Bird Global, Inc. (NYSE:BRDS) Q1 2023 Earnings Call Transcript May 11, 2023

Bird Global, Inc. misses on earnings expectations. Reported EPS is $-0.14 EPS, expectations were $-0.08.

Operator: Hello, and welcome to the Bird Global First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn it over to Investor Relations. You may now begin.

Unidentified Company Representative: Good morning everyone, and welcome to Bird’s First Quarter 2023 Financial Results Conference Call. On this call are Shane Torchiana, Bird’s CEO; and Michael Washinushi, Bird’s CFO. Before we begin, I need to remind you that all statements made on this call that do not relate to matters of historical fact are considered forward-looking statements under the U.S. Federal Securities Laws, including statements regarding our current expectations for the business and our financial performance. These statements are neither promises nor guarantees and are subject to risks and uncertainties that could cause actual results to differ materially from the historical experience or present expectations. A description of the risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements on this call can be found in the Risk Factors section of our Form 10-K for the year ended December 31, 2022 and in our other filings with the SEC.

On this call, management will also reference non-GAAP measures, including adjusted EBITDA, adjusted operating performance, ride profit before vehicle depreciation and free cash flow, which we view as important in assessing the performance of our business. A reconciliation of each non-GAAP measure to the most directly-comparable GAAP measure is available in our earnings release on the company’s Investor Relations page at, ir.bird.com. The growth percentages that follow are in comparison to the same-period in the prior year except as otherwise specified. I will now turn the conference call over to Shane.

Shane Torchiana: Thank you all for joining us today for our first quarter fiscal 2023 financial results conference call. We reported $29.5 million in revenues in Q1 with $28.5 million in sharing revenues with a 16% share in gross margin, and 52% ride profit margin before vehicle depreciation, up from 35% last year. As a reminder, Q1 is our slowest and coldest seasonal period. But as we enter Q2 and warmer weather, we continue to see strong demand for micromobility and eco-friendly transportation across the hundreds of cities we serve. To put this into context, there are 90 markets that launch operations in Q2 that weren’t operating in Q1 including all of our Canadian markets, representing 14% of expected Q2 revenue. We also see higher revenue per vehicle per day as the weather warms and people get out into the world.

As we stepped into 2023, we’ve seen great progress on the transformation we began in Q3 of last year. As part of that, we remained laser focused on our mission to provide clean, equitable transportation alternatives for the consumers, communities and cities we serve, while fully committing to be a self-sustaining company that generates positive cash flow this year. That transformation relies on three focus areas, aligning our costs to cash inflows, improving asset efficiency, and being a trusted partner to the cities we operate in. The strategy is set us on our way to a free cash flow and EBITDA positive 2023, and also supports our long-term growth plan and what continues to be a multibillion dollar addressable market. Now I’d like to dive a bit deeper into Q1 specifics in those three major focus areas.

First, aligning cost structure with inflows. As we discussed, our top priority is to be free cash flow positive, and ultimately self funding. As part of this, we continue to decrease our adjusted operating expenses year-over-year targeting approximately $100 million of total cost for this year. We ended the first quarter with adjusted operating expenses at $30.6 million down 39% year-over-year and expect our cost optimization initiatives will continue to flow through our financial performance as we progress in fiscal 2023. Ride profit margin before we vehicle depreciation which is a proxy for city level cash margin reached 52% for Q1, 2023. Throughout Q1, we continue to aggressively reduce our central cost structure with savings from exiting our lowest performing cities in EMEA and North America and reducing unnecessary central overhead costs progressively.

Our second focus area is improving asset efficiency. To reiterate the three legs of our asset efficiency stool are one; improve supply-demand matching through our demand-based vehicle drop model. Two, increasing our vehicle deployment rate, and three, extending the average life of our vehicles. At the beginning of the year, we began deploying a new software at scale to improve where we dropped scooters that also layers in predictive models that anticipate where the next rides will take place with the goal of improving scooter utilization. As we increase adoption of new vehicle placement technology, we continue to see substantial optimization. Specifically, that markets where it’s been implemented, have seen a over 25% increase in revenue per vehicle per day, compared to the markets where this technology has not been implemented.

