Bird Global, Inc.

Hello, and welcome to the Bird Global first quarter 2022 earnings call. All participants will be in the synonym mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, you may press star, then two. Please note, today's event is being recorded. I would now like to turn the conference over to Caitlin Churchill, Investor Relations. Please go ahead.

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 U.S. federal securities law, 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, our 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 Vander Zanden.

Thank you, everyone, for joining us today. In Q1, revenue grew by 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 eased, weather improved, and consumers turned 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.

Thanks, Travis. For the quarter, we reported revenue of $38 million, up 48% against Q1 2021, and driven by a 66% year-over-year increase in rides. With respect to profitability, first quarter gross margin, which is net of 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-occurring, 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 seasonal 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 deposits 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 upcycle, we expect our cash position to stabilize, particularly as we begin to realize the benefits of cost savings initiatives 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 U.S. 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 repayment 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 our 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 the slowing of expansion of our SIP product sales portfolio offering. We now expect revenues to be in the $275 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 continued 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 and 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.

Thank you, Yibo. Key to our success over the past five years has been our ability to continue to evolve and adapt our operations even amidst a dynamic macro environment in order to best serve and address the significant market opportunity for micromobility 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-sized 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 paths 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 U.S. 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 unfinanced capital spend in the latter half of 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 Ibo outlined. I remain confident in the opportunity we continue to see ahead for Byrd. 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, 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?

Yes, thank you. As mentioned, at this time, we will begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble the roster. And the first question comes from Tom White with DA Davidson.

Good evening, guys. Thanks for taking my questions. A 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, you know, product sales versus revenue? 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.

Hi, Tom. So on the bridge to the previous guide, between now and the previous guide, the delta is primarily attributable to our slowing of the product sales expansion. Our outlook on the sharing business hasn't materially changed, save 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 view, though, on 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 of that product sales portfolio, as I mentioned earlier.

Okay, thanks. And then just on just kind of how should we think about overall utilization? And then I and then I had a follow up on the competitive environment. Just 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 by their sort of near-term and the impact on the business, or maybe just like longer-term, the structure of how the industry evolves.

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

And on the utilization piece, Tom, that's generally performed against expectation through April here. Okay, thank you. And top line through April.

Thank you. And the next question comes from Stephen Fox with Fox Advisors.

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 it 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 how should we think about that in coming quarters? And then I had a follow-up.

Yeah, for global expansion, we plan to continue our focus on the U.S. and Europe regions. We expect to look at the entire market portfolio there, 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 U.S. and Europe regions. Within those markets, You know, we'll obviously look to make sure, you know, 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, you know, 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 U.S. and Europe regions for the rest of the year.

That's helpful. And then in terms of thinking about cash flows versus EBITDA, if you've pretty much pulled forward all the capex for vehicles between now and next year, how quickly would we expect cash flows to turn positive if the EBITDA is positive next year? Thanks.

Yeah. As you mentioned, we have pulled up a significant amount of our CapEx. Through the last two quarters, we saw a pretty significant outflow of the 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 the standby equity purchase agreement of up to $100 million we mentioned earlier, we do feel confident in the path ahead. We're not giving specific guidance on free cash flows at this point, but we'll be back on that.

Thanks, that's very helpful.

Thank you. And next question comes from Eric Sheridan with Goldman Sachs.

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. The first question would be, you know, can you help us better understand what you're analyzing to think about what's a structural market you might want to exit and 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 longer term, just so we can better understand a little bit of the 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 mix dynamic you're trying to solve for on the EBITDA side over the medium to long term. Thanks so much.

Yeah, on the market mix, as we mentioned, we'll be focused primarily on U.S. and Europe, looking for only the profitable cities. Near-term cash generation is 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, you know, like I said, the vast majority of our markets are profitable. I would say the ones that aren't tend to be some of the bigger cities that, you know, a handful of the bigger cities that have pretty onerous regulations in place. And so we'll certainly be looking at the regulatory framework in these cities and what that means for future profitability, near-term and future profitability.

Yeah, 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.

Okay, thank you. And the next question comes from Richard Torres with Capital One.

Thanks. Good afternoon, everyone. Ibo, in your opening comments, you had mentioned the kind of the move or the continued transition to bringing in newer vehicles into the fleet. You know, say by third quarter of this year or toward the end of this year, you know, what percentage of total vehicles could the newer vehicles, say the Bird 3s, represent of the total fleet?

Yeah, as of this moment, about half the vehicles in our fleet are Bird 3s. And for the balance of the year, we expect roughly 60% to 70% of our fleet to be Bird 3s.

Okay, that's helpful. Thank you. And, you know, going back to kind of the strategy going forward of just de-emphasizing product sales, maybe update your view on, you know, bike sales, etc. It seemed like it was pretty positive toward the end of last year. Maybe demand was even outstripping supply, given the logistics issues. What's changed there? Is it a supply chain driven deal or is there more to it?

Last year, as you know, product sales was 9% of revenue, so there's a new business line for us and, and, you know, we still think there's opportunity and that market is growing fast, but given the macro backdrop, you know, it felt important to really focus the business on, on the core, 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, given the macro environment.

Okay. That's, that's good. That's all for me. Thanks.

Thank you. And that concludes both the question and answer session as well as the call itself. Thank you so much for attending today's presentation. We now disconnect your lines.