Today after the bell, scooter-sharing company Bird disclosed its third-quarter earnings, the first time it has done so as a public company. Bird recently merged with a SPAC, bringing cash and public-status to the formerly private unicorn.
In the third quarter, Bird’s revenues missed expectations, but given an expanded global footprint and an expectation that tourism and commuting will return to cities and global supply chain issues will ease, the company also boosted its guidance for the full-year 2021 period. Shares were up marginally at 1.14% in after-hours trading at the time of this writing.
Bird’s Q3
In the third quarter, Bird generated nearly all of its revenue from what it describes as “sharing” efforts, or its scooter business. A smaller portion — 2.1%, or $1.38 million — of its total top line came from sales of scooters and Bird’s new e-bike. More simply, the hardware side of Bird is effectively nil compared to its larger business of providing hardware to independent fleet operators.
“Supply chain was a particular headwind in our product sales business principally for our new e-bike launch,” said Yibo Ling, Bird’s CFO, during the Q3 earnings call on Monday. “Demand for e-bike is surpassing expectations given global supply chain issues. We have seen difficulties particularly around logistics. As an example, $10 million of product sales we expected to realize in the third quarter was pushed back to the fourth quarter as a result of shipping logistics, which directly impacted revenue recognition timing.”
Ling went on to say it will monitor the situation closely and look for ways to mitigate supply chain pressures. Do we smell more vertical integration in the future?
Bird’s total revenue came to $65.4 million in the third quarter, up 63% compared to its year-ago period. However, public-market investors had expected Bird to generate $69.85 million in revenues during the three-month period.
From that revenue result, Bird managed to post gross margins of 21%, a huge improvement over the 3% that it recorded in Q3 2020. Still, the company was far from profitable. It lost $36.9 million on a net basis — an improvement on its year-ago Q3 net loss of $43.8 million — and had adjusted EBITDA of -$5.3 million, a huge improvement on its Q3 2020 adjusted loss of $28.0 million.
However, don’t let that adjusted EBITDA number give you hope that Bird is about to have a profitable business. In its calculations to reach the -$5.3 million figure, Bird removed its hardware depreciation costs, effectively stripping out the expense of scooter wear and tear. That’s too laissez faire to pass our muster; depreciation is not a one-time cost, and should thus be included in the company’s operating results, from our perspective.
Guidance upgrade
Per the company, Bird now expects:
- Revenues of “between $195 million and $205 million” in 2021, up from a prior estimate of $188 million.
- Adjusted EBITDA of “between $(85) million and $(75) million,” an improvement of prior guidance indicating a -$96 million adjusted EBITDA result for the calendar year.
Larger revenues and smaller losses are welcome at any company, and especially so at public companies banking on growing their way to break-even status. Doing some simple subtraction from the company’s results through September 30, 2021, Bird estimates the following results for its fourth-quarter:
- $32.6 million in adjusted EBITDA losses, calculated using the midpoint of Bird’s full-year guidance range.
- $48.8 million in revenue, calculated using the midpoint of Bird’s full-year guidance range.
It should not surprise that Bird anticipates larger losses in the fourth-quarter on the back of slimmer revenues, given the seasonality inherent to its business. When it’s cold, people go outside less. And few people rent scooters to ride them inside their primary residences.
Last month, Bird upped its credit facility from Apollo Investment Corp. from $40 million to $150 million, which will allow the company to be more capital efficient with vehicle financing. The money will allow Bird to purchase vehicles in the slow winter season, as long as supply chain constraints ease, and deploy them to existing and new markets in the spring and summer.
Despite the guidance gains, however, Bird anticipates undershooting the market’s expectations. Investors anticipate that Bird will file $201.2 million in total revenues in 2021, though the company’s Q4 guidance in particular appears to be better than expectations as they stand ($45.45 million).
During Bird’s difficult 2020 and through its SPAC-led public debut, our question has been simple: Is the company building a sustainable business that has a real shot at long-term, GAAP profitability? So, let’s talk about just that.
Core model questions
There are some positive notes in Bird’s latest results. The company, it said in an earnings release, has grown its operations to 350 cities. That’s a wide footprint that could provide attractive growth in the next year.
But the company will need extensive growth to get closer to profitability. From total revenues of $65.4 million in the third quarter, Bird generated gross profits of $13.5 million. That figure is a massive improvement on its year-ago result of gross profits of just $1.08 million, to be clear, but remains miles from its $40.0 million worth of operating costs in the quarter. And the gap between the two numbers — gross profit and operating costs — will widen in the fourth quarter due to weather-related issues.
At its current 21% gross margin, a figure inclusive of “depreciation on revenue earning vehicles,” Bird would need to generate $190.6 million worth of revenues in a quarter to cover the operating costs it posted in Q3 2021. That’s around triple its current run rate.
Recall that Bird’s economics have improved dramatically thanks to a shift to a third-party model, in which scooter fleet operations are handed to others. Previously, Bird ran a more centralized, and less profitable business.
“We’re seeing very strong retention with our fleet manager partners, and one of the reasons why is the hundred vehicles on average we ship to each fleet manager partner, which gives us a lot of leverage on the labor and allows them to actually really maximize their earnings,” Travis VanderZanden, founder and CEO of Bird, said on Tuesday. “The very strong earnings we’re seeing with the fleet manager partners is in rev share potential, I think is why we’re seeing such strong retention on the fleet manager base despite some labor headwinds in other industries.”
There are reasons for cautious optimism. Bird’s revenue won’t have to triple to cover its operating costs with gross profit if the company’s gross margins can improve further. And Bird has posted some encouraging signs to that effect. For example, despite boosting its “average deployed vehicles” by 52% on a year-over-year basis in Q3 2021 to 78,500, the company still saw its average daily rides scoot from 1.6x to 2.1x. More scooters and more rides per scooter per day is good news for Bird.
That 2.1x figure is the highest result on file in the company’s earnings report, indicating a slope that points up. Rising average ride volume will provide a nice tailwind to Bird’s profitability in the coming quarters, if it can be maintained.
There isn’t a quick fix between the large gap that remains between Bird’s operating costs and gross profit. But at least the company’s core operations are improving, and it recently recapitalized thanks to its SPAC-led public debut, so it has cash on hand. Bird reports, inclusive of its public debut, “total cash, cash equivalents, and restricted cash, as of September 30, 2021 were $309 million after adjusting for $246 million received at the closing of the business combination.”
Bird’s operations consumed $66.5 million worth of cash during the first nine months of 2021, while its investing cash flows ran a larger, negative $115.5 million during the same period. The company’s scooter purchases are recorded in investing cash flow, for reference.
Looking at the sum of Bird’s Q3, it’s clear that its recovery from its 2020-lows continues. If it is recovering quickly enough to keep investors happy is the next question.