Bird Global, Inc.

Greetings. Welcome to the Byrd Global fourth quarter and full year 2022 earnings call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Karen Tan, Director of Investor Relations. Thank you, Ms. Tan. You may now begin. Ms. Tan, you may now begin.

Good morning, everyone, and welcome to BIRD's fourth quarter and full year 2022 earnings conference call. On this call is Shane Tortiana, BIRD's CEO, and Michael Washington, 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 should 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 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 factor 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 expenses, 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.co. 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 Tortellana.

Thank you, Karen, and thank you all for joining us today for our fourth quarter and full fiscal year 2022 earnings conference call. We reported a record $245 million in total revenues in fiscal 2022, with $231 million in sharing revenues, representing 34% growth year over year, along with a 28% sharing gross margin and 55% ride profit margin before vehicle depreciation. Riders continue to adopt micromobility and look to our vehicles as an attractive mode of eco-friendly transportation across the hundreds of cities that we serve around the world. Over the last six months, we've been laser-focused on becoming a self-sustaining company that generates profits and cash flow, all while maintaining our longstanding focus on our mission to provide clean, equitable transportation alternatives for the consumers, communities, and cities we serve. To recap the substantial progress we made in 2022, First, we sharpened our geographic and product focus on our highest yielding cities and business lines and exited lower margin markets and products. Second, we initiated cost optimization efforts that we expect will result in an approximately 60% reduction in operating expenses to no more than $100 million in fiscal 2023 versus our second quarter 2022 run rate. Third, we enhanced our executive and board leadership. adding members of the track record of success in our industry to support our strategic focus on shared micro-mobility. These three actions underpin our progress toward generating significant adjusted EBITDA in 2023, including our expectation to be free cash flow positive in the range of $5 to $10 million on adjusted EBITDA of between $15 to $20 million for the full fiscal year. We had to make several tough decisions along the way, but we are now better positioned to deliver on our profitability goals in longer term our eco-friendly mission. Additionally, we closed 2022 with the successful completion of our acquisition of Bird Canada's micromobility operations, which further consolidated our market leadership in North America with new profitable Canadian markets and added proven senior management to our leadership bench. Bird Canada offers an excellent template on how to grow successfully while generating positive cash flow and profits. With this acquisition, Stuart Lyons, who has an extensive business background and grew Bird Canada into our most successful and profitable platform business, will work closely with me as president of Bird Global, leading our North American operations and city partnerships. Michael Washinushi also joins our executive team with over 17 years of experience in the CFO seat and will leverage his extensive financial experience to focus on cost optimization and cash management. The Bird Canada transaction also provided Bird with over $30 million of cash investment by experienced investors in the transportation industry who support our profitability roadmap and are aligned with our sustainability mission. As we move into 2023, we are laser focused on three major areas. First and foremost is to align cost structure with inflows. We cannot emphasize enough that our top priority is to be free cash flow positive and ultimately self-funding. This is a twofold process we are committed to. First, our operating expenses must not exceed the cash margin our sharing business generates. Second, we must be efficient and disciplined with our overall cost structure to support our core sharing operations. Drive profit margin before vehicle depreciation, which is a proxy for city level cash margin, reached 55% for the fiscal year 2022. Through fiscal 22, we continue to aggressively reduce our central cost structure with savings from exiting our lowest performing cities in EMEA and North America, discontinuing our product sales portfolio offering, and reducing unnecessary central overhead costs. While many of these changes did not yet have a major impact on the Q4 numbers, we expect these efforts will drive significant improvements in our financial condition in 2023. Excluding nearly $9 million of operating expenses, we do not expect to repeat in the first quarter. We ended the fourth quarter with an annualized operating expense of $134 million and expect our cost optimization initiatives will continue to flow through our financial performance as we progress in fiscal 2023. As a result of actions already taken related to our focus on fiscal responsibility, we are planning for an annual operating expense of $100 million or less in 2023. Our second focus area is to improve asset efficiency. Three legs of our asset efficiency stool remain Number one, improved supply-demand matching for our new demand-based vehicle drop model. Two, increasing our vehicle deployment rate, the percentage of vehicles that are on the road at any given time. And three, extending the average life of our vehicles. Frankly, our 2022 utilization