An economist on Lyft’s extremely expensive typo: ‘The CFO or someone on her team should have caught this’

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

Leaderboard

 Susan Keefe was named CFO at Benson Hill, Inc. (NYSE: BHIL), an ag tech company, effective March 29. Keefe succeeds Dean Freeman, who is leaving the company to pursue other opportunities. Freeman will continue to serve in the role until Keefe begins at the company. Most recently, Keefe served as CFO of GreenLight Biosciences. Before joining GreenLight, she served as CFO, VP of finance at Danforth Advisors.

Iain Balchin was named CFO of Tradeshift, a B2B e-commerce and fintech platform. Balchin joins Tradeshift from Dublin-listed energy storage company Corre Energy, where he led an equity raise. Before that, he held group CFO positions at the publishing business XL Media and wealth management firm Ascot Global.

Big deal

American Express has released its second Amex Trendex: Small Business Edition, showing how the small business sector is anticipating the year ahead, including strategizing ways to strengthen their businesses with AI. Eighty-five percent of all small businesses surveyed said they are satisfied with the success of their business. Further, 86% said they achieved their 2023 business goals. Half of the respondents have plans to grow or expand their business this upcoming year. The findings are based on a survey of 557 financial leaders at U.S. small businesses. 

Going deeper

"AI in Finance: The Promise and Potential Pitfalls" is a new article in Wharton's business journal. It highlights a recent Future of Finance roundtable that explored how AI is drawing big investments with its promise of new efficiencies, but ethics and regulation remain concerns. 

Overheard

"When used responsibly, AI-driven software can let doctors spend more time being doctors and has tremendous promise to create a better and more sustainable healthcare experience for all."

—Sunita Mishra, M.D., the chief medical officer for Amazon Health Services, writes in a new Fortune opinion piece.