Lyft, Inc. (LYFT) Q1 2023 Earnings Call Transcript

Lyft, Inc. (NASDAQ:LYFT) Q1 2023 Earnings Conference Call May 4, 2023 4:30 PM ET

Company Participants

Sonya Banerjee - Head of Investor Relations

Logan Green - Co Founder and Board Chair

John Zimmer - President, Co Founder and Vice Chair

David Risher - Chief Executive Officer and Director

Elaine Paul - Chief Financial Officer

Conference Call Participants

Doug Anmuth - JPMorgan Chase and Company

Stephen Ju - Credit Suisse

Eric Sheridan - Goldman Sachs

Nikhil Devnani - Bernstein

Ian Peterson - Evercore ISI

Benjamin Black - Deutsche Bank

Rohit Kulkarni - ROTH MKM

Steven Fox - Fox Advisors

Operator

Good afternoon, and welcome to the Lyft First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode to prevent any background noise. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Sonya Banerjee, Head of Investor Relations. You may begin.

Sonya Banerjee

Thank you. Welcome to the Lyft earnings call for the first quarter of 2023. On the call today we have our CEO, David Risher; our CFO, Elaine Paul; and our Co-Founder and Board Chair, Logan Green. In addition, John Zimmer; our Co-Founder, President and Vice Chair; and Kristin Sverchek, our President of Business Affairs are here for the Q&A session.

We will 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 actual results to differ materially from those projected or implied during this call. These factors and risks are described in our earnings slide deck and our recent SEC filings.

All forward-looking statements that we make on today's call are based on our beliefs as of today and disclaim any obligation to update any forward-looking statements, except as required by law. Our discussion will include non-GAAP financial measures, which are not a substitute for our GAAP results. Reconciliations of our historical GAAP to non-GAAP results may be found in our earnings material, which are available on our IR website.

And with that, I will pass the call to Logan.

Logan Green

Thanks, Sonya. Good afternoon, everyone and thank you for joining us. The team is going to address a few big developments on today’s call. I'm going to kick things off by talking about our leadership transition. I'm excited to pass the baton to David Risher, who is now Lyft's second ever CEO. That change was effective on April 17. John will also be transitioning from his role as President early this summer.

David is an incredible proven leader and he's going to be great for Lyft. His experience on our Board, give him a strong appreciation for the incredible opportunities ahead of us and a clear view of the challenges. He brings the right energy, ambition and experience to lead Lyft to the next chapter. David's customer obsession, purpose driven mindset and competitive spirit are exactly what Lyft needs. With the transition, this will be the last earnings call that John and I join.

I'm now the Chair of Lyft's Board. John will continue to serve as President of Lyft until the end of June, at which time he will continue to serve as Lyft's Vice Chair. We're excited for David to be leading the company on the day to day basis, and look forward to continuing to serve as Board members and to supporting the company on the next leg of its journey.

Finally, I want to say thank you to the Lyft investor community. John and I are incredibly grateful to have had the opportunity to build this company with your support. Lyft is our life's work, and we are confident it's in great hands. Now I'm going to turn the call over to David.

David Risher

Thanks, Logan. I'm so grateful to you and John for pioneering a new industry, establishing a defining company and building an iconic brand. Lyft has had a profound impact on the lives of millions of riders, and drivers have earned billions of dollars. That is an extraordinary legacy.

To everyone who has joined us on today's call, if you haven't -- we haven't yet met, you should know that I'm an extremely results driven leader, and I'm a builder at heart. At Microsoft, I learned the power of scale and competitive focus. At Amazon, I help the company be insanely customer focused. And at Worldreader, I learned how to do more with less. That's what I bring to Lyft. So here's my perspective. Lyft addresses two basic and very durable needs. We get riders out and about so they can live their lives together. We are a social species. And we provide drivers away to work that gives them control over their money and time.

As one driver told me driving with Lyft means I will never go broke. These needs aren't going to go away. And they're the basics -- the basis of what will be a large, durable and profitable business. But today Lyft is at an inflection point. People are getting back out to work and play. And we have renewed focus on delivering a great rideshare experience. Near-term, we are prioritizing strong execution for riders and drivers. This pure play approach will help us build a growing profitable business over the long-term.

