over-year while non-GAAP sales and marketing as a percentage of revenue declined from 42% to 29%. We are extraordinarily pleased with our momentum. I mean just for historical context, non-GAAP sales and marketing as a percentage of revenue was 127% in 2016, 54% in 2017 and 37% in 2018. The 29% achieved in the first quarter is just another proof point of our success in driving brand preference, and sales and marketing efficiencies. Now, in terms of your question on the current competitive environment, I would say that competitive pressure in terms of rider incentives has recently receded. We are encouraged by this simply being the industry headed in the right direction and becoming increasingly rational. Our strategy is to win on experience, not price
And then to answer your insurance question, we have a variety of initiatives to reduce the cost of insurance. There are two factors that drive insurance costs, the frequency and the severity of accidents. And we are making investments in technology, data science as well as just changing business workflows to reduce both factors. You may need to cut off, because I get excited when talking about insurance. But we believe the insurance related initiatives can have super high ROI and just share three quick examples. We are investing in telematics to be able to monitor driver behavior and assess speeding or heartbreaking. We invest in predictive analytics to mitigate fraudulent claims.
And then in the first quarter, we moved to a new third-party claims administrator to help us handle new insurance claims. The goal here is to reduce claims cycle times, thereby improving settlement results.
Thank you. I love the color
Thank you. And our next question comes from the line of Mike Olson with Piper Jaffray. Your line is now open
Hey, good afternoon. Just following the Waymo question earlier, perhaps higher than the specific details of the deal. Could you share some thoughts on how you think about your internal autonomous technology development effort while at the same time, partnering with external technology developers like Waymo and should we potentially expect additional future partnerships like this?
John Zimmer  Yes. So, we have two pieces of our autonomous strategy. one is first party, which is our Level 5 group. we believe we are in a great position, given our platform, our access to data, and an amazing talented team to build our own self-driving components. And something that is important to note that those investments make us today and our first-party system benefit from the existing business even before there are autonomous vehicles through mapping and better ETAs and therefore higher utilization and efficiency in the marketplace. But we are agnostic to where this technology comes from. And so we have a third-party part of our strategy. and Waymo is a phenomenal partner with leading AV technology. And so it's part of that two-pronged strategy, and it doesn't affect the other relationships that we have. And you can expect more developments on both sides of that strategy.
Okay. And then you mentioned, but I don't think you said transportation, again, North America, I realize with $ 1.2 trillion spent on transportation, there is a lot of wood to chop in the North American market, but do you think about international expansion is a long-term option for growth at least to focus really North America?
Yes. Our focus today is 100% on the United States and Canada. We look at international as a potential future opportunity. but right now, we're absolutely focused on the U.S. and Canada and have no current plans
Thank you. And our next question comes from the line of Eric Sheridan with UBS. Your line is now open.
Thanks so much for taking the question. Sales and marketing, obviously the biggest driver of the improvement year-on-year in the cost structure below the gross margin. Just wanted to get a little bit better sense of whether the sales and marketing channels you are looking at where you see potentially higher returns against marketing dollars and how that should factor into the way we think about marketing efficiency, not only in 2019 , but more longer term? Thanks so much.
Sure. let me start and then I’ll hand it off to John to add some additional color. I would say, maybe, where I started in my last answer, which is the current competitive market is improving. We are seeing a reduction in terms of rider incentives. And so we do believe, the industry is headed in the right direction. For us, we are focused on building the defining brand of our generation.
Yes. And so just from the perspective, Logan and I have now been in the market for – Lyft is about seven years old. And if you look at the economics, you can see as a percent of revenue that this is the most rational the market has been. I think that’s a really important takeaway. And as that happens, that happens, because there are now two strong players, right? And both players can provide three-minute ETAs, three-minute pickup times in major markets. And so then the reason why people choose one company versus the other comes down to the brand. And this is where something that we’ve always believed is important. Something that we have always valued and always, I believe done better than the industry.
And so within that brand, we don’t mean adds, we mean every single touch point that you have with us and our company. And that gets to the actions we take locally. That takes place in the app itself, that takes care place in the products we build for our drivers. And we think that will be the biggest opportunity for leverage against that sales and marketing line, so that it can continue to come down.
Thank you. And our next question comes from the line of John Blackledge with Cowen. Your line is now open.
