Prepared remarks
Good afternoon, and welcome to the Lyft Second Quarter 2025 Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Aurelien Nolf, VP of FP&A and Investor Relations. You may begin.
Thank you. Welcome to the Lyft Earnings Call for the Second Quarter 2025. On the call today, we have our CEO, David Risher, and our CFO, Erin Brewer. As a reminder, our full prepared remarks are available on the IR website, and we will use this time to answer your questions. We'll make forward-looking statements on today's call relating to our business strategy and performance, partnerships, future financial and operating results, trends in our marketplace and guidance. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call. These factors and risks are described in our earnings materials and our recent SEC filing. All of the forward-looking statements that we make on today's call are based on our beliefs as of today, and we disclaim any obligation to update any forward-looking statements, except as required by law.
Additionally, today, we are going to discuss customers. For rideshare, there are two customers in every car. The driver is Lyft's customer and the rider is the driver's customer. We care about both. Our discussion today will also include non-GAAP financial measures, which are not a substitute for our GAAP results. Reconciliations of our historical GAAP to non-GAAP results can be found in our earnings materials, which are available on our IR website. And with that, I'll pass the call to David.
Thanks, Aurelien. Okay, everyone, listen up. Q2 was a record-breaking quarter for Lyft. We delivered all-time highs across gross bookings, adjusted EBITDA, and free cash flows for the first time in company history. We reduced our share count by repurchasing $200 million worth of stock. This strong performance positions us for accelerated growth in Q3, and we remain on track to achieve our long-term targets. Our marketplace is thriving, setting us up for an even stronger second half of the year. Over 1 million drivers spent a record amount of hours with Lyft. That's the same number of drivers that Lyft had pre-COVID, but now on average, they're driving 40% more each. We had a record number of active riders in Q2, with new riders increasing double digits year-on-year for the second consecutive quarter. As a result, rides reached an all-time high of almost 235 million, marking our ninth consecutive quarter of double-digit growth year-over-year.
A new Lyft is emerging. Not only are we consistently delivering for riders and drivers, but that customer obsession is producing record results quarter after quarter, and our momentum is building. We are now a global, more diversified company, with double the total addressable market. We are significantly broadening options for riders from market-expanding innovations like Lyft Silver for nearly 60 million older Americans to a greater emphasis on margin-expanding luxury offerings like our improved black and black SUV options. And we are uniquely positioned to benefit from the coming addition of autonomous vehicles to our platform across North America and Europe. This will be transformational for Lyft. Look, if you are getting tired of our customer obsession and operating excellence delivering quarter after quarter of record-breaking performance, well, we aren't. We are just getting started, and we're going to do it over and over again. So there's a whole lot to talk about. It's go time, bring your questions. Over to you.
Questions and answers
Your first question comes from Eric Sheridan with Goldman Sachs.
Maybe a 2-parter. When you think about the scaling of some of your broadening out of the array of products you bring to market with a specific focus on affordability, can you talk a little bit about what you're seeing in terms of, maybe, two factors, one, as a stimulant of both rider growth and rider frequency? And how you think the broader competitive landscape continues to evolve when you think about affordability becoming more a key theme across the industry looking out over the next 6 to 12 months?
I will take it and maybe Erin can add a bit of context. Our growth has never been stronger and continues to be robust. You mentioned affordability, and I’d like to broaden the scope a bit. Our growth is driven by fundamentals, which we discussed at our Investor Day about a year ago. The first key factor is operational excellence; success breeds success. This is reflected in our increased frequency. To illustrate, when I joined about 2.5 years ago, our driver cancellation rate was around 15%, and now it’s below 5%, currently at about 4.7%. We have seen significant improvements in estimated time of arrival, driver cancellations, and other metrics. The second factor is innovation. As you noted, affordability necessitates innovation. For example, Price Lock allows users to secure pricing. Since commuting is our primary use case, Price Lock has exceptional retention rates. I view it in terms of both affordability and reliability.
