Bridger Aerospace Group Holdings, Inc. Common Stock (NASDAQ:BAER) Q4 2023 Earnings Call Transcript

Bridger Aerospace Group Holdings, Inc. Common Stock (NASDAQ:BAER) Q4 2023 Earnings Call Transcript March 19, 2024

Bridger Aerospace Group Holdings, Inc. Common Stock isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon, everyone. Welcome to today’s Bridger Aerospace Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Also, today’s call is being recorded and I will be standing by if anyone should need any assistance. Now, at this time, I would like to turn the call over to the Chief Financial Officer, Mr. Eric Gerratt. Please go ahead, sir.

Eric Gerratt: Good afternoon, and thank you for joining us today. Joining me on the call this afternoon is Chief Executive Officer, Founder and Director, Tim Sheehy. Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Since forward-looking statements are based on various assumptions, risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. Factors that could cause results to differ materially from those expressed include, but are not limited to those discussed in the company’s filings with the Securities and Exchange Commission, including expectations regarding financial results for 2024.

Management cannot control or predict many factors that ultimately impact future results. Listeners should not place undue reliance on forward-looking statements, which reflect management’s views only as of today. We anticipate that subsequent events and developments will cause our assessment to change. However, we undertake no obligation to revise or update any forward-looking statement or to make any other forward-looking statements. Throughout this afternoon’s earnings release and our call today, we refer to the non-GAAP financial measure of adjusted EBITDA. The definition, calculation and reconciliation to the financial statements of adjusted EBITDA can be found in Exhibit A of our earnings release, which is available on our website. We believe adjusted EBITDA is useful in evaluating our reported results as a supplement to and not our substitute for our results reported under GAAP.

With that, I’d like to turn the call over to Tim.

Tim Sheehy: Thank you, Eric. Good afternoon. Thank you for joining today. Bridger accomplished a great deal in the fourth quarter and in 2023 as a whole. We achieved record revenue of nearly $67 million and record adjusted EBITDA of $18.7 million for the full year. This record performance was despite one of the slowest fire seasons in 25 years in the United States. While these fire season has its own seasonal and regional fluctuations and complexions, the overall trend of larger wildfires and longer fire seasons continues. This drives continued long term demand for our aerial surveillance suppression, services and technology capabilities. In fact, 2023 saw a record contract awards for Bridger including a five year $60 million exclusive use fire surveillance and technology contract in support of the Department of the Interior and a 10-year Air Attack contract for up to $166 million from the U.S. Forest Service awarded in the third quarter.

See also 11 Best Ethanol Stocks To Invest In Now and 20 Most Underrated Travel Destinations in Asia.

Q&A Session

While we saw a slow start to the U.S. fire season last year, we offset the impact by expanding our aerial firefighting operations internationally to Canada for the first-time in our history where wildfires kicked off early and record acreage was burned. In fact, there are still over 100 wildfires that continue to burn underneath the snow today across Canada. These overwintering fires or zombie fires as they are called, burn slowly below the surface during the cold months and have become more common in recent years. Having gone through the regulatory process in Canada last year, we are hopeful that Bridger could assist in Canada in the future as part of normal operations. Our deployment in Canada last year translated into the most territory covered in the history of the company, and we continue to make strides to further expand our aerial firefighting services to new mission critical areas and geographies.

In late 2023, we entered into a joint venture partnership with Marathon Asset Management LP and Avenue Sustainable Solutions Fund to complete the purchase of four Spanish Coopers recently awarded from the Government of Spain. This transaction was kept several years in the making and positions us to meaningfully expand our fleet over the coming years. As part of our expansion into Europe, we have established a new Spanish subsidiary, Albacete Aero to oversee the return to service work on the four Spanish Scoopers, which has already begun. It is important to note that we are not including any impact of the Spanish Coopers in our current 2024 guidance. We also acquired a hangar in Spain in the fourth quarter to support our growth in Europe. I also want to touch on our September acquisition of Ignis Technologies, which has been fully integrated with our investments in fire surveillance intelligence SaaS assets.