Great, thanks. Just a couple of questions, on the driver center rollout, could you just provide an update on the number of driver centers that have been rolled out thus far this year and perhaps how the drivers are responding to these centers. And then the second question on bikes and scooters, just how is this initiative ramping thus far this year? How many markets are you in now with bikes and scooters and color on how you – how incremental it was or a percent of revenue from bikes and scooters that you saw in the quarter? Thank you.
Yes. On driver centers, this is part of our broader strategy to go above and beyond to take care of our drivers. So, we have a history of leading the industry with driver facing initiatives. We’ve had tipping from day one. We were the first to launch Express Pay, which provided a same day pay option for drivers. We were also the first to launch Express Drive, which is a weekly rental program for drivers, all of which have helped build and sustain driver preference over the years. We’re very excited about the driver service centers, vehicle operating expenses, our drivers top cost, and service is a big component of that. And so we’ve had hubs, we refer to them as hubs in the market for a number of years.
and that’s where drivers can show up to get a sort of to do some of their onboarding activities and get imprisoned help. So it’s sort of like a genius bar type experience. What we realized was we had an opportunity to provide, really low-cost, essentially at cost vehicle service for drivers instead of just answering basic questions. So, we’ve now opened up and are operating our first two driver service centers with a number of more that it’ll continue to scale this year. it’s still early days, but we’re – the anecdotal feedback from drivers has been very positive. And we’ve really focused on speed at these driver centers. So we’re able to turn cars around quite quickly, help get drivers back on the road and making money. As a driver on the platform, if your car’s in the shop for a number of days, that can be very tough financially, because you use and depend on that car to make money. So, we’ve focused on helping high-quality service with record speeds. So, it’s – anyway, it’s still very early, but we’re excited about the initiative.
And then on bikes and scooters, we have approximately nine markets with bikes, 15 with scooters. We’re not going to be breaking that out separately, on the economic side. but as I said in the prepared remarks, it’s something that we will continue to invest in, with those relationships we have with local cities. And we’re excited that now, in New York, the first few customers will be able to actually book a city bike within the Lyft app.
Thank you. And our next question comes from the line of Ron Josey with JMP Securities. Your line is now open.
Great. Thanks for taking the question. one of the folks a little bit more on rider growth, the 40% to $20.5 million. Brian, you mentioned initiatives to attract and retain riders here. Just can you provide a little more details on those initiatives you mentioned and while we’re at it, any insights or lessons learned on the testing of prescription or loyalty programs and how that’s helping the service? Thank you.
Yes. this is Logan. I’ll just go back into a couple of the big initiatives that we launched in Q1 that we attribute a decent portion of our growth curve; one was the investment in the Lyft matching platform that we’ve been working on for over a year. That reduces cancels, increases the reliability of the service and the unlock of new rider experiences. So, Shared Saver now live in three markets and that’s able to provide a lower cost shared ride by driving further efficiency in the system. and like John was just talking about our first rollouts of the bikes and scooter integration into the Lyft app. So, as a whole we are trying and striving to continually provide a better multimodal experience for all of our customers, a more reliable experience and we see those afterwards stack over time.
Great. Thank you.
Thank you. And our next question comes from the line of Andy Hargreaves with KeyBanc. Your line is now open.
Thanks. I just want to ask you a question on sort of the share gain and the brand, it seems like bit share gain is persistent. So, just wanted to get your thoughts on the underlying drivers there and what you’re doing to reinforce that? And then just a follow-up on the insurance, if you could give us any help on – should we see those – the benefits there sort of scale smoothly overtime or are there stair steps that we might hit a different milestone?
Great. Just on the brand front. One of the advantages, we’ve always had in the market has been on a driver preference. So when you ask drivers, who drive for both Lyft and Uber, which service they prefer? Historically, to this day, drivers – the majority of drivers prefer driving on Lyft. And like we talked about the Lyft Driver Centers are one of the latest initiatives as well as Lyft Direct. So, we had launched Express Pay, which is a same-day pay service a number of years ago, and it’s been extremely popular. And the new Lyft Direct Debit Card actually puts money after every ride directly on that driver’s debit card.
