LYFT Inc (LYFT) Q4 2022 Earnings Call Transcript

LYFT Inc (NASDAQ: LYFT) Q4 2022 earnings call dated Feb. 09, 2023

Corporate Participants:

Sonya Banerjee — Head of Investor Relations

Logan Green — Co-Founder and Chief Executive Officer

Elaine Paul — Chief Financial Officer

John Zimmer — Co-Founder and President

Analysts:

Doug Anmuth — JPMorgan — Analyst

Stephen Ju — Credit Suisse — Analyst

Mark Mahaney — Evercore ISI — Analyst

Nikhil Devnani — Bernstein — Analyst

Eric Sheridan — Goldman Sachs — Analyst

Brian Nowak — Morgan Stanley — Analyst

Alex Potter — Piper Sandler — Analyst

John Colantuoni — Jefferies — Analyst

Steven Fox — Fox Advisors — Analyst

Lloyd Walmsley — UBS — Analyst

Deepak Mathivanan — Wolfe Research — Analyst

John Blackledge — Cowen and Company — Analyst

Benjamin Black — Deutsche Bank — Analyst

Presentation:

Operator

Good afternoon, and welcome to the Lyft Fourth 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 — Head of Investor Relations

Thank you. Welcome to the Lyft earnings call for the quarter and fiscal year ended December 31, 2022. Joining me 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 macroeconomic factors, the performance of our business, future financial results and guidance, the impact of our cost-reduction initiatives, strategy, longterm 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-Q for the third-quarter of 2022, filed on November 8, 2022, and in our Form 10-K for full-year 2022, that will be filed by March 1, 2023, as well as risks related to the current uncertainty in the markets and economy. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of the date hereof, and Lyft disclaims any obligation to update any forward-looking statements except as required by-law.

Our discussion 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, as well as in our earnings slide deck. These materials 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 — Co-Founder and Chief Executive Officer

Thanks, Sonya, and good afternoon. Today, I’m going to cover the team’s Q4 performance, important updates to our non-GAAP financial measures, as well as our Q1 expectations. But first, I want to reflect on the progress we made in 2022. I’m appreciative of the team’s execution in a challenging year. We took important steps to strengthen our business and deliver significant value to our customers. We connected more than 1 million drivers with nearly $40 million riders. We supported hundreds of millions of rideshare rides and more than $50 million bike and scooter rides, which was a new record for us. Millions of people use Lyft to take trips to get to work, vote, attend events and connect with friends and family. The team worked incredibly hard and delivered significant value. We also introduced high-impact product improvements, upfront information is a major advancement to the driver experience.

And our work in other areas including with Lyft Maps is competitively differentiating and delivers valuable marketplace efficiencies. We’ve also expanded our market reach by relaunching our Lyft Pink membership program with new benefits and a lower price point. Additionally, by integrating services for car owners into the Lyft App like roadside assistance, parking and maintenance. We can deliver even more value to the roughly 75% of Lyft riders, who have a car. With innovations like these, we can capture more of consumers’ transportation spend.

Before I move on to our financial results, I want to highlight two items from the press release. First, we’ve updated our definitions of contribution and adjusted EBITDA to include reserve adjustments for prior periods. And in Q4, we took action to strengthen our insurance reserves by $375 million, which given the definition change affected our reported results. Elaine will discuss this in more detail.

Now let me talk about Q4. We saw important tailwinds in rideshare, including strong demand and more drivers organically using Lyft. Revenue was the highest in our company’s history and our results beat our outlook on every metric, excluding the action we took to strengthen our insurance reserves. Rideshare demand was strong, we had 20.4 million Active Riders, which was the highest level in nearly three years and revenue per Active Rider reached a new record. In particular, the airport use case reached another new high at just over 10.4% of rideshare rides with the absolute number, up 25% versus Q4 of 2021.

Additionally, on the enterprise side managed bookings grew by more than 60% year-over-year and set a new record with continued strong adoption of our B2B offerings, particularly in the healthcare and retail verticals. In Q4, with the most active drivers on our network in nearly three years reflecting healthy organic tailwinds. Bookings per Active Driver were more than 50% higher than they were in Q4 of 2019 and near our all-time high. Drivers spent more time driving than they did in Q3 of 2022 or in Q4 of 2021 and across the U.S. our average rideshare ETAs improved.

Even with these tailwinds, our marketplace was running hot in Q4, demand outstrips supply and Prime Time went into effect, more often than we would have liked. As a result, our conversion rates, meaning the share of ride intents that convert to taken came down quarter-over-quarter. This dynamic contributed to revenue and adjusted EBITDA exceeding the high-end of our outlook, excluding the increased insurance reserves. But we know high Prime Time can hurt conversion and is not healthy over time. Going forward, we are prioritizing competitive service levels to maximize long-term growth and retention.

