David Risher: Yes, thanks for the question. A couple of things that I’ll just say sort of directionally. First, just a level set for everyone. We launched it at the end of last year. It was first in five markets and it was in 55 markets now. Just as a stay, it’s in over 200 markets. So obviously from an overall buying perspective, it’s still fairly small, but from a product-market fit perspective, it’s super, super good. And frankly, sort of off the charts type of thing. There aren’t many features that you launch, for example, that have something like a 98% driver acceptance rate, and no one turns it off once it’s on. And so those are types of early indicators we look for. I mentioned the fact that drivers are now referring Lyft to other potential drivers.
These are women drivers referring to potential men drivers. And back to that margin expansion point, roughly speaking, if we have higher density, we have higher margins because of the sort of way the structure of rides goes. So anyway, that’s really good. And then if we mentioned we’ve done about 7 million rides so far on Women+ Connect just in the last couple of months, just in those 55 markets. And we expect, obviously, that to accelerate quite a bit now that we’re nationwide. So nothing specific to share, but really good product-market fit. And as I always say, if you look at the sort of social media commentary or frankly, ask if you see your wife or your daughter or a woman in your life, whether they think this is a good thing, you’ll I think probably hear very good response.
Operator: Your next question comes from the line of John Blackledge from TD Cowen.
John Blackledge: Great. Thanks. Two questions. First, on the 2024 free cash flow, can you just remind us again the drivers of the 50% EBITDA conversion in a free cash flow in ‘24? And is that kind of sustainable going forward, that conversion rate, or should we expect it to perhaps rise as we go forward? And then second question is on the customer experience with the ETAs and primetime kind of improving. Could we see further incremental improvements in both of those consumer experience metrics in 2024? Thank you.
Erin Brewer : Thanks so much, John. I’ll start with the first question and then turn it over to David. So as we mentioned in our prepared remarks, very pleased to give this directional commentary on free cash flow for 2024. From where we sit today, we believe we’ve reached a turning point and it’s an important milestone overall for our company. In terms of what’s driving that right, first and foremost, obviously just operating a healthier business, right? We’ve got adjust EBITDA growth and expansion year-over-year. And then I talked a little bit about the transition with respect to our insurance program. So, there was a period of time in our history where we were largely fully self -insured. As insurance works, it can take up to seven years for claims to fully resolve.
Now, while we did transition to our risk transfer structure about five years ago and we are at the tail end of the legacy book. It’s not fully resolved. And so again, meaningful progress this year, but there’s still some resolution of that legacy book to go. So I think you can think about that somewhat in the free cash flow conversion, if you will, directional commentary we’ve given for 2024. The last thing that I would say is, I obviously touched on our capital expenditures moderating year-over-year. This is largely because we invested in 2023 in updating our bike fleet across our bike and scooters business. And we’ve got a much larger mix of e-bikes that allows us to, first of all, riders love them. Second of all, it allows us to be more efficient.
And that’s a higher margin ride overall, and just frankly, an overall better experience for riders. So while most of that investment in deployment happened in 2023, there’s still some more to come in 2024. So hopefully that gives you some additional color on free cash flow and a little bit about how we’re thinking of the conversion for 2024. But bottom line is, again, we feel we’ve reached a turning point and we’re very focused on improving from here.
David Risher: Let me pick up on that, speaking of improving from here. So I’ll give you some data about what we’ve seen and then maybe directionally in the future. What we’ve seen, and we mentioned ETA specifically, as well as primetime. So ETA actually got faster in Q4 quarter-over-quarter and year-over-year than they’ve been before. So we saw a really nice directional improvement there. Primetime, I can actually be more precise. We saw about a 40% reduction in the share of rides affected by primetime in Q4, again, year-on-year. So really significant meaningful changes in both. So then the question is how much further is there to go? And this is an area, look, here’s a little personal story. I just finished a book recommended to me by a colleague here called Unreasonable Expectations.
And my expectations are unreasonable. I will continue to push this very hard on this. And the team, I hope, is energized by it, because as you’ve seen with things like the on-time pickup promise, now, I really focus on doing something, even at the scale we are in, which is just a reminder, we’re doing 2 million rides a day. Well, I think I sometimes comment on, the riff here is I look at an airline, like a Delta Airlines, you might do 3,000 or 4 ,000 flights a day. Now, obviously, they’re shipping on a lot of people. Those are 180, 200 passengers in jets. But still, the scale that we’re working at is really quite large. And so I remind our team, while it’s large, we do it, it’s no excuse. We still have to do just an unreasonably good job every day.
