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spk03: Hello and welcome to the BIRD Global First Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. I'll now turn it over to Investor Relations. You may now begin.
spk00: 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 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 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 forward-looking statements on this call can be found in the risk factors section of our Form 10-K for the year 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 gap measure is available in our earnings release on the company's investor relations page at ir.berg.co. Growth percentages that follow are in comparison to this same period in the prior year, except as otherwise specified. I will now turn the conference call over to Shane.
spk01: 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% sharing 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 launched 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 step 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 cost to cash inflows, improving asset efficiency, and being a trusted partner to the cities we operate in. This strategy has set us on our way to a free cash flow and EBITDA positive 2023, and also supports our long-term growth plan in what continues to be a multi-billion 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've 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 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 the man, North America, and reducing unnecessary central overhead costs aggressively. Our second focus area is improving asset efficiency. To reiterate, the three legs of our asset efficiency stool are, one, improved supply-demand matching for a 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 drop 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 is still far more upside to this figure as we further improve drop locations, routing, and rebalance logic using this model. Additionally, we are in the process of repairing and refurbishing damaged and under-utilized devices, ensuring our key markets have the latest vehicles and that they are in excellent shape for riders this 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 vehicles to 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 in average vehicle life on the same vehicles 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 are focusing on generating cash flow from our existing markets and exiting any lagging markets, while deepening existing partnerships within our possible 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 Byrd'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 have 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 micromobility 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 have 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 experienced continued momentum in North American Europe as well, including notable city winds in North America. Lincoln, Nebraska, Burlington, Vermont, Logan, Utah, Montgomery, Alabama, Grand Junction, Colorado, Orange County, Florida, and Pocatello, Idaho. In EMEA, we saw winds in Grosseto in Italy, Bastio, Ajakio, Bichi in France. These winds point to the market potential we have yet to capture. In addition to new launches, we are seeing success with permit renewals in a number of cities where Byrd 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 micro-mobility 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 flea 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 Maps 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 to come, will continue to give bird an edge with cities, especially in comparison to sub-scale 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.
spk02: 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 depreciation, net income, and adjusted EBITDA, showcasing the effectiveness of our cost optimization efforts. As Shane highlighted, sharing gross margin came in at 16%. Right 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% for the majority of revenues, declined 5% year-over-year. Rise in Q1 declined 30% year-over-year. As a reminder, Our Q1 2022 comparison was also before exiting a number of unprofitable markets, resulting in meaningful drag to revenues in Q1 2023 affecting growers. As we exited the seasonally slower winter months and we continued with unseasonably cold conditions in the northwestern, northeastern, 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 costs of sharing. While costs benefited from lower rides, we realized a favorable change in the effective fleet manager payment rate due to the closure of several jurisdictions in which we paid higher payments. Order 1 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 continued to realize benefits from reductions in force that occurred in 2022 optimization in third-party spend, 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 at the dot 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 secured 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 23, 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 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 balance of the 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 23 guidance. And with that, I will turn it over to the operator for a QA session.
spk03: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question today, please 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 that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Once again, that's star one. Thank you. Our first question is from the line of Tom White with DA Davidson. Please proceed with your questions.
spk04: 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? You know, 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?
spk01: Yeah, thanks. Thanks for the question. So the, overarching strategy hasn't changed from what we talked about a few minutes ago, which is building capital T trust with cities, reducing our costs to match our inflows, 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 efficiency, 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 rides per vehicle per day and revenue per vehicle per day to the tune of about 25%. Now I get fully optimized. There are also opportunities we see for new promotion and marketing and growth initiatives as well. Historically for us, we've seen the vehicles as sort of their own sales and marketing. They're effectively billboards that are out on the street. And I think in the early days of the business and 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.
spk04: Awesome. Thank you. And then a question on the international. Could you give a little more color on the momentum you 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? Sure.
spk01: Yeah. 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 an 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 where 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 wins over the course of Q1, a dozen plus, and I think I mentioned Perth and many other smaller cities in Europe. There's also one large city that we've 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, reminder 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 US, us 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 ahead.
spk04: Great. Thank you for the call. Thanks.
spk03: Thank you. Our next question is from the line of Eric Sheridan with Goldman Sachs. Please receive the call.
spk05: Thanks so much for taking the questions. Maybe two if I can. Following up on that last answer, I'm curious about different partnerships or distribution models or promotion models you might be exploring to simulate growth. We've seen a lot of cross-platform partnerships broadly in the industry, and I'm just kind of curious how that might amplify growth at a pretty constructive unit economics, not only just in 23 but beyond. And then in terms of the efficiency program, can you help us better understand how 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.
spk01: Yep. And just to clarify, when you're talking about efficiency, it sounds like you're talking about on the cost side as opposed to the vehicle utilization side, is that correct?
spk05: Yeah, the efficiency side would be on the cost side, thanks.
spk01: Okay, yeah, I'll take the first part of the question, and Michael can 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 in 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 to continue to be a demand generator. And also on the parking side, we are 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. That's just a couple of examples. There are many others, but I think that's an exciting area that we'll continue to develop.
spk02: Yeah, and Eric, thank you for the question. I think I'll comment by saying cost optimization and cost efficiency has never stopped. It's going to be 23 and 24, but I think the larger ones that we enacted in Q4 and Q1 are really 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 optimizations at making sure that we optimize revenue at the same time.
spk03: Thank you. Our last question is coming from the line of Doug Becker with Capital One. Pleased to see you with your questions.
spk06: Thank you. I wanted to gauge the need and outlook for incremental financing. In the past, you've mentioned the expectation to raise an incremental 10 million beyond the 33 announced in March.
spk02: Yeah, I think let's just separate need for ninth to half. It would be great to have the incremental capital that we can actually deploy towards driving additional or accelerating additional growth into the market. The need, I mean, we're tracking to our forecast, and so assuming we hit our free cash flow targets and EBITDA targets, the need is less than, I guess, a desire to have that incremental capital.
spk06: That makes 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?
spk02: Yeah. I think we've 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.
spk01: Yeah, just to add this, Shane, just to add that, I mean, we are reaffirming our guidance to be free capital generative this year, and 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. So for free cash regenerative, we don't actually need more cash to continue to operate through the year.
spk06: That's what I wanted to confirm. Um, maybe last one here. Uh, you mentioned the 25% increase, I guess more than 25% increase in revenue per vehicle day where the new vehicle placement technology has been implemented. Uh, just what percent of the markets has that been introduced? It seems pretty compelling.
spk01: Yeah. Uh, so at the end of the quarter and we, we ramped up through the quarter, but by the end of the quarter, it was, uh, about 50% might've been just over 50% actually. And, uh, 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 a version one. Of course, there's going to be a version two and a 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.
spk06: Great. Thank you very much. Thanks.
spk03: Thank you. At this time, there are no additional questions, and I'll turn the floor back to Mr. Tartiano for closing remarks.
spk01: Thank you all so much for the time today. We are extremely excited to close our best Q1 to date 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.
spk03: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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