Lyft's CEO says the company will be profitable soon

Fortune

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

Transcript

00:00 Brands are so interesting and reputations are so interesting because they take a long time to build and once you've got them

00:06 They actually persist for many years. So I was just we by the way at fortune

00:11 Hmm, we know that for sure you do hard to hard to kill a good brand once it once you

00:15 Are you guys trying?

00:18 Anymore, but there probably been times in our past when we were trying pretty hard

00:22 Welcome to leadership next the podcast about the changing rules of business leadership

00:27 I'm Alan Murray and I'm a colleague wrong

00:29 This is a hyper competitive business

00:34 Yeah, you're like coke and Pepsi or maybe more like Hertz and Avis or something that you know

00:39 I know when I'm when I'm getting a car. I just want the car to be there fast

00:42 I don't care who it comes from. So what is the nature? It's a fairly undifferentiated

00:47 Product what

00:51 What what can you do? What is what what how do you really make ground against uber in this battle?

00:56 yeah, it turns out you can do a lot and

00:58 It's interesting because so first of all, you know really focusing on the customer really makes a difference

01:06 So I'll give you some examples

01:07 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

01:12 Own riders and drivers and so, you know, if I'm honest we were paying our drivers not quite competitive rates

01:19 We were charging our riders a little bit more

01:23 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

01:30 Who's gonna get me there less expensively who's gonna get me there faster?

01:33 So when I when I look forward, you know over the year, you know

01:38 Just fixing some of the basics really really helps and I'll give you you know

01:42 An example a year ago our what we call our pin ETA difference

01:46 So let's say the gap between how fast you might be picked up in the other guy versus us

01:50 Might have been three or four minutes, which is significant if you're in a hurry

01:53 Yeah, now it's ten seconds now. It's ten seconds

01:55 So when you get to the point where it's ten seconds now, you can start to compete on other things

02:00 You can start to compete on women plus connect which we launched which is a product that lets women choose women

02:05 You can start to compete on faster airport pickup where people are very stressed about getting to the airport

02:10 So it's sort of a couple stage thing. You got to make sure you're focused on your customers

02:14 You got to fix the basics to give yourself permission to do some of the other more innovative things

02:18 And then you can start to innovate and give people a real reason to choose one or the other

02:22 Instead of having them think it's kind of the same thing is

02:24 Transparency part of it too. I mean, I I would assume that drivers care very much about that. Have you made changes there?

02:31 Absolutely. Absolutely. And in fact, that's exactly it. So I have a public email address. It's David at lyft comm and

02:39 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

02:46 And so but again customer obsession, right? So our drivers are our customers

02:51 So we have to pay attention to what bugs them and the lack of transparency really bothers them

02:57 You know, they start to kind of come up with all sorts of theories of what's going on

02:59 So now and this again is a relatively new feature

03:02 We're actually just rolled it out over the last, you know

03:05 Six weeks or so at the end of every week you you get a full statement that literally starts with how much

03:11 Riders paid because that was the thing that would bug them so much is they would say, you know

03:15 I got a you know a trip where a rider paid me 50 bucks and I only made 10 and said

03:20 But what is that? So anyway, so now we show them, you know the complete statement

03:24 Literally everything that a rider paid everything that they got all their tips all the tools all the different, you know things and then again

03:30 If it's ever less than 70% after those past three fees, we literally send them a check

03:34 We send them a check and again this driver group. I talked to you the other day

03:37 They said I couldn't believe it the first time I got a rebate. I was sort of like getting a tax rebate

03:42 It was it was great. So David you're you're you're focusing on customers. You're focusing on riders

03:47 You're focusing less on shareholders

03:49 But at the end of the day you do have to make money sure and you haven't yet. Yep

03:53 How do you feel about?

03:55 Progress towards that goal great. And the reason is because our store our mantra is

04:00 customer obsession drives profitable growth

04:03 So, you know, let's look at the other numbers for a second. So

04:07 So first on the growth side, you know the first quarter that I was CEO

04:12 We grew about 10% a year on year then we grew about 17%

04:15 They were about 20% then we go about 26% So those are the first four quarters. So we're growing

04:20 So then the question is what are we doing it profitably?

04:22 Well as you point out we haven't made gap profitability yet, but it is absolutely on the you know on the roadmap

04:28 We were free cash flow positive last quarter. That's q4 of 2023

04:33 We will be free cash flow positive this entire year. Absolutely

04:37 We've promised it to Wall Street and when you look at our losses

04:40 They are diminishing to the point where they're really quite small right now and most Wall Street analysts show us turn your profit quite soon

04:46 So we are absolutely on that path some of it was through very hard decisions

04:50 You know, one of my first decision was was obviously very difficult involving cutting about 26% of our staff, which is very difficult to do

04:57 Incredibly hard, you know kind of heart-wrenching work

05:01 But you you have to do it if you're gonna be able to lower your prices and pay drivers more

05:06 You know and and and and now we're being very disciplined very disciplined quarter after quarter

05:10 Our listeners would never forgive us if we didn't ask you about the EBITDA mistake because it was such a fascinating

05:16 Moment, it's a misplaced zero in a press release that caused the stock to soar came back down

05:22 You now have class-action lawsuits. Oh

05:25 What did you learn from that? Did you learn anything? Was there were there any oh, yeah

05:31 We learned a lot. Yeah

05:33 I mean the first thing I have to say and I've said this before I'll say it again

05:35 That's on me. That's on me

05:37 And I want people really to understand that when you're the leader of the organization someone makes a mistake

05:42 It's your problem

05:43 And so now I will also say man did our team hustle and what happened what happened literally was an extra zero

05:50 That got inserted into an early version of the press release and it just rolled forward and this despite

05:57 Literally, no exaggeration hundreds of people's about hundreds people's eyes including my own seeing it over and over again

06:04 But what happened it was in a forecast piece which gets a little less scrutiny than the backwards looking stuff

06:09 The basis point versus percentage that I mean, they're very very different words

06:14 but unfortunately, of course

06:15 they mean something very very different and so and we literally found it in real time as we were reading out the

06:23 The sort of earnings report and we changed it within two minutes

06:27 I think and all of a sudden our legal team again and actually our policy team jumped into action

06:31 So very very quick response absolutely fantastic

06:33 And I certainly learned how fast a team can work when it when it is under that kind of pressure now

06:38 What about what have we also learned?

06:40 Well, we've learned that even though we have really exactly the same process that every other public company has all sorts of eyes

06:46 Also checks about it wasn't sufficient. It wasn't sufficient. So what are we doing? We actually now have a process

06:51 We're just about to go through this as our next earnings come out where we take all of our materials

06:56 We now give them to an outside third party

06:59 We've hired to do exactly this and what they do is without having any other context

07:03 They look not just in sort of double check the numbers

07:06 but they try to build the model that our press release and earnings statement is

07:10 Suggesting they build and then look at what that model results in and then we compare that back to our internal models

07:16 And if those models are vary by anything insignificant, we know there's a problem along the way

07:21 You

07:23 You

07:25 [BLANK_AUDIO]

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