Bird Reports Q3 Earnings: Revenue Miss & Improved Guidance

Bird Reports Third Quarter Earnings as a Public Company

Following the market close today, Bird, a scooter-sharing enterprise, revealed its financial performance for the third quarter. This marks the first earnings disclosure since becoming a publicly listed company. Bird recently completed a merger with a Special Purpose Acquisition Company (SPAC), securing additional capital and achieving public market status.

During the third quarter, Bird’s revenues experienced a slight shortfall compared to projections. However, the company expressed optimism, citing an expanding global presence and anticipating a resurgence in tourism and commuting, alongside an expected easing of global supply chain disruptions. Consequently, Bird has increased its guidance for the entirety of 2021. Shares saw a modest increase of 1.14% in after-hours trading at the time of reporting.

A Detailed Look at Bird’s Q3 Performance

The majority of Bird’s revenue in the third quarter stemmed from its core “sharing” operations – specifically, its scooter service. A relatively small percentage – 2.1%, equating to $1.38 million – originated from the sales of scooters and Bird’s newly introduced e-bike. Essentially, the hardware component of Bird’s business is minimal in comparison to its primary activity of providing hardware to independent fleet operators.

Yibo Ling, Bird’s CFO, explained during the Q3 earnings conference call on Monday that supply chain challenges significantly impacted product sales, particularly the launch of the new e-bike. Demand for the e-bike exceeded expectations, but logistical difficulties arose. Specifically, approximately $10 million in anticipated product sales from the third quarter were deferred to the fourth quarter due to shipping constraints, directly affecting revenue recognition timing.

Ling indicated the company will closely monitor the situation and explore strategies to mitigate supply chain pressures. Could this signal a move towards greater vertical integration in the future?

Bird’s total revenue for the third quarter reached $65.4 million, representing a 63% increase year-over-year. However, market analysts had predicted revenues of $69.85 million for the three-month period.

[*Note: The initial data source used by TechCrunch for analyst estimates was outdated. The most current average revenue estimate for Bird’s Q3 is $65.7 million, indicating a smaller discrepancy than originally reported.]

From this revenue, Bird achieved gross margins of 21%, a substantial improvement from the 3% recorded in Q3 2020. Despite this progress, the company remained unprofitable. It incurred a net loss of $36.9 million – an improvement over the $43.8 million net loss in the same quarter of the previous year – and reported adjusted EBITDA of -$5.3 million, a significant improvement from the Q3 2020 adjusted loss of $28.0 million.

However, the adjusted EBITDA figure shouldn’t be interpreted as an immediate indication of profitability. Bird’s calculation excluded hardware depreciation costs, effectively omitting the expense of scooter wear and tear. We believe this laissez faire approach is inappropriate, as depreciation is an ongoing cost and should be factored into the company’s operating results.

Revised Guidance for 2021

The company now anticipates the following for the full year 2021:

• Revenues “ranging from $195 million to $205 million,” an increase from the previous estimate of $188 million.
• Adjusted EBITDA “between $(85) million and $(75) million,” representing an improvement over prior guidance of a -$96 million adjusted EBITDA result.

Increased revenues and reduced losses are positive developments for any company, particularly those publicly traded and focused on achieving profitability. Analyzing the company’s results through September 30, 2021, Bird projects the following for the fourth quarter:

• Adjusted EBITDA losses of $32.6 million, based on the midpoint of the full-year guidance range.
• Revenue of $48.8 million, calculated using the midpoint of the full-year guidance range.

It’s logical to expect larger losses in the fourth quarter alongside lower revenues, given the seasonal nature of the business. Reduced outdoor activity during colder months naturally leads to decreased scooter rentals.

Last month, Bird expanded its credit facility with Apollo Investment Corp. from $40 million to $150 million, enhancing its capital efficiency in vehicle financing. This allows the company to procure vehicles during the slower winter season, contingent on easing supply chain constraints, and deploy them to existing and new markets in the spring and summer.

Despite the positive guidance revisions, Bird anticipates falling short of market expectations. Investors currently project total revenues of $193.1 million for 2021, although the company’s Q4 guidance appears more favorable than current estimates ($45.45 million).

Throughout Bird’s challenging 2020 and its transition to a public company via a SPAC, a central question has remained: Is the company constructing a sustainable business model with a realistic path to long-term, GAAP profitability?

Examining the Core Business Model

There are encouraging aspects to Bird’s recent results. The company has expanded its operations to 350 cities, creating a broad footprint with potential for future growth.

However, substantial growth is necessary to approach profitability. From total revenues of $65.4 million in the third quarter, Bird generated gross profits of $13.5 million. While this represents a significant improvement over the $1.08 million gross profit from the same period last year, it remains considerably below the $40.0 million in operating costs incurred during the quarter. The disparity between gross profit and operating costs is expected to widen in the fourth quarter due to seasonal factors.

With a current gross margin of 21%, Bird would need to generate $190.6 million in quarterly revenue to cover its Q3 2021 operating costs. This represents approximately triple its current revenue run rate.

Bird’s economic performance has improved significantly due to a shift towards a third-party operational model, where scooter fleet management is outsourced. Previously, Bird operated a more centralized, and less profitable, business.

“We’re observing strong retention among our fleet manager partners, largely due to the average of 100 vehicles we deploy to each partner, providing leverage on labor costs and enabling them to maximize earnings,” stated Travis VanderZanden, Bird’s founder and CEO. “The robust earnings seen by fleet manager partners, and the resulting revenue share potential, are driving strong retention despite labor challenges in other industries.”

Reasons for cautious optimism exist. Bird’s revenue doesn’t need to triple to cover operating costs if gross margins continue to improve. The company has demonstrated encouraging signs in this regard. For instance, despite a 52% year-over-year increase in “average deployed vehicles” to 78,500 in Q3 2021, average daily rides increased from 1.6x to 2.1x.

More scooters and increased rides per scooter per day are positive indicators for Bird. The 2.1x figure is the highest recorded in the company’s earnings reports, suggesting an upward trend. Rising ride volume will provide a tailwind to Bird’s profitability in the coming quarters, assuming it can be sustained.

There’s no immediate solution to the substantial gap between Bird’s operating costs and gross profit. However, the company’s core operations are improving, and its recent recapitalization through the SPAC merger provides it with financial resources. Bird reports that, 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 in cash during the first nine months of 2021, while investing cash flows were even larger, at a negative $115.5 million. Scooter purchases are recorded within investing cash flow.

In conclusion, Bird’s recovery from its 2020 lows continues. The crucial question now is whether this recovery is rapid enough to satisfy investors.