Bridger Aerospace Group Holdings, Inc. annual report, FY2023

Bridger Aerospace Group Holdings, Inc. — FY2023 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023; filed March 20, 2024. The filing is an annual report, not a standalone fourth-quarter filing. Bridger provides aerial wildfire suppression and surveillance services, primarily to U.S. federal and state agencies, using Super Scooper and Air Attack aircraft. The company operated as a single reporting segment and had 148 employees at year-end.

Financial Performance and Position

Metric	FY2023	FY2022	Change
Revenue	$66.7 million	$46.4 million	+44%
Gross income	$25.4 million	$12.5 million	+103%
Gross margin	38.0%	27.0%	+11.0 percentage points
Operating loss	$(57.5) million	$(22.6) million	Loss increased
Net loss	$(77.4) million	$(42.1) million	Loss increased 84%
Adjusted EBITDA	$18.7 million	$3.7 million	+410%
Adjusted EBITDA margin	28%	8%	+20 percentage points
Cash flow from operations	$(26.8) million	$(9.9) million	Greater use of cash

Revenue growth was driven by increased fire suppression revenue of $56.0 million, up 44%, and aerial surveillance revenue of $9.7 million, up 35%. Flight revenue increased 36% to $34.2 million, while standby revenue increased 48% to $30.7 million. Canada contributed $17.2 million of revenue in 2023, compared with none in 2022.

Reported profitability was heavily affected by $47.8 million of stock-based compensation, including $44.6 million in selling, general and administrative expense, higher public-company costs, and $2.4 million of aircraft and drone impairment charges. The filing does not provide a clear standalone fourth-quarter revenue or profitability figure.

Liquidity, Debt and Capital Structure

Cash and cash equivalents were $23.0 million at December 31, 2023; restricted cash was $14.0 million and marketable securities were $1.0 million.
Unrestricted cash and investments totaled approximately $24.0 million for covenant purposes.
Total debt was $211.4 million before debt issuance costs; long-term debt, net of issuance costs, was $204.6 million.
The Series 2022 Bonds totaled $160.0 million, bear interest at 11.5%, mature September 1, 2027, and require approximately $18.4 million of annual interest payments.
The company was not in compliance with the Series 2022 Bonds’ minimum 1.25x debt service coverage ratio as of December 31, 2023. It was in compliance with the $8.0 million minimum liquidity covenant at year-end.
Management expects further debt service coverage covenant noncompliance during the next 12 months and expects that additional funding will be needed to fund operations, interest payments, and required liquidity.
The auditor included a going-concern explanatory paragraph. Management’s plans include cost reductions and additional equity financing, but those funding sources are not assured.
Series A Preferred Stock had a carrying and redemption value of $354.8 million and accrued dividends or interest of $22.2 million at year-end. It carries an initial 7% annual rate, increasing to 9% in 2028 and 11% in 2029.

Material Changes Versus FY2022

Revenue increased 44%, primarily because more Super Scoopers operated for the full 2023 wildfire season and the company expanded into Canada.
Gross margin improved to 38.0% from 27.0%, but operating expenses increased 136% to $82.9 million.
Net loss increased to $77.4 million from $42.1 million, while operating cash outflow increased to $26.8 million from $9.9 million.
Investing cash flow changed to a $27.2 million source of cash, primarily from $55.4 million of marketable-security sales and maturities, compared with an $89.8 million use of cash in 2022.
The company completed its January 2023 reverse recapitalization and began trading on Nasdaq under BAER. It did not receive meaningful cash proceeds from the transaction because most public shareholders redeemed their shares.
Bridger acquired Ignis Technologies in September 2023 for $11.6 million, primarily through stock consideration, recording $10.7 million of goodwill and $1.3 million of intangible assets.
The company entered into a financing and services arrangement with MAB Funding for four Spanish CL-215T aircraft. Bridger invested $4.0 million in MAB and has options, but not an obligation, to acquire aircraft as they are returned to service.
The proposed $39.3 million acquisition of Big Horn Airways was terminated in November 2023; Bridger agreed to reimburse approximately $0.5 million of transaction expenses.
The company recorded $2.4 million of impairment charges on three Twin Commander aircraft and two Aurora eVTOL Skiron drones as it plans to phase out those platforms.

Outlook, Commentary, Risks and Unusual Items

Management views long-term demand favorably because wildfire seasons are becoming more severe, federal and state suppression spending is increasing, and purpose-built aircraft remain in limited supply. However, the 2023 U.S. wildfire season was materially less intense than anticipated, reducing flight hours, standby days and operating cash flow. Management expects revenue and cash generation to remain highly seasonal, concentrated in the second and third quarters.

Going-concern risk: Liquidity may be insufficient before seasonal 2024 collections, and debt could become immediately due if covenant breaches are not remedied or required interest is not paid.
Financing risk: The company expects to use an at-the-market offering and shelf registration, but additional financing may be unavailable or dilutive. In January 2024, it established an offering program for up to $100.0 million and sold approximately $0.2 million of shares through the filing date.
Customer concentration: The three largest customers represented 88% of 2023 revenue, with the largest representing 65%. Government customers represented approximately 72% of revenue, while federal and state government contracts together represented approximately 88%.
Aircraft and supplier concentration: Revenue depends disproportionately on Super Scoopers, for which replacement aircraft, parts, pilots and specialized mechanics are difficult to obtain.
Contract risk: Government contracts are subject to annual appropriations, audits, termination for convenience, regulatory requirements and potential suspension or debarment.
Internal controls: Management concluded that disclosure controls and internal control over financial reporting were ineffective due to three material weaknesses involving complex transactions, IT general controls and period-end account reconciliations and review.
Leadership risk: CEO Timothy Sheehy was running for the U.S. Senate and would be required to resign as an officer and director if elected.
Unusual accounting items: The company reported $8.5 million of net income attributable to common stockholders despite a $77.4 million consolidated net loss, primarily because of non-operating preferred-stock accounting adjustments. Basic and diluted earnings per share were $0.19 and $0.11, respectively.

Most Important Facts for Investors to Verify

Whether Bridger raises sufficient capital before seasonal 2024 cash collections and whether the Series 2022 Bonds remain in compliance or become subject to acceleration.
The company’s actual 2024 wildfire-season deployment, flight hours, standby days, revenue and operating cash flow.
Progress and measurable results from the cost-reduction plan initiated in November 2023.
Terms, timing, renovation costs and customer contracts associated with the four Spanish Scoopers and the MAB arrangement, including potential obligations of up to $15.0 million.
The extent of future dilution from the ATM program, RSUs, warrants, contingent Ignis consideration and conversion of Series A Preferred Stock.
Remediation and auditor validation of the three material weaknesses in internal control over financial reporting.
Renewal and funding status of major USFS and other government contracts, including the transition to the National Multiple Award Task Order Contract.
Whether the company can sustain positive Adjusted EBITDA while reducing reliance on stock-based compensation and other adjustments excluded from that measure.