Next, I’m going to address our Q1 guidance. There are three factors putting pressure on both revenue and adjusted EBITDA relative to Q4. First, seasonality. As we’ve shared before our business faces pressures in the first quarter of the year, both in terms of rideshare as well as bikes and scooters related to colder weather. Second, Prime Time is coming down dramatically quarter-over-quarter because of increased driver supply. This reduction in prime-time is good for our service levels that will reduce our Q1 revenue and adjusted EBITDA. Third, base price. In January, we slightly reduced based pricing to remain competitive with the industry.

Given the combination of these factors, we anticipate Q1 revenues of roughly $975 million. Relative to Q4, this is a decline of approximately $200 million, about one-third of the sequential decline is due to seasonality, while the remainder is due to less Prime Time and lower base prices. We expect this will result in Q1 adjusted EBITDA between $5 million and $15 million. This is obviously not the level of growth or profitability we are aiming for capable of. And we are laser-focused on driving additional growth and managing costs.

Relative to three months ago, the competitive dynamics changed. And the better marketplace balance we see it today, create significant opportunities for long-term growth. To take advantage of this opportunity and grow the market, we must prioritize competitive service levels. This will impact our 2024 adjusted EBITDA and free cash flow targets. We are assessing the impacts of these changes and are actively reviewing adjustments to the business, including cost-cutting measures. We will share additional long-term margin targets in the near future.

Stepping back, the fundamentals of the business are strong, we’re seeing healthy rider demand and our driver supply position has significantly improved. We believe these conditions, paired with cost cuts will ultimately enable us to build a larger, healthier business.

Now let me turn the call over to Elaine to share the details on our financials.

Elaine Paul — Chief Financial Officer

Thank you, Logan, and good afternoon, everybody. To begin. 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.

Excluding the action we took to strengthen our insurance reserves, our Q4 financial results beat our guidance. This reflects a combination of strong rideshare demand, improving supply and good early progress on our cost-reduction efforts. In Q4, we reported record revenue of $1.175 billion, up 12% sequentially and 21% year-over-year. This was the highest quarterly revenue in Lyft’s history and it exceeded the top-end of guidance of $1.165 billion. As Logan mentioned, our Q4 results reflect our marketplace dynamics, including elevated Prime Time. For full-year 2022, our revenue reached a new high of $4.095 billion, up 28% versus full-year 2021.

We had 20.4 million Active Riders in Q4. Active Riders grew slightly quarter-over-quarter and 9% versus Q4 of 2021. Within Active Riders, the sequential increase in rideshare riders, more than offset reduced use of our bikes and scooters in the colder weather. And revenue per Active Rider reached a new high of $57.72, up 11% sequentially and year-over-year, reflecting more prime-time and longer rides. As Logan mentioned, we are now including insurance reserve adjustments for prior periods in our definition of contribution and adjusted EBITDA.

Let me talk about why we are making this change and the impact. In December, SEC updated its guidance related to non-GAAP measures, which applies to all public companies. Subsequent to this change and following consultation with the SEC, we have aligned our disclosures. To be clear, we are not required to restate our historical financials. We have already disclosed when we’ve had reserve adjustments for prior periods and the amounts, these disclosures are not changing. What is changing is we are now including these figures in our non-GAAP financial measures. We will also speak to past periods on a comparable basis.

In Q4, we strengthened our insurance reserves by $375 million. This is at the high end of management’s estimate of our potential exposure to past claims in light of past volatility. We believe this action will have the benefit of reducing the risk of insurance-related volatility going forward. We reported Q4 contribution of $414.7 million, including $225 million of the reserve increase just discussed. Excluding this item, and relative to our guidance, Q4 contribution was $639.7 million and contribution margin as a percentage of revenue was 54.4%, which is 290 basis points better than our outlook. Outperformance versus guidance was driven by rideshare.

Let’s move to non-GAAP operating expenses below cost of revenue in Q4, each line reflect savings from the cost-reduction initiatives we began implementing in November in addition to leverage from higher top-line. Operations and support expense was $95.1 million, as a percentage of revenue, operations and support was 8.1%, down roughly 50 basis points from Q3 and 260 basis points from Q4 2001. Sequentially, in addition to the impact of cost savings initiatives, the decline in operations and support expense reflect seasonally less bike and scooter support. These modes typically have peak usage and support in Q3, which declines in Q4 and further in Q1 along with winter weather.

R&D expense was $105 million, as a percentage of revenue R&D was 8.8%, down roughly 140 basis points sequentially and 150 basis points year-over-year. Sales and marketing was $114.4 million. As a percentage of revenue, sales and marketing was 9.7%, down 150 basis points from Q3 and 190 basis points from Q4 of ’21. Within sales and marketing, incentives were 2% of revenue. We reported G&A expense of $379 million. This includes $150 million of the $375 million insurance reserve increase that I discussed earlier, and it’s related to certain insurance costs that are generally not required under TNC regulations. Excluding the impact of this action and relative to our outlook, G&A was $229 million in Q4, which is 19.5% of revenue, down 110 basis points from Q3 and 280 basis points from Q4 of ’21.