The third factor is partnerships. While talking about affordability in relation to partnerships may seem unusual, it is a vital growth driver. It broadens our total addressable market and connects us with different customer bases, like Chase, United, and DoorDash. Each partnership typically results in beneficial economics for both the companies involved and our riders. For instance, with Chase, there’s a new offer of $10 off each month, which totals $120 a year for Chase Sapphire Reserve customers, who also earn 5x points. Similarly, there are attractive point earnings with DoorDash and United for every ride. When considering affordability, it’s important to look beyond just pricing and focus on the overall value to customers. We can discuss media, global expansion, and autonomous vehicles separately as part of our growth strategy. Overall, I view our approach as enhancing customer value rather than merely adjusting prices.
However, our prices are competitive, and our pricing strategy aims to remain both competitive and reliable. Pricing has evolved differently than we anticipated a year ago, and while it hasn’t increased as much as we expected, we remain dedicated to delivering excellent value to our riders. Now, I’ll hand it over to Erin for further context.
Yes. Happy to add on. Eric, I guess the few things that I would add is, as you think about affordability, and I think I've said this on the previous earnings call, this is not new to Lyft, right? We've got a wide array of products to offer the consumer overall. And so affordability and having that be part of our portfolio is not new to Lyft. Our growth algorithm is really centered, as David mentioned, on active riders and frequency. In Q2, we saw active riders up 10%. Frequency increased mid-single digits. This has been a pretty consistent trend now for 18 months, so we're super proud of that. And then David talked a bit about pricing. What I would say is there's not much to highlight there, right? So in Q2, I would say prices were roughly flat quarter-over-quarter, up a little bit year-over-year as we think about Q3 and what's embedded in our guidance, kind of the same, assuming roughly flat sequentially and up year-over-year. And yet, we've continued to drive great profitability, right? Record in Q2, our adjusted EBITDA was up 26%, so I think we're positioned well. And again, I just end with this concept of affordability and having that as part of our toolkit is not new to Lyft. So we feel like we're positioned well.
The next question comes from John Blackledge with TD Cowen.
Two questions. First on the third quarter gross bookings guide, the range is 13% to 17%. Just curious if you can talk about the expected contribution from FREENOW or maybe frame the gross bookings guide range excluding FREENOW. And then second question, kind of a follow-up on the partnership deals. Could you provide an update on some of the more impactful partnership deals that are driving the business? And as we think looking into the second half in 2026, what are some of the key existing deals that could be growth drivers?
John, I'll start, and then I'll turn it over to David. So I'll start a little bit with where I left off on the last question. It really centers around our algorithm around continuing to grow active riders and frequency, right? So I mentioned our performance in Q2. That has been a very consistent drumbeat over a long period of time, and we expect that to continue. And that's what really leads into our expectation in Q3 around ride growth in the mid-teens. We expect that continued strong rider and driver engagement, continued industry-leading service levels. We're going to continue to grow exceptionally well across our markets. And in particular, last quarter, we highlighted some of the outsized growth we see in places like underserved markets or in Canada, et cetera. Now the thing to highlight with FREENOW, remember, we closed 1 week ago. I think it's really important to note a couple of things. Our Q3 guidance includes 2 months of FREENOW in it. Another important thing to think about as you consider that business, which is a taxi business across 9 European markets. Taxi tends to be a little bit more of an elevated experience. They have a heavy business travel population. So this is all getting to that Q3 is generally a seasonally lower quarter for them, and in our guide, it only includes 2 months of activity. So hopefully, that color is helpful. David?
Sure. There is a lot to discuss regarding partnerships. Let's start with the new ones and then move to the older ones. The big news today is United Airlines, which is among the largest airlines in the world. We are thrilled about this partnership and will provide more details later this year when we launch it for consumers. The highlight is that we anticipate it to be a leading program in the industry, allowing users to earn points on every ride, not just the journey to the airport. This is exciting for us, and we are honored to be United's first rideshare partner, a decision they are taking seriously, which presents significant growth opportunities. MileagePlus is a substantial program. Next, let’s discuss Chase. We have partnered with Chase for many years, particularly through the Chase Sapphire Reserve and JPMorgan cards. The recent refresh has significantly boosted growth, especially among high-value riders, with over 1 million connected accounts.
