Bridger Aerospace Group Holdings, Inc. — 2022 Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended December 31, 2022. Historical financial statements are those of predecessor Bridger Aerospace Group Holdings, LLC and its subsidiaries, not the public company that completed its business combination with Jack Creek Investment Corp. on January 24, 2023. Bridger provides aerial wildfire surveillance, suppression and firefighting services, primarily to U.S. government agencies, using specialized aircraft, manned and unmanned surveillance systems, and related technology.
- Operations are managed as one operating segment.
- At December 31, 2022, the company reported 166 employees and a fleet of 21 aircraft at the public-company level, including six Super Scoopers, 13 manned surveillance aircraft and two Aurora eVTOL systems; the predecessor financial note separately identifies 17 aircraft owned at year-end.
- Revenue is highly seasonal, with most activity historically occurring in the second and third quarters.
Financial performance and key metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $46.4 million | $39.4 million | 18% |
| Gross profit | $12.5 million | $12.8 million | (2%) |
| Gross margin | 27% | 33% | Down approximately 6 percentage points |
| Operating loss | $(22.6) million | $1.6 million | Material deterioration |
| Net loss | $(42.1) million | $(6.5) million | Loss increased $35.6 million |
| Net loss margin | (91%) | (17%) | Down approximately 74 percentage points |
| Adjusted EBITDA | $3.7 million | $9.8 million | Down 62% |
| Adjusted EBITDA margin | 8% | 25% | Down approximately 17 percentage points |
| Net cash from operating activities | $(9.9) million | $6.0 million | Deterioration of $15.9 million |
Fire suppression revenue increased 28% to $38.8 million, primarily from two additional Super Scoopers entering service, partly offset by a less intense 2022 fire season. Aerial surveillance revenue declined 16% to $7.2 million. Flight revenue increased 23% to $25.1 million, while standby revenue increased 12% to $20.8 million.
Cost of revenues increased 27% to $33.9 million. Flight operations expense rose 19% to $18.8 million, and maintenance expense rose 41% to $15.1 million. Selling, general and administrative expense increased 213% to $35.1 million, including $10.1 million of transaction-related discretionary bonuses, approximately $5.3 million of higher professional services costs, and a $1.8 million loss on disposal of aging aircraft and rotables. Interest expense increased 115% to $20.0 million, primarily due to the 2022 bond financing and preferred-share-related costs.
The reported net loss attributable to common shareholders was $(328.3) million, or $(8.15) per share, versus $(22.5) million, or $(0.56) per share, in 2021. The 2022 amount included a $200.5 million adjustment to the Series C Preferred Shares’ maximum redemption value and an $85.7 million adjustment related to Series A Preferred Shares; these items substantially increased the loss attributable to common shareholders.
Cash flow, liquidity and capital structure
- At December 31, 2022, cash and cash equivalents were $30.2 million, restricted cash was $12.3 million and short-term available-for-sale debt securities were $55.0 million.
- Cash used in investing activities was $89.8 million, including $60.2 million of marketable-security purchases, $25.6 million of property and equipment purchases and $9.8 million for hangar construction, partly offset by $5.5 million of marketable-security maturities.
- Cash provided by financing activities was $124.9 million, reflecting $160.0 million of Series 2022 bond proceeds and $288.5 million of Series C Preferred Share proceeds, offset by redemptions of Series A and Series B Preferred Shares, debt extinguishment and financing costs.
- Total debt obligations were approximately $213.6 million before debt issuance costs; long-term debt, net of issuance costs, was $205.5 million. The Series 2022 Bonds carry an 11.5% annual interest rate and mature September 1, 2027.
- Contractual obligations totaled approximately $229.2 million, including $213.6 million of debt, $9.1 million of aircraft purchase obligations and $3.8 million of hangar construction obligations.
- Debt agreements require, among other matters, minimum liquidity of $8 million and a minimum debt-service coverage ratio of 1.25x beginning with the quarter ending December 31, 2023. Prior covenant violations under certain Rocky Mountain Bank facilities were waived; the filing states the company was not in violation of specified senior leverage and debt-service coverage ratios at December 31, 2022.
