Earnings Transcript for BRDS - Q1 Fiscal Year 2022

Operator: Hello and welcome to the Bird Global First Quarter 2022 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] Please note today’s event is being recorded. I'd now like to turn the conference over to Caitlin Churchill, Investor Relations. Please go ahead.

Caitlin Churchill: Good afternoon, everyone, and welcome to Bird's first quarter 2022 earnings conference call. Before we begin, I need to remind you that all statements made on this call, that do not relate to matters of historical fact, should be considered forward-looking statements under US 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 historical experience or present expectations. A description of some 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 factor section of our Form 10-K, filed on March 15, 2022, or Form 10-Q for the quarter ended March 31, 2022 to be filed later today, and other filings with the Securities and Exchange Commission. This call will also reference non-GAAP measures, including adjusted EBITDA and adjusted operating expenses that we view as important in assessing the performance of our business. A reconciliation of each non-GAAP measure to the nearest GAAP measure is available in our earnings release on the company's investor relations page at ir.bird.co. I will now turn the conference over to Bird’s CEO and Founder, Travis VanderZanden.

Travis VanderZanden: Thank you everyone for joining us today. In Q1, revenue grew but 48% year-over-year and exceeded our guidance range, driven by continued demand improvement into the end of March alongside expanding vehicle deployments. As we noted on our last call performance early in the quarter was impacted by weather and the surge in Omicron cases. But we saw a significant increase in demand beginning in early March as macro headwinds ease, weather improved and consumers turn to transportation alternatives such as Bird in light of higher gas prices. With that said, the softness early in the quarter resulted in lower utilization year-over-year, which negatively impacted adjusted EBITDA for the period. Overall, we are very pleased with the Q1 results and the strong demand signals in March. That said, given broader market trends, we plan to accelerate our path to profitability. As you saw in our press release, we have announced plans to streamline our operations that we expect will result in at least $80 million of annualized cost savings. As a result, we now expect to deliver our first quarter of positive adjusted EBITDA in the third quarter of 2022. Furthermore, we are now on track for our first full year of positive adjusted EBITDA in 2023. We understand the importance of delivering on our profitability goals and believe the difficult decisions we are making now will allow us to accelerate our path to profitability and toward positive cash generation positioning Bird for long term value creation and market leadership. Before I go deeper on our path to profitability, let me turn the call over to Yibo to review our financial results and outlook in more detail.