The new offer of $10 a month with 5x points has accelerated adoption, driving growth indeed. It is now a global program; for instance, you can earn Chase points on the FREENOW app, making us a more attractive partner and increasing the offer's value to more people. Regarding DoorDash, we launched the partnership at the end of last October, and it surpassed our expectations within the first couple of months and continues to expand. As noted in the prepared remarks, their Summer of DashPass achieved remarkable results, with a one-day spike in account linking that was significantly higher than usual. DashPass has 18 million members globally, making this partnership increasingly relevant and capable of generating real growth. On to Alaska Airlines, the fifth largest airline in the U.S. We just refreshed our offer with them, improving it for consumers and resulting in growth. Now, let’s talk about Bilt.
While it might seem small overall, it’s very important to a specific audience. Our partnership allows users to earn and redeem points with 360 million points already redeemed in the last four months, showing promise as we move forward. We also just launched a Business Rewards program, which began yesterday. This free program stands out by offering cash back, addressing affordability concerns, and providing double points with certain partners like Hilton. When considering partnerships, it’s worth noting that approximately 20% of our rides were linked to partnerships, and that number has risen to 25%. We now have over 50 million rides associated with partnerships, indicating significant growth potential. I apologize for the lengthy explanation, but it’s an important story that warrants deep exploration.
The next question comes from Doug Anmuth with JPMorgan.
David, can you talk more about how Lyft is looking to build the AV use case? And when you think about some of the stuff that you're doing in Europe, for example, and the recent partnership that you announced with Baidu, what are the key capabilities that Lyft and FREENOW bring for AV tech providers?
Sure. That's a great question and certainly an important area to explore. First and foremost, when considering autonomous vehicles (AVs), it's essential to view them as a significant expansion opportunity for the rideshare market. My confidence in this perspective stems from the data we observe. In markets where AVs are operational, such as San Francisco, Los Angeles, and Phoenix, we are witnessing industry growth that is five times greater than in other leading markets. This growth can be attributed to the successful introduction of a new product. AVs are perceived as safe; they understand and adhere to traffic regulations, and they offer a private and reliable experience. Furthermore, the vehicles tend to be newer, which certainly impacts their appeal. While some of this growth may diminish over time as AVs become less novel, it represents a significant advancement. To effectively commercialize AVs, which involve expensive technology and vehicles requiring extensive maintenance, certain key elements are necessary.
Primarily, we need strong demand, which we currently have both in the U.S. and Europe. Additionally, a functioning marketplace that balances supply and demand while setting prices is essential. Customer care is crucial as well; if a customer has an issue with the AV, there needs to be someone available to assist them. As we progress through the value chain, fleet management becomes vital. While fleet management might seem unexciting, it encompasses crucial aspects such as acquiring cars, maintaining them, cleaning them, and ensuring they are ready for use as much as possible. We have a well-established subsidiary, Flexdrive, which has been operational for about ten years and has managed tens of thousands of vehicles, currently overseeing around 10,000 to 15,000 cars on its platform. This operation is highly specialized for rideshare needs and operates very sophisticatedly, anticipating maintenance needs and optimizing vehicle availability based on demand.
In Europe, FREENOW has established strong connections with taxi fleets, enhancing fleet management capabilities. Additionally, speaking with CEOs of AV technology companies often reveals that regulatory approval will significantly influence the pace of AV adoption. In the U.S., various states and municipalities regulate AV operations, and FREENOW also engages closely with regulators across nine countries in Europe, which is a clear advantage over other approaches that may not be as regulation-friendly. Moreover, financing options play an integral role, and we can offer a variety of solutions in that respect. To summarize, AVs will undoubtedly support the growth of rideshare by introducing more people to the technology, especially since many will encounter their first AV experience through rideshare services. We have the demand, a functioning marketplace, operational excellence around the clock, effective fleet management integrated with rideshare, and solid relationships with regulators who understand our commitment to compliance.
The next question comes from Benjamin Black with Deutsche Bank.
I just wanted to dig a little bit deeper into the Baidu partnership, sort of any sense on the economic model, and any way to sort of think about the vehicle ramp? And can you maybe talk about the regulatory process in Germany and the U.K.? Do you have a clear line of sight there? And then on FREENOW, now that the acquisition has closed, can you just talk about the incremental investment you may need to deploy to sort of ramp and scale that business? What are some of the key focus areas that you're looking at now that you're fully consolidated?
