Q4 2023 Bridger Aerospace Group Holdings Inc Earnings Call

Participants

Eric Gerratt; Chief Financial Officer; Bridger Aerospace Group Holdings Inc

Timothy Sheehy; Chief Executive Officer, Co-Founder, Director; Bridger Aerospace Group Holdings Inc

Presentation

Operator

Good afternoon, everyone, and 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 statements, 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 a substitute for, our results reported under GAAP.
With that, I'd like to turn the call over to Tim.

Timothy Sheehy

Thank you. Good afternoon, and thank you for joining today. Bridger accomplished a great deal in the fourth quarter ended 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 each fire season has its own seasonal and regional fluctuations and complexion, 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 record contract awards for Bridger, including a five-year $60 million exclusive-use fire surveillance and technology contract with support for the Department of Interior, and a 10-year AeroTech contract for up to $166 million from the US Forest Service awarded in the third quarter.
While we saw a slow start to the wildfires in last year, we offset the impact by expanding our aerial firefighting operations internationally into Canada for the first time in our history were wildfires kicked off early and record acreage was burned. In fact, there are still over a hundred wildfires that continue to burn underneath the snow today across Canada. These over wintering 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 can 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 meet mission critical areas and geographies.
In late 2023, we entered into a joint venture partnership with Marathon Asset Management LP, an avenue sustainable solutions fund to complete the purchase of four Spanish Scoopers recently awarded from the government of Spain. This transaction was 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 Scoopers 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 and SaaS assets. The development with federal, state and local fire organizations, this pioneering mobile and web platform elevates firefighters situational awareness to create a common operating picture across firefighting units and produces real time high value data to better manage wildfire risk. Recent software and surveillance contract showcased this unique and differentiated offering in the marketplace.
Turning to 2024 is important remember, we have historically used our first quarter to finish winter maintenance of our fleet and to complete flight training and carting 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 employment of Scooper and surveillance aircraft in company history, to Texas and Oklahoma, where wildfires are being driven by air conditions in the central US.
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 US wildfire season, fire activity increase in the third quarter, driving record utilization of the ompany's growing Super Scooper fleet, despite a 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 noncash 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 bonus 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 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 lost 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 noncash impairment charges, changes in fair value of earnout consideration, changes in fair value of warrants, loss on extinguishment of debt, and onetime 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 of flight operation expenses of $4.7 million, and maintenance expenses of $3.7 million. This compares to 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 noncash stock-based compensation related to RSUs, as well as an increase in professional services and insurance and other expenses associated with operating as a publicly-traded company.
The increase is also partially due to the noncash impairment charges associated with our plan to phase out certain aging aircraft as I mentioned before. Interest expense for the fourth quarter of 2023 decreased to $6 million, down from $7 million in the fourth quarter of 2022. For the fourth quarter, we reported a net loss of $31.1 million, compared to a net loss of $17 million in the fourth quarter of 2022.
Adjusted EBITDA was negative $10.4 million compared to a negative $8.5 million in the fourth quarter of 2022. We ended the year with cash, restricted cash, and short-term investments of $37.9 million, and outstanding long-term debt of just under $207 million.
Looking at Bridger's standalone operations for the full year 2024, including our six Scooper, adjusted EBITDA is anticipated to range from $35 million to $51 million on revenues of $70 million to $86 million. This guidance, which is in line with our prior guidance issued in November 2023, includes the impact of recent reductions to the company's largely fixed cost structure and excludes any impact from the Spanish Super Scoopers offers acquired by the joint venture partnership between Marathon Asset Management, LLP, Avenue's Sustainable Solutions Fund, and Bridger aerospace, which are undergoing maintenance work in order to be returned to service.
Also despite the early start to the wildfire season, given the company's largely fixed cost structure, Bridger is expected to generate negative adjusted EBITDA in the first quarter of 2024 with positive adjusted EBITDA anticipated in the second and third quarters.
With that, I'd like to turn the call back to Tim for final comments.

Timothy Sheehy

Thanks, Eric, and thank you to everyone for joining us on today's call and for your support. While our first year as a public company was not without its challenges, with a profitable business model, strong fundamentals and strict cost controls, we reported record results and are well-positioned for 2024.
We continue to pursue opportunities to expand our aerial firefighting services to new mission critical areas and geographies, and are receiving an unprecedented influx of requests from multiple foreign governments for wildfire suppression and technology services. This is due both to the global demand for Super Scoopers and surveillance aircraft fed by the limited supply of functional Super Scoopers and the heightened awareness of the effectiveness of these purpose-built aircraft.
With the specialized aircraft, our high-quality team, and innovative use of technology and data, we are uniquely positioned to drive stakeholder returns while supporting our federal and state government clients in the growing battle against wildfires. We look forward to updating you on our progress when we report our first quarter results in May,

Question and Answer Session

Timothy Sheehy

If anyone has any follow-up questions, please reach out to our Investor Relations contact found on the IR section of our website. Thank you and have a great day.

Operator

Thank you, Mr. Sheehey. Ladies and gentlemen, that will conclude the Bridger Aerospace fourth-quarter 2024 earnings conference call. We'd like to thank you all so much for joining us and wish you all a great remainder of your day today. Goodbye.