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spk02: Good afternoon, and welcome to the Bridger Aerospace third quarter 2023 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note, this event is being recorded. I would now like to turn the conference over to Eric Jarrett, CFO. Please go ahead.
spk01: Good afternoon, and thank you for joining us today. Joining me on the call this afternoon is Chief Executive Officer, Founder, and Director, Tim Sheehy. Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Since forward-looking statements are based on various assumptions, risks, and uncertainties, actual results may differ materially from those expressed or implied by such statements. Factors that could cause results to differ materially from those expressed include but are not limited to those discussed in the company's filings with the Securities and Exchange Commission, including expectations regarding financial results for 2023 and 2024. Management cannot control or predict many factors that ultimately impact future results. Listeners should not place undue reliance on forward-looking statements, which reflect management's views only as of today. We anticipate that subsequent events and developments will cause our assessments to change. However, we undertake no obligation to revise or update any forward-looking statement or to make any other forward-looking statement. Throughout this afternoon's earnings release and our call-in presentation today, we refer to non-GAAP financial measures, adjusted EBITDA, The definition, calculation, and reconciliation to the financial statements of adjusted EBITDA can be found in Exhibit A of our earnings release, which is available on our website. We believe adjusted EBITDA is useful in evaluating our reported results as a supplement to and not a substitute for reported results under GAAP. With that, I'd like to turn the call over to Tim.
spk03: Thank you, Eric. Good afternoon. Thank you for joining today's call to discuss our third quarter results and recent progress, including contract wins, fleet acquisition plans, and the expansion of our aerial firefighting services to new mission-critical areas and geographies. For our third quarter update, the earnings potential of our scooper fleet was on full display. In the third quarter, we experienced the highest level of utilization in the company's history. This drove our record results, including record quarterly revenue of over $50 million and record adjusted EBITDA of nearly $39 million. It was also a record quarter in terms of our territories covered as we flew from east to west coast of Canada and all the way down to Louisiana. This is a testament to the rapid adoption of our initial attack platform enabled by the SuperScooper's superior initial attack capabilities and our industry-leading surveillance technology. With one of the nation's largest aerial firefighting fleets and our longstanding customer relationships with federal and state agencies, we continue to be a beneficiary of the trend for government outsourcing of aerial firefighting services. This quarter, we were awarded a 10-year air attack contract for up to $166 million from the U.S. Forest Service to provide various fixed-wing missions for aerial supervision, incident awareness, fire detection, and reconnaissance. This contract is separate from the previously disclosed contract for the U.S. Department of Interior awarded in July 2023, which included two five-year exclusive use contracts worth up to $24 million each and one culminated contract worth up to $20 million for high-resolution surveillance and intelligence operations using a specialized air attack asset. The award was based in part on the architecture of Bridger's proprietary data platform. As a small business with leading-edge sensor and mapping capabilities and historic contract performance, we are well positioned to support our federal and state and international alliance in the growing battle against wildfires. Speaking of our fire intelligence assets, in September, we completed the acquisition of Ignis Technologies to expand our wildland fire software offerings. We issued $3 million in restricted stock at the close, and there will be additional contingent earn-out consideration of up to $9 million, also to be paid in restricted shares. IGNIS delivers mission-critical intelligence and technology solutions and maximizes the value of our investments in fire intelligence SaaS assets. Through collaborative development with federal, state, and local fire organizations, IGNIS is developing a pioneering mobile and web platform that elevates firefighter situational awareness, creates an interoperable common operating picture across firefighting units, and produces real-time high-value data in conjunction with our proprietary fire track software. It presents the clearest path to executing on our shared mission to equip firefighters with the critical technology they need to reduce the number of lives, properties, and natural habitats lost to wildfire. We also continue to pursue opportunities to further expand our fleet, both in the U.S. and abroad. As we announced in September, we successfully bid via public tender process to purchase four Canadair CL-215T amphibious aircraft from the Spanish ministry. We are working to complete the acquisition process, and we'll have an update soon. While we remain on good terms with Bighorn Airways, we have mutually agreed to terminate the existing purchase and sale agreement, which was announced in July. We remain hopeful that there will be opportunities to re-engage in the future. While the wildfire season will always remain unpredictable, we see continued demand for our services and look forward to supporting the needs of our customers. We are also receiving an unprecedented influx of requests from multiple foreign governments for wildfire suppression services. This is due both to the global demand for super scoopers, fed by the limited supply of functional super scoopers, and the heightened awareness of the effectiveness of these purpose-built aircraft. We're just taking steps to strategically position its assets to serve these needs and to match multi-continent weather exposure to diversify Bridger's customer base and facilitate year-round firefighting operations. I'll now turn the call back over to Eric, who I'll tell you about our financial performance in the third quarter.