In addition, drivers – a lot of our drivers yet hit with a ton of banking fees. And so by launching a no fee bank account, we think we can drive a lot of additional economic value. And at the end of the day, all of this adds up to providing a better hospitality experience. Our goal is for – when you get in a Lyft for that, Lyft to take care of the driver and the driver in turn to take care of the rider in the car. So that’s part of our broader hospitality experience. Additionally, we’ve made some significant investments to really showcase our values. So last year, we became one of the largest voluntary purchasers of carbon offsets, and we made every single ride on the Lyft platform, carbon neutral through the purchase of those offsets.
Additionally, we have a program, we’re really proud of called RoundUp and Donate. And through RoundUp and Donate, riders can optionally opt into this program and round up the fair at the end of the ride to the nearest dollar with the difference being donated to one of a handful of non-profits that we’ve partnered with. So, collectively, we’ve raised, since launching the program a little over a year ago, we’ve raised over $14 million for a number of different causes. And I think really, living our values and finding ways to harness the power of the platform for change has been a big part of building this differentiated brand.
Thanks, Logan. Let me answer part two of your question around insurance. We have a range of initiatives and I should say, what gets me so excited about insurance is just the opportunity, because it is both business spectrum, there’s short-term opportunities and then there’s really exciting long-term opportunities. I can say when I look back though the last five quarters, every single quarter; we’ve reduced the cost of TNC insurance as a percentage of revenue excluding any adverse development. So, this is an opportunity for us to continue to try to really leverage one of the largest costs on our income statement.
Thank you. And our next question comes from the line of Ron Josey with JMP Securities. Your line is now open.
Hey guys, it’s me again. Just real quick, I’m in to also ask Brian, can you just give us a little more detail on 2Q expense guidance, I noticed that definitely coming down relative to where we were on an EBITDA basis? That’d be helpful. Thank you for that. And I’ll get back in.
Sure. So, I may provide some extended comments on guidance. Just want to have everyone on the phone. So, this may be a relatively long answer. And I’ll actually – let me start with the revenue. And then I’ll go into your expense question. So, as I mentioned in my prepared remarks, we’re really pleased with a momentum underscored by the positive trends of both active riders and revenue per active rider. The strong increase in Q1 active riders was a positive surprise for us. The number of quarterly active riders jumped 10% quarter-on-quarter.
That being said, we do believe in the first quarter, we benefited from some unprecedented publicity about Lyft given where the first major tech company to go public in 2019. In terms of Q2, we want to remind investors that there was an industry wide price increase introduced in the second quarter of last year. This significant increase – this increased significantly boosted revenue in the second quarter of 2018. Just as a data point, revenue per active rider jumped 16% quarter-on-quarter in the second quarter of last year, which led to 27% quarterly revenue growth and a 111% annual revenue growth. So, this obviously creates a challenging comp this year. Our revenue guides of $800 million to $810 million for Q2 implies annual revenue growth of 58% to 60% off of last year’s exceptional Q2. So, this is still a super strong quarter for us coming up.
Additionally, as we continue to grow our bike and scooter business, it’s worth noting seasonality. This is really going to be our first summer and fall with both bikes and scooters. We anticipate that revenue per active rider may be more flat over this period, especially, if there’s a positive surprise the number of active riders from new bike and scooter customers. Also, as we look out later in the year, we anticipate that the seasonality from bikes and scooters may have a more pronounced impact on consolidated revenue trends.
More specifically, we expect that bikes and scooter revenue will decline between Q3 and Q4 given snow and other seasonality. This may cause our consolidated quarter-on-quarter revenue growth in Q4 to exhibit more meaningful seasonality in it and impact revenue per active rider for the same reason.
Now, let me switch gears to answer the question you asked on expenses. We are extremely pleased that we were able to leverage expenses in important areas of our P&L in the first quarter. We now believe that the strength and efficiencies we’re realizing in our core ride-sharing business will help offset and even larger portion of our strategic initiatives than we originally expected. Notwithstanding this benefit, the investments and bikes and scooters, autonomous and driver centers will increase operating expenses.
And so let me just spend a moment to provide some highlights. In terms of contribution margin, we reached a 50% record in the first quarter versus 35% the same period a year ago, as we leveraged key expenses. For the remainder of 2019, contribution margin will be negatively impacted by two to three percentage points versus Q1 as we expand our shared network of bikes and scooters. I want everyone to remember that depreciation is in contribution. We’re also able to leverage the efficiency of operations and support excluding our new strategic investments.
