Lyft, Inc. (LYFT) CEO Logan Green on Q1 2022 Results - Earnings Call Transcript

Lyft, Inc. (NASDAQ:LYFT) Q1 2022 Earnings Conference Call May 3, 2022 4:30 PM ET

Company Participants

Sonya Banerjee - Head of IR

Logan Green - Co-Founder and CEO

Elaine Paul - Chief Financial Officer

John Zimmer - Co-Founder and President

Conference Call Participants

Doug Anmuth - JPMorgan

Eric Sheridan - Goldman Sachs

Stephen Ju - Credit Suisse

Mark Mahaney - Evercore

Deepak Mathivanan - Wolfe Research

Ygal Arounian - Wedbush

John Blackledge - Cowen

Brad Erickson - RBC

Benjamin Black - Deutsche Bank

Steven Fox - Fox Advisors

Lloyd Walmsley - UBS

Operator

Good afternoon and welcome to the Lyft First Quarter 2022 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.

Sonya Banerjee

Thank you. Welcome to the Lyft earnings call for the quarter ended March 31, 2022. Joining me today to discuss Lyft's results and key business initiatives are; our Co-Founder and CEO, Logan Green; Co-Founder and President, John Zimmer; and Chief Financial Officer, Elaine Paul. A recording of this conference call will be available on our Investor Relations website at investor.lyft.com shortly after this call has ended.

I'd like to take this opportunity to remind you that during the call, we will be making forward-looking statements. This includes statements relating to the expected impact of the continuing COVID-19 pandemic, the performance of our business, future financial results and guidance, strategy, long-term growth and overall future prospects.

We may also make statements regarding regulatory matters. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call, in particular those described in our risk factors included in our Form 10-K/A for full year 2021 filed on April 29, 2022 and in our Form 10-Q for the first quarter of 2022 that will be filed by May 10, 2022, as well as the current uncertainty and unpredictability in our business, the markets and economy.

You should not rely on our forward-looking statements as prediction of future events, all forward looking statement that we make on this call are based on assumptions and beliefs as of the date hereof, and Lyft disclaims any obligation to update any forward-looking statements except as required by law.

Our discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results, may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC. It may also be found on our Investor Relations website.

I would now like to turn the conference call over to Lyft's, Co-Founder and Chief Executive Officer, Logan Green. Logan?

Logan Green

Thanks, Sonya. Good afternoon, everyone, and thank you for joining our call.

I'm incredibly proud that Lyft will celebrate our 10th anniversary this month. Looking back, the first decade can be divided into two chapters. In chapter one, we overcame the odds and pioneered the industry, being the first to launch and scale peer-to-peer rideshare, create a new regulatory category and establish shared rides.

In chapter two, we made our business profitable on an adjusted EBITDA basis during a global pandemic. We were the first in our industry to achieve this important milestone, and we did it earlier than we initially anticipated. Now we're turning the page to our most exciting chapter yet.

In chapter three, we plan to get Lyft into the most impactful modern transportation network, which John will talk about more. Our mission continues to serve as our North Star. We want to improve people's lives with the world's best transportation. We have a lot of work in front of us, and I'm incredibly excited about our roadmap to build Lyft into a much larger company.

Turning to Q1. Our results exceeded our outlook. January ride volumes were soft due to Omicron, but demand rebounded sharply in February and March. Average daily rideshare rides were up 20% in February versus January and grew further in March. Given the strong recovery, rideshare rides for the first quarter reached a new COVID high.

And our marketplace has been getting healthier. Total active drivers in Q1 were up by more than 40% year-over-year, and new driver activations were up 70% versus Q1 last year. Consistent with what we saw last year, drivers in Q1 gave more rides on average than they did in 2019, and average ride ETAs in Q1 were 30% better on average than in the first quarter of last year.

Even as gas prices increased in March, average driver earnings were up year-over-year. Our analysis shows that in March, drivers nationally spent an average of $0.61 more on gas per hour than they did in March of last year. Net of this increase, drivers using Lyft earned more than $24 per hour on average, including tips and bonuses. To be clear, this is for all online time, which includes time drivers may have been doing other things, including earning on other app-based platforms. And we ended March with more active drivers than we had at the end of January.

We're continuing to keep a close eye on gas prices and have taken steps to help offset these costs. We instituted a $0.55 per ride fuel surcharge in most markets at the end of Q1. I want to be clear, the average hourly earnings figure I just discussed excludes any benefit from this fuel surcharge, which didn't go into effect until March 21.

In addition, drivers who use the Lyft Direct debit card are able to get up to 5% cash back on gas through the end of June. And our partnership with Upside gives driver discounts on gas with the highest savings available to top Lyft drivers.

Now let me talk about Q2. Even as our marketplace has been getting healthier, we want to continue improving service levels in preparation for further growth. So we expect to invest strategically in order to deliver the best possible experience for Lyft users. We believe more demand is ahead of us, particularly in the second half of this year.