Let me provide an update on our cost reduction initiatives. In November, we spoke to this work in detail and shared our expectation that it would result in roughly $350 million of annualized savings when fully in place. We achieved $50 million of these savings between Q2 and Q3 of 2022 related to opex. In Q4, these initiatives resulted in incremental opex savings of roughly $20 million sequentially, reflective of a partial quarter impact of the reduction in force. In Q1, we expect to realize an additional $40 million in savings versus Q4 ’22.

In Q4, we reported an adjusted EBITDA loss of $248.3 million, including the $375 million insurance reserve adjustment. Excluding this impact, we generated positive adjusted EBITDA of $126.7 million, which beat the top end of guidance of $100 million. We ended Q4 ’22 with unrestricted cash, cash equivalents and short-term investments of $1.8 billion, in line with the level at the end of Q3 ’22.

Before I move to our outlook, it’s important to note that macroeconomic factors are impossible to predict with any certainty future conditions can change rapidly and affect our results. Now let me talk about Q1. As Logan mentioned, there are three key factors affecting our outlook relative to Q4. First, seasonality. We tend to see a different mix of ride guides, for example, shorter rides and fewer airport trips. And cold weather means bike and scooter usage is always lowest in Q1. Second, rapidly improving supply conditions are resulting in less prime time. This is ultimately good for our service levels that will reduce our revenue and adjusted EBITDA in Q1.

And third, base price. We slightly reduced base pricing to remain competitive with the industry. Given these factors, we expect Q1 revenue of approximately $975 million, which is down 17% sequentially. We anticipate roughly 6 percentage points of the decline will be driven by seasonality with the remainder related to decreased prime time and pricing. Our Q1 revenue guidance implies year-over-year growth of 11%, driven by growth in rideshare rides.

In terms of profitability, we expect contribution margin of roughly 47%, reflecting lower Prime Time in prices. We, therefore, expect adjusted EBITDA will be between $5 million and $15 million. The sequential revenue decline of $200 million translates into a sequential adjusted EBITDA decline of roughly $157 million at the midpoint of our guidance range. The decline in Prime Time and base prices flows directly to the bottom line, with the remainder driven to the seasonal component. This impact is partly offset by $40 million in incremental opex savings in Q1 from the cost reduction initiatives we began implementing last quarter.

As Logan mentioned, and I want to reiterate, our profitability in Q1 is a consequence of the dynamics we are facing, and we are taking immediate action to improve our future financial results. We are looking very closely at our fixed and variable costs to ensure we are operating a durable and profitable model. We are looking for opportunities to significantly cut costs and drive efficiencies. As one example, let me speak to stock-based compensation expense. Our current plans are to reduce this expense to approximately $400 million in fiscal year 2024 through measures such as our previously announced headcount reduction and shifting more of our employee base to international locations. We expect stock-based compensation will vary, but generally come down quarter-to-quarter as we progress towards this target.

To conclude, we are facing near-term financial headwinds driven by current market conditions. However, with more demand and better supply and a healthier marketplace overall, we can build a much larger business. This, in combination with the cost actions we are taking will position us to deliver strong shareholder returns.

With that, let me turn it over to John.

John Zimmer — Co-Founder and President

Thanks, Elaine. We have three key business initiatives this year, each of which aligns with our strategy to deliver competitive service levels and capture more demand. First, strengthen our marketplace technology to drive improvements in price and ETA. Second, deliver more value to a growing population of Lyft loyal riders. And third, create more opportunities for consistent and transparent driver earnings. I’m going to speak to some of the work we’ve done to execute on these initiatives already.

Lyft Maps continues to be a great example of how we’re differentiating and strengthening our marketplace technology. Today, over 60% of our rideshare rides are powered by our in-house mapping and navigation, which is up from less than 1% a year ago. With this foundational work in place, we can accelerate the pace of innovation across our network. It’s the reason why we were the first to market to integrate our driver app with CarPlay and with Android Auto, which has been incredibly well received by the driver community. I got to drive on New Year’s, and I can see why almost two-thirds of drivers who try Lyft Maps through Apple’s CarPlay stick with it as their primary navigation experience. It’s a big win for the driver to have turn-by-turn directions on the in-car display and also creates nice route visibility for the rider.

Next, I’m going to touch on our partnerships, which give riders more reasons to use Lyft and directly impact their loyalty and frequency. Our Chase partnership is important. In Q4, we expanded our relationship with Chase, giving their millions of card members access to Lyft Pink and to accelerated points or cash back when they use Lyft through 2024. With this partnership, we can introduce millions of people to Pink, increase our touch points with business travelers and capture more high-value rides. We’ve also expanded our travel loyalty integrations with the addition of Alaska Airlines. We’re thrilled to offer Lyft riders an easy way to earn miles when they link their Alaska loyalties.

Based on our experience with similar relationships, riders with linked accounts take on average up to 20% more rideshare rides with Lyft than those with nonlinked accounts. For drivers, we’re doubling down on initiatives that increase preference. As Logan mentioned, upfront info is now available on 100% of rideshare rides on our network. This is one of the biggest changes we’ve ever made to the driver experience, and it has been incredibly well received, resulting in a meaningful increase in the time driver spend using Lyft. In addition, last fall, we began rolling out our stay nearby filter, which gives drivers the ability to stay in a particular region and the feedback has been incredibly positive. Innovations like these can have a significant impact on driver satisfaction and engagement.

