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spk02: Hello, and welcome to the BIRG Global second quarter 2022 earnings call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Karen Tan. Please go ahead.
spk00: Good afternoon, everyone, and welcome to BIRD's second 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 to be 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 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 factors section of our form 10-K for the year ended December 31st, 2021 filed with the SEC on March 15, 2022. Our Form 10-Q for the quarter ended March 30, 2022 filed with the SEC on May 16, 2022. Our Form 10-Q for the quarter ended June 30, 2022 to be filed with the SEC later today in our other filings with the SEC. This call will also reference non-GAAP measures including adjusted EBITDA, adjusted operating expenses, and ride profit margin 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 call over to Bird CEO and founder, Travis Van Der Zanden.
spk07: Thank you, Karen. And thank you everyone for joining us today for our first half and second quarter earnings conference call. I'll begin with a few highlights on our first half performance, including an update on our path to profitability. And then Shane and Yibo will review our Q2 operational and financial performance in more detail before we open the call up for questions. For the first half of 2022, we delivered record rides in revenues representing increases of 39% and 34% respectively, off of a strong rebound in both metrics in the first half of 2021, while ride profit margin before vehicle depreciation reached 48%, up from 45% a year ago. Over the past two years, we've experienced dramatic shifts in consumer behavior patterns, and despite so, our first half 2022 sharing business revenues have nearly doubled compared to the first half of 2019, representing a compounded annual growth rate of 26%. while sharing gross margin has turned from a loss of 159% to a positive 22%, a significant win for our core business with anticipated upside ahead. Absent temporary distortions caused by the pandemic, these longer-term trends point to the attractive demographic tailwinds for this industry as consumer spending preferences shift from goods to services. That said, we have to contend with an evolving macro environment including significant near-term inflation pressures on discretionary spending and resulting lower consumer sentiment, and adjust our cost structure to be agile to economic headwinds. BIRD was founded and operates today with the mission to bring environmentally friendly transportation to everyone. I truly believe this mission has never been more important. It is what drives our whole organization and keeps us committed to delivering against our long-term goals, including delivering value to our shareholders who similarly believe in our mission and the opportunity. As part of that commitment, earlier in the year, we announced plans to refocus the business on our path to profitability through firstly, prioritizing our core sharing business in North America and EMEA. Secondly, taking a more measured approach to expansion within our sharing business. And finally, aligning our resources and reducing our expenses to match this newly sharpened focus. In the second quarter, We slowed our product sales expansion and made the difficult decision to reduce our workforce and corporate overhead. While these actions are never easy to take, we believe they best position Bird to deliver on its core mission over the long term. Our actions in the second quarter contributed to our target $80 million annualized cost reduction plan and will more meaningfully flow through to our consolidated operating expenses and adjusted EBITDA in the third quarter, as reflected by our guidance. In connection with these activities, we have taken a number of one-time restructuring charges, which Ivo will cover later. In addition, we have remained focused on strengthening our balance sheet and remaining disciplined with our cash position. At the end of the second quarter, we held $105 million on our balance sheet of cash and cash equivalents, including restricted cash and cash equivalents, compared with $70 million at the end of the first quarter. Following our peak operating season this summer, we will conduct a thorough review of our deployed vehicle fleet by city through the lens of profitability, right-sizing our footprint based on where we anticipate positive pricing and profit per ride in fiscal year 2023. Our focus is on optimizing asset utilization, profit per vehicle on a total consolidated basis, paving the path for our first full year of positive adjusted EBITDA as a company. Now let me turn the call over to Shane, who leads our day-to-day operations and has been instrumental in driving our strategy. Shane will review our Q2 sharing business performance in more detail. Shane?