Keep in mind our Q1 rideshare ride volumes, which hit a new COVID high, we're still only around 70% recovered versus the Q4 2019 level. And we see significant runway in key markets like San Francisco, which was less than 50% recovered in Q1 versus Q4 of 2019. The continued return of Shared rides and more use cases, as we progress through the year is also expected to help drive demand. We remain cautiously optimistic that revenue growth for full year 2022 will accelerate versus 2021.

Now let me turn the call over to Elaine.

Elaine Paul

Thanks, Logan, and good afternoon, everybody, and congratulations to the team on reaching Lyft's 10th anniversary.

I'm very excited to be part of this company as Lyft enters its third chapter. I'd echo what Logan said, we are focused on building our business for the long term. This includes investing in a healthy marketplace, which will in turn drive scale and operating leverage.

Before I turn to our financial results, you may have seen that we filed an 8-K and an amended 10-K on Friday. We restated our 2021 financial statements to correct a technical accounting issue in Q3 and Q4 related to how our reinsurance coverage was reflected in those periods. This restatement caused our full year 2021 GAAP net loss to increase by 5% or $52.8 million. To be clear, this adjustment did not impact our revenue, cash balances or non-GAAP results in any period. It also does not reflect any change in the underlying performance of our business. Please refer to our SEC filings for more detail.

Now let's talk about Q1. Rideshare rides were stronger than we anticipated. Given the impact that Omicron had on demand in January, we anticipated that ride volumes would be down slightly in Q1 versus Q4. And even though January was soft, demand rebounded meaningfully in February and March. As a result, total rideshare rides in Q1 were up quarter-over-quarter and reached a new COVID high.

On the supply side, we ended Q1 with more active drivers than we had at the end of Q4. Relative to last year, as Logan mentioned, total active drivers were up by more than 40% and new drivers were up 70%.

Accordingly, we reported Q1 revenue of $876 million, up 44% year-over-year, exceeding our guidance range of $800 million to $850 million. On a sequential basis, our Q1 revenues were down 10%. This reflects the impact of Omicron on the first month of the quarter and seasonality headwinds with shorter rides and less use of bikes and scooters.

We had 17.8 million active riders in Q1, which includes rideshare as well as bike and scooter rides. This represents an increase of more than 4.3 million people or up 32% versus last year and reflects a mix of both new and returning riders. Active riders declined by 5% in Q1 versus Q4, reflecting the impact of Omicron and reduced bikes and scooter usage.

In terms of the recovery, it's worth noting that active riders increased 9% month-over-month in February and another 12% in March. New rider activations were up 22% month-over-month in March. Remember that rider activations through the end of the quarter are typically dilutive to revenue per active rider since there is less time for those riders to take rides.

Even so, revenue per active rider in Q1 was the second highest it's ever been at $49.18, up 9% or roughly $4 versus Q1 2021 and just 5% short of the peak set in Q4 2021. Even while revenue per active rider benefited from a sequential increase in ride frequency, this was more than offset by lower revenue per ride in line with the seasonal trends I mentioned earlier.

Before I move on, I want to note that unless otherwise indicated, all income statement measures are non-GAAP and exclude stock-based compensation and other select items as detailed in our earnings release. A reconciliation of historical GAAP to non-GAAP results is available on our Investor Relations website and may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC.

Contribution margin in the first quarter was 57.4%, exceeding our guidance of 56.5%. On a sequential basis, contribution margin declined by approximately 230 basis points, reflecting a shift in our revenue mix versus Q4. The outperformance on revenue and contribution margin relative to our guidance helped drive strong Q1 contribution of $503 million.

Let's move to operating expenses. Operations and support expense for Q1 was $92 million, up 11% year-over-year. That represents roughly 11% of revenue, flat with Q4 but down more than 300 basis points versus Q1 last year, reflecting leverage against topline growth.

R&D expense in Q1 was $103 million, down approximately $29 million year-over-year, reflecting the sale of our Level 5 self-driving division in Q3 of 2021. As a percentage of revenue, R&D expense was 12% in Q1, down from 22% in the year ago period.

Q1 sales and marketing was $115 million, up just 2% sequentially. As a percentage of revenue, sales and marketing was 13%. Within sales and marketing, incentives were 3% of revenue, which is a mix of driver referrals in addition to incremental rider incentive.

G&A expense in Q1 was $167 million, up 7% versus Q1 2021. G&A expense as a percentage of revenue was 19%, down roughly 650 basis points from 26% in Q1 of 2021. The decline versus last year is a reflection of better leverage on a higher top line. Relative to Q4 of 2021, G&A expense declined 23% and reflects reduced policy and professional services spend.

In terms of the bottom line, our Q1 adjusted EBITDA profit of $54.8 million was better than our outlook of between $5 million and $15 million. This outperformance was driven by top line strength and expense savings. We ended Q1 of 2022 with unrestricted cash, cash equivalents and short-term investments of $2.2 billion.

Before I move to our outlook, it's important to note that COVID and other macro factors like geopolitical dynamics and inflation are impossible for us to predict with any certainty. Future conditions can change rapidly and affect our results.