We are also working to make owning an AV and driving it on Lyft more affordable and convenient. Lyft drivers can now access charging discounts at EV go-stations with gold and platinum drivers getting as much as 45% off in certain markets. We’ve also made it much easier to install a Level 2 in-home charger by partnering with Wallbox to offer a Lyft-specific discount on the hardware along with prenegotiated rates on installation. Given the high utilization Lyft drivers have of their vehicle, driving an electric vehicle can help increase their take-home earnings.

We’ll continue building on this work to support drivers as they shift to electric vehicles. The team’s various innovations and partnerships enhance the value of the Lyft network, positioning us to deliver better service levels and ultimately capture a larger portion of consumers’ transportation spend. I’m grateful to the entire team for their continued hard work and look forward to the road ahead in 2023.

Operator, we’re now ready to take questions.

Questions and Answers:

Operator

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

Doug Anmuth — JPMorgan — Analyst

Thanks so much for taking the questions. I was hoping you could just talk a little bit more about how the competitive environment has changed in the past three months? And just when you talk about 1Q dynamics and current market conditions, isn’t this more of a return to normalcy in a healthier marketplace, trying to understand the impact on Prime Time and base prices and perhaps, I guess, a return to normalcy and that helped your marketplace maybe was not anticipated in your 2024 targets, if you could just flesh that out more? And then on the 1Q EBITDA of $5 million to $15 million, is there anything contemplated there in terms of reserves that we should be thinking about or is that a clean number? Thanks.

John Zimmer — Co-Founder and President

Sure. Thanks for the question. I’ll pass the second part of the reserves Q1 EBITDA to Elaine after. But yes, as you mentioned, the marketplace is much healthier, much more in balance than it’s been for several years, and this is a very good thing. The primary thing that has changed, and I will say it happened more rapidly than expected is the supply side. So the supply side has come back in a very meaningful way as we talked about already on the call, some top metrics on the supply side in nearly three years. So this is very good for our riders. This is a good thing.

What is happening with the guidance, obviously, seasonality, which is expected in our business, both rideshare and bikes, but also price with that extreme improvement in supply, you have a lot less prime time. And so there, price comes down. And then the last point I want to make is that there is a difference in timing with insurance renewals and it’s important to us to not wait for any of that to rationalize and to be smart about ensuring competitive service levels. Elaine, do you want to take the second portion?

Elaine Paul — Chief Financial Officer

Yes. In terms of your question about adverse, we believe that having taken the reserve that we took in Q4, we are very well reserved and that, that reserve is appropriate. We are not anticipating any incremental adverse development at this stage, and we do not have any forecasted in Q1. We do like the reserve we have is ample.

Doug Anmuth — JPMorgan — Analyst

Thank you.

John Zimmer — Co-Founder and President

Thanks.

Operator

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

Stephen Ju — Credit Suisse — Analyst

Okay. Thank you. I mean, I guess, similar question to Doug’s in terms of the first quarter guidance. I guess, the sequential decline that’s implied here seems to be much larger than last year and even the step down in volume due to the pandemic. So are there sort of any other, I guess, accentuated seasonality factors that we should be thinking about? And can you help reconcile, I don’t know, you’re talking about sort of extreme improvement in price. And so I would be hoping that you would see an extreme improvement in demand also because I think you’re calling out sort of a healthy demand environment. So I guess what is happening from a ride frequency perspective from an active buyer perspective? Thanks.

Logan Green — Co-Founder and Chief Executive Officer

Yeah, this is Logan. So in terms of seasonality, I think we’ve seen fairly typical seasonality effects and that accounted for roughly a third of the decrease. So that was baked in and not unexpected. I think the part that we talked about — that John just talked about, the reduction in Prime Time was much larger than anticipated. And I think that’s a great thing for the business we’ve been coming off of an extremely tight labor market still tracking the unemployment numbers. It’s not showing up in the public numbers that there’s any softening. But we have seen a real softening in Q1. And so that shift, I think, is very healthy, but has and had a significant quarter-over-quarter impact.

And then the other kind of key piece on insurance is we had previously increased base prices in Q4, right? This is not prime time, this is just the base fare. And in January the competition reduced their prices as they eliminated the fuel surcharge. So we rolled back our base price increase to ensure that we had competitive pricing in the market. But the bottom line is that puts margin pressure on Q1, as you can see in the guidance.

John Zimmer — Co-Founder and President

And then you asked a bit about, I think, active riders. We are happy to see quarter-over-quarter that tick up. And the increase on active riders on the rideshare side was large enough to account for what is typically a sharp decrease on the bike and scooter side because you have obviously snow and cold weather. Thanks for the questions.

Operator

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

Mark Mahaney — Evercore ISI — Analyst

Okay. I’m going to get away from the quarter and just talk about big-picture issues like or ask about big features just like regulations. So two things in particular, New York City and then Prop 22 in California, what’s the latest thought on the handling those risks? Thank you.