Now, over the remainder of 2019, we expect to increase our investments in our shared network of bikes and scooters, Express Drive and Driver Centers. So, notwithstanding the efficiencies we’re unlocking and core ride-sharing, we anticipate that non-GAAP operations and support as a percentage of revenue will increase from Q1 levels as a result of these investments. This is baked into the guidance that we’ve provided. In the remaining quarters of 2019, we anticipate an increase of three to five percentage points relative to Q1 level with an expected peak in the third quarter.
Moving to R&D, as we invest fuel key improvements in our multimodal platform and our autonomous future, non-GAAP R&D as a percentage of revenue will increase over the remainder of 2019. We anticipate that Q2 non-GAAP R&D will increase two percentage points versus Q1 with Q3 and Q4 up two percentage points from the Q2 levels.
Now, in terms of sales and marketing, again, we are extraordinarily excited about the leverage we’ve delivered. We expect that sales and marketing will decline to 28% as a percentage of revenue in the second quarter, down from 35% in the year-ago period and really hold there for the remainder of 2019 as we launched and expand our network of shared bikes and scooters as well as Driver Centers across the country.
Finally, we anticipate that non-GAAP G&A expense as a percentage of revenue will increase approximately four percentage points in Q2 from Q1 and peak at 26% in Q3 and Q4 as part of the build out required to support our new strategic initiatives as well as SOX readiness. We anticipate that we can unlock G&A leverage beginning in 2020.
And I just want to end with repeating what I said in my prepared remarks. We are really encouraged by the strength of our core business and we see a clear path to profitability in ride-sharing. We anticipate the 2019 will be our peak last year and then we move – then we’ll move steadily towards profitability at a consolidated basis. And again, all of the remarks I just said were baked into the guidance we provided on EBITDA.
Thank you. And our next question comes from the line of Michael Graham with Canaccord. Your line is now open.
Thanks a lot. Just two. First on shared rides, just maybe, can you talk a little bit about the KPIs and shared rides as it is straightforward as a three-minute arrival time or what else do you think about there is obviously a more complex proposition. And then just wonder if you could spend a minute on the government and regulatory landscape, what are some of the key things you’re focused on as you look to cement relationships with local and state governments? Thank you.
Yes, this is Logan. So on shared rides; we do have a lot of internal KPIs that we use to measure the quality of the service. We don’t disclose any of those, but I can sort of talk through at a high level of what we look for. The first is around the efficiency generated by the system overall. So, we look at based – what’s the match rate? What’s the quality of those matches? So what’s the overlap of those rides? And what type of efficiency does that generate in the system? Because then we can pass that efficiency back to our riders. And then we look at – in addition to pickup times, there’s also a matching window, and there’s an obvious tradeoff, the longer the matching window, the more opportunities there are for higher quality matches and that lets just pass on lower prices.
So, we’re not always trying to just optimize on price or pickup time. There’s a tradeoff between the two and we’re really working to find the right balance for our users. And then lastly, the quality of the match, so not just how fast the car comes to pick up the rider, but how quickly do you get to your destination and what’s the sort of detour on the route. And obviously, we try to minimize the detours as much as possible. So those, hopefully that gives you a little bit of a sense of the kind of high level areas that we look at internally. But again, we don’t break out shared ride numbers or disclose those other KPIs.
On the policy and local policy front, some of you know, we hired Secretary Anthony Fox, who used to run the Department of Transportation for President Obama to leave policy at Lyft; he was also the Mayor of Charlotte, North Carolina. So, he understands both local and federal politics and opportunities in transportation. And so with him and his team, we’re continuing to build the local relationships that have served us well. We’re investing locally, and we’re listening to make sure that the actions we’re taking are aligned with the interests of the local officials.
Thanks very much.
Thank you. And our next question comes from the line of Justin Patterson with Raymond James. Your line is now open.
Great. Thanks. On enterprise, it sounds like you had some continued success there during the quarter. Could you talk about the factors driving that growth? What do you need to do to get further traction within the healthcare vertical? Thanks.