With that, let me start by providing some important context. We are encouraged by the recovery in demand since January. Even if our marketplace has been getting healthier, we want to continue improving service levels in preparation for further growth.

Over the past two years, evolving COVID conditions have made near-term demand trends highly variable. Federal stimulants and other pandemic-related dynamics have served as headwinds to driver supply. Together, these factors create rapid shifts in demand and in supply that make it more difficult to achieve a healthy balance when compared to a more typical environment.

Coming out of Omicron, we want to invest more in driver supply in Q2 to move our marketplace further into balance. This will set us up for the long term and ensure we're doing everything we can to take care of drivers and riders with the best possible experience. We also expect to invest in key business initiatives to support the continued growth of our company. These investments will have an impact on the leverage we are able to show in Q2.

Over time, as our marketplace health continues to improve, this will allow us to support more ride volumes with better service levels. This will in turn allow us to achieve significant operating leverage.

Now, let me provide our Q2 outlook. We expect revenue of between $950 million to $1 billion, which would represent quarter-over-quarter growth of 9% to 14%. In terms of profitability, we expect Q2 contribution margin will be approximately 56%, which reflects the impact of growth investments on our leverage.

Post Omicron, we feel the worst is behind us, and this coming quarter is an opportunity to invest in kick-starting the next year of growth. We will do so with a focus on drivers, the overall marketplace and some additional brand marketing. As a result, we expect adjusted EBITDA of between $10 million to $20 million for Q2. For full year 2022, we remain cautiously optimistic that we will grow revenues faster than the 36% achieved in 2021. On a go-forward basis, even as we invest in our business, we remain committed to being adjusted EBITDA profitable.

With that, let me turn it over to John to provide key updates on the business and our strategy.

John Zimmer

Thanks, Elaine.

I'm excited for our next chapter and ready to scale Lyft into the most impactful modern transportation network. Let me talk about what this means and how we are going to get there. First, a modern transportation network brings today's fragmented set of transportation services together into one unified customer experience. Today, people have to deal with 10 different companies and go through 10 different channels to stitch together all of their ground transportation needs.

In much the same way, you can't use a mobile phone without attaching it to one of the big wireless networks, in the not-too-distant future, it will become impossible to imagine using a car and other modes of transportation without connecting to a network.

Lyft's third chapter will be about completing the Lyft network, connecting rideshare, bikes, scooters, rentals, transit and even personal vehicles to maximize value for our customers. Our singular focus on transportation is a big competitive advantage.

It enables us to go deeper within the transportation ecosystem to build experiences that go beyond today's status quo in every mode. These elevated yet simple experiences strengthen the network today and help us prepare to commercialize autonomous vehicles into the future.

Take our rental car programs. As a reminder, we have Lyft Rentals, which is consumer-facing; and Express Drive, which is a driver-facing rental program. Both contribute to our marketplace efficiency and allow us to support more of our customers' use cases.

They also give us the foundation of data and hands-on experience we need to keep building our fleet management technology and capabilities that maximize vehicle uptime and lower overall fleet operating costs. These exact platforms and skill sets are critical into the future, as we drive maximum returns for our AV partners.

Now, let me provide an update on our three key strategic areas of focus for this year. These include: one, accelerate our core; two, expand emerging and new products, including our bike, scooter, rental cars and vehicle services; and three, invest in our innovation stack.

Let me start with accelerating our core. Even as we continue to improve our service levels, we will also deliver innovations and partnerships that allow us to grow riders and use cases. One great example is Priority Pickup, which is our rideshare mode that gives riders access to an even faster pickup.

We began rolling it out last year, and we've seen high repeat usage. This mode delivers meaningful value to riders, while also making our network more efficient by better understanding rider preference. We are working to scale Priority Pickup to more markets and use cases, as we progress through this year.

In terms of partnerships, we recently renewed our relationship with Chase, the largest credit card issuer in the United States. Chase card members who ride with Lyft will continue to receive preferred points on those rides for the next three years. This partnership gives the millions of Chase card members even more reason to use Lyft. The initial program produced great results, allowing us to meaningfully increase card members' transportation spend with Lyft.

Next, I'm going to talk about how we've been expanding our emerging and new products. In Q1, we grew the number of electric vehicles available to drivers through our Express Drive program in California. This work is part of our commitment to achieve 100% electric vehicles on our network by 2030.

We've also been working to expand Lyft Rentals to new markets, including Chicago and San Diego, bringing our best-in-class consumer rental experience to more customers. In Q1, we saw more first-party rental activity than ever before, with growth of more than 55% versus Q4. And by building on our existing real estate footprint, we can optimize our investments in these regions.

Let me spend a moment on what we've been doing to expand and diversify our micro mobility operations. These systems deliver compounding value as an additional entry point to our network. We've partnered with Spin to make their scooters available through the Lyft app. Through this partnership, we can make more micro mobility options available to Lyft riders nationwide. This integration is available in select US cities today and were ultimately scale to 60 markets.

