An economist on Lyft’s extremely expensive typo: ‘The CFO or someone on her team should have caught this’
Good morning. No one likes making typos, especially writers and editors, but for Lyft, an extra zero in a press release caused confusion.
After the bell on Tuesday, when the rideshare company posted Q4 and full-year 2023 results, the accompanying press release stated that one of Lyft's profit margins, EBITDA, was expected to expand 500 basis points in 2024. This is a closely watched metric, so an analyst questioned it during the earnings call. And Lyft CFO Erin Brewer said: "This is actually a correction from the press release. You're correct. In my prepared remarks, I referenced 50 basis points of margin expansion.”
Shares soared more than 60% in after-hours trading, but Lyft then updated its press release with the correct figure of 50 basis points, and shares immediately began retreating. However, on Wednesday, shares hit a 52-week high.
'One zero in a press release'
“My bad.” That was what Lyft CEO David Risher told Bloomberg in a Wednesday TV interview.
“First of all, it’s on me," Risher said, adding that it was a "bad error" but also "one zero in a press release."
I contacted Lyft to ask about its process for earnings releases. The company didn't respond.
Typically, an earnings press release is crafted by one or more individuals on the investor relations team, John M. Veitch, dean of the School of Business and Management at Notre Dame de Namur, told me. That person, or persons, may sit in the CFO’s division but most likely reports to the CEO, he said.
So is the CFO still accountable? “I’d say almost completely accountable,” Veitch told me. The investor relations person or team may be crafting the release, but the financials and bullet points for the earnings call typically come from the CFO, who's responsible for checking the numbers.
“Changes in EBITDA are a number that investors look at and is a crucial number that goes into most valuation models trying to estimate a stock’s ‘intrinsic value,’” said Veitch, a macroeconomist specializing in money and banking. He added: "The CFO or someone on her team should have caught this error almost immediately in receiving the proposed press release."
Brewer joined Lyft as CFO last July. Before that, she served as managing director of enterprise finance at Charles Schwab, and prior to that was head of strategy and finance at Atlassian.
Risher said during his Bloomberg interview, in responding to whether someone would be fired over the error, that Brewer's role is “100% safe.” He said that Brewer and her team are taking this "very seriously."(He also confirmed that the that the press release was not written by AI.)
“A mistake in the press release, but not the financials themselves, seems to indicate that it was a simple mistake, rather than a problem with the financial systems of Lyft,” Veitch told me. “I imagine identifying how the error came about, being forthright about it, apologizing, and promising to put additional controls in place to ensure it doesn’t happen again is all Lyft can do."
And not to get lost in the shuffle: Lyft reported solid earnings. In Q4, active riders rose 10% year over year, and the 191 million total rides reported is a gain of 26%. For all of 2023, rides rose 18% to 709 million, the most ever. All of this probably was on Brewer’s mind when she reminded those listening to the earnings call that the company is positioned to “drive meaningful margin expansion and our first full year of positive free cash flow.”
Sheryl Estrada
sheryl.estrada@fortune.com
This story was originally featured on Fortune.com