Sure, let me start by discussing the partnership with Baidu. I'm really excited about this collaboration. Baidu is the largest provider of AV technology worldwide, having completed over 11 million rides in driverless mode. They are a prominent market leader in China and are looking to expand globally, which is why they chose us as their first partner for European expansion. Regarding the details of our agreement, while I can't specify everything, there's an initial deployment involving hundreds of cars, which will eventually increase to thousands. We will be the point of contact with regulators, as we have a better relationship with them in Europe compared to Baidu. Our role includes operating these vehicles on a day-to-day basis as well. The process involves several stages, starting with homologation, which means certifying the vehicles to ensure they are road-ready in Europe, particularly in Germany and the U.K. The cars, known as the RT6, have been designed by Baidu and have been tested on the road for several years.
They are already in the homologation process in Switzerland and other countries. Next, we will have on-road testing with a safety driver before we can eventually start charging riders. This process will take some time, starting immediately, but the duration will decrease with subsequent deployments. Different regulations in various countries will mean we have to adapt to specific requirements. By 2026, we expect to operate in two markets and will own some of the vehicles ourselves, aligned with our strategic goals. Switching to FREENOW in Europe, the rideshare market here is enormous, comparable to that of the United States. Taxis still play a significant role, with many of them operating offline through street hails or phone calls, representing a huge growth opportunity for us. We aim to direct Lyft's European users to the Baidu platform, capitalizing on the 4.6 million instances in which they opened Lyft, expecting service.
This transition is straightforward and won't require substantial investment. Our technology can enhance FREENOW's service, resulting in more stable pricing and quicker pickups. Despite having closed the deal only recently, our teams are already engaging creatively and putting plans in place to execute on these opportunities. The focus is on growth, particularly in the higher-end taxi market in Europe, which offers advantageous unit economics. There's a lot to look forward to. I've recently visited our teams in Barcelona and Hamburg, and they are scheduled to meet next week. We're eager to kick off several immediate initiatives aimed at driving growth. Erin will provide further insights on the cost aspects shortly.
Yes. I don't have much more to add regarding costs, but I can provide some context about the near-term outlook. After going through the deal process and a month-long regulatory review, which is typical for situations like this, our attention has been divided between running the business and finalizing the deal. I want to emphasize what David mentioned; the teams are very eager to get started. We're just in the early days, and we have ambitious plans moving forward, as David highlighted. In the near term, particularly as we consider the remainder of 2025, we previously indicated a EUR 1 billion annual run rate for the business upon the deal announcement. I want to reiterate our third quarter guidance, which accounts for 2 months instead of 3. However, looking broadly at the remaining 5 months of the year, that run rate may be slightly lower, but nothing significant, and it won’t affect our long-term plans. We are also expecting that, at least in the near term for these upcoming 5 months, the EBITDA in dollar terms will be relatively neutral. We are entering this with clear eyes and are very focused on driving top-line growth and taking advantage of some growth opportunities we see.
The next question comes from Ken Gawrelski with Wells Fargo.
Erin, I was wondering if you could break down free cash flows a little bit more. It was a very strong number. Is there anything unusual, one-time in nature in that number? And outside of that, can you talk about the organic progress you made in cash flows?
Yes. Thanks for the question, Stephen. I wouldn't highlight anything in particular. We specifically focus on a trailing 12-month number, right, because there can be some quarter-to-quarter variation, but nothing new in terms of the dynamics. So just to refresh everyone, as we think about free cash flow, right, this is going to be influenced by a few things. Of course, the growth of the base business, but also timing around our ride growth and the way that we accrue for insurance, and then the actual cash out-the-door payments for insurance, which tend to be on rides that were delivered anywhere between 1 and 7 years ago, but the bulk between the last 1 and 3. So those similar dynamics, which we've walked through and articulated remain the same. So nothing in particular to highlight, but we are incredibly proud of the progress. We continue to make $993 million over a trailing 12-month period. So we feel great about where that's positioned. Our balance sheet continues to be extremely strong. And so hopefully that is helpful, Stephen.