Turning to our bikeshare systems. In April, we entered into an agreement to acquire PBSC Urban Solutions, a leading global supplier of bikeshare equipment and software. We're excited about this acquisition because it complements and expands our own bikeshare model.

PBSC has a significant hardware footprint and will bring an incremental 70000 bikes in 39 markets to our business. We are excited to build on the strong relationships PBSC has established with cities and operators around the world to support and expand these systems. The transaction is expected to close in Q2, subject to customer closing conditions.

Finally, let me highlight some of the investments we are making in our innovation stack. This refers to the R&D we're doing to advance the technology that underpins our network. We continue to advance our pricing technology, specifically the feedback mechanism that enables our systems to adjust to sudden changes in demand. This has significant value across our network and for particular use cases like airport rides.

Demand for airport pickups can be highly variable depending on the volume of arrivals and departures at a given time. And by enabling our systems to detect and adapt to these sudden shifts as quickly as possible, we can optimize our service levels at airports and capture more rides. We are applying a similar approach to address supply-demand shifts that result from events and other unique traffic patterns. Innovations like these can enable us to address more rides, deliver a better rider experience, increase driver earnings and improve our top line.

Operator, we're now ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Doug Anmuth of JPMorgan. Your line is now open. You may ask your question.

Doug Anmuth

Thanks for taking the question. I just wanted to follow up on some of the comments around the investments in driver supply. You talked about drivers being up 40% year-over-year and then up sequentially from year-end 2021. Just hoping you can help us understand what's going on with drivers around higher gas prices and why you feel the need to invest that much more in driver supply now. And then can you help us just in terms of quantifying how much spend there might be in upcoming quarters? Thank you.

John Zimmer

This is John, Doug. Just for context, obviously, we're reporting on Q1, and it was the largest spike in COVID cases of the pandemic. And one thing to think about, like typically, when we're managing the marketplace, there's much more organic growth or change. And when you come out of a large spike or a large change to the marketplace, and actually, we went through multiple of these large spikes, the importance of quickly getting service levels back but in a less organic way is part of what's happening here.

So I would just tie those comments to the fact that Q1, there was Omnicom. And we want to -- we're -- this quarter, Q2, which we're talking about with that guidance, is about kickstarting the rest of the year's growth. And we feel that it's the right investment to make. There's no underlying fundamental foundational concerns. In fact, driver earnings compared to last year are up, average about $24, and that was before we put in the $0.55 gas surcharge.

Logan Green

Yes. So one thing that I think is important to understand about the marketplace is that supply adjustments are like moving the Titanic. It's very, very slow, whereas demand can change on a dime. And what we saw, most of the marketplace moves organically, right? So there are only kind of modest things that we can do to impact that. And what we saw coming out of Omicron was, obviously, as demand went down, more drivers signed off. And then demand turned on a dime and shot back up, and drivers continued to rejoin the platform.

So when we look at our role and it is – again, most of it is happening organically in the marketplace. But when we look at our role, we look for what are the positive ROI opportunities where we can invest to accelerate the trend we're confident in. And we're confident that we have turned an important page in the pandemic. The policies across the US, across much of the world, are adjusting. And people are getting very comfortable living with COVID.

And we feel very confident that this is the right time to put a little extra investment behind ensuring we're ready to handle that demand and that we're there providing the best service levels we can. So we are making ROI positive investments that – where we have high confidence that they will pay off in the long-term for the business and for shareholders.

Doug Anmuth

Thank you. And any more you can add just around quantification?

Elaine Paul

Hi, it's Elaine. I can add a little more context on our investments. So in addition to investing in drivers, we're really focused on investing in drivers, the marketplace and a bit of marketing as well as we anticipate this continued comeback in demand.

In terms of our cost categories below cost of revenue, we're projecting that R&D, sales and marketing and G&A increase about one percentage point as a percent of revenue this quarter versus last quarter, Q2 versus Q1. And that's what you see impacting our margin this quarter. We believe that these investments in drivers and other initiatives that are supporting our growth ultimately are going to pay off in the healthier marketplace, which drives more rides, more top line, and that drives the flywheel of leverage. And we feel really good about what we're seeing in terms of demand for Q2 and in the back half.

Operator

Thank you. We have the next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is now open. You may ask the question.

Eric Sheridan

Thank you so much for taking the questions. In prior calls, you've talked about some pockets of market concentration that are still well-below pre-pandemic levels. Can you give us a sense of geographic skew, where you're seeing – still room for a fair bit of pre-pandemic recovery in the business broadly? And then within the business itself from a product or a type of ride standpoint, I think if you can help us understand in terms of either long or short-duration rides, return to work, airports, elements of SKUs that are driving the business versus where there could still be recovering over the next couple of quarters. Thank you so much.

Logan Green

Yes. Yes, a couple of things. We see a ton of headroom for growth on the West Coast, particularly and Lyft has always over-indexed our share on West Coast markets. So I think that provides some real upside for us as the business recovers. Cities like San Francisco are still just about 50% recovered, whereas nationally, the average is 70% recovered. So we feel like there's a lot of great headroom there.

