Ben Black

Ben Black inquired about Lyft's observations in California, specifically the anticipated demand pickup in H2 2026 due to lower insurance rates and the phasing of savings pass-through, as well as updated thoughts on loyalty and growth opportunities.

Answer

CFO Erin Brewer confirmed that California's common-sense reforms, effective January 1st, are leading to passed-through savings, with demand impact expected to be more noticeable in H2 2026 due to seasonal Q1 and rider behavior adoption time. CEO David Risher emphasized that loyalty is built on great service, citing a 31-point driver preference advantage and record retained riders in Q4. He highlighted successful loyalty programs like Business Rewards (26% YOY activation growth) and the pilot Lyft Cash Rewards, indicating increased focus on this area.

Ben Black asked about demand pickup in California in H2 2026 due to lower insurance rates, the phasing of insurance savings pass-through, and updated thoughts on loyalty, specifically the room for growth in that space.

Answer

CFO Erin Brewer explained that California reforms went into effect January 1st, with savings currently being passed to riders, varying by market. Demand impact will be more noticeable in H2 2026 due to Q1 being seasonally lower and time for price improvements to affect rider behavior. CEO David Risher emphasized loyalty through good service, citing a 31-point driver preference advantage and record retained riders in Q4. He discussed specific programs like business traveler rewards (activations up 26% YoY) and the pilot Lyft Cash Rewards program, indicating increased focus and future innovation in loyalty.

Jeffrey Seiner, on behalf of Ben Black, asked if the high percentage of aged inventory (over 120 days) would be an overhang on contribution margins in 2025. He also inquired if the company was seeing different levels of success or drag across various home price points.

Answer

CFO Selim Freiha explained that while aged inventory was up, it was partly due to lower Q4 acquisition volumes and a deliberate strategy to slow price drops in a weak market. He stated it is not a significant overhang and expressed confidence in achieving the 5-7% annual contribution margin target, noting recent cohorts are selling at higher margins. CEO Carrie Wheeler added that a new pricing model has improved conversion through better price segmentation, allowing for lower spreads on easier-to-sell homes and higher spreads on harder-to-sell homes, expanding the conversion frontier.

Ben Black of New Street Research questioned Spotify's level of investment in AI, its impact on productivity and user experience, and the company's view on the commoditization of AI models.

Answer

Co-President & CPTO Gustav Söderström stated that AI drives productivity, lowers moderation costs, and enhances the user experience through recommendations and new features like AI DJ. He believes the company is investing at a 'prudent level,' noting that the rapid commoditization and open-sourcing of large AI models means the cost per unit of intelligence is dropping rapidly.