John Zimmer — Co-Founder and President

Thanks for the question, So I think you asked about California and New York, is that right?

Mark Mahaney — Evercore ISI — Analyst

That’s right.

John Zimmer — Co-Founder and President

Cool. So in California, the Attorney General, along with the Protect app-based drivers and services coalition of which we’re part of both that group and AG appealed to superior court’s ruling against Prop 22, which you probably know, oral arguments were in December. They basically have until mid-March to issue a decision. Regardless of which way the ruling goes, the next step is likely an appeal by either side to the California Supreme Court. That could then take a few months to even over a year depending on when — whether the Supreme Court accepts that review.

Although you didn’t ask about it in Washington State, there was a historic milestone last year where a new law was signed that did protect the independent contractor plus model. It’s the model preferred by drivers. And notably labor organization and elected officials, along with the companies listen to drivers and work together to pass the bill. In New York, a classification build does not seem to be a priority for either the legislature or governor of this session, which ends in June. So we’re focused on building relationships and engaging the driver community to lay some groundwork for potential movement on that in 2024.

Mark Mahaney — Evercore ISI — Analyst

Thank you.

John Zimmer — Co-Founder and President

Thanks.

Operator

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

Nikhil Devnani — Bernstein — Analyst

Hi, there. Thanks for taking my question. So in the press release, you talked about reinforcing the competitive position. Do you expect to be stepping up promotional intensity across the business here for drivers or riders? And how should we think about, I guess, the structural level of growth spend for Lyft going forward? And how do you think about balancing your ambitions on growth and needing to spend for growth with the objectives that you have on free cash flow and EBITDA? Thank you.

John Zimmer — Co-Founder and President

The balance is important. I think the largest point just to emphasize is what Logan said and kind of what we talked about, the changes it impact over the last quarter. Number one, very positively for the first time in approximately three years, the supply side has come basically into balance with demand, and it really feels like the pandemic is behind us. That was the biggest limiter over these past few years to growth. So there’s pent-up demand, particularly at peak times, such that we don’t need to necessarily coupon to get that demand.

Our focus on growth will be on Pink, which is our membership program, which focuses on our most loyal users. And we’re happy with the progress we’ve made there. We’ve actually doubled our Pink members in Q4 and recently launched our partnership with Chase. So we think partnerships are a smart and efficient way to lean into growth now that the marketplace is in balance. Chase is the top card issuer in the country. And now all Chase Sapphire Reserve cardholders received two years of free Lyft Pink. And that scaling of Lyft Pink is an important priority. And so the individuals who have signed up for Pink are seeing about $29 a month value from the program that they’re paying just about $9.99 for it. So I’d say that’s the most important area of growth in the years ahead, and we’re excited about that. All right. Next question.

Operator

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

Eric Sheridan — Goldman Sachs — Analyst

Thanks so much for taking the question. Maybe I’ll ask a multiparter just on relative market share and where you have most exposure. You’ve talked a fair bit about the West Coast. And obviously, there’s been elements of a slower return to work in the West Coast to the U.S., and now we’re seeing layoffs and maybe some reduced benefits inside companies on the West Coast. Can you talk a little bit about the recovery trajectory you’re seeing in some of your key cities on the West Coast? And how some of the cost-saving measures might be acting as a bit of a headwind as you think about how the arc of the recovery trajects into Q1 and the first half of the year?

Logan Green — Co-Founder and Chief Executive Officer

Yeah, absolutely. So in Q4, the West Coast broadly was 60% recovered versus Q4 ’19. So it is still way behind. In comparison, the East Coast was much stronger. If you look at a city like New York, it’s more than 100% recovered even on a ride basis. So we’ve seen in general all of the kind of typical use cases start to return one kind of notable call out is that travel has been incredibly strong across the board. We think for the West Coast, one of the things holding it back had been supply levels.

So we do expect that as we see this broader national easing of pressure on the supply side of the market that, that’s going to really benefit service levels on the West Coast. And then we think it’s probably just going to take a little bit more time for the West Coast to get back to normal.

John Zimmer — Co-Founder and President

And then since you asked a little bit about kind of company spend and how that affects us. I just want to comment on our enterprise business, we call Lyft business. We have a few different segments, enterprise, universities and healthcare. On enterprise, we’re continuing to see that actually pick up. We’re seeing the return of large events and conferences, and Lyft what we call business — Lyft business-managed bookings grew by more than 60% year-over-year. We have some new offerings like Lyft Pass and Concierge. And then we’re going to keep leaning in. We think that’s a really nice margin opportunity and growth opportunity.

We also, as I mentioned, have healthcare in our enterprise business. We’re seeing great traction. Healthcare bookings in Q4 were 92% higher than the level of Q4 2019. And so that business is scaling nicely. And there’s actually more markets being authorized from a regulatory perspective to use our services, which expands the addressable market for healthcare. And then last, I mentioned universities. We have over 200 partnerships with universities and colleges that give students access to all our products, and we’re seeing the back-to-school fully in October. And that Q4 was our university partnership’s biggest quarter of the year with bookings up nearly 50% year-over-year.