The other area where I think there's a lot of headroom in the business is on Shared rides. And we have Shared rides live in two markets today, live in Philly and Miami. But we are quite excited about the opportunity to launch Shared rides.

And for those of you who remember, but back in 2019, they were a very meaningful part of the business, and again, an area where Lyft was known. We were very known for our Shared rides product. And so we're excited to light that up again and imagine that, that will make up a meaningful part of the business by the end of the year.

Elaine Paul

Yes. Thanks for the question. And in terms of airport rides, we mentioned that in Q4, airport rides were 9%. We were pleased that in Q1, it stayed relatively flat at 8% of rides, and we feel bullish about this going forward with the rebound in travel. In addition, beyond the airport use cases increasing throughout the rest of the year, we also see headroom for not out. That's still as a percent of total rides below where it was pre-pandemic. And we think that all the tailwinds are with us on that one. In addition, we think there's more headroom with return to work. And within travel and related to return to work, we also see headroom with business travel. I mean that's a big opportunity for us.

Operator

Thank you. Next question comes from the line of Stephen Ju of Credit Suisse. Your line is now open. You may ask the question.

Stephen Ju

Okay. Thank you. So can you talk about the benefits to either retention rates or frequency of usage you may see in those cities where you have that expanded transportation offering with micro mobility so we can perhaps think about how PBSC can help transform the business in those markets where you don't yet have a bike footprint?

And also last quarter, I think you talked about the desire to invest into a more, I guess, purpose design maps product that's appropriate for Lyft usage versus the general use case. So can you share what your progress has been there and when we can start seeing you guys start to ship some products? Thanks.

John Zimmer

Sure. This is John. I'll talk the device and Logan can talk to the maps. So as you mentioned, we are working towards acquiring PBSC. Excited about the acquisition. We're seeing , more than 2.4 million first-time riders across the U.S. try Lyft-operated bikes and scooters. There's some other stats around kind of how big our current presence got, and then I can talk to what we get with PBSC.

In New York City, 40 -- greater than 40% of communa rides on our platform were by Citi Bike. In 2021, Citi Bike, if you consider the transit system, is the 25th largest in the United States. So we're seeing positive success with this more dock-based kind of city partnership model where we have exclusive relationship with the city.

PBSC had done this as well and had done this globally. And by doing that acquisition, we double -- more than double the number of bikes on the ground. And it really helps when we're -- when we have R&D that's going into building a better fleet. E-bike, which we just launched, which is doing really well, it's lowered our cost of operations to be able to spread that R&D cost across many more geographies.

Double the footprint is great. On the revenue side, we can sell that hardware into a much larger base of cities. And so, excited about that acquisition, excited about the transit and bike business as a way for people in very dense urban environments to get affordable rides and to become loyal Lyft users.

Logan Green

And then on the mapping front, a couple of things. One, just give a little more color on how we're approaching our mapping investment or mapping work. First is we're building on top of Open Street map, which is a long-standing open-source project. And you have a lot of major companies, Amazon and Meta being a couple of the larger ones, who are heavily invested in that and making it a success. So the project has accelerated a lot over the last number of years and has gotten quite good.

So that's the foundation of our -- of the Lyft map. And we have been putting a lot of energy into capturing the unique data that we have as a company. We have tens of thousands of cars, hundreds of thousands of cars on the road at all times, capturing data, sending that back to us about traffic speeds. We capture safety data. We capture road closures, et cetera. And we're able to feed all of that back to create a unique value-add layers to the map and, in some cases, edits and improvements to the map.

And you see a lot of that work is already evident in the product today. So a lot of those breakthroughs mean that a driver gets there are few seconds faster because we've navigated them around the street closure or we more accurately sort of identify that a driver who's physically closer to you may actually get stuck in traffic for longer than a driver that's physically a little further away, but has a straight shot on a street without traffic. So those are some of the more fundamental improvements that show up in dispatch.

With the navigation product, we just had a really exciting milestone where we have completed our 10 millionth ride on the Lyft NAV stack. So this is something where we're still scaling this up and iterating on it to make sure that we hit the sort of experience levels we're targeting, but it's starting to get really, really good. And you should see that scale up in a much larger way over the course of the year.

Operator

Thank you. We have the next question comes from the line of Mark Mahaney of Evercore. Your line is now open. You may ask your question.

Mark Mahaney

Great. A couple of questions please. When do you think rides will recover to post-COVID levels? Is that what -- is that assumed in your guidance for kind of accelerating revenue growth this year versus last year? And then, you provided some color on rider incentives as a percentage of revenue. I think it was 3%, which looks like it's pretty consistent. What about driver incentives? How did that look as a percentage of revenue with what you've had in the past? And then you gave guidance for the next quarter on some of the OpEx lines. What are you assuming is going to -- what should we assume is going to happen with driver incentives as a percent? Thank you very much.