So here's what we've been doing and here's what you can expect next. First, over the last 10 weeks, we've been pricing rideshare competitively, which is what riders expect and want. This is key and really important to remember, every year millions of riders choose Lyft over Uber. We don't want to give them a reason to go the other direction. The results have been an acceleration in our year-on-year rideshare growth for the first time in nearly 2 years, and a smaller percentage of rides with primetime pricing. In this way, we have strengthened our category position on both bookings and ride basis.

Second, to fund these services improvements, we've cut costs and restructured our organization. We didn't make these decisions to cut costs and headcount lightly, but it is critical to consistently being able to offer good prices and fast pickup times. Collectively, we expect the changes we announced last week to deliver about $330 million in annual savings when in full effect. And Elaine will review the financial impact of those in greater detail.

Even more importantly, we have restructured the organization and nearly halved the number of management layers from eight to five, flattening teams, and enabling for faster decision making. Our new structure gives me direct contact with our rideshare leads, removing layers, so we can innovate faster.

Third, we need to drive awareness that Lyft is a great choice, so that more people open our app and see our improved pricing and service levels. We've been too quiet for too long. So you'll see us use low cost, high visibility ways to remind folks of who we are and point out real differences between us and Uber. I hope you've gotten a chance to see our collaboration we launched just yesterday with TikTok influencer, Delaney Rowe, it's funny, it's smart, and it's designed to get people to consider us.

And finally, it's time to grow again. Riders and drivers both want a healthy competitive rideshare market with Lyft as a strong player. I can't yet share our long-term growth plans, but I can tell you, I'm spending the majority of my time on projects to top line and margin. In fact, this was the topic of the very first meeting I had as my first day of CEO 3 weeks ago. I am super excited about what I believe is the significant untapped opportunity to innovate and grow North American rideshare.

So let me finish by saying this, I am very aware of our current levels of growth and profitability are not acceptable. I also know that investors are waiting for long-term -- updated long-term targets. I'm new in the job, I want to wait to provide those targets until I'm sure we can deliver on them.

So here's the recap. Here's the game plan. First, at a time when demand is increasing, we are all about execution. We're focusing on the basics of what riders and drivers want and demand, and in particular on competitive pricing that increases our ride volumes.

Second, we have clear objectives and we are executing in a disciplined way. We've structurally removed costs from our business, and we organize to increase the velocity of execution and -- excuse me, bring real innovation to the sector. And third, my focus is on building a great business over the long-term by focusing on riders and drivers. That's what I learned from my time building Amazon's retail business and we're off to a very strong start. I am committed to growing Lyft into a large, durable, profitable business that our riders, drivers and shareholders love. And I look forward to keeping you informed on our progress.

Elaine, I'll turn it over to you.

Elaine Paul

Thanks, David. To start, I want to say a big thank you to Logan and John for building Lyft and for having the vision to pioneer this industry. I'm also excited to welcome David. He's already bringing a lot of energy and vision to the team and I'm energized about the path forward.

Before I review our financial results. I want to remind everyone that unless otherwise indicated, all income statement measures are non-GAAP and exclude select items which are detailed in our earnings release.

Turning to Q1. Our focus on pricing competitively produced solid early results. Our year-over-year rideshare ride growth rate accelerated in Q1 for the first time in nearly 2 years. Q1 was a partial quarter of operating with this renewed focus. And with a full quarter impact in Q2, we expect rideshare ride growth to accelerate further.

Our Q1 financial results were better than guidance driven by rideshare strength. Q1 revenue was roughly $1 billion, up 14% year-over-year, and was $26 million better than our guidance. We had $19.6 million active riders in Q1, up 10% year-over-year, which represents an acceleration from 9% year-over-year growth in Q4.

Revenue per active rider was $51.17 in Q1, up 4% year-over-year versus a 11% year-over-year growth in Q4 '22. The decelerating growth rate was primarily driven by our pricing changes. Contribution was $465 million in Q1, down 7% year-over-year. As a percentage of revenue, contribution margin was 47% in line with guidance and down 11 percentage points from Q1 of 2022. The decrease versus last year is primarily due to higher insurance costs as well as lower per ride units economic.

Operating expenses were $465 million in Q1, down 2% year-over-year. As a result of our cost cutting efforts to date, operating expenses were 46% of revenue and improvement of 8 percentage points from Q1 of '22. Q1 adjusted EBITDA was $23 million, exceeding the high-end of guidance of $15 million. Our adjusted EBITDA margin in Q1 was 2%. We ended Q1 with a strong cash balance. Unrestricted cash, cash equivalents and short-term investments were $1.8 billion, flat with the level at the end of 2022.