metrics fell below expectations, and competitive data would suggest that we are positioned to improve them in 2023. We had previously communicated that we had pulled forward vehicle orders for the 2022 operating season, due to pandemic-related elongated supply chain lead times. However, we were not able to support our higher vehicle deployment with an improved level of specificity in the data-driven drop locations last year. That is set to change for the 2023 operating season for our new demand-based vehicle drop model, which was recently rolled out in our largest North American NMA markets. Keep in mind that right now we are in a seasonally slow period in the operating cycle. But where our demand model has been implemented, we have seen a significant improvement in our vehicle utilization rates. Real-world data from these rollouts so far gives us further confidence in our expectation for the drop model to drive our goal of a 10 to 20% increase in utilization, i.e., rides per vehicle per day. We also continue to focus on ways we can capture incremental revenue opportunities by rebalancing our existing vehicle supply on expected demand at a city basis. For fiscal 2023, we're able to repurpose vehicles following city exits and reallocate the newer generation vehicles to support our top performing cities in North America, or we can generate higher revenue per ride and city profits with those same vehicles than in less profitable cities. The third pillar to our roadmap is to be the trusted partner that cities deserve. We are focused on generating cash flow from our existing markets and exiting any lagging markets. At the same time, we continue to deepen our existing partnerships within our profitable cities and selectively expand where we expect to see a clear return on our investment. This approach has been very successful in Canada. Our goal has been to continue to build upon the strong foundation we have with our city partners and gain a deeper understanding of their transportation needs, pain points, and climate goals so that our technology operations and government partnerships teams can be at the forefront of addressing them. a partnership that ultimately aims to better serve our millions of riders across the hundreds of cities around the world that seek convenient clean transportation alternatives in 2022 we experience continued momentum in north america including notable city winds in dallas and the new york boroughs and presence during the world cup in qatar which paves the way for further expansion in that region these winds point to the market potential we have yet to capture both to consolidate our share within existing profitable regions and encounter seasonal markets to our North American business to generate year-round sharing revenues. Let me take a minute to highlight our recent win in Dallas as an example of how BIRD can make an impact on climate and traffic through last mile transportation. Like many cities, Dallas unanimously adopted the city's first ever strategic mobility plan, Connect Dallas, in 2021. Connect Dallas re-envisions the way people get around a historically car-centric city with micro-mobility programs and infrastructure investments. In addition, Dallas adopted a comprehensive environmental and climate action plan in 2020 with the goal of achieving community-wide carbon neutrality by 2050 to combat findings in a recent report which reflect that 35% of Dallas's greenhouse gas emissions come from the city's transportation sector. The city selected Byrd as a partner for a number of reasons, many of them coming back to our aligned interests in reducing the city's carbon footprint while improving connectivity in some of the most gridlocked areas of the city. We consider it a privilege to partner with Dallas, as well as the many hundreds of other cities around the world like it. On top of our three pillars of profitability, we made great strides in 2022 in our mission to provide equitable, sustainable transportation to all by providing eco-friendly micro mobility solutions and vehicles that riders embrace. providing about 50 million rides for the year, tens of millions of which replaced car, truck, or SUV trips. Notably, the majority of riders are with us for more than one ride. An average of 44% of total rides came from users with 20 plus lifetime trips. This compares to 37% in 2021. This material uptick is indicative of how Bird continues to engage with and provide a valuable service to our growing base of recurring riders. Lastly, our newest Bird 3 and Swapable vehicles continue to outperform. These are our most recently deployed vehicles, and they outperform in rider experience and net revenue relative to the fleet average. Bird 3 is our most sustainable vehicle with a lifespan of up to five years after refurbishment, which significantly cuts down our capital costs and greenhouse gas impact. Bird 3 is among the most climate-friendly vehicles on the road, which helps cities from Dallas to Doha reduce their carbon footprints. In 2022, 27 million rides were taken on our Bird 3 and SWAPL vehicles, which accounted for over half of our fleet. This resulted in 2.1 million kilograms of CO2 reduction, which is equivalent to that from about 2,500 acres of forest. We expect this will only get better as our vehicle hardware, scale, and fleet management software continue to improve. These achievements would not be possible without the support of our riders, city, and fleet manager partners, and the day-to-day dedication, passion, and hard work of our team of Bird employees around the globe. I will now turn the call over to Michael to review our financial performance in more detail.

