EFTA00670359.pdf

From: David Fiszel < To: Richard Kahn Subject: Fwd: Lyft meeting Date: Fri, 01 Sep 2017 00:59:42 +0000 Attachments: image001.jpg >, Jeffrey Epstein <jeevacation(iefigmail.com> My analyst met with LYFT CFO for an update and I thought I would pass along in case you are interested. Sounds pretty +ive to me but we don't own it. Begin forwarded message: From: Joyce Jen < Date: August 31, 2017 at 8:38:03 PM EDT To: InvestmentTeam Cc: " Subject: Lyft meeting — RBC bus tour Key Takeaways: Focused on US ride-share only, no international, no other services like Lyft eats Biggest distinction of them vs Uber is the experience Sees world shaking out as KO vs PEP - In several markets have over 50% market share now Growth got a lift after the Uber issues from earlier this year, but has accelerated from there Can't control D b/c will be highest at commute times and that's dictated by work hours Biggest issue / barrier to growth is getting more drivers Thinks competition at this point will be hard — a new entrant today needs to spend tens of billions to get to where Uber and Lyft are now Ride share will be won by AV They are partnered with Waymo, but can't talk about any details Biggest hurdle for AV right now is cost of the tech Brian Roberts, CFO Founders: Logan Green and John Zimmer - Founded zimride in 2007 - Traditional ride share Sold to enterprise in 2013 Sounded lyft in 2012 Transportation as a service 2015 $2.251 of spend in US consumer transportation Ride sharing will be majority of future state Today $2.15T car ownership $12B taxi and limo $9k annual cost per vehicle Vehicle payments, insurance, fuel, parking, mtc, registration Avg usage = used 4% of the time Believe transportation in the future will be bundled Future => Mileage Subscription Plans EFTA00670359 - $200B mkt telco (VZ, T) Where? - Phase = 1/1/2017 US pop coverage 51% 8/31/17 = 94% coverage - Launched 40 states since Statewide in 40 states, have service in 48 states Historically focused on big cities Now have best coverage in US of any ride sharing co Critical scale and unprecedented growth Mo's of consec 100% yoy ride growth? 50 All US, not international - All cities = 50 Top 20 cities = also 50 New users today look like orig users back in 2012 tt of cities with >1M monthly riades Today = 9 cities July '16 = 3 July '15 = 0 The first 3'/: yrs vs 2016 vs YTD 2017 keeps accelerating Q1 15 = 11% share (series E) Q4 15 = 16% share (series F) Q4 16 = 20% share (series G) Today = 31% share Today RR of over $5B of GMV Certain cities do have filings of mkt share - Do have licensed drivers where that data is available NYC one city that reports Get, Juno shrinking in that mkt Sharp uptick from Uber issues? Did get tailwind, but given how they are tracking in Q3, would call it a big blip that has accel'd from that point Does matter how you get there Secret sauce 1. It matters how you get there (mission to treat ppl well) Founders approach and mission = really to improve the world, make the world greener, etc. Drivers will say Lyft treats them a lot better than Uber Riders area also nicer 2. Focus Not looking at other markets = food, international, flying cars Stuck with the one mkt One of the number one things is around safety Lots of jurisdictions elsewhere in the word where felt like cldn't keep drivers or riders safe Wake up and go to sleep focused on US Not to say won't ever go int'l Can do it lots of ways (JVs, etc) 3. Service level obsession Without scale, can't get same level of service Magic number = 3 minute ETA Big kink in the line of ride growth when can hit that level Then brand and experience wins 4. Founders-led with stable executive team EFTA00670360 2 founders better ability to attract talent 5. Partner with the best Fun halo, no darkness to the brand Have partnered with SBUX, DIS, GOOGL / Waymo, key airlines (DAL, LUV, JBLU), TMUS, HTZ, GM, Jaguar / Land rover What about autonomous? Human Drivers = today Human Self-driving = next 10 yrs Will happen faster but take longer than ppl think Will see driverless cars soon, but will take time Can run on a programmed route pretty safely Will evolve over time to take into account all the diff scenarios you might see Analogy = launching 5G if you cldn't fall back on 4G Power of a hybrid network = know where they are and where they are going Will also be curve on consumer adoption Can shape S to a certain extent with humans Impossible to shape D Every day there is a morning and evening commute Can't build toward the peak with autonomous, will have too much under-utilization Outperforming 2017 plan - Gross bookings Active passengers Rides per passenger Completed rides Contrib margin - EBITDA Top-tier investors - KKR, AB, PSP, Baillie Gifford - GM, Jaguar, Rakuten, BABA, Tencent - Janus, Coatue, Fortress Metrics - Have more than doubled # of active passengers this yr - And freq incr'd by DD %'s Passenger churn When he started, wld pay a fortune on passenger acq Have pretty much turned off free rides for new users Retention = if someone paying for that first ride, the quality of that passenger is better Went from CPA in mid-$40's few yrs ago to single digit A162, Founders Fund, Mayfield (zimride) Driver churn Have found there are just diff types of drivers There is a certain use case in mind for some ppl Some are tgt-ing specific # of $'s When hit their tgt, go away Then have a new tgt and they are back So hard to measure churn b/c have these drivers that are super active and come back Some drivers are clearly FT EFTA00670361 FT driver can make over $100k of gross revs rt now Clearly have ppl who intend to do it, sign up and then never start A&A = approved but not activated Have done a good job re-activating drivers - Lyft is about community so create good resources for them CPAs have been in a good place given the value More around just needing drivers Not the time now to optimize that Rt now, favoring growth over pure optimization Any mkts where north of 50% share? Have multiple 5 yrs ago, wld have been an outrageous thought Uber has been trying to kill them for 5 yrs There are some cities where passengers and drivers have made a choice West