Yes. So, a part of it is just changing over how an industry has done things in the past. And I think the first critical thing that the team did is they built relationships with I believe nine, the top nine transportation, healthcare brokers. So historically, when someone like the rider, Logan mentioned in his remarks with needing a non-emergency medical transportation, they would call into a call center, and then that call center would call out to a taxi dispatcher. And then they would do their best to have that taxi show up, which would happen sometimes. And other times if that taxi was held from the street, it wouldn’t show up for that patient. And so we’ve worked directly with those call centers, which are run by those brokers to build a service that’s called Lyft Concierge. And it’s a web platform that allows – and there’s an API that allows us to basically, have a deep integration with these large transportation brokers.
And order rides, multiple than the rides when needed and for the book – the customer in some cases and the broker in other cases to be able to track the success of that pickup and drop off. So, first was establishing those relationships. Second was building the technology platform to scale that. And then third will be more work on the policy front, because these are new ways of bringing non-emergency medical transportation patients to their appointments and in some cases, laws didn’t account for this new form of transportation and will need to be adjusted.
Thank you. And our last question comes from the line of Tom White with D.A. Davidson. Your line is now open.
Great. Thanks for taking my question. So first off, congrats on the IPO. Brian, since you like talking about insurance so much, maybe just a follow-up there. You’ve highlighted three specific drivers kind of leverage related to insurance. Could you maybe, give us a sense of the magnitude of the efficiencies that you guys can think – do you think you can get there over the next 12 to 24 months maybe you put it in terms of kind of insurance costs per driver, per day, today versus maybe where you think that can go?
And then just on the Waymo announcement, realize it’s early, but if we were to look out five to 10 years and partnership was a big part of your autonomous strategy, how should we think about kind of how the economics get split? And I’m also curious if it’s cheaper for a Phoenix based person to grab a Waymo ride versus a Lyft ride and maybe by how much roughly?
Sure. So, this is Brian. Let me tackle the first question. The reason I get so excited about insurance is there’s just so many different initiatives. For the company, we have different goals for the company. And so in the first half reducing the cost of insurance is actually the number one goal companywide. And so, I mentioned three, we probably have a list of probably 10 to 20 different programs and initiatives that we could discuss.
What’s really powerful is each initiative has a different timeline in terms of unlocking benefits. And so this is one, and again, we work with third-party actuaries. and so we may know internally something it’s going to be a stat sig in terms of having an impact, but it will take time for the actuaries then to give credit in terms of loss reserves et cetera. So, this is one where we see, we have years of opportunities in terms of unlocking costs on the platform.
And for the Waymo relationship, we can’t comment on the economics. But again, we are very excited about the opportunity to work with them and to get Waymo’s on the Lyft platform.
Okay, great. Maybe just one last one. Sorry, slip it in. Could you guys give us any sense about, gross booking trends that I see? It’s not – I don’t think it was in the press release and also rides as well. I’m just curious why – maybe, you guys aren’t going to be sharing that quarterly going forward?
Sure. Thank you. So, our historical business was virtually entirely a ride-sharing marketplace. And so we included bookings and take rate in the S1. So, investors could understand the monetization trends. We’re now aggressively investing in new areas including those were revenue equals bookings. So, we really want to try to avoid investor confusion. Lyft take rates could increase solely based on the relative proportion of initiatives, where revenue equals bookings. We believe it’s more appropriate for investors to use revenue as the best top-line growth metric since revenue drives our P&L across all initiatives.
And just so that there is absolutely no confusion on this call, this is absolutely a positive metric for us in the first quarter. Revenue as a percentage of bookings increased in the first quarter on both a year-over-year and quarter-over-quarter basis. We just believe it’s more important for investors to analyze the performance using revenue going forward.
In terms of rides, we will report important ride milestones from time to time. But as we begin to expand our shared networks up bikes and scooters and really lean into related subscriptions, we don’t think the ride metric is the best way to understand our business going forward. For example, we offer a bike subscription right now in New York, where rider has access to unlimited bikes for a fixed dollar amount. We believe it’s better for investors to understand trends in our business based on active riders and revenue per active rider.
Great. Thank you.
Thank you. And I would now like to turn the call back over to Co-Founder and CEO, Mr. Logan Green for any further remarks.
All right. Thanks so much everybody for joining our very first earnings call. And thanks for all the great questions. We look forward to seeing you all soon. All right, take care. Bye.
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. And you may all disconnect. Everyone have a wonderful day.