Next, I'm going to address the financial impact of our latest cost saving initiatives. When our headcount and operating cost savings are in full effect, we expect to generate approximately $330 million in annual savings. This is made up of approximately $215 million related to headcount and $115 million of operating costs reduction. We expect to realize roughly $40 million, $50 million and $70 million of savings in each of Q2, Q3, and Q4, respectively.

As David explained, in the near-term, we expect to use these savings to pay for our continued service improvements. So the savings will not materially flow to adjusted EBITDA. Over time, the lower operating costs will position us well for improved long-term profitability.

We are also further bringing down our stock-based comp expense. We've changed our compensation plans and when combined with the impact of the staff reductions, we expect our stock-based compensation costs will be roughly $550 million in 2023 and $350 million in 2024, down from approximately $750 million in 2022. Our reduction in force will result in a one-time charge of approximately $41 million to $47 million in Q2, which we are excluding from adjusted EBITDA.

Before I share our Q2 outlook, let me provide some framing. Q1 was a partial quarter of adjusting our prices to be competitive with the market. Q2 will be a full quarter with this continued focus, and we expect our rideshare ride growth to accelerate further. While this will result in lower per ride unit economics in the quarter, we are actively offsetting the impact with our cost savings initiatives. As a result, we expect our Q2 adjusted EBITDA and adjusted EBITDA margin will be roughly flat with Q1.

With that, let me share our Q2 guidance. We expect revenues of between $1 billion and $1.02 billion, which is up 1% to 3% year-over-year. This assumes rideshare ride growth accelerates to at least 15% year-over-year in Q2. We anticipate contribution margin will be approximately 42%, reflecting the full quarter impact of lower per ride unit economics.

We expect operating expenses as a percentage of revenue will be between 42% and 43%, which includes roughly $40 million of restructuring related savings. Finally, we expect adjusted EBITDA of between $20 million to $30 million, and an adjusted EBITDA margin of 2% to 3%. At the midpoint, both would be roughly flat with Q1.

Before I open the call up to Q&A, let me share three closing thoughts. First, we have a renewed focus on the basics of what riders and drivers expect. This is accelerating our ride growth.

Second, we're executing in a disciplined way. We've moved decisively to cut our operating costs and we'll use the savings to pay for continued service level improvements in the near-term.

Third, over time, with higher ride volume, and as we mix in higher margin opportunities, our economics can improve, and we can achieve greater operating leverage. As David mentioned, we expect to provide an update on our long-term financial targets in the coming months.

Operator, we're ready for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question is from the line of Doug Anmuth with JPMorgan. Your line is open.

Doug Anmuth

Thanks so much for taking the questions. One for David and one for Elaine. David, you talked about pricing more competitively and providing great service and both of those being big focus areas going forward. But can you just talk about how you think Lyft can really differentiate in the market over time. And then also provide when you talk about pricing more competitively, is that pricing kind of in line with the market and with parity.

And then Elaine on contribution margin, reflecting the lower levels of revenue per ride, how does that play out across both insurance and pricing and can we expect it around that low 40s level going forward that you have talked about for 2Q? Thanks.

David Risher

Hey, Doug, it's David. Thanks for the question. So on differentiation, it's a great issue. Right now our real focus is on execution on the basics. And as you said, it's really on pricing and getting service levels in line with where the market is and where the competition is. And it's just table stakes. Now, when you start to zoom out, then you have to start to tell people who you are. And in our case, I think we've been a little quiet on that.

So even before significant differentiation, I think just reminding people of who we are is really important. Now we get to differentiation, we do have different models. And again, I don't know if you've seen the TikTok ad, but that gives you a little bit of an indication of one way we can differentiate in the short-term. But medium and long-term there's so many ways where I think this category has sort of treated all drivers and all rides, more similarly than different.

And we've got a lot of ideas on how we can create products and services that our riders and drivers both like that are really differentiated against Ubers. And maybe we can talk later in the conversation about some of the approaches we've taken around shared ride versus Wait & Save as an example. But that'll be for the future. Let me turn it over to Elaine for the second part of the question.

Elaine Paul

Hi, Doug. Thanks for the question. With respect to your question on contribution margin and lower revenue per ride versus what's driving things in terms of insurance versus pricing. So year-on-year, the increase in insurance rates that we experienced in Q4, that's impacting the contribution margin year-on-year, as is with pricing. From Q4 to Q1 and Q1 to our Q2 guide, the deterioration and contribution margin is driven entirely by our lower revenue per ride driven by pricing and operating competitively.