spk04: Thank you, Travis. For the second quarter, we were pleased to deliver year-over-year sharing revenue growth of 28%, especially on the back of 487% growth in the comparable period last year, driven by the U.S. and other countries emerging from COVID-19 lockdowns following the rollout of vaccinations last spring. Average deployed vehicles rose 58% in the quarter relative to a year ago. We received the majority of vehicles delivered in Q2 as expected, without significant delays, and focused on expanding our Bird 3 fleet in our most profitable cities. As the overall fleet mix shifts towards newer vehicles, which are characterized by more ruggedized designs and possess longer useful lives, this leads to, one, operational efficiency upside in our time to repair and charge vehicles, and two, reduces our need for future CapEx as the vehicle life extends. We believe this useful life extension of our new vehicles is also a primary driver in reducing birds supply chain related greenhouse gas impact. As the greater denominator of trips per vehicle reduces the GHG impact per trip when the numerator GHG resulting from vehicle production is by and large held constant. Opening of new cities has been ahead of our expectations with a few major wins. For example, Seattle, Baltimore, Minneapolis, Providence, and dozens more small and mid-sized cities across both North America and EMEA. Beyond these new cities, we have continued to observe increased ridership within our existing cities, with rides growing 29%, approximately in line with the broader category, with average deployed vehicles growing 58%, and competitors significantly increasing supply. Average rides per deployed vehicle per day came down 19% year over year, despite healthy overall growth. and revenue. Our expectation is that this impact is temporary. We see opportunity in the remainder of 2022 and 2023 to recalibrate our deployment strategy to match increased local supply with hyperlocal demand in cities, and for pricing structures to continue to shift to better fit with an increase in commuter use cases. The Thrive profit margin before vehicle depreciation increased to 53% compared to 49% in Q2 last year. This improvement was largely driven by further optimization of fleet manager revenue share on the back of operational efficiencies mentioned previously. Ride profit margin after vehicle appreciation was 28% up from 27% a year ago. Looking ahead, our growth, operating model, and technology outlook lead us to believe that our revenues and margins will continue to expand year on year as the business matures. As vehicle technology continues to improve, the useful life of the vehicles increases further, reducing CapEx and per-ride depreciation costs. Improvements to batteries, tracking, and vehicle durability also flow into improved economics at the unit level. These advances, along with improvement in our data analytics on vehicle positioning, will optimize the cost of day-to-day operations, benefiting our revenue share and margin per trip. In the relatively more mature North American region, where we maintain a leading position and generate 76% of our sharing revenues, our city footprint skews toward higher revenue per trip and more regulated cities, resulting in strong, positive gross margins. We see additional opportunities to further consolidate our position and scale in large cities like New York and Los Angeles, as well as continuing to expand into midsize and small cities where the response to our service has been consistently positive. Our profitable North American sharing business balances a broader portfolio that includes earlier, more investment-based cities in EMEA, where we have seen a strong consumer demand, but a broader operating environment that has yet to mature to healthy unit economics. With that said, we do see a marked shift happening in real time. As EMEA cities evolve and adopt regulatory best practices, they tend to favor two to three larger global players with an established and proven track record. We believe our leading operational and technology platform provides us a long-term competitive advantage, which we realize over time as the EMEA or micromobility landscape matures in the coming years. Given the ongoing market and economic volatility, we will continue to assess our operating footprint, cost structure, and pricing model to make sure we're adapting quickly to prioritize total co-profitability. With that, I will now turn the call over to Ibo to review our financial performance and outlook in more detail.
