Lyft’s CEO Says ‘My Bad’ on Margin Error, ‘It Was One Zero’
(Bloomberg) -- Lyft Inc. Chief Executive Officer David Risher’s response to a clerical error that unintentionally inflated the company’s earnings outlook on Tuesday and sent shares soaring: “My bad.”
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“First of all, it’s on me,” Risher said in an interview with Bloomberg Television on Wednesday, taking the blame for a typo in a company press release Tuesday that erroneously projected a particular measure of earnings margin to expand by an eye-watering 500 basis points. (In reality, Lyft expects margins to grow by 50 basis points.) “This was a bad error,” he said, “but it was one zero in a press release.”
The typo, which actually appeared in multiple company documents on Tuesday, helped drive a 67% surge in Lyft’s shares in after-hours trading. The mistake was a serious one, Risher said. But it shouldn’t take away from Lyft’s “butt-kicking” financial performance, he said. The company reported that gross bookings had jumped 17% in the fourth quarter from a year earlier to $3.72 billion, surpassing estimates for $3.67 billion.
Risher said his team at Lyft was taking the error very seriously and noted it was corrected “within seconds of finding it.”
But in fact, on a call with analysts to discuss the quarterly results, Lyft executives didn’t immediately note the error in their opening remarks. Lyft Chief Financial Officer Erin Brewer just began referring to the company’s outlook for a 50-basis-point expansion. It wasn’t until later in the call, when an analyst pointed out the discrepancy, that Brewer acknowledged her outlook was “actually a correction from the press release.”
The company eventually corrected its statement and regulatory filings.
It’s a “black-eye moment” for Lyft, said Dan Ives, an analyst at Wedbush Securities, “a debacle of epic proportions.” He said by email that he’d “never seen an error like this in my almost 25 years on the Street.”
When asked whether someone would lose their job as a result of the mistake, Risher said the CFO’s role is “100% safe.” He added that, “we’re not at the point where press releases can be written by AI – at least not financial press releases, no way.”
Under Risher, Lyft has cut hundreds of jobs since late 2022 as part of a restructuring, including positions in corporate communications, policy and employee operations.
The mistake overshadowed what was otherwise a solid beat on profit and bookings projections that signaled a years-long effort to boost ridership and challenge Uber Technologies Inc. may be paying off. Lyft’s shares were up 32% at 12:25 p.m. in New York, the most in almost four years.
In fact, both Lyft and Uber delivered strong earnings reports this quarter, suggesting continued growth in overall rider demand since a nationwide plunge during the pandemic. The two have spent fiercely to recruit and retain enough drivers to meet the rise in orders. Risher, who took the helm less than a year ago, has focused the operations on customer satisfaction and has emphasized a return to the basics in an effort to close the gap with Uber. Lyft has spent millions of dollars to lure drivers but has had a hard time boosting its rider base.
Lyft said the number of active riders on its platform increased 10% in the fourth quarter from a year earlier to 22.4 million. Last year, Lyft had more than 40 million riders, the highest annual ridership in its history.
“We’ve entered 2024 with a lot of momentum and a clear focus on operational excellence,” CFO Brewer said, positioning the company to “drive meaningful margin expansion and our first full-year of positive free cash flow.”
In the current period, Lyft projected adjusted earnings of as much as $55 million in the first three months of the year, topping analysts’ estimates of $49.5 million.
But Lyft still lags behind Uber. According to market research firm YipitData, the company has held around 30% of the US rideshare market compared with 70% for Uber since the second quarter of 2022. Last week, Uber reported its full year of profit as a public company and said trips rose 24% in the quarter to 2.6 billion.
Lyft said adjusted earnings before interest, tax, depreciation and amortization were $66.6 million in the fourth quarter, beating the $56 million estimated by analysts. It reported a net loss of $26.3 million.
Like many areas of the US economy, Lyft also saw a Taylor Swift bump. High-attendance stadium events such as concerts by Swift and Beyonce, the US Open and football games helped boost rides by 35%, Lyft said.
As part of efforts to retain drivers and promote pay transparency, Lyft earlier this month said drivers will earn at least 70% of the amount that riders pay each week, excluding external fees.
But workers say it doesn’t go far enough. Drivers for Uber and Lyft were striking on Valentine’s Day, to call attention to low pay and what they claim is poor treatment by the app companies, according to a coalition representing drivers.
(Updates with more comments form the interview and background from the earnings report)
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