To be specific, with lower prices on average, we're generating less revenue per ride. Our cost per ride have not changed materially subsequent to Q4. And thus our per unit economics are compressing, which is driving the change in contribution margin. In terms of long-term margin, we are not giving go-forward guidance at this point. But as we alluded to on the call, we'll be providing long-term guidance at a future time this year. Thanks for the question, Doug.

Doug Anmuth

Great. Thank you both.

David Risher

Sure.

Operator

Your next question is from the line of Stephen Ju with Credit Suisse. Your line is open.

Stephen Ju

Okay. Thank you so much. So, David, and Elaine, if we could dig in a little bit on your commentary in regards to the accelerating unit growth. Does this imply that we have been decelerating, I guess, pretty much linearly since the peak in early 2021 and we are starting to see, I guess what is an inflection point. And secondarily, I think you guys have been talking about closing the service gap versus Uber. So as you are doing that, are you finding that consumers are coming back straight away given the affinity with the Lyft brand? Or are you finding that you have to go back and rewind your business? Thank you.

David Risher

Yes, good question. Stephen. Thanks for it. So, on the first, yes, we're absolutely -- I like your characterization of it as an inflection point. I think that's exactly what we're seeing. We've been really on this sort of focused execution strategy for about 10 weeks. You've seen some of the results that we've talked about that 30% overall share we're enjoying up from sort of that mid to high 20s.

I can give you a little bit more color there. In some of our markets, we're actually seeing even stronger growth, Portland, Oregon being an interesting example where we're running just about neck and neck, Phoenix, Arizona being another example, running pre-post neck and neck and there are other. So what does that tell us? That tells us that when we execute well, share can move fast and riders vote with their apps. So that's what we're seeing in the short-term. Maybe I'll just stop there and we can talk about it more detail after.

Operator

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Eric Sheridan

Thanks. Thanks so much for taking the questions. Maybe I can follow-up on some of the topics that were touched upon already. In terms of driving incremental rider growth, what are you sort of investing behind to continue to build riders scale, where maybe there's an ability to have a differentiated market share dynamic among newer riders or riders coming back to the product versus a pre-pandemic period as opposed to possible market share dynamics among existing riders? I'm curious your sort of framework around that.

And then I know we're going to wait for a period on longer term guidance. But I did want to understand a little bit better philosophically how you think about the pricing lever versus the margin lever in terms of striking the right balance in the business over the medium to long-term and how you think about sort of striking that balance against the broader goals? Thank you.

David Risher

Yes, great question. And my apologies I didn't catch the name at the beginning.

Eric Sheridan

It's Eric Sheridan from Goldman Sachs.

David Risher

Eric. Okay, got you. Nice to have talk to you, Eric. So, let me start from the end of the question and work backwards. Long-term pricing, look, we're pricing in line with the market. That's our strategy. And that's where we'll stay. So I only think pricing is a super interesting areas of focus once you're in line. So then the question becomes, how do you compete in other ways? And part of it, of course, is we do have a brand that people like, it's really quite an iconic brand. And this is maybe easy to dismiss.

But it's quite important, riders make a choice every single time they open their app, some of it's based on price. But once you take that away, it turns out to other things. Some of it is just brand impression, how much they like you versus the other guys. And then some of it is differentiated service. So on that side, we're building out some really interesting products.

And I can maybe allude to a couple, just very, very high-level. One, of course, as we enter the summer travel season, you'll see us make some noise there. In fact, I think we've got an event plan next week to make some announcements on how we're going to make life easier, particularly for riders as they enter the summer travel season.

And then another sort of secular thing that's happening is, bosses are trying to get employees to come back to work, we're doing the same here at Lyft where we're making that extra requirement of the job. And so that's a really interesting opportunity, because it gives us a way to introduce ourselves in a different way to take a non-productive commute ride into a productive commute ride.

So those are real areas of growth, I think we're just beginning, as I say, to scratch the surface on. Might be looking for sort of a framework, it's kind of price in line with a market, differentiate on brand, for sure. And again, you can see some evidence of that, just what we're doing now and that'll grow over time. And then really start to build some service levels, or -- excuse me, some products that meet head on people where they are in 2023, which might be a little different from where they were in 2019.

