BRDS - Bird Global Inc. (BRDS) Q1 2023 Earnings Call Transcript
2023-05-11 14:00:19 ET
Bird Global, Inc. (BRDS)
Q1 2023 Earnings Conference Call
May 11, 2023 08.00 AM ET
Company Participants
Shane Torchiana - President and CEO
Michael Washinushi - CFO
Conference Call Participants
Wyatt Swanson - D.A. Davidson
Eric Sheridan - Goldman Sachs
Presentation
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.
Question-and-Answer 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.
Wyatt Swanson
Hey. This is Wyatt Swanson on for Tom. Thanks for taking our questions. My first one relates to the macro. Could you kind of just walk us through some of the levers on your current outlook for the rest of the year given the macro backdrop. Do you experience any changes as to what you expect? And maybe what you're doing to offset any of the negatives?
Shane Torchiana
Yes. Thanks for the question. So, the overarching strategy hasn't changed from what we talked about a few minutes ago, which is building capital to trust with cities, reducing our cost to matter enclosed. And then several things within the area of asset efficiency. We have found that the macro environment could be a little bit of a headwind in the United States. As a result, we're spending more time on new growth initiatives to improve our asset efficiencies, specifically our revenue per vehicle per day.
That largely takes the form of rolling out our in-house drop model for vehicle locations that we talked about before, that's in about half of the markets that we operate in now. We expect to have that in 100% or very close to 100% of the markets we operate in by the end of the year. As I mentioned, that has a significant uptick in our ride per vehicle per day and revenue per vehicle per day to the tune of about 25%, not yet fully optimized.
There are also opportunities we see for new promotion in marketing and growth initiatives as well. Historically for us, we've seen the vehicles as sort of their own sales or marketing, they're effectively billboards that are out on the streets. And I think in the early days of the business in the category, that was a good answer. I think as we become a more mature company, there is more room to invest into sales and customer acquisition, which we're just beginning to do.
Wyatt Swanson
Awesome. Thank you. And then a question on the international. Could you give a little more color on the momentum you're experienced in the international markets during the first quarter? And then maybe give some insight as to what some of the drivers are on that front? And then, if there's any particular markets you'd like to highlight, and could you kind of deploy whatever playbook is working there to other cities?
Shane Torchiana
Sure. Yes. So on the international side, I'll include Canada and international. We continue to expand in the Greater Toronto Area. That's been a strong area of expansion for us. And that Canadian business has been EBITDA positive business for a couple of years now. So taking the learnings from that business into other parts of North America is something that we're quite focused on right now. And you can see that somewhat in the operating model we're in some larger cities. We do see efficiencies from doing more of the work ourselves, particularly on the repair and the vehicle rebalancing side.
Thinking abroad to Australia, New Zealand and to Europe, there have been many new permit winds over the course of Q1, a dozen plus, I think I mentioned Perth and many other smaller cities in Europe. There's also one large city that we have won in Europe recently as well, which we can't yet name, but the regulatory fronts in Europe in the markets that we've chosen to focus on, remind we exited large parts of northern Europe last year. But the areas that we're still focused in frankly have been quite healthy and are continuing to grow. And we don't see that trend reversing at all in Europe. There seems to be very healthy demand.
And then the other catalyst, which we think is likely to occur in 2023, given the changes in the macro environment and also in the funding environment is the European market from a competitive landscape perspective, still continues to appear to be two to three years behind the United States where in the U.S. and one other player have a fairly dominant share. Europe is still quite fragmented. And it appears that those leading four or five players are likely to consolidate down to a lower number in the year of 2023. And we see that as a massive potential tailwind for us as we look at.
Wyatt Swanson
Great. Thank you for the color.
Shane Torchiana
Thanks.
Operator
Thank you. Thank you. Our next question is from the line of Eric Sheridan with Goldman Sachs. Please proceed.
Eric Sheridan
Thanks so much for taking the questions. Maybe two, if I can. I'm following up on that last answer. I'm curious about a different partnerships or distribution models or promotion models, you might be exploring to stimulate growth. We've seen a lot of cross platform partnerships broadly in the industry. And I'm just curious how that might amplify growth at pretty constructive unit economics, not only just in 2023 but beyond. And then in terms of the efficiency program, can you help us better understand, how much of the efficiency program will be complete from an optimization standpoint by the end of 2023? Or do you foresee this being an effort that continues more broadly towards pulling costs out of the business beyond just 2023? Thanks so much.