Elaine Paul

Sure. Let's start about -- let's talk about incentives and incentives classified as contra. In Q1, they were $350 million, and that was up 3% quarter-on-quarter and made our important lever to achieve balance in our marketplace. All that being said, while we are continuing to invest in driver incentives, contract incentives per ride peaked in Q2 2021 and we still believe that that's a peak and I'm working backwards on your questions. I think your question before that was around -- do you mind repeating the other two parts to your question?

Mark Mahaney

Well, any particular guidance you want to give us on those -- that contra item for the June quarter? And then, when should we expect rides to be above -- back to pre-COVID, but higher than where you were pre-COVID? And is that assumed in the guidance for the year? Thank you.

Elaine Paul

Yes. In terms of our optimism about full year revenue and we do believe the full year revenue will be up faster than the growth we saw last year, so higher than 36% year-on-year growth. The exact means by which we get there between quantity of rides and the average revenue per ride, I don't want to comment on. And so therefore, I don't want to talk about like when we think that will hit pre-COVID rides.

But as you said, we think that there's a ton of headroom and that we're still at 70% there now. So lots of headroom on the quantity side to get there.

Operator

Next question we have from the line of Deepak Mathivanan of Wolfe Research. Your line is now open. You may ask your question.

Deepak Mathivanan

Thanks for taking my question. Yes actually, I just want to kind of expand a little bit on the last question. Previously, when you've had the need to build driver side or the supply side, large part of it was tied to consumer prices and largely kind of paid us higher earnings and incentives to drivers. It sounds like this time around these investments or some are coming from your P&L. Is that the right characterization? Or is it still going to be funded by higher prices? How should we think about kind of like the -- what type of these incentives are in order to kind of build on driver supply? Thank you.

Elaine Paul

Yes. So in terms of funding the investments in drivers, some of that does come straight from pricing. And the premiums that we see in prime time can fund the investments in drivers. Some of our second order investments in R&D and what we're doing to invest in the marketplace, and that's what you see in this quarter impacting our outlook on overall EBITDA margin. Those investments, which ultimately invest in a healthy marketplace, benefiting both drivers and riders, that's what's impacting our Q2 margin mode.

Deepak Mathivanan

Okay. Maybe if I can ask one more. You're guiding for contribution margin to be down quarter-to-quarter. Were there any one-time things that we should be aware of in the 2Q guide? Or is there anything that we should be aware of? Thank you.

John Zimmer

Sorry, say that again, any onetime?

Deepak Mathivanan

In the contribution margin outlook for 2Q?

Elaine Paul

There's nothing onetime impacting our contribution margin in Q2.

Operator

Thank you. We have next question comes from the line of Ygal Arounian of Wedbush. Your line is open. You may ask the question.

Ygal Arounian

Good afternoon, guys. Just on the 2Q guidance and the revenue guidance. You talked about the February-March trends and how they were doing and improving. Can you talk a little bit about what's built into your expectations for 2Q, if there's any color that you can give on April? Are you seeing any factors from kind of inflation in the macro or perhaps people not going out as much? Or is the reopening kind of going on pace? Just what's built into your expectations around that number?

Elaine Paul

Yes. Absolutely. So obviously, January took a big dip as we saw the impact of Omicron. And then as Logan alluded to in his comments, we saw a demand rebound in February and in March. Our Q2 guidance is informed by our exit rate in terms of ride per week at the end of the first quarter, and we're projecting low single-digit growth in the average weekly ride that's informing our second quarter guidance.

That low single-digit growth in rides is consistent with seasonality that we typically see Q2 versus Q1. And so we feel like that's a prudent sort of outlook for Q2. In terms of inflation or something like that, that's not impacting our revenue guidance. Our revenue guidance is driven by our outlook on rides, and that's really what's driving the $950 million to $1 billion.

Ygal Arounian

Thanks. And then maybe a little bit more detail on just when you talk about getting service levels back sort of investing in that rides come back and continue to normalize, can you just give a little bit more detail on what that means? What it is about the service levels that you're not happy with? Are there specific metrics that you're looking for, rider or driver ratio? Or just any more color around that, that could help us understand where we are now and where we want to get by the end of the year? Thanks.

John Zimmer

Yes. One of the metrics that we like to look at is average ride ETAs. The good news is in Q1, they improved by 30% year-over-year. But again, like we expect demand to keep increasing, and we need to get supply -- the supply side ready for that. And so that's one of the main metrics we look at, along with price and quantity of driver hours and sections on the demand side.

Operator

Thank you. We have the next comes from the line of John Blackledge of Cowen. Your line is now open. You may ask your question.

John Blackledge

Great. Thanks. Two questions. First on Shared rides. How did they perform in Philly and Miami in 1Q 2022? And kind of what's the cadence for opening up Shared rides in other markets the rest of the year? And then second, a little bit of a longer-term question. If you could discuss investments in EV infrastructure for drivers as Lyft points to the 2030 goal. Thank you.