The next question comes from Stephen Ju with UBS.
So David, I think one of the things you talked about before in terms of a product development direction for Lyft is to hopefully start opening up a differentiated innovation wedge versus your competitor and you start diverging in different directions over time and Lyft will be known for various things, innovation, et cetera. But it seems like whatever innovation gap from either yourself or from Uber, gets closed fairly quickly, so has your thinking evolved here in terms of how Lyft competes, how Lyft resources product development, et cetera?
Yes, Stephen, I appreciate this question. Let me elaborate. First, our approach remains unchanged. In the tech industry, continuous innovation is essential. History shows us what happens when companies outsource their innovation or stop entirely; it leads to failure. There are numerous books on this subject, particularly highlighting companies that ceased innovating. When comparing us to our competitor, it seems their strategy resembles a copycat approach. For example, Women+ Connect, which we launched two years ago, is now mirrored by them with a lightweight version a few weeks ago. Similarly, we introduced Price Lock about eight months ago, and they've responded with a similar offering. The same pattern can be seen with Lyft Silver. This observation raises questions about their strategy of looking towards competitors for innovation. Typically, this doesn't yield positive outcomes. However, our results indicate steady growth.
While I don't often discuss market share, I should mention that it is currently at its highest point in the last 2.5 years. We've transformed our financial health, moving from losing money to having $993 million in cash, achieving the highest profits in our history, and setting records in active riders. Additionally, we enjoy a significant driver preference advantage over our competitors. This is crucial in the service industry, as it influences who drivers choose to work for. I believe strongly in our strategy that prioritizes customer satisfaction, which drives profitable growth. I prefer being a leader rather than a follower in technology. That said, I want to highlight that despite our success, we are still working with relatively small figures. The rideshare industry is a multibillion-dollar sector, growing at a mid-teens rate consistently, and is vastly underpenetrated. The total addressable market includes 151 billion rides, of which we collectively handle about 3 billion.
So, if others want to imitate our innovations, that's fine. My primary concern is ensuring that riders and drivers have a better rideshare experience. If we succeed in providing that better experience faster than our competitors, history shows that we will likely emerge ahead.
The next question comes from Nikhil Devnani with Bernstein.
Apologies if this is a little bit repetitive, been bouncing around. But now that you've closed the FREENOW transaction, can you maybe talk about how you're thinking about investment into Europe as a region for you next year and thereafter? Is this going to be a significant area of investment or not so much? And I guess, how much investment is required to get that business to grow a bit quicker and add to the overall platform?
Okay, Nikhil, it's definitely good to hear from you, and I promise I'm not at all going to make fun of you for asking the exact same question that was asked 2 times ago. So just to be really brief, we bought FREENOW for all the growth opportunities it has. Its economics are great. Its service is great. Its relation with regulators is great. All these different things. And we have a lot of ideas as we were saying a couple of minutes ago of ways we can leverage it. And it's not going to be very costly. I'll let Erin speak much more directly and equally briefly, I think.
Yes. I'll just sort of reemphasize again, the case that we talked about here is you got to remember that more than half of this market is offline, right? So just the opportunity to more creatively and innovatively capture more of that to come online. Just refocusing, frankly, the team after a month-long deal and regulatory process is going to bring some improvements. The tech teams in some of the initial at least thinking and brainstorming have ideas about dispatch and other areas where efficiencies can be driven across the platform, taking expertise and experience that's already there. And then, of course, over the long term, we see a lot of value around our partnership strategy and expanding that in a much more global way. Media, autonomous vehicles, et cetera. So that's really how we think about the growth there.
Appreciate it. And if I could follow up with a separate question. Overall, it seems like the DashPass program has been helpful for you. Is there any reason that Lyft should not be a bigger part of other larger subscription bundles out there? Is that a viable way to acquire new customers when you think about your partnership strategy at large? Or is some of the constraints there just making sure the economics make sense? Obviously, there’s – between Prime, Walmart, Netflix and Instacart, there’s a lot of bundles out there that are pretty large. Are those addressable at some point as well via partnership, do you think?