Yibo Ling: Thanks Travis. For the quarter, we reported revenue of $38 million, up 48% against Q1 2021 and driven by 66% year-over-year increase in rides. With respect to profitability, first quarter gross margin which is net vehicle depreciation was 9% compared to 8% in Q1 2021. Ride profit margin before vehicle depreciation was 39% compared to 35% a year ago. Adjusted operating expenses which excludes $49 million of stock-based compensation expense and other certain non-cash non-recurring or non-core expenses increased 35% year-over-year. As a percentage of revenue adjusted operating expenses decreased 12 points versus the prior year despite increased expenses related to public company costs, as well as the CECL ramp ahead of peak operation periods. Adjusted EBITDA loss was $37 million, compared to a loss of $30 million in the prior year period given the softness in RPD, which Travis reviewed, as well as increased operating expenses. Please see today's press release for a reconciliation of GAAP to non-GAAP metrics. Turning to our balance sheet and cash flows. We ended the period with total cash, cash equivalents and restricted cash and cash equivalents of $70 million and total liquidity of $147 million, including $77 million of undrawn capacity under our vehicle financing facility. Q4 of 2021 and Q1 of 2022 saw significant investments in vehicle CapEx of approximately $160 million for 2022 deployments and 2023 deposit as part of our long-term supply chain management strategy in the face of global logistics and supply chain interruptions. As we move towards the seasonal upcycled, we expect our cash position to stabilize, particularly as we begin to realize the benefits of cost savings initiatives that Travis will discuss. Additionally, we ended April with more than $90 million in total cash, cash equivalents and restricted cash and cash equivalents. And we continue to draw on our flexible vehicle financing facility with Apollo against vehicle deployments in both the US and EMEA. Finally, as outlined in our press release, we've entered into a $100 million standby equity Purchase Agreement, which we expect to provide us with increased financial flexibility in the medium term and access to an upfront $21 million loan with optional cash repayments to further bolster liquidity ahead of the peak operating season. To be clear, any incremental issuance activity under this facility will be undertaken opportunistically as market conditions warrant. Now turning to our outlook. As seen in press release, we have revised our full year 2022 revenue outlook to take into account the actions we're taking to streamline our operations. Our updated 2022 revenue guidance reflects our focus on profitability and a slowing of expansion of our product sales portfolio offerings. We now expect revenue to be in the $275 million to $325 million range, representing 50% year-over-year growth at the midpoint. Core margins are expected to trend into the 20s owing primarily to the consumed scaling of our fleet manager operating model in the context of an ongoing fleet mix shift to newer, more innovative Bird design vehicles. Through our cost savings initiatives, we expect to achieve at least $80 million in annual run rate cost savings for fiscal year 2022, the majority of which will be realized by the third quarter resulting in an annual adjusted operating expense run rate of no more than $160 million. Given our revised top line outlook combined with our healthy gross margin expectations and cost savings initiatives, we expect to deliver our first quarter of positive adjusted EBITDA in the third quarter. Furthermore, we're targeting our first full year of positive adjusted EBITDA in 2023, which is achieved with year-over-year revenue growth of approximately 20% to 40% based on our current expectations for 2022 alongside an acceleration toward positive cash flow generation. Looking ahead, we're committed to maintaining a disciplined strategy with respect to capital expenditures, and expect the flexible capital structure solutions we have secured to be more than sufficient to support our updated plan to focus on profitable growing markets for the core sharing business with a lower fixed cost structure. With regards to the broader supply chain landscape, conditions continue to be challenging as new COVID strains sweep across China impacting global production and logistics across a number of sectors. That being said, we believe our decision to pull forward meaningful portions of our ‘22 and ‘23 vehicle CapEx into the last two quarters is helping to mitigate the full impact of these persistent headwinds. We are closely monitoring the ongoing developments, particularly as we approach peak summer months, but we have already received the vast majority of the vehicles we intend to deploy in 2022. As such, we believe we're well positioned with our vehicle deliveries for the balance of ‘22, we will maintain a disciplined approach to vehicle allocation. I'll now turn the call back over to Travis to discuss our plans to accelerate our path to profitability.

Travis VanderZanden: Thank you, Yibo. Few our success over the past five years has been our ability to continue to evolve and adapt our operations even amid dynamic macro environment in order to best serve and address the significant market opportunity form micro mobility in a scalable and efficient way. A great example of this is our fleet manager operating model, which was developed as a means of addressing the challenging fixed cost components of our prior operating model, especially in winter months. The fleet manager model paved the way for Bird’s consistent ride level profitability over the past two years, while providing a positive return to fleet managers and opening the door for expansion into small to mid-size long tail markets. The efficiencies we unlocked through this shift in our model, along with our overall operational and vehicle improvements position us well to further accelerate our path to profitability at the company level. As part of this initiative, we have taken a hard look at our cost structure, and have identified specific areas for immediate change. These decisions while prudent, are never easy to make. As part of this plan, we have decided to slow the expansion of our product sales portfolio offering. We will additionally be realigning our resources to prioritize sharing operations within our existing US and EMEA regions, which have proven investment returns while taking a measured approach to further geographic expansion. And we will be open to leaving some markets that do not meet our profitability goals given current market conditions. Finally, with the accelerated investments we made on vehicle CapEx in Q4 2021 and Q1 2022, we do not expect further material on finance capital spend in the latter half this year. While these actions prioritize profitability over growth, we remain focused on maintaining our leading position in core sharing markets. We expect to realize the majority of the associated cost savings by Q3, which we believe will position us to deliver our first quarter of positive adjusted EBITDA in addition to delivering on other profitability and cash flow objectives, which Yibo outlined. I remain confident in the opportunity we continue to see ahead for Bird. Our Board of Directors and management team echo this sentiment, and have voluntarily extended the lockup of their equity ownership for six months demonstrating their conviction towards our team's strategy and our path to profitability. We are focused on delivering value to all of our stakeholders, and the actions we are taking today are done at a time when our technology, vehicle hardware and commitment to our partners have never been stronger. We are committed to doubling down on our path to profitability. With that we are ready to take questions. Operator?

