Bridger Aerospace Group Q2 2023 Earnings Call Transcript

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August 10, 2023

There are 4 speakers on the call.

Operator

Greetings, and welcome to the Bridger Aerospace Second Quarter 2023 Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Eric Gerhardt, Chief Financial Officer.

Speaker 1

Good afternoon and thank you for joining us today. Joining me on the call this afternoon are Chief Executive Officer, are in the call to Mr. Sheehy and Chief Investment Officer and Director, Vikander Rudasil. Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward looking statements are 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.

Speaker 1

Factors that could 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, are participating in the call to questions regarding financial results for 2023. 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 assessments to change. However, we undertake no obligation to revise or update any forward looking statement or to make any other forward looking statements.

Speaker 1

For those joining by webcast, you can follow along with today's presentation. For those listening by phone, you can access today's presentation on our website at www.bridgeraerospace.com under the Investor Relations tab. Throughout this afternoon's earnings release and our call and presentation today, we refer to the non GAAP financial measure, 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 a substitute for reported results under GAAP.

Speaker 1

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

Speaker 2

Thank you, Eric. Good afternoon, everyone, and welcome. I'm happy to be joining you today to discuss our Q2 results and our progress as becoming a public company in January this Including recent contract wins and the announcement of our first acquisition, which will expand our aero firefighting services to new mission critical areas can create the largest specialty wildfire aviation fleet in the country. Our second quarter update. As we entered the 2nd are prepared for the start of the wildfire season, which typically starts mid April.

Speaker 2

Each fire season has its own complexion and this year has been no different. Due to the considerable winter snowpack in the West and wet spring conditions, the season began approximately 6 weeks later than usual. We actively worked to offset the impact of the slow start in the U. S. By expanding our Arrow Firefighting operations into Canada for the first time in our history.

Speaker 2

With a relatively dry winter in Canada, wildfires kicked off early and record acreage continues to be burned to this day. Operations in Canada allowed Bridgit to increase fleet utilization during the Q2 despite the slower start in the United States. Now that we've operated in Canada and gone through the process to do so, we expect that Bridgeway will continue to operate in Canada in the future as part of normal operations going forward. I'm very proud of the team are doing so well on our 1st international operations. The wet spring in the Western U.

Speaker 2

S. Did result in vegetation growth, which created excess fuel in most U. S. Mountain forests. As extreme hot dry conditions spread through the West, we saw an acceleration of wildfire activity towards the end of the second quarter as lightning strikes and human activity ignited this dry undergrowth.

Speaker 2

Today, all of our scoopers and Air Attack assets have been called back to the U. S. And are currently deployed supporting active fire incidents from Washington State to Texas are in many places in between. In previous years with later starts, the core of the fire season is oftentimes pushed further into the Q4. As a result, we believe our 2023 guidance remains achievable.

Speaker 2

The trend for government outsourcing of aerial firefighting continues to benefit Bridger. In July, we received notice that we were awarded 2 5 year exclusive contracts worth up to $24,000,000 each and 1 call winning contract worth up to $20,000,000 with the U. S. Department of Interior for high resolution surveillance operations using specialized air attacks assets, which is based on the Bridger Architecture proprietary software and data platforms, which is redefining the industry. With the recent decommissioning of the U.

Speaker 2

S. Air Force's distributed real time infrared aircraft are modestly as ideally suited to serve the DOI to help detect new fires, provide situational awareness for larger fires and real time data transmission and updates to line personnel. These contracts worth up to $68,000,000 in revenue also marked the 1st contract awards of a multiyear DOI contract to the private sector for this mission. As a small business with leading edge sensor and mapping capabilities, industry leading software capabilities and historic contract performance, we are well positioned to support our federal, state and government clients in the growing battle against wildfires. I will now turn it over to Vikander Rudacille to discuss the recently announced acquisition of Bighorn Airways.

Speaker 3

Thank you, Tim. We recently announced the addition of Wyoming based Bighorn Airways to the Bridger family with the signing of a definitive purchase agreement. The fleet includes 3 Bombardier Dash 8 featuring a 7,500 pound payload capacity and a range of 1200 miles and the capability of low level flights for paracargo operations. Bighorn also operates 4 Casa 212-200 and 5 Dornier 228-two 100 twin turboprop aircraft capable of short takeoff and landing. Bighorn is one of the only and few air carriers that are approved by the DoD Commercial Airlift Review Board, holds a DoD facility security clearance entered the U.

Speaker 3

S. Special Operations Command certified air carrier. The $39,000,000 transaction is expected to close by the end of September and to be accretive to our financial results with incremental revenue opportunities on these new assets as well as cost synergies in 2024. With the addition of Bighorn's unique skills, equipment and personnel, Bridgeland will become the largest specialty wildfire aviation fleet in the country. We continue to see additional opportunities to further expand our fleet both in the U.