Eric Sheridan — Goldman Sachs — Analyst

Thank you.

John Zimmer — Co-Founder and President

Thanks.

Operator

Your next question comes from the line of Brian Nowak with Morgan Stanley.

Brian Nowak — Morgan Stanley — Analyst

Thanks for taking my questions. I have a couple, one, just sort of a historical look back, I was just wondering so we can sort of better understand the competitive dynamics. Can you help us better understand a little bit how quickly trips or bookings growth in the core rideshare business. How did that progressed throughout the course of ’22? Or even a full-year number, just so we can sort of compare that to the overall industry trips or bookings? And the second one, I know in the past, you talked about sort of growing in line with the industry, etc. Just I know you’re making some price adjustments now, Logan, how do you think about other sort of big picture adjustments you might have to make to the platform just to ensure that you can grow at those previous rates that you spoke about, call it, six, nine months ago? Thanks.

John Zimmer — Co-Founder and President

So on the first question, we saw mid-20s growth for the year on the kind of overall bookings. Can you repeat the second part of your question or Logan did you get that?

Logan Green — Co-Founder and Chief Executive Officer

Yes, I think you were asking what are the other investments we’re making in the platform. The foundational investment is on service levels. We have a very loyal group of riders and drivers who prefer Lyft, and we need to make sure that we show up for them with competitive price and ETA for our writers and competitive pay for our drivers. That’s kind of first and foremost. The second big area of investment that John mentioned is Lyft pick. So we’re very happy with the growth that we’ve seen that program doubling just in Q4 alone, the great Chase partnership and the increasing suite of benefits that we’ve put behind Lyft Pink, I think, make it hands down the best transportation membership program out there. And we’re going to keep pushing to make sure that it remains in that position.

John Zimmer — Co-Founder and President

Thanks for the question.

Brian Nowak — Morgan Stanley — Analyst

Thank you both.

Operator

Your next question comes from the line of Alex Potter with Piper Sandler. Your line is open.

Alex Potter — Piper Sandler — Analyst

Great, thanks. So you mentioned this is following up there on Link. You were mentioning earlier that it’s a great value. You’re paying $9.99, but you get $29 in value. How do you assess the economic impact then to Lyft at the — in the early stages of a membership’s, I guess, life cycle, presumably, the economics aren’t quite as favorable for you. How do you sort of calculate how long it takes to earn back what you’re presumably giving away at the outset?

John Zimmer — Co-Founder and President

So just to be clear, the $29 doesn’t mean that we’re — the individual is paying $9.99, and we’re — we have cost of $29. It means that the value they get from the program on things that we may have a large margin on is $29. It’s — we are running the program profitably. We look at two main metrics for Lyft Pink. One is incrementality, when a person has the Pink versus doesn’t, they ride more with Lyft and every ride more they take with us is incremental profit for us. And we look at retention on a month-over-month basis, and we’re seeing industry-level retention for these types of membership program. So again, we are running the program profitably and still users are able to get that type of value.

Alex Potter — Piper Sandler — Analyst

Okay. Great. And then one last one here just on stock-based comp, you mentioned the 2024 target, which is helpful. Thanks very much. I’m curious to hear how you’re getting to that. Are you focusing on attrition? Are you just talking about SBC being a lower percentage of people’s comp in general? What’s your strategy for driving that lower? Thanks.

John Zimmer — Co-Founder and President

Yes. There’s two main things. One is that we did the reduction in force last year — late last year. So that’s accounted for in that new target. And also, there’s been a shift on some of our talent to international markets where your second point is more the case that individuals are primarily making cash not equity.

Alex Potter — Piper Sandler — Analyst

Great, thanks.

John Zimmer — Co-Founder and President

Thank you.

Operator

Your next question comes from the line of John Colantuoni with Jefferies.

John Colantuoni — Jefferies — Analyst

Hey, thanks for taking my questions. I just wanted to start with the first quarter guidance assumes that you’re going to need to see a ramp in incremental margin to get towards the $1 billion in ’24 EBITDA. Can you just talk about how you can balance your competitive positioning and EBITDA margin over time? And if there’s anything about the first quarter that’s causing sort of transitory headwinds to profitability? And also wanted to ask quickly going back to sort of regulation. I believe the — in New York City, there’s a proposed rideshare wage increase that was recently announced. Maybe you could just talk about how you’re thinking about that and if you believe you can sort of just price that through? Thanks.

Logan Green — Co-Founder and Chief Executive Officer

Yeah. So I think the most kind of important piece to understand is what we talked about before, which is the timing of our insurance renewal and the significance that, that has had on our Q1 margin. I think if you look back at our earlier margins Q2, Q3 last year, that’s probably more instructive of a typical place for them to operate. But the marketplace dynamics have changed. The competitive environment is different. And so we’re stepping back and reassessing at this moment.

