Name: Lyft's CEO says the company will be profitable soon
Uploaded: 2024-05-28
Duration: 7 min 29 s
Description: A year into the job, David Risher talks innovation at Lyft, plus lessons learned from the recent earnings error.

A year into the job, David Risher talks innovation at Lyft, plus lessons learned from the recent earnings error.

Lyft's CEO says the company will be profitable soon

Photo illustration by Fortune. Photograph provided by Lyft.

Leadership

David Risher talks innovation at Lyft, plus lessons learned from the recent earnings error.

Brands are so interesting and reputations are so interesting because they take a long time to build and once you've got them, they actually persist for, for many years. So I was just by the way at fortune, we know that for sure, hard to, hard to kill a good brand. Once, once you are, you guys trying? No, we're not anymore. But there probably been times in our past when we were trying. Pretty hard. Welcome to leadership next, the podcast about the changing rules of business leadership. I'm Alan Murray and I'm Mia, this is a hyper competitive business. You're like Coke and Pepsi or maybe more like Hertz and Avis or something. And, you know, I know when I'm, when I'm getting a car, I just want the car to be there fast. I don't care who it comes from. So what is the nature? It's a fairly undifferentiated pro uh product. What, what, what can you do? What is, what, what, how do you really make ground against Uber in this battle? Yeah, it turns out you can do a lot and it's interesting because so first of all, you know, really focusing on the customer really makes a difference. So I'll give you some examples. When I started, the company had started to focus a little bit too much on Wall Street and a little bit too little on its own riders and drivers. And so, you know, if I'm honest, we were paying our drivers not quite uh competitive rates. We were uh charging our riders a little bit more, uh under the hopes of making more money faster. Just a bad strategy. Just because to your point, a lot of people, they'll say, you know, who's going to get me there less expensively, who's going to get me there faster. So when I, when I look forward, you know, over the year, you know, just fixing some of the basics really, really helps and I'll give you, you know, an example a year ago our of what we call our pin eta difference. So let's say the gap between how fast you might be picked up and the other guy versus us might have been three or four minutes, which is significant if you're in a hurry now, it's 10 seconds. Now it's 10 seconds. So when you get to the point where it's 10 seconds, now, you can start to compete on other things, you can start to compete on women Plus Connect, which we launched, which is a product that's women, choose women. You can start to compete on faster airport pickup where people are very stressed about getting to the airport. So it's sort of a couple stage thing. You got to make sure you're focused on your customers. You gotta fix the basics to give yourself permission to do some of the other more innovative things. And then you can start to innovate and give people a real reason to choose one or the other instead of having them. Think it's kind of the same thing is, uh, transparency part of it too. I mean, I, I would assume that drivers care very much about that. Have you made changes there? Absolutely. Absolutely. And in fact, that's exactly it. So I have AAA public email address. Uh It's David at lyft.com and, and, and drivers, right? And they're very clear about what it is that they like and they're also very clear about what bugs them. And so, but again, customer obsession, right? So our drivers are our customers. So we have to pay attention to what bugs them and the lack of transparency really bothers them, you know, they start to kind of come up with all sorts of theories of what's going on. So now, and this again is a relatively new feature where actually I just rolled it out over the last, you know, six weeks or so. At the end of every week, you, you get a full statement that, that literally starts with how much riders pay because that was the thing that would bug them so much is they would say, you know, I got a, a, you know, a trip where a rider paid me 50 bucks and I only made 10 and it's like, but what, what is that? So anyway, so now we show them, you know, the complete statement, uh, literally everything that rider paid, everything that they got, all their tips, all the tools, all the different, you know, things. And then again, if it's ever less than 70% after those pass through fees, we literally send them a check, we send them a check. And again, this driver group, I talked to the other day, they said I couldn't believe it. The first time I got a rebate, you know, it was sort of like getting a tax rebate. It was, it was great. So David, you're, you're, you're focusing on customers, you're focusing on riders, you're focusing less on shareholders. But at the end of the day, you do have to make money and you haven't yet. Uh uh How do you feel about progress towards that goal? And the reason is because our, our mantra is customer obsession drives profitable growth. So, you know, let's look at the other numbers for a second. So, um, so first on the growth side, you know, the first quarter that I was, uh CEO we grew about 10% year on year, then we grew about 17% then we were about 20% then we grew about 26%. So those are the first four quarters. So we're growing. So then the question is, what are we doing it profitably? Well, as you point out, we haven't made gap profitability yet, but it is absolutely on the, you know, on the road map, we were free cash flow positive last quarter. That's Q four of 2023 we will be free cash flow positive this entire year. Absolutely. We've promised it to Wall Street and when you look at our losses, they are diminishing to the point where they're really quite small right now. And most Wall Street analysts show us turning a profit quite soon. So we are absolutely on that path. Some of it was very hard decisions. You know, one of my first decision was, was obviously very difficult uh involving cutting about 26% of our staff, which is very difficult to do incredibly hard, uh you know, kind of heart wrenching uh work, but you, you have to do it if you're gonna be able to lower your prices and pay drivers more, you know, and, and, and, and now we're being very disciplined, very disciplined quarter after quarter. Our listeners would never forgive us if we didn't ask you about the EBITA mistake because it was such a fascinating moment. It was a misplaced zero in a press release that caused the, the stock to soar came back down. You now have class action lawsuits. What did you learn from that? Did you learn anything? Was there we were there any? Oh Yeah, we learned, we learned a lot. Yeah, I mean, the first thing I have to say and I said this before, I'll say it again. That's on me, that's on me. And I want people really to understand that when you're a leader of the organization, no, makes a mistake. It's your problem. And so now I will also say, man did our team hustle and, and what happened, what happened literally was an extra zero that got inserted into an early version of the press release and it just rolled forward. And this despite literally no exaggeration of hundreds of people's hundreds of people's eyes, including my own seeing it over and over again. But what happened, it was in a forecast piece which gets a little less scrutiny than the backwards looking stuff, the basis point versus percentage. I mean, they are very, very different words, but unfortunately, they mean something very, very different. And so, and we literally found it in real time as we were reading out the, um the, the, the sort of earnings report and we changed it within two minutes, I think. And all of a sudden our legal team again and actually our policy team jumped into action so very, very quick response. Absolutely fantastic. And I certainly learned how fast the team can work when it, when it is under that kind of pressure. Now, uh what have, what have we also learned? Well, we've learned that even though we have really exactly the same process that every other public company has all sorts of eyes, it wasn't sufficient, it wasn't sufficient. So, what are we doing? We actually now have a process. We're just about to go through this as our next earnings come out where we take all of our materials. We now give them to an outside third party we've hired to do exactly this and what they do is without having any other context. They look, not just to sort of double check the numbers, but they try to build the model that our press release and earnings statement is suggesting they build and then look at what that model results in. And then we compare that back to our internal models. And if those models are vary by anything that significant, we know there is a problem along the way.