coast more lopsided than central and east coast - Uber started first with black cars and limos - Lyft started with P2P When Uber saw Lyft model working, took it took the east coast and rolled out fast Moats around the business model - Both co's started focusing on P2P 5 yrs ago When he joined Travis was big on talking about how this is winner take all, network effect Need to differentiate b/w D-side and S-side network effects (like FB and LNKD) Ride sharing is a S-side network effect (like mobile carriers) Have raised a lot of capital It's expensive building up those service levels For a new entrants, very expensive to do it today - $10's of B's to do it today to build something nation wide - To build to 2-3 minute ETAs No one will try to do it with human drivers - Ride share will be won on AV Goes back to — matters how you get three Drivers and partners who won't work with Uber b/c culture so toxic Trying to lean in on what they do better And their focus has been on treating drivers better - Will be more and more like KO-PEP Uber ride passes - Lyft focused on sustainable growth Think will be difficult for Dara to keep bleeding money Everyone has a negative surge exp that marks their exp with the brand Think having consistent prices LTV = ppl who use regular rides at commute time are least valuable to them Highest LTV = off-peak passenger going to the airport How to create loyalty on the S side? Used to have something called power driver bonus Over time, morphed to tt of rides Tried to encourage better kind of S - Got bonus for newer car B/ca way for them to pay for that upgraded car That's coming down as a % Will be certain times of day when you just have a surplus EFTA00670362 Used to be that peak times were weekends, but not commute D has changed that Isn't lack of driver loyalty concerning if S-side network effect is that key? Big lawsuit against Juno by their drivers for stealing from them Juno tried to juice both sides by giving passenger discounts and driver commissions Passenger discounts have entirely gone away b/c running out of money (why had to sell) Games you can play in the ST, but had to do LT and at scale Lots of diff strats by Lyft and Uber to keep drivers on the platform Important to have diff modes = shared rides for ex As you create route density, create matching density - Shuttle mode more like fixed route Can you partner with cities in the future for their municipal transportation services? Founder Logan grew up in LA, hated traffic Developed a zip car like program for ride share Realized quickly how broken it is, all based on subsidies, rates don't make sense Are partnering with some cities Have taken one bus route offline and giving citizens subsidies for free rides and everyone happier Waymo partnership - Both co's have confirmed there is an agreement but can't go into detail Believe in open autonomous networks Obviously have a lot of D and data Have announce down self-driving effort GOOGL Maps ride share feature where you can compare prices Both Lyft and uber have in their terms of service in API feeds, can't use wo Both co's agree that GOOGL maps provides a lot of value, makes sense for them - Get a lot of new users from that For them, v valueable, one of their best partnerships Biggest hurdle to AV? Today, it's cost of technology - Look at the cost of Lidar Think even TSLA will change their tune on that soon - SW can amortize over time HW is expensive, custom, long lead times - That's barrier #1 You could need crazy high utilization and only certain metros where time and distance rates are at a level where can try to make it work in NT Most of the pilots today are free, just to get the experience Very long time before viable across the US Take rates to drivers - Take rates in US have been increasing 2 components: - Service fee Commission = historically 20%, grandfathered older drivers - New drivers are at 25% - Fare = time and distance Service fee goes 100% to Lyft Uber has a booking fee Those fees have increased across every city in the US For private rides, north of 30% take rate now EFTA00670363 Calculus of combined cost of driving EXPE ex of agency + merchant model - Lyft Line = shared product Wldn't accept Line rides if had to take payout risk They launched first, Uber copied quickly Both co's taking arb opportunity to match better If car going to a place where need S, will discount even more Focus = Other areas that could be more tangential for you? When he joined, Uber had 30-40x the capital, that was part of the drive to focus When looked in the US, just saw so much opp So much to do in the core, no need to think about adjacencies yet Amazing how many I-II-I's are using ride share to fill in fewer cars in the home 4-5M ppl turn 18 ea yr and can use ridesharing Brand tends to skew stronger with digital natives Independent contractor discussion seems to have died down — is there room for that in the future and what does that do to the model? Don't think will see that change Lots of drivers drive for multiple platforms and maybe do deliveries too All abt treating their drivers better and giving them benefits, but prob won't happen They are a lead gen platform for drivers Can imagine both co's are focused on making dispatch decisions focused on loyaty How is pricing trending? Look at blended price Q2 yoy with 3-4 cents NY trips = higher gross bookings per ride Joyce Jen Managing Director L;sid:image002.jpg@OlD1699 C.569ADF60 645 Madison Avenue, 16th floor New York, NY 10022 W: This e-mail and any file(s) transmitted with it may contain confidential and/or privileged information. Nothing contained in this e-mail and/or any file(s) transmitted with it constitutes a solicitation or an offer to buy or sell any securities. Use or disclosure of this e-mail or any such files by anyone other than a designated addressee is unauthorized. If you are not an intended recipient (or have received this email in error), please notify the sender immediately and delete this e-mail without making a copy. If this e-mail is misdirected, Honeycomb Asset Management, L.P. and its affiliates do not waive confidentiality or any privilege. EFTA00670364