John Zimmer — Co-Founder and President

On New York, you asked about kind of the potential for pricing change we’re not party in that litigation that’s ongoing. If there’s any pricing change, it would be at the industry level, and so it would be passed through. Thanks for the questions.

Operator

Your next question comes from the line of Steven Fox with Fox Advisors. Please go ahead.

Steven Fox — Fox Advisors — Analyst

Hi, thanks for taking my question. I just had one. It’s obviously been a very dynamic environment that you’re dealing with over the last couple of years. Based on what you know today, including the recent change in base pricing, how do we think about your expectations for what kind of driver supply you would like to bring on? What kind of ridership growth you think is reasonable to assume, what is a normal pace of pricing decline going forward? How does the marketplace look to you from those aspects, say, over the next 12 months? Thanks.

Logan Green — Co-Founder and Chief Executive Officer

Yeah. Broadly, we expect demand growth has been healthy. I think we saw in the back half of last year and continue to see healthy demand. And the kind of most notable change is the real acceleration in driver supply. So I think it’s hard for us to project out much further, but I think a lot of the kind of pandemic-related swings are now behind us, and we’re going to be more of a healthy, steady-state growth where it looks like supply growth will be able to track with demand growth going forward.

John Zimmer — Co-Founder and President

Yeah. Just to emphasize that point, it’s — like Logan said, like much more stable growth for us. And as you mentioned, like the swings that we saw over the past few years are much more costly and difficult to manage through. And so happy to see more of that stability on the horizon.

Steven Fox — Fox Advisors — Analyst

I guess just to follow up real quick on that.

John Zimmer — Co-Founder and President

Sure.

Steven Fox — Fox Advisors — Analyst

I guess you don’t want to put hard numbers on it, which I understand. But do we look back at what the pre-COVID business model looks like? Or are there distinct changes now when we think about pricing? Or I know the technology is advanced, etc.? Is there anything you would say, all right, this is a major change in how you look at the business versus because of COVID of XYZ?

John Zimmer — Co-Founder and President

I think the major change structurally was just the highest valuable cost insurance went up. And again, that’s going up for everyone in the industry. That’s the most material change. Other than that, I’d say our tools have gotten better because we’ve had to manage those extreme swings primarily from like a year plus ago. So we built all these tools for oversupply, undersupply that we’re continuing to refine and use on a market-by-market basis. But in general, the only major structural difference is the higher insurance.

Steven Fox — Fox Advisors — Analyst

Great, that’s helpful. Thank you.

John Zimmer — Co-Founder and President

Thanks.

Operator

Your next question comes from the line of Lloyd Walmsley with UBS. Your line is open.

Lloyd Walmsley — UBS — Analyst

Yeah, I had a question about the gain on sale and disposal of assets. I think it was about $61 million in ’22. Am I right to assume that’s all coming from the sale of Flex cars at kind of above carrying value? And does that flow through the new definition or the old definition of EBITDA? And how does this kind of fall in used car prices? How does it change the opportunity to continue to kind of monetize that fleet going forward? Thanks.

Elaine Paul — Chief Financial Officer

Yeah, largely, that does reflect the remarketing of vehicles. And in this quarter-on-quarter, we project a modest decline related to that. And we continue to see that as an opportunity in our business as we all fleet vehicles to continue to put them for sale in the aftermarket.

Lloyd Walmsley — UBS — Analyst

Okay. And does that — I mean, is that — is the core operating side of that business, something you guys are still seen as an attractive business to provide supply? Or is it a function of, hey, we don’t — as supply comes back, we don’t need that as much. And so we can kind of offload some of the vehicles?

John Zimmer — Co-Founder and President

I’d say it’s still attractive because the individuals that use Express Drive drive many hours. And so it’s a great high-quality lever for that type of supply.

Logan Green — Co-Founder and Chief Executive Officer

And fleet remarketing is a steady-state part of the business. There’s very kind of subtle timing adjustments that we make, but that will be an evergreen aspect of the business.

Lloyd Walmsley — UBS — Analyst

Okay, thanks.

John Zimmer — Co-Founder and President

Thanks, Lloyd.

Operator

Your next question comes from the line of Deepak Mathivanan with Wolfe Research. Your line is open.

Deepak Mathivanan — Wolfe Research — Analyst

Great. Hey guys, thanks for taking the questions. And really sorry if these are asked before. I was just jumping in on a couple of calls. But just trying to understand what is prompting this base price change. I know you mentioned competition removing fuel surcharge. Are you seeing kind of demand sensitivity and market share loss due to this? And then how does this translate into driver running? It sounds like you’re absorbing something in your P&L. But how confident are you that this is kind of a onetime adjustment and not a steady erosion in unit economics that happens going forward? Thanks so much.

Logan Green — Co-Founder and Chief Executive Officer

Sure. So on base price, just to kind of repeat what we’ve gone through. In Q4, insurance prices went up significantly. We made a base price increase at that moment. In the beginning of January, we saw our competition removed their fuel surcharge, which was a price — base price decrease. We know from years of operating in the market that riders are sensitive to price and ETA. Those are the kind of the basics of service levels. So it’s critical for us to maintain a competitive position, and we did so, right? First and foremost, we are always prioritizing competitive service levels that is critical for us. And we also know that we have different timing for insurance renewal, right? The majority of ours was renewed October 1. And so that is having a unique impact on Q1. What was the…

John Zimmer — Co-Founder and President

You guys think about how base price impacts driver earnings. Is that part of your question?

