Earnings report typo lands Lyft in hot water

The stock of ride sharing company, Lyft, saw a 35% rise on February 14 following an earnings report that added an extra zero to its growth assessment.

The report was released after the market closed on Tuesday and caused the stock to briefly skyrocket in after-hours trading.

During the company’s earnings call held on February 13, CFO Erin Brewer informed analysts that the initially reported 500 basis points or 5% growth in adjusted EBITDA margin for 2024 was actually a mistake.

Brewer clarified that the actual growth is only .05% or 50 basis points. This error resulted in a 67% surge in Lyft’s shares during after-hours trading, but the correction issued by Brewer reduced this gain by half.

Despite this correction, Lyft’s stock closed at a 52-week high of $16.39 at the end of regular trading on Wednesday.

What went wrong?

Lyft CEO David Risher acknowledged the news release containing an extra zero was a result of a mistake on his part, he said during an interview with CNBC.

He expressed his frustration over the error, stating that it was a “terrible thing” for Lyft.

According to a company spokesperson, Lyft has confirmed via email that they have made adjustments to the margin expansion figure in their materials and have also issued an 8-K filing with the Securities and Exchange Commission. The purpose of the filing was to address and highlight a clerical error that was discovered by the company.

According to Brewer’s statement during the earnings call, the company would have experienced a significant increase in performance with a 5% growth reported, as it has been facing challenges in achieving profitability since its initial public offering in 2018.

However, the revised data shows that Lyft’s profit margin, based on booking percentage, will now be 2.1% in 2023, higher than the previously reported 1.6%.

Growth is on the rise

Lyft achieved record-breaking levels for both gross bookings and riders, with a 14% year-over-year growth resulting in a total of $13.8 billion in bookings for the entire year, according to its earnings report.

In the last quarter of the year, which ended on Dec. 31, Lyft saw a 17% increase in gross bookings, reaching a total of $3.7 billion.

Lyft’s annual ridership exceeded 40 million, with a total of 709 million rides, marking an 18% increase from the previous year.

This growth was driven by a rise in rides to stadiums for popular events like Taylor Swift and Beyoncé’s tours, as well as major sporting events like the US Open. The company experienced a 35% year-over-year growth in bookings for these types of trips.

Getting ahead of the competition

In an effort to surpass competitors in the market, notably Uber, Lyft has implemented several measures, one of which involves retracting unfavourable practices like implementing “surge pricing,” which results in riders being charged higher fares during specific hours of the day.

The company has also reportedly made the decision to decrease expenses and fares, as well as raise driver wages, resulting in the layoff of 1,110 workers in April.

Last week, the company declared that it will compensate for the discrepancy if drivers earned less than 70% of the amount paid by riders, after accounting for external fees. The estimated earnings for drivers, after deducting expenses, is around $23.46 per hour of service, with expenses estimated at $7.02 per hour.

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