Lyft CEO takes blame for ‘extra zero that slipped into’ earnings release
Lyft CEO David Risher accepted accountability for a significant error in the company’s Q4 earnings release during an interview on CNBC's “Squawk Box,” expressing frustration over the incident. Following the release on Tuesday, Lyft’s stock witnessed a staggering 60% surge because the press release incorrectly stated a projected 500 basis points (5%) margin expansion for 2024, a notable increase for a company struggling with profitability. Lyft, Inc. also beats earnings expectations. Reported EPS is $0.18, expectations were $0.08. Lyft, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter.
In a surprising turn of events, Lyft CEO David Risher has shouldered the blame for a significant error that made its way into the company’s fourth-quarter earnings release. During an interview with CNBC's “Squawk Box,” Risher openly acknowledged the mistake, emphasizing his frustration and taking full responsibility for the oversight.
The error in question led to a substantial surge in Lyft’s stock by more than 60% after the earnings report was released late on Tuesday. The initial excitement stemmed from the press release, which erroneously indicated that Lyft was poised for a remarkable margin expansion of 500 basis points, or 5%, in 2024. This ambitious projection represented a substantial boost for a company that has long grappled with turning a profit.
However, during the quarterly call with investors, Lyft CFO Erin Brewer clarified that the stated figure was inaccurate, and the actual increase would be 50 basis points (0.5%). This would result in Lyft’s adjusted profit margin being 2.1% in 2024, up from 1.6% in 2023. The error also appeared in Lyft’s presentation slides.
Acknowledging the mistake, Risher remarked, “Look, it was a bad error, and that’s on me.” Despite the correction, Lyft’s stock remained elevated, as the reported numbers surpassed analysts’ expectations, though it did lose a significant portion of its initial gain, amounting to over $2 billion in market capitalization. The discovery of the error was made during the earnings call when it became apparent that there was considerable interest in the margin figures. Risher described the moment a team member identified the problem, noting her visible surprise and emphasizing the gravity of the situation, saying, “It’s a terrible thing. It is an extra zero that slipped into a press release.”
Risher disclosed that the company identified the error when it became apparent during the earnings call that there was substantial interest in the margin figures. Once a team member recognized the problem, Risher noted her surprised reaction, saying, “It’s a terrible thing. It is an extra zero that slipped into a press release.”
Fortunately, the error was swiftly detected, and an immediate correction was issued. Lyft shares experienced a 33% surge on Wednesday, reaching $16.09, marking one of the company’s best days since its IPO in 2019, although the stock still remains approximately 78% below its debut price.
Lyft reported a Q4 revenue of $1.22 billion, a 4% increase from the previous year, with adjusted earnings per share at 18 cents, surpassing the 8 cents expected by analysts. Gross bookings for the year rose by 14% to $13.8 billion, and quarterly bookings increased by 17% to $3.7 billion. Despite the setback, Risher characterized the quarter as “great.”
Following the incident, analysts at MoffettNathanson upgraded their rating on Lyft shares from sell to neutral in a note titled “Lyft: We all make mistakes.” The firm highlighted the company’s “better-than-expected take-rates" and improved “cost discipline” as positive factors. The incident serves as a reminder of the challenges companies face in maintaining accuracy in financial disclosures, even with robust processes in place.