spk05: Thanks, Shane. I want to start by noting that the second quarter was nuanced, with several large line items not core to our sharing business, but material and aggregate impacting our consolidated statement of operations. During the quarter, we recorded $248 million of non-cash, non-core, and non-recurring income statement adjustments, which include, one, $136 million of impairments and write-offs driven by the impact of the macro environment on the fair market value of long-lived assets, as well as our shift in focus away from product sales, and two, $112 million of goodwill impairment. The adjustments were made with an eye toward keeping these one-time items behind us. We believe for this quarter that the sharing gross margin, which is not impacted by these adjustments, as well as adjusted EBITDA, which adjusts for these non-cash, non-core, and non-recurring items, reflect the health of the go-forward business. With that said, in turning our attention back to our second quarter financial results, for the quarter, we reported revenue of $77 million, up 28% against Q2 2021, and driven by a 29% year-over-year increase in rides. Previously mentioned, Second quarter ride profit margin before vehicle depreciation of our sharing business was 53% compared to 49% a year ago, driven by further progress in fleet manager rev share. Gross margin, which came in at negative 17% against positive 26% in the year-ago period, was impacted by a one-time $32 million impairment charged to product sales. Putting aside the one-time charge and double-clicking on just the core sharing business, Gross margin as a percentage of revenue was 27% compared to 28% in Q2 2021, due primarily to outsized accelerated depreciation in the quarter. Adjusted operating expenses, which excludes $44 million of stock-based compensation expense, $112 million of goodwill impairment, $104 million of impairment-related charges, and certain other non-cash, non-recurring, or non-core expenses, increased 43% year-over-year, reflecting higher expenses related to an expanded operating footprint, as well as operating as a public company, in addition to $4 million of that debt expense. All in all, adjusted EBITDA loss was $19 million compared to a loss of $12 million in the prior year period. Please see today's press release for our reconciliation of GAAP to non-GAAP metrics. The end of the period with total cash, cash equivalents, and restricted cash and cash equivalents of $105 million. The increase of $35 million since the end of Q1. Additionally, as of June 30th, 2022, we have $24 million of undrawn capacity under our vehicle financing facility with Apollo to execute against our CapEx needs in the US and EMEA, and up to $100 million of equity financing available through our standby equity purchase agreement, which we would use only as judiciously as market conditions want. Highlighted last quarter, Q4 of 2021 and Q1 of 2022 saw significant investment in vehicle CapEx of approximately $160 million for vehicle deliveries over the next several years as part of our long-term supply chain management strategy in the face of global logistics and supply chain interruptions. As we had meaningfully pulled forward CapEx associated with the majority of our 2022 CapEx deployment needs, particularly ahead of our peak summer season, our vehicle CapEx in Q2 was $18 million. Now, Turning to our outlook, based on our Q2 results and our second half projections, we are reiterating our full year 2022 revenue guidance of $275 to $325 million. And while we still have big weeks ahead of us within peak season, if trends were to remain consistent with Q2, we would more likely fall into the lower end of that range. We continue to expect core share and gross profit margins to trend into the 20s for the full year, including the expectation for trends to meaningfully increase for the balance of the year owing to our renewed focus on our core sharing business, optimizing asset utilization and profit per vehicle, the ongoing expansion of our fleet manager operating model, and the mixed shift benefit from increased utilization of our newer Bird 3 vehicles. We're on track to achieve our first quarter of positive adjusted EBITDA in Q3 2022 in line with prior guidance, as the majority of our $80 million of annualized cost savings for 2022 will be realized in the third quarter. Most of that cost savings will come as a result of reducing expenses associated with our product sales business and reducing our corporate overhead. Looking ahead to fiscal year 2023, we are targeting our first full year of positive adjusted EBITDA, driven by our Path to Profitability initiatives. We expect our adjusted operating expense run rate of no more than $160 million to support growth of our core sharing business in cities across North America and the Maya. With that, I'll turn it over to the operator for any questions from the audience.
spk02: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. Our first question is coming from Tom White from D.A. Davidson. Your line is now live.
spk06: Great. Thanks. Good afternoon, everyone. Thanks for taking my questions. Two, if I could. Maybe first for Ibo. Ibo, given the utilization trends that you guys saw in the quarter and kind of year to date, can you talk a little bit more about your expectations for the third quarter and the second half as it relates to revenue? I'm just trying to kind of understand the different puts and takes that kind of lead to the revenue range for the full year. And then just secondly for Travis, you know, obviously there's chatter and data about inflation putting pressure on consumer spending over the last few months. Can you talk a little bit about maybe what you're seeing with regards to kind of your core demographic? Are you seeing any impact or not? Thanks.