Operator

Your next question is from the line of Nikhil Devnani with Bernstein. Your line is open.

Nikhil Devnani

Hi, there. Thank you for taking the question. I had a couple please. Just on the Q2 revenue outlook, could you please unpack some of the underlying pieces there and maybe provide some color around trip growth or bookings growth? Just trying to understand how much of this low single-digit revenue outlook is really a function of pricing and incentives, maybe which are some near-term drags on revenue that you can lap at some point down the road?

And then maybe, David, on the back of the recent cost cuts, could you talk about some of the tradeoffs you might be making going forward or had to make between kind of driving incremental efficiency and maybe giving up some longer term growth opportunities like locks or shared rides? Thank you.

David Risher

Yes, let's do this, Nikhil. Thanks for the question. Let me -- Elaine is going to sort of tackle the first part, and I will tackle the second.

Elaine Paul

Hi, Nikhil, thanks for the question. In terms of what is behind our 2Q revenue guide, let me give you some more color there. We're assuming significant acceleration of the rides growth in Q2 to at least 15% year-on-year. So significant acceleration of our growth. And we anticipate that that's faster than the overall market growth.

In terms of bookings, we're assuming in our Q2 guidance, assumes that gross bookings grow at a faster rate quarter-on-quarter and year-on-year than revenue. And as a result, that means that our take rate is moderating quarter-on-quarter and year-on-year. So hopefully that gives you some color behind our single-digit revenue growth. Thanks for the question.

David Risher

Yes. And then on sort of the cost cutting and kind of where does that lead, I guess, is was sort of the question. Let me start with two things. The first is, why did we cut costs? We cut costs so that we could be more competitive for riders and drivers and pass along great prices and great earnings. So that was the rationale. The second piece was accelerating decision making. So it's maybe a little counterintuitive, but sometimes less is more.

And in this case, we think we can move faster now that we've right sized organization, which I think sort of gets to the other point. I didn’t so much think of it as a tradeoff. And I certainly did not, let me say it just affirmatively. I am very focused on the long-term health of this business, very focused on the long-term health of this business. So I'm really not so interested in making short-term tradeoffs that jeopardize the long-term health and growth of business. It doesn't make any sense to me at all.

Now, if you look very specifically, you kind of alluded to a couple of things like, for example, Wait & Save. And I want to actually bring this up even a little proactively because I think it's an interesting case study. So Wait & Save is our mechanism for giving riders something they really like, a segment of our riders, which is a way to save money, and it's something we've leaned into. We're quite excited about it. It's a different approach from what Uber is taking. We can talk about that if that's of interest, but I bring that up as an example of we're very focused on what our riders and our drivers want. And that's really the primary lens I used to make the cuts.

Nikhil Devnani

Great. Thank you both for the color.

David Risher

Sure.

Operator

Your next question is from the line of Mark Mahaney with Evercore ISI. Your line is open.

Ian Peterson

Hi, guys. This is Ian Peterson on for Mark. One quick question here. Great if you could provide an update on how Lyft Pink is tracking? I know, membership growth doubled in Q4, if you could just provide us an update there. And any progress in some of your new key segments including enterprise, universities and health care? Thanks.

David Risher

Sure. I'll speak a little general here. I'm not actually sure whether we have much to report kind of on a more detailed basis, but we can find out. Unless Pink what's really interesting is if you look at those members, they take more than double the rides on average. And so what that tells me is that if you are Lyft loyal for whatever reason, you're really important to us, you're really important to us. So we're going to double down on that.

Now I think of it and this might be slightly differently from the way we've talked in the past. So I'll acknowledge that. I'll think of this as how can we make sure we build a strong, fervent [ph] base of people who are linked -- Lyft loyal. And [indiscernible] people, I mean, riders, but I also mean drivers. And I think that's going to be a real area of focus of ours over time, because not the economics are such that rider and driver acquisition is one thing, but retention is very different thing.

So anyway, that's a little bit theoretical, I really -- I’m speaking -- liking a lot what I see. But I think we've got a lot more work to do there and I love the fact that we've got such loyal riders. I don’t know, Elaine, do we want to go into any detail on the other segments or maybe not for today? I can tell you that on our B2B side, we've had really strong momentum with health care. And as I've kind of alluded to, we see some real opportunities to drive enterprise usage on our network. And there, I think I just have to say, stay tuned for more on that. But that's what we got.

Ian Peterson

Great. Thank you.