Logan Green

Great. Yes. So in April, Shared rides were roughly 9% of total rideshare rides in Philly and Miami. The cadence for reopening new markets will sort of be based on how we see initial launches go and kind of early success of that. So, we expect it to be over the course of the year, but probably expect to be fairly fully ramped by the end of this year. And then the second question on electric vehicles. Do you want to give -- can you ask that question again what you were looking for?

John Blackledge

The investments that you're making in charging stations across the country, any -- for the drivers, any kind of update there that might differentiate you from competitors?

John Zimmer

I'd say the biggest differentiation is that we have the Flexdrive program. So today, drivers can rent EVs from Flexdrive, which is our independent managed subsidiary, which includes free charging. Actually, EVs have been available through our test drive, which is the external name, we call it for drivers for years. They've had EVs. And so the structural advantage is that, we have these fleet management capabilities at scale, and we're able to distribute these EVs along with partnerships we've made on the charging side directly to our drivers.

John Blackledge

Thank you.

John Zimmer

Yes. One of the other exciting things we saw for the first time with EVs, that the financial equation for a driver made EVs as good or, in some cases, better financial decision than combustion engines.

Logan Green

Yes. One kind of interesting fact is that as we saw gas prices shoot up, a number of drivers have both the gas-powered car and an EV, not a large quantity, but a number do. And we saw the sort of every driver who had access to EV basically jumped in that EV and started giving rides in that EV as gas prices shot up.

So whereas historically, they have been at a premium, we see in the next couple of years there being a turning point where EVs can provide much more kind of consistent cost structure for our drivers. And right now, when you layer in all the incentives, it is roughly breakeven, but we think that sort of is going to tip over time. And so we're really interested in doing what we can to remove those barriers for our drivers so they can untap that. And I think, obviously, it's going to become the majority of our business in the next several years.

Operator

Thank you. We have the next question comes from the line of Brad Erickson of RBC. Your line is now open. You may ask your question.

Brad Erickson

Just a couple of follow-ups here. Elaine, the contra portion on the incentives baked into the guide, assuming it's higher quarter-over-quarter, any magnitude you might be able to give there?

And then secondarily, on the contribution margin. In the past, I think you've talked about 45% being the goal. I think you dropped it this quarter at about 48%. Is that something you look to get back to as we look beyond some of these near-term driver incentives? And any sense if that's maybe now a '23 thing versus a '22 thing or the intensity of these incentive investments is maybe going to be a little shorter-lived? Thanks.

Elaine Paul

On the driver incentives, look, we think -- sort of to reiterate something that John said earlier, we're coming out of Omicron. And reiterating something that Logan said, it's hard to use the ocean liner of supply, but demand is very equity.

And we're seeing great signs on demand. This is an investment quarter to get drivers in line with that. When the marketplace reaches much healthier balance would be hard to predict. But I think it's important to reiterate, that we're bullish on full year top line performance.

And we remain committed to adjusted EBITDA profitability, reaching GAAP-profitable over time. And all of our investment decisions are made through a ROI-positive lens with the goal of delivering and maximizing free cash flow growth per share.

So we are still looking at to the long-term and we just wanted to be very clear that in Q2, it's a kick start quarter in terms of our investment across not only drivers, but other things that we're doing to invest in growth initiatives for the future, the health of the marketplace and our brand.

Operator

Thank you. The next question comes from the line of Benjamin Black of Deutsche Bank. Your line is now open. You may ask your question.

Benjamin Black

Thanks for the questions. I have a follow-up on supply. Uber struck deals with taxis in New York and also San Francisco. Just curious, if you're in similar conversations and sort of beyond incentives, what's your strategy to grow supply organically longer term? And then, one on regulation, we saw the Washington State ruling. Can you sort of help us understand the incremental costs associated with the new independent contractor model in the state? And could you give us an update sort of on the regulatory environment more broadly as it pertains to work classification? Thank you.

John Zimmer

Cool. Let's say, the taxies and thoughts on supply -- organic supply. And then, this is John, I'll talk about the regulatory environment. Yes. On taxis, we are not planning anything similar to what Uber is working on there. But I think it's important to note that none of the deals are exclusive. So we do plan to track it and monitor the work. I think there are a couple of really big structural challenges to making taxis successful on the platform, and we've studied this closely over the years.

But what's unique about a taxi is that traditionally, they get most of their business from street hails. And when you try to combine an e-hailing platform with a primarily sort of street hail-based business, it's in the driver's best interest to cancel, on the e-hail ride most of the time any time they get a street hail that is sort of, by definition, closer and more of a burden in the hand.

And so you see traditionally very sort of poor levels of reliability. You also see a different regulatory structure around pricing that makes it extremely hard, I think, to incorporate taxis in a way that really adds value for any of the parties involved. So, we think it's definitely a challenge to take on. We – so, we will continue to watch it, but we do not have any plans at the moment. You had another question.