Operator: [Operator Instructions] And the first question comes from Tom White with D.A Davidson.

Tom White: Good evening, guys. Thanks for taking my questions. Couple if I could, I guess just first off on the updated full year guidance for revenue. Can you maybe give us a little bit of color about how to think about I guess maybe the next couple of quarters here? Product sales versus sharing? And then also maybe, how should we think about utilization that's kind of contemplated in the new full year revenue outlook, I think last quarter, you kind of presumed no increase in overall utilization. But just any updated thoughts that would be helpful.

Yibo Ling: Hi, Tom. So on the bridge, the previous guide between now in the previous guide, the delta is primarily attributable to our slowing of the product sales expansion. Our outlook on insurance business hasn't materially changed, say for taking a higher bar to near term profitability on individual markets. Generally, Q2 has performed against plan to date. And however, given the timing of the actions we're taking, we're not really in a position to give Q2 guidance in light of the cost savings initiatives and the updated [Indiscernible], the full year top line performance, we do expect some headwinds, potentially in the back half of the quarter with the slowing of the expansion that product sales portfolio, as I mentioned earlier.

Tom White: Okay, thanks. And then just on just kind of how we should think about overall utilization. And then I had a follow up on the competitive environment. Just kind of curious if there's been some consolidation in the space. You've also had some recent developments here domestically with one of the larger competitors, with one of your larger competitors. Just kind of curious to hear your high level thoughts on whether those moves have kind of changed your view on the competitive landscape, either sort of near term and the impact on the business or maybe just like longer term, the structure of how the industry evolves?

Travis VanderZanden: Yes, I would say that consolidation continues to happen in the space. And we look forward to seeing more consolidation. As you mentioned, there was a recent acquisition in the US market, which is helping consolidate their, US markets largely consolidated, Europe's a little bit behind on that, but it is helpful with the overall market structure to see more consolidation.

Yibo Ling: And on the utilization piece, Tom, that's generally performed against expectations through the April here and topline also through April.

Operator: And the next question comes from Steven Fox with Fox Advisors.

Steven Fox: Hi, good afternoon. When you think about the change in sort of regional expansion going forward is there any way to sort of put some parameters around what that means now versus what you previously meant and the reference to looking at cities where you're not getting the appropriate return? Do you have sort of cities on that list now? Or are you or how should we think of about that in coming quarters and then had a follow up?

Travis VanderZanden: Yes, for global expansion, we plan to continue our focus on the US and Europe regions, we expect to look at the entire market portfolio. They're both new and existing through this lens of near term cash flow generation and the path to profitability. But we do primarily want to continue to focus on the US and Europe regions. Within those markets, we'll obviously look to make sure we focus on the markets that are profitable and are creating that cash flow generation. Thankfully, the vast majority of our markets are profitable already. And so that's great to see the ones that aren't, we'll obviously be taking a close look at. But again, vast majority of the markets are already profitable. And we will be focusing primarily on the US and Europe regions for the rest of the year.

Steven Fox: That's helpful. And then in terms of thinking about cash flows versus EBITDA, if you -- pretty much portfolio, the CapEx for vehicles between now and next year. How quickly would we expect cash flows to turn positive that’s EBITDA is positive next year? Thanks.