So I don’t want to speculate on how much further we can go, but I will say we’re quite focused on perfection. That’s not a word we chose, cavalierly.
Operator: Your next question comes from the line of Alec Brondolo from Wells Fargo.
Alec Brondolo: Hey, thank you so much for the question. Two for me. I guess, why is now the right time to establish a 70% minimum driver payout threshold? It seems like all of the commentary suggests that industry supply trends are extremely healthy. And so I think that stands a little bit in contrast with increasing the payouts. So just any commentary on the timing, I think, would be really interesting. And then maybe secondly, if I could ask one on insurance, you guys indicated correctly that even mixing the business towards risk transfer, obviously, in the US, your primary competitor, Uber has been moving the other direction. They’ve been shifting their business towards captive insurance. I guess how can we explain the differential in strategy there? I mean is there any concern that they’re going to build structural cost advantage over Lyft by leveraging the captive insurance muscle? Thank you.
David Risher: Yes, that’s good. One I want to meddle. I’ll start with the first. So I mean a couple things there. So actually I’ll start with an old chess type. The best time to replace your roof is when the sun is shining. So we have strong driver preference for Lyft already. And that’s been true for a long time really since the earliest days of Lyft. I’d say it’s one of the real sorts of differentials between Lyft and Uber on kind of a perception basis on the driver side. And so we’re leaning into that. We’re leaning into that. And so behind the scenes, you might have seen the report that came out a couple weeks ago from Gridwise that sort of suggested that Uber drivers earnings have been decreasing. I think they estimated about 17%.
Where is ours have been going up over the same period. I forgot; period was I think two years maybe a little over 2%. So in the background, we’ve been working quite hard at making sure that our drivers are paid as well as they can. And again, just for clarity. It’s technically the riders who pay the drivers, and we just take a cut. So that’s kind of the mechanics of it. So then I say, given those mechanics, the riders pay the drivers, and we take a cut. Well, what can we do to address a very consistent set of pain points the drivers have communicated to me, often in quite personal ways, I might add, I’m since the day I started. One is around transparency. A question of fairness. Are you taking too much? And the second is a question of minimums, frankly.
Why are there some rides where it feels like my rider pays 20 bucks, and I get barely anything? So it was a very deliberate strategy in our part. It’s been, for some period of time, to say there are two customers in every car, as a rider and a driver, and if we can drive preference on both, that’s what ends up creating marketplace efficiency, which then in turn, obviously increases service levels, improved service levels, but also increases top line end margin. So it’s really quite a self-fulfilling prophecy. And back to your question around timing, sort of if not now when, like you sort of want to do it when things are going pretty well, rather than feeling like you’re going to have to defend yourself. I’ll say one last thing before I turn it over to Erin.
There’s a piece we published last week that I would encourage everyone to read is customer obsession doesn’t just mean listening to customers. Of course it means that, and trying to come up with things innovating on their behalf. But it also means deeply, deeply understanding their needs so that the work that you’re doing, responds to those needs. We published a white paper about 10 days ago, or actually I guess about a week ago, and it’s called something like the Driver Transparency Earnings Report. I forget the exact name of it. It’s really quite a nice piece of work, and I’m going to brag on the team for a second. The team, quite a large team actually across the company, spent a lot of energy looking not just at gross earnings, which is how much drivers get paid kind of off the top, but also net earnings, in other words, what they make after their expenses, their gasoline, their maintenance, their depreciation, even the cleaning of the car, all the marginal costs that you have when you drive for ride share.
And I did it for all kinds of reasons. Policymakers are interested in this, but frankly, so are we. We’re really interested in understanding how much drivers take home. And on average, after all the expenses, the best we can see, and this is an average, you can see the quantiles in the report, but on average, $23.46 per engaged hour is what Lyft drivers make. And we’re very proud of that. We think it stacks up really nicely against other potential ways people can earn money, particularly when you add the flexibility you get. So there’s a very long answer, but really, I think it, I hope reveals the way we think about driver supply, which is not just some generic number of million drivers making a billion dollars, whatever, but very specifically, why do drivers drive, how much money do they make, and how can you give them a certain amount of assurance within the context of our business, all of their independent contractors that they take is fair.