David Risher

Sure.

Operator

Your next question is from the line of Benjamin Black with Deutsche Bank. Your line is open.

Benjamin Black

Hey, David, perhaps this is a bit of a follow-up. You spoke about in your blog, this narrow focus, discontinued share locks, what gives you the confidence to this narrow focus or narrow rideshare offering can fuel growth? And also, is there any way that you can help us size the revenue contribution of shared or locks? And then from a marketplace bounce perspective, how do you feel positioned today? And where do you feel the need to grow incentives on either side of the marketplace, either being on the consumer side or on the driver side? Thank you.

David Risher

Yes, again, thanks for the question, Benjamin. And we'll see if we can divide and conquer this one. I'm actually going to bring up shared rides. You just mentioned it. And I want to say a little more about that, because I know that's a change of what you've heard in the past. We introduced shared rides, of course, pre-COVID. One of the things we found though, is it was -- let's say, it was a little complicated because certainly as we moved into COVID, people were not at all interested in that product offering. But what they were interested in was saving money. So we came up with a new product called Wait & Save and in fact I can tell you about that which is Wait & Save is already more popular than shared drives ever was.

And I think we can explain that again, by looking at it through the lens of our riders and our drivers. From a rider's perspective, it means you can save money without going out of your way. And people really don't like that feeling of I'm headed to one place, and all of a sudden, I'm going in a different direction, they really don't like that feeling. And from drivers, drivers also don't love the added -- the loss of control, let's say, because I thought I was going in one direction, and then all of a sudden, I'm picking somebody else up. And by the way, pickup and drop offs are the least fun part of a drivers like. They'd much rather have you in the car, and have a good conversation with you or not, but at least to kind of stay on track.

So we like our strategy there a lot. And we're really impressed with how fast customers have picked it up. So again, I'm using it as a sort of maybe example of kind of the bigger point of how we're evaluating the types of opportunities we look at going forward, both to differentiate from the competition, as it turns out, but also to give our customers, our riders and our drivers what they really want.

Operator

[Operator Instructions] Your next question is from line of Rohit Kulkarni with ROTH MKM. Your line is open.

Rohit Kulkarni

Hey, thank you for taking my questions. A couple of them. Maybe talk about driver incentives and how that feeds into your that algorithm of profitability versus growth over the near-term, as there has been history of kind of how driver incentives have sometimes been very short-term oriented, and drivers tend to be quite fickle. So we'd love to hear how you are thinking over the next, call it, critical period of summer to incentivize drivers to drive more on Lyft. And then just on bikes and scooters, maybe the latest thinking beyond the restructuring on how bikes and scooters fits into the portfolio. If you think strategically, you need to make any changes because sometimes it may lead to more seasonality than what some of the investors tend to compare you with Uber and have somewhat of a different [indiscernible].

Sonya Banerjee

Rohit, sorry, we can't hear you.

David Risher

Rohit you faded out there a little at the end. But I think we got the essence of your question. Yes, let me -- let's do this. Let me let me say one quick thing about drivers. Elaine is going to go more into the incentive side, which is also the question we were hearing last, and then we'll kind of end up with the bikes and scooters. On the driver side, I think a really important data point is that more drivers are choosing Lyft than ever before. So at least in recent memory, I can say more clearly.

So in Q1, we have the most drivers in about 3 years, which is really pretty exciting for us. And we see that growth is accelerated in Q1 for the first time in a year on the driver supply side. So, we -- obviously, it's very important for our business for our riders as well. And so, Elaine, can give you a little color on the incentive side of it.

Elaine Paul

Yes. So on the incentive side, we are being helped by tailwinds to organic supply. To give you some color, in Q1, in absolute terms, incentives and contra revenue were $304 million. On a per ride basis, incentives were down 13% quarter-on-quarter. This is consistent with what we were anticipating. It's also consistent with what we said in February that we'd be down quarter-on-quarter in absolute terms and on a per ride basis.

And then looking forward to Q2, we currently anticipate that contra revenue incentives will be roughly flat with the level in Q1 and also down quarter-on-quarter on a per ride basis. So, of course, the extent of our investment is dependent on what we see with real time market conditions. But that's our outlook. And one other point of color to add, we're seeing that our driver investments are more efficient. The cost per incremental driver hour was the lowest that it's been in 2 years in Q1. And again that's helped by tailwinds we see to organic supply.