This is in line with our prior expectations, but there’s so far more upside to this figure as we further improved drop locations, routing, and rebalance logic using this model. Additionally, we’re in the process of repairing and refurbishing damage and underutilized devices, ensuring our key markets have the latest vehicles and that they’re in excellent shape for riders the spring and summer. Building out a more robust repair capability in local markets leads to longer-term CapEx as we get more rides out of the same vehicles and also extends the useful life of the vehicle for several years or more. We expect to see continued upside ahead in repair and in useful life as we roll out learnings from our recent Canadian acquisition where we saw repair rates that were considerably faster and average vehicle life on the same vehicle that we operate at Bird Global of one to two additional years.

The third pillar to our roadmap is to be the trusted partner that cities deserve. We’re focusing on generating cash flow from our existing markets and exiting any lagging markets, while deepening existing partnerships within our profitable cities and selectively expanding where we expect to see a clear return on our investment. Our relationships with city regulators and officials are the key to Bird’s long-term success. Ensuring they are happy with our relationship not only streamlines our operations, but also unlocks growth in the business. We are working constructively with cities around the world to evolve regulations to better meet the needs of all stakeholders. As an example of our efforts to improve relationships with cities and regulators, we’ve recently worked with city officials in Atlanta, Nashville, Cleveland, Cincinnati, Richmond, Lexington, St. Louis, and Gainesville to extend the hours and areas of operations for their micromobility programs.

By permitting micro mobility operations in new areas, and in the evenings, these cities are offering their residents a reliable, sustainable transportation option for getting home at night, and of course, these policies benefit our revenue as well. Moving on to our European operations. Over the past eight months, we’ve also shut down a significant portion of the European markets we operated in. As planned, this results in dramatically reduced operating expenses, and a higher quality footprint which is one of the main drivers behind the financial improvement in our European business. With these changes, we continue to be more focused on executing on our core business and portfolio in the region. I’m also pleased to share a recent RFP success that we had in Australia with the city of Perth.

This new city that launched in Q2 marks the first major Australian city for our shared e-scooter services building upon momentum in the country with successful operations across Bunbury, Albany and Margaret River. In Q1 we experience continued momentum in North American Europe as well, including notable city wins in North America, Lincoln, Nebraska, Burlington, Vermont, Logan, Utah, Montgomery, Alabama, Grand Junction, Colorado, Orange County, Florida and Pocatello, Idaho. In EMEA we saw wins in Grosseto in Italy, Bastia, Ajaccio, Vichy in France. These wins points to the market potential we have yet to capture. In addition to new launches we are seeing successful permit renewals in a number of cities were Bird already operates. In the U.S. this notably includes Louisville, Kentucky, South Bend, Indiana and more.

Internationally, we renewed our permits with Tel Aviv in Israel and Turin in Italy, showcasing the continued demand for micromobility, as well as a strong satisfaction with Bird from our city partners. In many cases, these renewals include expanded operating zones and led to bigger fleet caps. Lastly, we are committed to investing in new technologies. These new technologies are designed and integrated into Bird’s rider experience in order to support safe riding and parking. New product solutions include global Google Apps Integration, Enhanced Bird Visual Parking System, Rider Age Verification, Double Riding Detection and Camera-Equipped Vehicles to detect unsafe riding. These technologies plus many more — many more to come will continue to give Bird an edge with cities, especially in comparison to subscale players in the category that cannot invest in the same level of technological development.

To conclude, I’d like to thank our riders city partners and our team of Bird employees around the globe. Without you, none of this would be possible. We are still in the early days of seeing the impact from our transformation, but with the dramatic improvement on margin, year-on-year even in our coldest quarter, I am more than excited about our prospects of becoming a self sustaining free cash flow positive company in 2023. I will now turn the call over to Michael to review our financial performance in more detail.