Thank you, Shane. I'm excited to be part of Bird's transformation era. For months, I have been working alongside the Bird Canada team, performing due diligence on Bird Global's operations and financials. I have been impressed with the prospects for Byrd to be a cash-generating profitable company. Now, I want to recap a few key technical highlights on the fiscal 2022 year of the business. First, the cash margin in our core sharing business is encouraging, and we have confidence that it will continue to expand through our focus on asset efficiencies and other operational initiatives. Second, we continue to demonstrate significant progress in trimming down our centralized cost structure and have identified many of the cuts we need to make to get below our $100 million operating expense target. Third, we have made great strides in turning around free cash flow generation of the business, clawing back over $75 million in operating tax losses and reducing our capital expenditures by nearly $126 million. There is still a lot of work to do, but significant progress has been made. Now onto our fourth quarter results. In the fourth quarter, we completed our detailed analysis of preloaded wallet balances against historical redemption patterns. Upon completion, we recorded breakage revenue of $28.8 million in the quarter of unredeemed preloaded wallet balances from prior periods, which is in line with what we had anticipated. For the quarter, we reported revenues of $70 million, which included the $28.8 million revenue number mentioned above. It is important to remind everyone that we have exited a number of unprofitable markets, which will have a future impact on overall revenues. but we expect to see continued growth in our core markets. In Q4, the $70 million in recorded revenue represents a 71% increase in share in revenue and $8.4 million decrease in product sales year over year. Our Q4 ride declined 14% year over year compared to our deployed vehicle growth of 12%. Adverse weather in the Midwest contributed to the weakness in the quarter, and as Shay noted, we increased our vehicle orders and deployment for the 2022 season without providing optimal data-driven deployment support to our fleet manager partners. As we plan for 2023 and retire our older fleet, we look to rebalance our existing fleet based on demand across our cities and have rolled out our new demand-based vehicle drop model. Q4 consolidated growth margin reached 42%, up from 7% last year, benefiting from higher revenues, offset by higher accelerated depreciation from year-end inventory flows. Q4 profit margin before vehicle depreciation reached 72%, up from 53% last year, primarily driven by higher revenues, inclusive of the $28.8 million in breakage revenues. Q4 adjusted operating expenses decreased 29% year-over-year to $42 million, below our recent peak of $56 million in quarter two. As a percentage of revenue, Q4 adjusted operating expenses were 61% compared to 120% a year ago. Q4 adjusted operating expenses includes nearly $9 million of expenses we do not expect to repeat in Q1 of 2023. including over $4 million of spare parts crew up and over $3 million of fees associated with our Bird Canada transaction. We expect further operating expense savings through 2023, resulting in adjusted operating expenses below $100 million. Our Q4 net loss improved $11 million year-over-year to a loss of $36 million. and adjusted EBITDA was $6.1 million compared to a loss of $24 million in the prior period. We ended the year with total cash of $39 million, including $33 million of unrestricted cash. Additionally, seasonality has a strong impact on cash flow, and we expect to return to positive cash flow in Q2. To supplement our balance sheet, we also have 48.5 million shares of equity financing available through our standby equity purchase agreement with Yorkville, which we did not utilize in the fourth quarter. Looking ahead, our guidance reflects our confidence in the transformation of Bird Global as a profitable and self-sustainable business. Many of the changes that we have made in the second half of the year had a nominal effect on our results in Q4. but will have a much greater impact on the bottom line in 2023. Our fiscal 2023, we are expecting positive adjusted EBITDA in the range of $15 to $20 million on a full year basis and our first year of positive free cash flow in the range of $5 to $10 million with operating expenses below $100 million. We expect to generate positive free cash flow starting in the second quarter of 2023 given the seasonality of our business. Lastly, our quarter-to-date performance through February 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 our operator to take questions.