Through development with federal, state and local fire organizations, this pioneering mobile and web platform elevates firefighters’ situational awareness, creates a common operating picture across firefighting units, and produces real time high value data to better manage wildfire risk. Recent software and surveillance contracts showcase this unique and differentiated offering in the marketplace. Turning to 2024. It’s important to remember we’ve historically used our first quarter to finish winter maintenance of our fleet and to complete flight training and carding so that we are ready to mobilize come spring. While fire season typically begins in late April or May, this year we saw our earliest seasonal deployment of scooper and surveillance aircraft in company history to Texas and Oklahoma, where wildfires are being driven by air conditions in the Central U.S. While this revenue will not be sufficient to offset spending in Q1 and seasonally negative adjusted EBITDA, it is helpful to set the company up for another record year of growth.

And I’ll turn it back to Eric to talk about our financial performance.

Eric Gerratt: Thanks, Tim. Looking at our results for 2023, revenue grew 44% to a record $66.7 million compared to $46.4 million in 2022. After the late start to the 2023 U.S. wildfire season, fire activity increased in the third quarter driving record utilization of the company’s growing Super Scooper fleet despite the shorter than average North American wildfire season. Cost of revenues was $41.3 million and was comprised of flight operations expenses of $24.4 million and maintenance expenses of $16.9 million. This compared to cost of revenues of $33.9 million in 2022, which included $18.8 million of flight operations expenses and $15.1 million of maintenance expenses. The increase primarily relates to higher employee labor and depreciation expenses related to the two additional Super Scooper Aircraft that were placed into service in September 2022 and February 2023 respectively.

Gross margin increased to 38% in 2023, up from 27% in 2022, driven primarily by the record utilization of the company’s Super Scooper fleet. Selling, general and administrative or SG&A expenses were $82.9 million compared to $35.1 million in 2022 with the increase primarily attributable to $45.7 million of non-cash stock-based compensation related to RSUs granted to management and employees in 2023. The remaining increase was primarily attributable to an increase in business development, insurance, professional services and other expenses associated with operating as a publicly traded company in 2023, as well as impairment charges of $2.4 million associated with our plan to phase out certain aging aircraft platforms in our aerial surveillance operations.

The increase was partially offset by $10.1 million of transaction related bonuses for employees recorded in the third quarter of 2022 in connection with the business combination and preparation of becoming a public company. Interest expense for 2023 increased to $23.2 million from $20 million in 2022. Bridger also reported other income of $3.1 million for 2023 compared to $0.5 million of other expenses for 2022. Net loss was $77.4 million in 2023 compared to $42.1 million in 2022. Adjusted EBITDA was $18.7 million for 2023 compared to $3.7 million in 2022. Adjusted EBITDA excludes income tax expense or benefit, depreciation and amortization, interest expense, stock-based compensation, business development and integration expenses, operating — offering costs related to financing and other transactions, loss on disposal and non-cash impairment charges, changes in fair value of earn-out consideration, changes in fair value of warrants, loss on extinguishment of debt and one-time discretionary bonuses to employees and executives.

Turning to our results for the fourth quarter of 2023. Revenue was $1.1 million compared to $1.1 million in the fourth quarter last year. Cost of revenues was $8.4 million and was comprised flight operation expenses of $4.7 million and maintenance expenses of $3.7 million. his compares the cost of revenues of $5.3 million in the fourth quarter last year, which included $2.1 million of flight operations expenses and $3.2 million of maintenance expenses. SG&A expenses were $18.6 million in the fourth quarter of 2023 compared to $6.5 million in the fourth quarter of 2022. The increase was primarily driven by the non-cash stock-based compensation related to RSUs, as well as an increase in professional services and insurance, and other expenses associated with operating the publicly traded companies.