spk01: Thanks, Tim. Revenue for the third quarter of 2023 was $53.6 million, compared to $32.4 million in the third quarter of 2022, up 65%. The increase was the result of record utilization of the company's growing scooper fleet despite a slower than average North American wildfire season. Cost of revenues was $15.2 million in the third quarter of 2023 and was comprised of flight operation expenses of $9.7 million and maintenance expenses of $5.5 million. This compares the cost of revenues of $12.6 million in the third quarter of 2022 which included $7.1 million of flight operations expenses and $5.5 million of maintenance expenses. The increase primarily relates to higher depreciation, maintenance, and other expenses related to the two additional Super Scooper aircraft that were placed into service in September 2022 and February 2023, respectively. Selling general and administrative expenses were $15.8 million in the third quarter of 2023, compared to $18.1 million in the third quarter last year. The decrease was primarily due to transaction-related bonuses for employees and executives and higher offering costs recorded in the third quarter of 2022. These decreases were partially offset by higher non-cash stock-based compensation expense in the third quarter of 2023 compared to the third quarter of 2022. Interest expense for the third quarter of 2023 decreased to $6 million down from $7 million in the third quarter of 2022, primarily due to lower interest expense for the Series A preferred stock year over year. The decrease was partially offset by additional interest expense for the Gallatin Municipal Bond that closed in the third quarter of 2022. The company also reported other income of $.6 million for the third quarter of 2023, primarily comprised of interest income for the embedded derivative of our preferred equity of $.4 million. For the third quarter of 2023, net income was $17.5 million compared to a net loss of $5.7 million in the third quarter of 2022, driven by strong fleet utilization in the third quarter this year. Adjusted EBITDA was $38.7 million compared to $19.1 million in the third quarter of 2022. Adjusted EBITDA excludes income tax benefits, interest expense, depreciation and amortization, stock-based compensation, gains and losses on disposal of assets, offering costs related to financing another transaction, business development integration expenses, as well as loss on extinguishing of debt and one-time discretionary bonuses to employees and executives. Looking at our results for the first nine months of 2023, revenue was $65.6 million compared to $45.3 million in the first nine months of 2022. Cost of revenues was $33 million compared to $28.6 million in the first nine months last year. SG&A expenses were $64.2 million compared to $28.6 million in the first nine months of 2022, with the increase being driven primarily by non-cash stock-based compensation expense this year. Interest expense for the first nine months increased to $17.2 million from $13 million in the first nine months of 2022. Bridger also reported other income of $2.3 million for the first nine months of 23 compared to 0.2 million of other expenses for the first nine months of 2022. Net loss was $46.2 million in the first nine months of 2023 compared to $25.1 million in the first nine months of 2022 with adjusted EBITDA at $29 million for the first nine months this year compared to $12.2 million in the same period last year. Turning to our balance sheet, we ended the third quarter with cash, restricted cash, and short-term investment of $33.9 million, up from $25.7 million at June 30th, 2023, driven by seasonality and the strong third quarter performance. While the company's saw record results in the third quarter after the late start to the wildfire season, the last two weeks of September brought cooler, wet weather to the U.S. and Canada. With limited wildfire activity in the first part of our seasonally slower fourth quarter, we now expect the shortest North American fire season in the past 10 years. As a result, we are reducing our previous annual 2023 revenue guidance of $84 to $96 million to a range of $66 to $68 million. Given the company's largely fixed cost structure, Bridger typically generates negative EBITDA on the fourth quarter. In response to the shorter 2023 wildfire season and reduced revenue, we've identified reductions to our cost structure, which will benefit the fourth quarter as well as the full year of 2024. Even with these cost reductions, the company expects to report negative EBITDA of $10 million to $11 million in the fourth quarter of 2023, which brings full-year 2023 adjusted EBITDA to a range of $18 million to $19 million. This compares to our prior estimate of $37 million to $45 million. These current estimates assume wildfire conditions will remain unchanged for the remainder of the fourth quarter and additional aircraft will not be deployed. Looking at Bridger standalone operations for the full year 2024, which excludes the impact of any acquisitions and accounts for the estimated $16 million of annual reduction to the company's cost structure, 2024 adjusted EBITDA is anticipated to range from $35 million to $51 million, a gain of at least 84%, on revenue of $70 million to $86 million. The low end of this guidance range is consistent with the unusually short 2023 fire season, with the high end being consistent with a longer, more normal fire season. With that, I'd like to turn the call back to Tim for final comments.
spk03: Thank you, Eric, and thank you to everyone for joining us on today's call and for your support. Well, this year has been full of challenges thus far with a profitable business model, strong fundamentals, strict cost controls, and a growing number of opportunities to expand our fleet. We are well-positioned to see significant growth and drive shareholder returns while supporting our federal, state, and international clients in the growing battle against wildfires. We look forward to updating you on our progress. We'll also be attending the Wolf Research First Annual Small and Mid-Cap Conference, which is scheduled for December 6th and 7th in New York, and hope to see some of you there. Thank you.
spk02: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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