Shane Torchiana
Yes. And just to clarify, when you're talking about efficiency, are you talking -- it sounds like you're talking about on the cost side as opposed to the vehicle utilization side. Is that correct?
Eric Sheridan
Yes. The efficiency side would be on the cost side. Thanks.
Shane Torchiana
Okay. I'll take the first part of the question and Michael will take the second. So on the partnership side, we continue, especially in Europe, but a little bit in the United States, we continue to invest heavily in city partnerships, particularly with mass transit app integrations. So where you have a local app, and France, or Switzerland to use the train system. I think having our vehicles on that app does seem to be a material demand driver. It's also something that helps deepen our moat in terms of the city relationship itself, because once you're in that app, they generally don't want to take you out. So that's something we're going to continue to do, and have been doing for some time.
We do have a couple of interesting partnerships with Google that we're doing as well. So you can access our vehicle through Google Maps. That's a bit of a demand generator for us. We expect that continue -- to continue to be a demand generator. And also on the parking side, we're working with Google to create what we call automated docks or automated parking corrals, where you can essentially use the Google mapping technology to get very precise parking locations. When it comes to our city technology that's one of the most important features that we offer to help us differentiate versus others. Because top of mind for city regulators and city administrators is making sure that we're parking in an orderly way and not causing clutter. So that will continue to be an area of investment for us. So just a couple of examples. There are many others. But I think that's an exciting area that will continue to develop.
Michael Washinushi
Yes. And, Eric, thank you for the question. I think I'll comment by saying cost optimization and cost efficiencies never stopped. It's going to be 2023 and 2024. But I think the larger ones that we enacted in Q4 and Q1 really helped us get to or helping us get to the approximate $100 million of OpEx target, we're targeting for the year. And that the balance of the year, there are some cost optimizations that we're going to put in play. They're just not as big and take a little bit longer time. And you're going to see that over the course of the following quarters. And in 2024, we're challenging ourselves to see how we can find more cost optimization and making sure that we optimize revenue at the same time.
Operator
Thank you. Our last question is coming from the line of Doug [Indiscernible] from Capital One. Please proceed with your questions.
Unidentified Analyst
Thank you. I want to gauge the need in outlook for incremental financing. In the past, you've mentioned expectation arrays and incremental $10 million beyond the 33 announced in March.
Michael Washinushi
Yes. I think let's just look separate need for nice to have. I mean, the great to have the incremental capital that we can actually deploy towards driving additional or accelerating additional growth into the markets. The need, I mean, we're tracking to our forecasts and so assuming we hit our free cash flow targets, and EBITDA the need is less than, I guess, a desire to have that incremental capital.
Unidentified Analyst
That make sense. Now, we're about halfway through the second quarter. You mentioned some unseasonably cold weather into the spring. How much visibility do you have into say being free cash flow neutral in the second quarter? Maybe put differently, if we had seasonally normal demand the rest of the quarter, would you anticipate being free cash flow neutral, positive, negative?
Michael Washinushi
I think we got to be careful in terms of providing some guidance in terms of where I think I'm going to be in for the quarter. We do have, obviously clear visibility in terms of what our rides have been up to midway through the quarter and a forecast for the balance of the quarter. And we're tracking that very carefully.
Shane Torchiana
Just to add. Its Shane. I mean, we are reaffirming guidance to be free cash flow generative this year than Q2 of course is going to be a contributor to that. And I do just want to clarify. We did have interest in additional financing, we may still pull the trigger on that one. But that was interest as opposed to a requirement for free cash flow generative, we don't actually need more cash to continue to operate through the year.
Unidentified Analyst
Right. That's why I wanted to confirm. Maybe last one here. You mentioned that the 25% increase, I guess, more than 25% increase in revenue per vehicle day where the new vehicle placement technology has been implemented. Just what percent of the markets has that been introduced? It seems pretty compelling.
Michael Washinushi
Yes. So at the end of the quarter, and we ramped up through the quarter, but by the end of the quarter, it was about 50%, might have been just over 50%, actually. And we expect in a pretty linear fashion to get that up close to 100% by the end of the year as I mentioned. And that was just Version one, of course, there's going to be a Version two and Version three with further intelligence built into the drop engine. But it is pretty exciting. That's what we had modeled out and expected to happen. And it seems to be happening roughly as we thought it would.
Unidentified Analyst
Great. Thank you very much.
Michael Washinushi
Thanks.
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.
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Bird Global, Inc. (BRDS) Q1 2023 Earnings Call Transcript