Yibo Ling: Yes. So as you mentioned, we have pulled up a significant amount of our CapEx through the last two quarters, we saw a pretty significant outflows of vehicle CapEx for primarily 2022 deployments and 2023 deposits, we did end April with over $90 million in total cash, cash equivalents and restricted cash and cash equivalents. And as you just pointed out here, we don't expect further material on finance capital spend in the latter half of this year. So with these sizable investments behind us, and the flexible capital solutions we've secured, including that $150 million vehicle financing facility, and standby equity purchase agreement above $200 million we mentioned earlier, we do feel confident in the task ahead. We're not giving specific guidance on free cash flows at this point, but we will be back on that.

Operator: And next question comes from Eric Sheridan with Goldman Sachs.

Eric Sheridan: Thanks for taking the question. Sorry to follow up on some of the alignment in the business for the long term. But can you talk a little bit about I know we talked a little bit about new markets versus in market growth? First question would be, can you help us better understand what you're analyzing to think about what's a structural market, you might want to exit versus one where you're seeing the type of in market growth that you want to lean in and stay there and be behind over the long term, just so we can better understand a little bit of prism you're analyzing the markets that will be in the portfolio versus not in the portfolio longer term? That'd be number one. And number two, in terms of the path to profitability, you're laying out, is this a new structural higher profitable business than what you laid out when you listed last year? Or is this an element of just accelerating a push to get to a higher degree of profitability sooner? Just trying to understand the mixed dynamic you're trying to solve for on the EBITDA side over the medium to long term? Thanks so much.

Travis VanderZanden: Yes, on the on the market mix. As we mentioned, we'll be focused primarily on US and Europe looking for only the profitable cities and near term cash generation and profitability is the true north here, obviously. And there's a lot of dimensions around seasonality, weather trends, density, college towns, et cetera, that we certainly look closely at. But like I said, vast majority of our markets are profitable, I would say the ones that aren't tend to be some of the bigger cities that a handful the bigger cities that have pretty onerous regulations in place. And so we'll certainly be looking at the regulatory framework in the cities and what that means for future profitability near term and future profitability.

Yibo Ling: Yes, and with respect to the sharing business, our plan here is really just to focus and align our resources against the core sharing business. Our view on the potential there hasn't changed our view, generally on the margin profile hasn't changed. We are tapering down growth a bit, as we've noted here, primarily to ensure that as we build the fixed cost structure against that growth, we can do it most efficiently. And so it's really about accelerating the path to profitability more than anything else.

Operator: And the next question comes from Richard Tullis with Capital One.

Richard Tullis: Hey, thanks. Good afternoon, everyone. Yibo, in your opening comments, you had mentioned the kind of the move or the continued transition to bring in newer vehicles into the fleet, say by the third quarter of this year or toward the end of this year, what percentage of total vehicles could the newer vehicles say the Bird Three is representative of the total fleet.

Yibo Ling: As of this moment about half the vehicles in our fleet are Bird Threes and for the balance of the year we expect roughly 60% to 70% of our fleet to be Bird Threes.

Richard Tullis: Okay, that's helpful. Thank you. And going back to kind of the strategy going forward of just deemphasizing product sales, maybe update your view on bike sales, et cetera, it seemed like it was pretty positive toward the end of last year, maybe demand was even outstripping supply given the logistics issues, kind of what's changed there? And is it a supply chain driven deal? Or is there more to it?

Travis VanderZanden: Yes, it was really, last year, as you know, product sales was 9% of revenue. So there's a new business line for us and we still think there's opportunity, and that market is growing fast. But given the macro backdrop, it felt important to really focus the business on the core business, which is our sharing business. And really, it's just a level of focus that we want to put in place for the company so we can be laser focused on that path to profitability given the macro environment. Thank you. And that concludes question and answer session as well as the call itself. Thank you so much for attending today's presentation. You may now disconnect your lines.