Michael Washinushi: Thank you, Shane. I would like to start by recapping a few key highlights from Q1. I am pleased that we ended the quarter with significant year-over-year improvement on our gross margins, excluding appreciation, net income and adjusted EBITDA, showcasing the effectiveness of our cost optimization efforts. As Shane highlighted sharing gross margin came in at 16%, ride profit margin before depreciation increased to 52%, up from 35% last year. Operating cash flow was negative $21.7 million and free cash flow came in at negative $25.3 million, also aligning with our goals to become a self sustaining free cash flow positive growth company. While we are still in the early stages of our strategic plan to optimize the business for profitability and cash flow, I am pleased with the progress we have to share today.

Now on to our first quarter results. Total revenue came in at $29.5 million, down 17% or $5.8 million year-over-year of which $4.1 million was due to lower product sales, as we strategically exited our retail business over the course of 2022. Our core sharing business which represents nearly 97%, or the majority of revenues declined 5% year-over-year. Rides in Q1 declined 30% year-over-year. As a reminder, our quarter one, 2022 comparison was also before exiting a number of unprofitable markets, resulting in meaningful drag to revenues in quarter one, 2023 affecting growth. As we exited the seasonally slower winter months and we continued with unseasonably cold conditions in the North Western, North Eastern and Central northern portions of the U.S. Additionally, we experienced unexpected new IDV regulations in EMEA.

Q1 consolidated gross margin reached 17%, up 15 points from 2% last year, and ride profit margin before vehicle depreciation reached 52%, up 17 points from 35% last year, primarily driven by lower cost of sharing. While costs benefited from lower rides, we realize a favorable change in the effective fleet manager payment rate due to the closure of several jurisdictions in which we paid higher payments. Quarter one adjusted operating expenses decreased 39% year-over-year to $30.6 million compared to $50 million last year. As a percentage of revenue, Q1 adjusted operating expenses were 104% of revenue, compared to 141% in the same period a year ago. We continue to realize benefits from reductions in force that occurred in 2022, optimization in third-party spent in professional fees, technology costs, and advertising and reduction in logistics and facility expenses following our geographic footprint rationalization.

We expect further operating expense savings through 2023, resulting in adjusted operating expenses of approximately $100 million. Our Q1 net loss came in at negative $44.3 and adjusted EBITDA was negative $15.6 million, compared to negative $39.4 million in the prior period. We ended quarter one with total cash and cash equivalents of $18.3 million including $12.8 million of unrestricted cash. Additionally, seasonality has a strong impact on cash flow and we expect to return to positive free cash flow over the next three quarters. In March, we secure additional funding, bringing the total new capital to almost $33 million in the last six months. The funding strengthens our cash position in support of expanding into new markets and investing into new technologies.

Looking ahead, we remain confident in the transformation of Bird Global as a profitable and self-sustained business. We are still realizing the impact of the changes we have made within the past four months and believe the targets we laid out last quarter are achievable. To reiterate, for our fiscal 2023, we are expecting positive adjusted EBITDA in the range of $15 million to $20 million on a full year basis, and our first year of positive free cash flow in the range of $5 million to $10 million with a target of approximately $100 million in adjusted operating expenses. We expect to generate positive free cash flow for the balances year given the seasonality of our business. Lastly, our performance up to quarter end is tracking in line with our 2023 expectations, and we are tightly controlling our cash burn giving us confidence in our full year 2023 guidance.

And with that, I will turn it over to the operator for a QA session.

Q&A Session

Operator: Thank you. At this time, we’ll be conducting a question and answer session. [Operator Instructions]. Our first question is from the line of Tom White with D.A. Davidson. Please proceed with your questions.

Operator: Thank you. Thank you. Our next question is from the line of Eric Sheridan with Goldman Sachs. Please proceed.

Operator: Thank you. Our last question is coming from the line of Doug [Indiscernible] from Capital One. Please proceed with your questions.

Operator: Thank you. At this time, there are no additional questions and I’ll turn the floor back to Mr. Torchiana for closing remarks.

Shane Torchiana: Yes. Thank you all so much for the time today. We are extremely excited to close our best Q1 today in the history of the company. And look forward to our first free cash flow generative year in 2023, which also will be a first for the category. Thank you all. And we’ll talk again in Q2.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines this time and thank you for your participation.