Thank you. We'll now be conducting a question-answer session. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question today, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, please pick up your handset before pressing the star keys. If you'd like to withdraw your question, you may press star 2. One moment, please, while we poll for questions. There's a tab called QA. Thank you, and our first question is from the line of Tom White with DA Davidson. Please proceed with your questions.

Hey, this is Wyatt Swanson on for Tom. Got a couple questions here. Just starting with your recent Bird Canada transaction, can you just elaborate on what this means for Bird Global?

Yeah, thanks for the question. This is Shane. So a few things. Of course, we were excited to announce the transaction at the end of the year. Bird Canada, for a couple of years now, has had EBITDA plus or EBITDA positive operations, which they achieved just in their first few years of operation. As we integrate them into our North American operations through the course of Q1, we see vast upside from taking some of their learnings and applying them to our broader business. And we believe it will be an accelerant to our own path to becoming EBITDA positive in 2023. Slightly more specifically, we brought in Stuart Lyons, who's the CEO of Bird Canada, to lead our North American operations, as I mentioned previously, and also Michael Washinushi, who's here on the call with me, who had a very deep record of cash management and financial planning to bolster our finance team. In addition to that, the $30 million of new capital that came in through that transaction gives for global the cash it needs to get through the winter trough of 2023 and heading into Q2 of 2023. As the weather warms up, we expect to become cash generative and get the free cash flow guidance that we mentioned through the course of the year this year.

Great. Thank you. And then could you just kind of walk us through the drivers of the now 15 to 20 mil adjusted EBITDA outlook following a loss of 62 million in 2022, which is a major swing in expected results. What's fundamentally changing to drive that large delta?

Good morning. This is Michael Washinushi speaking. Look, a lot of the activities we did or the company did in the second half of 2022, the actions made set the foundations for the 2023 outlook. The actions that we took in terms of exiting non-core markets exiting our consumer product business, exiting some non-core markets, cost efficiencies that we put in place in the second half to trim costs. And we're going to be realizing that in the fiscal 2023 year. And then for 2023, our viewpoint starts with a conservative and achievable 2023 revenue forecast. And then with that, we take further steps to reduce costs. And I'm happy to say that, you know, February year to date, we're tracking to our expectations. So we're going to continue on monitoring, closely monitoring, and looking at reducing OPEX through 2023, which will be no more than $100 million for the full year. And we expect to be below $100 million run rate by year end.

Awesome. Okay. And then just one final, you know, question here. Uh, related to deployment, can you give a little more color on the focus for this year? Is the goal to just optimize your unit economics in the existing markets? Are you trying to enter some cities where you believe you could maintain or drive up some healthy unit economics? And then related to that, you know, what's the regulatory environment looking like for micro mobility? You know, has it become increasingly more challenging and what's, what's your outlook related to that?

Uh, yeah, sure. I'll, I'll take those, I think two questions in two parts. So. On the unit economic front, the primary driver we see there falls under the asset efficiency pillar I was referring to. That is mostly about getting more out of the vehicles we have in the cities that we're in. There will be a few new cities that we add to the portfolio, but the focus in 2023 or the true north in 2023 is about optimizing our footprints primarily in the city that we're in to make sure that we are on a total co-basis for cash flow generative. There are three sub-points to that. Number one is the demand model that we discussed, so making sure at a very, very local level, the street corner level, we have, in a data-driven way, the right number of vehicles in the right place at the right time where folks want to ride them. That's an area where we see huge opportunity, as Michael said, just in January, February this year. based on real-world rollouts, we're seeing quite a bit of upside by evolving that strategy to make it more data-driven. So that's the biggest piece. Secondarily, there's improving our repair rate, which we do have some learnings from the Bird Canada folks that I mentioned as we've integrated the team so that we repair our vehicles faster and thus improve the rate of deployment onto the street instead of having them in a warehouse. And then number three, we've seen a lot of progress in our end-of-life rate, and that has to do with the depreciation that you'll see flowing through in our gross margin to non-cash item, but that will impact the amount of capex that we need to do at the end of the year, which, of course, has a free cash flow impact as well. So from a union economic perspective, those are the three major drivers, or at least the top three drivers. And then from a regulatory perspective, the second part of your question, interestingly, this is early days. Micromobility, of course, is still a young category, but broadly, that's been favorable. So it's the healthiest that it's been, and the trend that we see specifically starting in the U.S. and now bleeding somewhat into EMEA is cities trend toward favoring two to three operators. They tend to start with a pilot or sometimes even just with many operators in an unregulated fashion and then realize that a few folks are able to follow through on their promises better than others. And they will go to an RFP and generally select those folks. To give you a few examples, just in the last few months, Dallas, Baltimore, Doha, Abu Dhabi, Seattle, just to name, I could keep going, but just to name a few, we've all gone through that process with them and we've won permits in those markets. And that for us is a massive tailwind because once you're in and you build trust with cities, as we've discussed, you tend to stay. So what we've seen in the United States, which we think is a couple years ahead of the rest of the world, is two players, us and one other, have over 70% market share, the vast majority of which has a protected license that's sticky. And we think EMEA is going to head in the same direction. So for us, that is a medium-term, long-term focus, and we find once we go through those regulatory changes that our margin tends to improve in a city. So that's, as I mentioned, a tailwind as we look ahead.