David Risher

I'm going to say one more super quick thing on that one and then move to your bikes question. And this is a little bit more philosophical you guys. Of course, driver incentives will always play a role. They do. They help balance supply and demand in the short-term. I will tell you backing up just a touch. The drivers really like the work. They like the flexibility it gives them and the control it gives them over their time and they like the flexibility and control gives them over their earnings.

One of the drivers said to me not so long ago, I love driving for Lyft because I know I'll never go broke, I can just drive more. Everyone is saying that is because while again, incentives are important in a sense. Strategically, they don't make for the best driver experience because they reduce visibility and earnings. And so we'll use them tactically and there's nothing wrong with that. But it's not -- let's say, strategically, it's the tail of the dog. It's not really the dog. [Indiscernible] create a great experience for drivers.

Now on your question about bike and scooters and kind of other businesses. A couple of things I want to get to first. So we've -- our focus is, I think, a real strength of ours. I mean we are effectively a pure play on rideshare. So that's important for us to execute on as well. So what have we done? We've wound down the car services like what we call garage and the consumer rental business that we are -- we experimented with it for a while. We're spinning off loop, which is the infrastructure that we built in-house, not a material change economically, but it's material in terms of our focus.

And now we get to bikes and scooters. The bike operation, and this is the sort of secular comment I'm about to make. E-bikes are a big deal. When people ride e-bikes, they like them a lot. But for us, I think we haven't done the job we need to do to make sure that every time person rides the bike, they get welcomed into the Lyft ecosystem, and frankly, welcome into the rideshare side of things. So we'll do some thinking on how to do that better.

We've also got some work on the economics of the bike side of our operation. So tune up, it's a capital-intensive business relatively, of course. So we've got some work to do there to kind of optimize. But I like the interplay we have, and I think we can do even better.

Operator

Your next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Steven Fox

Hi. Good afternoon. You've talked a lot about just making new decisions around product offerings. And I think the company has a pretty good history of introducing products with decent levels of success. So I'm trying to understand what you're seeing that needs to change in terms of maybe how you introduce products into the rideshare space? What mistakes were made in the past? And what kind of selectivity is going into it now with -- under the new structure? Thanks.

David Risher

Yes. Thanks, Steven, and thanks for your comment about the past as well, I agree. Look, in terms of changes, I think bigger and faster. So I think we have some big opportunities in front of us that, to a certain extent, COVID slowed us all down from, and now we're kind on the other side of that, so we can think big again. And in the past is just -- it's a bit of a mantra internally of how can we move more quickly because drivers -- excuse me, riders and drivers expectations are quite dynamic, they change. And so our focus, of course, is on building a profitable business. That profitability is going to be driven in large part by can we create products and services that our drivers and riders absolutely love. We've got a great brand. We've got great history to build on and a lot to do, and we want to do it with urgency.

Steven Fox

That's helpful. And then just any comments on sort of how you think autonomy eventually fits into your network going forward?

David Risher

I do. I mean it's -- I have a lot to say about this, but I'll be very brief today. Autonomy is a big deal. It's a big deal. And the reason it's a big deal is because the companies that have invested in it so far have invested, and this is not probably billions of dollars into their platforms. That means that in order for them to make -- have any chance at all making a decent ROI or any return on that investment, they got to plug in to effectively use fleet in a very generic way of operators who can bring that volume because it's going to take a while on the consumer side. These are going to be expensive and sort of niche for some period of time. So very, very important that we position ourselves as being an incredible partner.

Now you know we are doing some experiments in Las Vegas with this. We've got cars on the road in kind of a venture there. And the whole point of that is to be very, very ready to be that great partner with the AV guys. I'll say one last thing. This like AI, I think we will wake up one day and think, wow, where did this come from? Where did AV come from so fast? So right now, the narrative is, oh, it's always just around the corner, it's always just around corner. And that's been true.

But if you're here in San Francisco, and again, this is not hyperbole [ph] you can within 5 minutes see 5 cars driving with no one in the front seat. And that's, again, not hyperbole, that's lived reality day by day. So what that tells you is this is one of those phenomena that are going to seem below the surface for most people for a fair period of time, kind of background noise. But when it happens, it will happen fast, and we are positioning ourselves to be very ready for that.

Steven Fox

Great. That’s very helpful. Thank you.

David Risher

Sure.

Operator

There are no more questions at this time. Ladies and gentlemen, thank you for participating. This does conclude today's conference call. You may now disconnect.