Logan Green

About like organic supply ways that we can grow that. We're constantly investing in the referral channel that we have, which in some ways is organic, some ways -- there is an incentive on that. But generally, the biggest thing that's going to be helpful, like we do not have concerns based on what we're seeing on the ground around the growth in organic drivers.

The challenge has been managing the pandemic and the quarter after the largest spike in COVID cases, wanting to ensure that we provide great service levels to all these potential new users and all these people that we have a chance to win over from other services. So organically, we continue to see positive trends. It is our main channel on the supply side. And I think the biggest change is going to be getting distance from the pandemic.

On regulatory, a few different questions. Let me start at the highest level. The latest Washington milestone at the end of March, having a new law signed that you mentioned, it protects the independent contractor model, which is preferred by drivers. The landmark piece of that specific law is that labor organizations were -- or a labor organization, the Teamsters there was involved and interested in pushing forward the IC model.

So great progress coming out of Prop 22 the prior year going into a law that had labor support protecting the IC model. Not going to comment -- you asked about the cost. We want to see the model in action just like we did in California, but nothing concerning from a cost perspective.

And overall, as we stated a couple of years ago, I've been talking about the independent contractor models, what drivers want, is popular amongst the voters as we saw in California. And it's great progress to see a state like Washington moving forward with legislation to protect that and even getting the support of labor.

Operator

Thank you. We have the next question comes from the line of Steven Fox of Fox Advisors. Your line is now open. You may ask your question.

Steven Fox

Thanks very much. Two questions, if I could. First of all, just again on the incremental trends around the margins and the revenues for this quarter. Why shouldn't we be thinking more broadly about Q2 being always a seasonal investment period for the company around drivers given that you always have sort of that the difference between volatility of rides and drivers in Q1? And then secondly, is there any more you can provide on the PBSC acquisition in terms of just scale and closing and how quickly it could add to the EBITDA and revenues? Thanks.

Logan Green

Yes. I think in terms of seasonality, the last two years is really COVID-driven. So we certainly don't expect that to sort of continue to have the type of impact it's had. But if you think back to the last two Januarys, there were huge COVID spikes that threw off the market and required a little bit of additional investment in Q2. So I think there has been a pattern there the last couple of years. We do not expect that to be the case going forward.

I think the way that we're seeing sort of demand trends shift even in the face of another variant sort of making the round, I think people are very much adopting a live-with-it sort of approach to where I don't expect sort of future seasonal spikes to have the same sort of impact on the market. So I would not read that as a sort of permanent seasonal trend even though it has shown up for the last two years.

John Zimmer

And your second question, maybe you could repeat was specific to PBSC acquisition?

Steven Fox

Can you give us a little bit more color on sort of the financial impact or how you expect it to help the business on the top and bottom line after it closes? Thanks.

Elaine Paul

Yes. Thanks for that. We are not providing any guidance specifically related to our -- to the acquisition. So unfortunately, we're not commenting on that at this time.

John Zimmer

Yes. Strategically, as has been stated, there are great revenue opportunities and leverage against our R&D investments that we're already making by doubling the number of bikes -- more than doubling. And it diversifies that for that specific product, bikes and scooters. It diversifies the geographic concentration and customer mix. And overall, we think we can drive real cost savings by streamlining their supply chain.

Operator

Thank you. We have the next question comes from the line of Lloyd Walmsley of UBS. Your line is now open. You may ask your question.

Lloyd Walmsley

Thanks. Two, if I can. First, just on your market share. How do you feel about your market share overall? And then maybe on a geographic mix basis, are you seeing any trends, positive or negative, you would call out on market share? And then kind of related to that, how do you feel about Lyft Pink subscriber trends and kind of how that offering compares to other subscription offerings in the market? Any big changes aside from renewing the deal with Chase that we should think about?

Logan Green

Yes. Great. So first on market share. And broadly, we see the competitive environment has remained stable. And based on all the third-party data that we track, and I'm sure you're tracking as well, our market share is roughly consistent with where it was pre-COVID. And our service levels, both price and pickup time, are competitive as well. So, I think as we kind of look forward to the recovery, we see two big areas of upside. One is that our share overindexes on the West Coast, which is less recovered broadly versus the rest of the country.

So I think there's a lot of great upside there and on Shared rides, which we were talking about earlier. So those are the two big kind of upside factors we see in the remainder of the year as the West Coast recovers and if Shared rides relaunch and become a larger part of the business. So bottom line, we feel very confident in our competitive position in the market.

In terms of membership, Lyft Pink, we are very committed to our membership program, Pink, and see it as a long-term growth driver for the business. In terms of Uber's product, UberOne, is clearly very focused on food and food delivery. Ridesharing is a smaller component of that. So we don't have any kind of broader steps to share on Lyft Pink other than we're very committed to it and excited to see it become a larger part of the business overtime.

Operator

Thank you. And that will be the last question. Presenters, do you have any closing remarks?

Logan Green

That's everything. Thank you all for joining the call today. And we look forward to talking with everybody next quarter.

John Zimmer

Thank you.

Elaine Paul

Thank you.

Operator

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