Yes, I appreciate that question. The answer is definitely yes. Rideshare is a crucial aspect of many people's lives; we provide about 800 million rides each year, which is more than 2 million rides a day. This reflects how deeply integrated we are into daily life. For example, regarding our partnership with Sephora, it was a targeted collaboration over three days during the summer. This partnership led to a significant increase in foot traffic, delivering around four times the average daily volume to their stores across the U.S. With Sephora competing against online-only businesses, having customers physically come to their stores can be beneficial. While Sephora does have a rewards program, it operates on a distinct timeline. This illustrates the types of collaborations we can create. We see ourselves as part of a broader ecosystem that serves riders and drivers alike. Through our loyalty program, we've awarded approximately 1.2 billion points that can be redeemed at places like Walmart and Starbucks.
So, if we position ourselves as a part of individuals' lives, we can explore partnerships effectively. I believe any partnership must meet two key criteria: it should be appealing to both riders and drivers, and it must benefit both companies involved, which often makes negotiations lengthy. We aim for meaningful and sustainable partnerships, so while I can't share specifics right now, I do like the general idea and direction of the question.
The next question comes from Ken Gawrelski with Wells Fargo.
Apologies for the technical difficulties last time. I want to discuss the penetration levels in the domestic rideshare market, as you mentioned, and the potential for growth. Can you elaborate on pricing? Reflecting back on the IPO days, there was a focus on lowering the cost per mile to replace or at least reduce car ownership, particularly outside urban areas. How do you plan to address lower-priced or lower-cost use cases and the opportunities that arise from them? It has been challenging in the U.S., while other markets like Brazil or India have managed to navigate this better. Could you please provide some insight on this?
Certainly. I believe a few key points are important. First, it's clear that vehicle ownership will decline over time as alternative options become more available. Demand will ultimately align with supply. When buying a car was the only option, people did it, but now manufacturers have introduced leasing, which opens up new possibilities. We’ve also seen the rise of car-sharing and ride-sharing services, which, while still relatively small, are changing how younger generations view car ownership. The traditional milestone of obtaining a driver's license isn't as significant today because people have the ability to access transportation on demand and without the responsibilities of maintenance. Regarding pricing, it's evident that price elasticity plays a role; lowering prices can increase demand. However, we’ve also witnessed the potential of autonomous vehicles (AVs), which may not be low-priced yet but are still growing in market presence.
This indicates that demand can be stimulated in various ways beyond just pricing. Driver earnings are a crucial factor in this dynamic. We operate in a two-sided marketplace where riders want lower fares and drivers seek higher pay, creating a need for balance. Autonomous vehicles could significantly impact this landscape by reducing the complexity of the marketplace and allowing for new pricing strategies. Insurance costs also represent a significant factor in our pricing structure. We have done a strong job managing these costs, but regulatory challenges remain. We are actively collaborating with state regulators to address high minimum insurance requirements that drive up prices, in particular in certain regions like Washington. California presents its own challenges with insurance costs. Moreover, we are seeing innovations, such as Price Lock, which may help lower effective prices. Our media division is on track to reach a $100 million run rate, which can assist in subsidizing rides.
For example, initiatives that offer free or discounted rides to locations like Sephora demonstrate how we can partner with third parties to support drivers while reducing costs for riders. In summary, while there are certain hard constraints such as insurance regulations, we have the potential to innovate and adapt our pricing strategies, especially with advancements in autonomous vehicle technology. I want to temper expectations as AVs come with their own operational costs, but in the long-term, they are likely to favorably influence the economics of our business.
That is all the time we have for questions. I will turn the call to CEO, David Risher for closing remarks.
Listen, I just want to thank you all very much for being part of this call. I'm going to go off script for about 30 seconds and say, I think it's a new Lyft you're looking at now. It's a much more global Lyft, a much more diversified Lyft. A Lyft that's got a lot of good irons in the sort of growth fire and also margin as well. We're a stronger company than we've been ever before. And I'm super excited to have you guys along on the journey. Look forward to talking to you all either in person or next quarter when we all get back together again. Thank you so much.
This concludes today's conference call. Thank you for joining. You may now disconnect.