Great. Thank you very much.

Thank you. As a reminder, to ask a question today, you may press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 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 the star keys. Once again, that is star 1 to ask a question. Thank you. Our next question is from the line of Eric Sheridan with Goldman Sachs. Please receive your question.

Thanks so much for taking the question. Maybe twofold, if I can. Coming back to Bird Canada, can you give us a better sense of how to think about the contribution of Bird Canada, run rate growth, incremental margin dynamics, so we can better understand unpacking the contribution of Bird Canada, both from an exit velocity for 2022 and what's embedded in sort of the 2023 guide from that asset. And then maybe following up a little bit on Wyatt's topics, just better understanding the bridge of contribution from various forms of revenue and different pockets of the operations, the Canada and the non-Canada operations. in terms of bridging, again, to the variability on that EBITDA guide for 2023. And then maybe I'll just squeeze one more follow-up in if I can after that. Thank you.

All right, Eric. That's a handful, but you probably appreciate we don't separately report out Bird Canada results. We don't plan on reporting out Bird Canada results. But I can give you a directionally, I mean, it's meaningful in terms of the revenue contribution that Bird Canada will contribute to Bird Global for the 2023 year. And it's accretive from an EBITDA and free cash flow. It will be accretive from a free cash flow point of view. And in terms of the growth trajectory, Bird Canada has seen some healthy growth, both from the existing markets and growth markets within Canada. And I think the opportunity we see is Leveraging some of the best practices that Bird Canada deployed in 2022 into Bird Global 2023. Similar items in terms of just deploy rates, RPD rates, as well as cash management. So all of these things we're trying to bring in into Bird Global.

Okay, maybe I'll just ask a follow-up then. I know we're not talking about a revenue guide for 2023, but can you talk us through how we should be thinking about some of the variables that are at play that could push elements of the revenue curve up or down as you think about what the probabilistic outcomes are for revenue in 2023? Thank you.

Yeah. Two parts to that. As you mentioned, we're not guiding on revenue, and the reason is because what we're focused on as a management team is for cash flow generation. But to answer your question, the biggest driver that we're going to see in there is revenue per vehicle per day, as we're not materially changing the size of our fleet in 23. And if I tie it back to the first part of your question, part of the reason we were excited about the Bird Canada acquisition is they were doing three trips per vehicle per day in very similar markets to the markets that we were operating in in North America. So we see quite a bit of operational upside. I've already mentioned to the tune of 10% to 20% conservatively for this year as we roll out similar operating strategies. But we do see quite a bit of room on that asset efficiency front, which longer term we think could be a material revenue driver without significantly increasing the size of the fleet.

Thank you.

Thank you. There are no further questions at this time, and I would like to turn the floor back over to Mr. Tartagliano for closing comments.

Thank you very much. So as a management team, we've made great progress in identifying the areas of the business where we can prove efficiency, as we've discussed, and importantly, create value for our stockholders. And I can speak for the entire senior leadership team that we're more energized right now about the future of birth than we've ever been. and the mission that we serve. So thank you all for the time, and we look forward to talking next quarter.

This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.