Speaker 3

S. And abroad, which will create the opportunity for geographic expansion and flexibility to cover more territories and wildfire seasons. And with the potential for a long and aggressive fire season combined with cost savings initiatives put in place to maximize we continue to expect 2023 to be a record year for the company. With that, I will turn it over to Eric, who will talk about our financial performance in the Q2.

Speaker 1

Thanks, Nikky, Andrew. Revenue for the Q2 of 2023 was $11,600,000 compared to 12 $800,000 in the Q2 of 2022. The decline was a result of the later start to the 2023 U. S. Wildfire season, partially offset by utilization of our fleet in Canada, which was our first international deployment.

Speaker 1

Cost of revenues was $10,500,000 in the second were in the Q3 and was comprised of flight operation expenses of $6,300,000 and maintenance expenses of $4,200,000 this compares to cost of revenues of $9,400,000 in the Q2 of 2022, which included $5,800,000 of flight operations expenses and $3,600,000 of maintenance expenses. The increase primarily relates to higher personnel and other expenses related to the 2 additional SuperScooper aircraft that were placed into service in September 2022 February 2023, respectively. Selling, general and administrative expenses were $15,200,000 in the Q2 of 2023 compared to $5,700,000 in the Q2 of 2022. The increase was primarily driven by non cash stock based compensation of $7,900,000 for restricted stock units granted to employees as well as $1,100,000 in loss on disposal and non cash impairment charges on aging surveillance aircraft. Interest expense for the Q2 of 2023 increased to $5,500,000 from $2,300,000 in the Q2 of 2022 due to the additional interest expense related to the Gallatin Municipal Bond, which closed in the Q3 of 2022.

Speaker 1

The company also reported other income of $600,000 for the 2nd quarter, which was comprised of interest income for the embedded derivative of preferred equity of 0 point and realized gains from available for sale securities of $300,000 For the Q2 of 2023, net loss was $19,000,000 compared to a net loss of $4,600,000 in the Q2 of 2022. The increase in the net loss was primarily driven by the increased SG and A I mentioned previously, as well as the impact of reduced second quarter revenue due to the delayed start of the U. S. Wildfire season. Adjusted EBITDA was $1,000,000 compared to $2,000,000 in the Q2 of 2022.

Speaker 1

Adjusted EBITDA excludes interest expense, depreciation and amortization, stock based compensation, gains and losses on disposal of assets, legal fees and offering costs related to financing and other transactions and business development and integration expenses. Looking at our results for the 1st 6 months of 2023, revenue was $12,000,000 compared to $12,800,000 in the 1st 6 months of 2022. Cost of revenues was $17,800,000 compared to $15,900,000 in the 1st 6 months of last year. SG and A expenses were $48,400,000 compared to $10,600,000 in the 1st 6 months of 2022, with the increase primarily driven by non cash stock based compensation expense. Interest expense for the 1st 6 months of 20 increased to $11,200,000 from $6,000,000 in the 1st 6 months of 2022.

Speaker 1

Bridger also reported other income of 1 point $7,000,000 in the 1st 6 months of 2023 compared to $300,000 for the same period in 2022. Net loss was $63,700,000 in the 1st 6 months of 2023 compared to $19,400,000 in the 1st 6 months of 2022. Adjusted EBITDA was negative $9,700,000 compared to negative $6,900,000 in the same period last year. Turning to the balance sheet. We ended the 2nd quarter with cash, restricted cash and short term investments of $25,700,000 receivables from our Q2 firefighting activity are expected to increase the cash balance in the coming months.

Speaker 1

Current fleet activity should further boost incoming cash are well through the balance of the year with excess cash expected to be used for further growth CapEx and to repay debt, which at June 30, 2023 stood at $207,500,000 Due to the rapid acceleration of the U. S. Wildfire are after its late start, combined with cost savings initiatives put in place to maximize earnings, we believe our 2023 guidance of $84,000,000 to $96,000,000 in revenue and $37,000,000 to $45,000,000 of adjusted EBITDA remains achievable. Bridger's entire fleet is currently deployed in the U. S.

Speaker 1

And the month of July was a company record in terms of revenue. As Tim mentioned, in years of the late start to the wildfire season, the core fire season is often pushed further into the Q4. We remain on track to close our acquisition of Bighorn in late September. We do anticipate Bighorn being accretive to our 2024 results and believe there will be incremental revenue opportunities as well as cost synergies. We've included a new investor presentation on our website covers the Bigtorn transaction in detail and provides updates about Bridger to answer any questions that you may have.

Speaker 1

With that, I'd like to turn the call back to Tim for final comments.

Speaker 2

Thank you, Eric, and thank you to everyone for joining us on today's call and for your support. With a growing number of opportunities to expand our fleet, we are well positioned to see significant growth and drive shareholder returns while supporting our federal, state and international clients in a growing battle against wildfires. We look forward to updating you on our progress when we report our Q3 results in November. We will also be attending the Gabelli 29th Annual Aerospace and symposium on September 7 in New York and hope to see some of you there. Have a great day.

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Earnings Conference Call
Bridger Aerospace Group Q2 2023
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