spk05: Hey, Tom. This is Ebo here. So to your question on the utilization trend and the back half of the year, we aren't formally providing Q3 guidance. And as we mentioned, we still do have big weeks ahead of us. But a few points I'd note. The first is on the sharing side, we will have roughly the same deployed fleet in Q3 as in Q2. And so we have the same fundamental supply demand dynamics at play for the balance of 2022. Related to that, point number two, though, is that the third quarter has traditionally been a slightly more significant quarter. than in Q2 in terms of pure revenue contribution. It just tends to be our strongest quarter of the year. You can see that in years past. Now, point three is putting the sharing piece aside on the product sales that we have largely restructured the business in the first half, but have significant inventory remaining that we do expect to sell. So there's going to be some upside there. All in all, we remain comfortable with our previously guided revenue range of $275 to $325 million on top line. We do also, for the third quarter, expect meaningful benefit from restructuring initiatives that we previously announced to flow through to both op-ex and margins. And so, hence, we remain comfortable with the Q3 adjusted EBITDA outlook as well.
spk07: And, yeah, happy to take the inflation question. At this point, we aren't seeing any data points linking our core consumer demand to broader inflationary pressures. The near-term issues in utilization in Q2 were driven primarily by micro street and block level supply and demand imbalances. With that said, we're obviously carefully monitoring the rapidly evolving macro environment, including significant near-term inflation pressures, in particular on discretionary spending. And so we'll be monitoring that closely, but at this point, no direct data points linking to any issues with inflation pressures.
spk06: Okay, guys, thank you very much
spk02: Thank you. Next question today is coming from Stephen Fox from Fox Advisors. Your line is now live.
spk03: Thanks. Good afternoon. A couple questions from me, if I could. First of all, on the decline in the rides per day, I guess it sounds like part of it is a supply-demand issue that you just mentioned, Travis. So I was wondering if you could dig into that a little bit more in terms of how you're handling it. And then secondly, I was curious if any of it was an impact from the timing of when you put vehicles, enabled vehicles on your network. There was a big jump up in vehicles during the quarter. And then I had a follow-up.
spk07: Yeah, so maybe I'll have Shane go a little deeper on some of the utilization and supply-demand balancing throughout the cities that we operate in globally.
spk04: Yeah, thanks, Travis. Happy to jump in. I suppose a way to answer that is where we see opportunities. So the opportunities we see, I guess, come in sort of four different varieties and somewhat of a descending order. So one is on pricing level and structure pricing, particularly as we see the commuter use case expand in cities both in the U.S. and in Maya as folks are going back to work and moving around more. redeployment between cities and regions. We see some pockets, US in particular, as being very strong. Some pockets of Europe as being stronger than others as well. So there's opportunity to redeploy. Number three is working with regulators across markets to evolve toward what we think of sort of a Goldilocks level of regulations, which I think some cities have already achieved and others are seeking to emulate. So not too much, not too little. And then number four, which also is very important, so last but perhaps not least, supporting our fleet management partners in optimizing their hyper-local deployment of vehicles. So not just which city or which market, but the very local street-level, corner-level distribution of where those vehicles go, which we've learned as we've increased supply is a massive driver of rider retention as well as per-day utilization per vehicle.
spk03: And before you answer the second part of that question, point number four, how exactly are you supporting the fleet managers on a block-by-block basis? What does that entail?
spk04: Yeah, so as you might imagine, we have a data-driven answer to this. So a suggestion as to where the next best drop would be, obviously the fleet manager partners have their own discretion as to what they can do, but We try to support them with the best recommendation as to where to put their next vehicle, where to rebalance a vehicle, and when to pick it up. And there's quite a bit of, I would say, sophisticated thinking behind that, both in terms of where the demand is and also how long it takes to fulfill that demand. And it takes a couple or even a few months to train that model as supply increases in a market.
spk03: Okay, understood. And then in terms of just the timing of the fleet coming onto the network last quarter? I don't think that was a material driver. Okay. And then just in terms of looking out to 2023, I guess after you take the cost out, which it sounds like you're well on your way to doing, you mentioned in your prepared remarks a review of pricing and profitability on a vehicle basis and regional basis. So can you give us a sense for how much more sort of adjustments, you know, you think you have to make on a city-by-city basis to sort of optimize the network for, you know, the different supply-demand dynamics you're seeing, you know, in order to be sustainably profitable. Thank you.
spk05: Maybe I'll take the first one.