Deepak Mathivanan — Wolfe Research — Analyst

Yeah, I was just curious how should we think about the driver earnings in this context and whether this is something that is a onetime adjustment or has the potential to happen multiple times through the year?

Logan Green — Co-Founder and Chief Executive Officer

Yeah, so the rider pricing is not directly connected to driver pricing. So the base price decrease is for riders. So there’s no direct impact on drivers with that change, except for more sort of top line, more demand flowing through the system. So bottom line, it’s always healthy for the business and healthy for drivers for us to stay competitive in the market. Any other questions? Or do we get yours?

Deepak Mathivanan — Wolfe Research — Analyst

No, that’s helpful. Thank you.

John Zimmer — Co-Founder and President

Yeah.

Operator

Your next question comes from the line of John Blackledge with Cowen. Your line is open.

John Blackledge — Cowen and Company — Analyst

Great, thanks. Two questions. On Lyft — on Pink, what was the big driver of the doubling of subs in the fourth quarter? And any way to kind of quantify sub spend as a percent of revenue or bookings or the Pink sub spend versus non-Pink subs? And the second question on driver supply, what was the big driver of the increasing supply? Was it just macro? And kind of when did it happen? Like you start to see it happen in 4Q or early part of 1Q? Any help there would be great. Thanks.

John Zimmer — Co-Founder and President

Sure. Thanks, John. So on PINK, only towards, I’d say, in early second half of last year, did we kind of really relaunched that with the lower $9.99 price, which was obviously material in getting more interest versus a $19.99 program, we adjusted the benefits as well to make that make financial sense. And as I said, with an earlier question, we run that program profitably.

Some of the main things that we did as we went into kind of Q4 is that we put more in-app messaging, just simply about the program as we got really confident in the retention levels that we were seeing that again are at industry levels for that type of membership program. At that point, we — and when we saw that we could do it profitably while driving $29 on average of value to the rider, we wanted to talk more about it with our users simply. So we added more in app messaging where it made sense, and it worked. So that was the primary thing.

You also asked about how we — or if we can share kind of as a percent of maybe bookings or something revenue, we do track that, and that is one of our internal targets for year-end that we are focused on. We are not sharing that externally at this time. And then I think your last question was around supply. And kind of why is that happening? And I would say it is broadly macro. For us, supply was impacted dramatically by the pandemic and important for drivers is consistency of earnings. And now that we’re out of the pandemic and the rideshare industry has moved past that, there’s consistent earnings. And so at a macro level, it’s come back, it started coming back towards the end of the year. But really I’d say is Q1.

John Blackledge — Cowen and Company — Analyst

Thank you.

John Zimmer — Co-Founder and President

Thanks.

Operator

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

Benjamin Black — Deutsche Bank — Analyst

Great, thanks for the question. So just circling back on the 1Q guide, can you help us understand what’s embedded from an incentive level or contract standpoint since travel supply levels are still strong? And then I just want to follow up on the 2024 EBITDA guide. I mean, I guess the question is, why are you reevaluating this early? It seems like the issues that you’re mentioning are really near-term challenges. So what’s exactly changed over the last three months that you’re rethinking the longer-term outlook? Thank you.

John Zimmer — Co-Founder and President

Yes. Let me take that first and then pass it to Elaine for your question about contra. And so as Logan mentioned, there was a change in base price that we made. But then as competition removed their fuel surcharge, we needed to ensure we had competitive service levels. We just want to ensure we prioritize that. That’s critical in this really good opportunity that exists right now where the market is finally back in balance. We want to ensure we make it really easy for people to choose Lyft. And so that is the priority. Obviously, we want to do that profitably. And we want to — just because there is quite a bit of changes over the past few months, we want to share our go forward with a little bit more information and confidence.

And then Elaine, do you want to take the contra?

Elaine Paul — Chief Financial Officer

Yes. In terms of contra, just to set a little context, in absolute terms in Q4, incentives in contra revenue were $337 million, which was up 17% versus Q3, flat year-on-year and still below the prior peak. But as we look to Q1, with the tailwinds we’re seeing to supply, we expect contra revenue incentives will be down quarter-on-quarter, both in absolute terms and on a per-ride basis and this reflects the benefit from the organic supply tailwinds. However, the extent of our investment will always depend on the real-time market conditions and supply-demand balance.

John Zimmer — Co-Founder and President

Thank you.

Benjamin Black — Deutsche Bank — Analyst

Okay, thank you.

Operator

That is all the time we have for questions today. I will now turn the call back to Logan Green for closing remarks.

Logan Green — Co-Founder and Chief Executive Officer

Alright, thank you everybody for joining the call today and we look forward to connecting again soon.

Operator

[Operator Closing Remarks]