- Management stated that cash, cash equivalents and debt securities were expected to fund working capital and capital expenditures for at least 12 months from the filing date. As of February 28, 2023, unaudited cash and cash equivalents were $16.8 million, restricted cash was $12.4 million and marketable securities were $32.2 million.
Material changes versus 2021
- Revenue grew 18%, but gross margin declined because operating and maintenance costs grew faster than revenue.
- The 2022 fire season was less intense than 2021 in the company’s principal Western U.S. markets, reducing surveillance demand, flight hours and standby days.
- Delivery delays affected the fifth and sixth Super Scoopers and two UAS systems. The fifth Super Scooper was deployed in September 2022, the UAS systems arrived in October 2022 and the sixth Super Scooper arrived in February 2023.
- SG&A and interest expense rose sharply due to transaction-related bonuses and professional fees, preparation for becoming public, increased debt and preferred-share obligations, and the 2022 bond issuance.
- The company completed the Series 2022 bond financing, redeemed its legacy Series A and Series B Preferred Shares, issued Series C Preferred Shares and subsequently exchanged those Series C shares for public-company Series A Preferred Stock at the business-combination closing.
- The business combination generated no cash proceeds for the company because most public shares were redeemed; the filing reports approximately $16.6 million of transaction costs and a substantial post-closing reduction in cash and cash equivalents.
Guidance, outlook, commentary, risks and unusual items
The filing does not provide specific revenue, earnings or EBITDA guidance. Management expressed a positive long-term outlook based on increasing wildfire demand, longer fire seasons, limited supply of specialized aircraft and government funding, while acknowledging near-term volatility from weather, aircraft delivery delays, supply-chain constraints, inflation, fuel prices and labor availability.
- Approximately 96% of 2022 revenue came from U.S. government customers, approximately 99.1% from federal and state government contracts, and approximately 94.8% from the largest customer. One customer represented 62% of accounts receivable at year-end.
- Government contracts may be terminated for convenience, depend on annual appropriations and are subject to audits, compliance requirements and potential repayment, penalties, suspension or debarment.
- The business depends heavily on the availability of Super Scoopers, qualified pilots and mechanics, specialized parts and a limited supplier base, particularly Viking/LAS.
- Aircraft operations involve significant safety, weather, mechanical and regulatory risks. A grounded or unavailable Super Scooper could materially reduce revenue.
- The company identified material weaknesses in internal control over financial reporting involving complex transactions, IT general controls and period-end account reconciliation and review controls. Management had begun remediation but could not estimate when remediation would be complete.
- The company is not profitable and generated negative operating cash flow in 2022. High leverage, the 11.5% bond rate, covenant requirements and substantial 2027 debt maturities create liquidity and refinancing risks.
- FireTRAC was launched in April 2022, but management expected it to begin generating revenue no earlier than the second quarter of 2023; the filing does not provide a clear revenue forecast for this initiative.
- The filing reports no material pending legal proceedings. The independent auditor issued an unqualified opinion on the financial statements but did not opine on internal control effectiveness.
Most important facts for investors to verify
- Whether the company can achieve sufficient operating cash flow and maintain the required $8 million minimum liquidity and 1.25x debt-service coverage ratio.
- The timing and terms of the approximately $165.4 million of scheduled principal maturities in 2027, including the Series 2022 Bonds.
- Progress in remediating the disclosed material weaknesses and the effectiveness of the company’s newly public-company reporting controls.
- Actual utilization, availability and revenue contribution of the six-Super-Scooper fleet, including the February 2023 delivery of the sixth aircraft.
- Customer concentration, contract renewal and appropriation risk, especially the dependence on the largest government customer.
- Whether FireTRAC, UAS services and potential domestic or international expansion generate material revenue without requiring disproportionate additional capital.
- The effect of the January 2023 business combination, including transaction costs, public-company expenses, preferred-stock dividend and redemption provisions, warrant dilution and the absence of cash proceeds from the transaction.