spk04: Go for it. Go ahead. Yeah, so starting on this one, As we think about our footprint and optimizing that footprint, as I alluded to, there is this, other than focusing in on the core sharing business itself, there is this opportunity to reallocate within sort of mega regions or broader regions. Don't want to get into a specific market by market analysis, but we would say that there is a significant distribution between our most profitable and least profitable markets. And I think as we come out of the high season here in the summer, we do see opportunity to reallocate supply away from sort of the bottom quartile or quintile markets toward the top quartile or quintile markets. So I think that's going to be a meaningful lever for us heading into the fall and certainly a lever for next year. Ivo, maybe I'll let you talk about what that means for forward-looking guidance or thinking.
spk05: Yeah. As Shane said, what we're really talking about is pruning the tree while the tree continues to grow. And so we'll just have to be choosier on near-term free cash flow generation in terms of both the markets that we operate in as well as more of the even local balancing within markets. But as we look forward to 23, we are still very much targeting positive adjusted EBITDA. I think really a big piece of that, maybe the largest part of that story, comes from just maintaining cost discipline. We do expect our restructuring initiatives, including what we just talked about here within cities, to bear fruit in 23 and meaningfully reduce our office cost structure to no more than $160 million of run rate for the year. We can, of course, reduce costs further if needed to meet our adjusted EBITDA commitment Now, based on a rough 50% cash variable margin, so if you just look at our ride profit before depreciation number, what that tells you is you would only need very modest growth in top line to clear EBITDA break-even. And so with respect to the pruning approach, that's how we're going to be thinking about the broader targets.
spk02: Great. That's all very helpful. Thank you very much. Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from Eric Chardon from Goldman Sachs. Your line is now live.
spk01: Thanks so much for taking the question. Maybe following up on the last question, can we talk a little bit in 23 and beyond around elements of the profit gap closing as a result of either good markets continuing to sort of scale? Are there any markets you're still examining where you worry about some of the structural components of the markets longer term closing? producing sort of consolidated level profitability so what I understand a little bit about the structural gap between some of your best markets and maybe some of your tier two or tier three markets from a long-term profitability standpoint how some of those gaps close over the medium to long term. And then against the dynamic you're calling out on the OPEX moving out of 22 and into 23, can you highlight for us some of the investments you're still making on the growth side within there and how should we think about the variability of the exit rate of your cost base at the end of 22 and how you could, if need be, continue to take that down over time? Thanks so much.
spk05: Sure. Hey, Eric. On 23 and beyond, I think there's a few ways to think about it. At the city level, as you can imagine, there's pretty wide dispersion between cities. And so over the course of the coming months and quarters, what we've stated already, which is to really take a higher bar than your term for cash flow generation for those cities, that's going to be very much the lens through which we think about things. the dispersion is quite meaningful across markets. So we think that's certainly a part of the answer is making sure we prune the tree carefully. That's one lens, though, is just the market aspect of it. There's also two other lenses I would offer. The first is just the vehicles themselves, of course. And we have the majority of our vehicle fleet mix is now the Bird 3s, and we have more coming online. So the newest vehicles generally are provide lower depreciation since they're better in every single way, including the life of those vehicles. So that's one continued upside that we see through the end of this year and through 23 as well. The other piece is as we think about really optimizing pricing and optimizing some of our operations, the fleet manager revenue share, you've seen that come up. Well, what we've seen is ride profit before depreciation come up from 49% to 53% year over year. What's above that is going to be predominantly what goes to the fleet manager. So we see that piece continue to improve as well as we move forward and continue to optimize our operations. On the OpEx side, I think, with respect to the dispersion coming out of 23, we feel at this point very comfortable. that we can keep our OpEx at 160 million or no more than 160 million in 23 and continue to then meet those objectives I mentioned with respect to the bottom line. The specific actions I've mentioned, but we feel very good about the adjusted EBITDA target that falls out of that. Shane, is there anything else that you'd offer on those fronts?
spk04: I'll leave it there unless there are follow-up questions.
spk01: Great, thanks.
spk02: Thank you. We've reached the end of our question and answer session, and that also concludes today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
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