Bridger Aerospace Group Holdings, Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
Bridger provides aerial wildfire surveillance, relief, suppression and firefighting services, primarily for government agencies in the United States. As of March 31, 2024, the Company owned 15 aircraft, including six Viking CL-415EAF “Super Scoopers,” four surveillance platforms, four Daher Kodiaks and one Pilatus PC-12. Results are highly seasonal, with most revenue historically generated in the second and third quarters during the North American wildfire season.
This unaudited Form 10-Q covers the three months ended March 31, 2024, compared with the three months ended March 31, 2023. The Company operates as one reportable segment.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $5.5 million | $0.4 million | Up $5.1 million, or 1,409% |
| Gross loss | $(3.7) million | $(6.9) million | Improved $3.2 million |
| Operating loss | $(15.3) million | $(40.1) million | Improved $24.8 million |
| Net loss | $(20.1) million | $(44.7) million | Improved $24.6 million |
| Adjusted EBITDA | $(6.9) million | $(10.7) million | Improved $3.7 million |
| Net cash used in operating activities | $(19.8) million | $(36.7) million | Improved $16.9 million |
Revenue consisted of $3.9 million from fire suppression, $0.6 million from aerial surveillance and $1.0 million from other services. Flight revenue was $0.9 million, standby revenue was $3.5 million and other revenue was $1.1 million. Other services included approximately $1.0 million of return-to-service work related to the Spanish Scoopers.
Gross margin was approximately negative 67% in Q1 2024 versus negative 1,886% in Q1 2023. Operating margin was approximately negative 278% versus negative 10,990%, and net loss margin was approximately negative 365% versus negative 12,242%. These comparisons are distorted by the very low Q1 2023 revenue base and unusually high prior-year stock-based compensation.
Total cost of revenues was $9.2 million, up 27%, including $5.0 million of flight operations and $4.2 million of maintenance. Selling, general and administrative expense declined 65% to $11.6 million, primarily because Q1 2023 included approximately $20.1 million of stock-based compensation associated with the reverse recapitalization and higher public-company professional fees.
Interest expense increased 5% to $5.9 million. Basic and diluted loss per share was $0.55. The Company recorded $5.9 million of stock-based compensation in Q1 2024, compared with $25.6 million in Q1 2023.
Liquidity, debt and balance sheet
- Cash and cash equivalents were $6.8 million at March 31, 2024, down from $23.0 million at December 31, 2023.
- Restricted cash was $9.3 million, primarily reserved for debt servicing; total cash, cash equivalents and restricted cash were $16.1 million.
- Total debt was $210.6 million before debt issuance costs, including $160.0 million of 11.5% Series 2022 Bonds maturing September 1, 2027. Long-term debt, net of issuance costs, was $204.1 million.
- Total assets were $252.4 million, while total liabilities were $240.1 million. Series A Preferred Stock was recorded as mezzanine equity at $361.0 million, and common stockholders’ deficit was $348.7 million.
- Net cash used in investing activities was $0.2 million, including $1.0 million of property, plant and equipment purchases and $0.3 million of capitalized software expenditures.
- Net cash used in financing activities was $0.9 million, principally reflecting $0.7 million of debt repayments, partly offset by $0.2 million of ATM offering proceeds.
Material changes versus the prior comparable period
- Revenue increased sharply because the 2024 wildfire season began earlier and more aircraft operated during the quarter; Q1 2023 had no fire suppression or aerial surveillance revenue.
- Cost of revenues increased despite the revenue growth, driven by higher aircraft lease expense, training costs, contractor wages, employee labor and stock-based compensation.
- SG&A declined substantially because Q1 2023 included immediate vesting-related stock compensation and elevated costs associated with becoming a public company.
- Operating and net losses narrowed, but the Company remained materially unprofitable and generated negative operating cash flow.
- Cash declined by $16.2 million from year-end 2023, reflecting operating cash use and limited financing proceeds.
- Two customers represented 69% and 19% of Q1 2024 revenue; two customers represented 82% and 13% of accounts receivable at March 31, 2024, indicating significant customer concentration.
Guidance, outlook, risks and unusual items
The Company did not provide specific quantitative revenue or earnings guidance. Management expects revenue and operating cash flow to remain concentrated in the second and third quarters and states that long-term demand may benefit from increasing wildfire frequency and severity. Near-term results remain dependent on weather, wildfire intensity, government contracting, aircraft availability, fuel prices, labor, suppliers and maintenance requirements.
The financial statements disclose substantial doubt about the Company’s ability to continue as a going concern for the 12 months following issuance. The Company was not in compliance with the Series 2022 Bonds’ 1.25x debt service coverage ratio or $8.0 million minimum unrestricted liquidity requirement at March 31, 2024. Management expects potential future noncompliance because of seasonality and the less intense 2023 wildfire season. Continued violations, failure to implement the cost-reduction plan or failure to make required interest payments could result in acceleration of the bonds.
Management began a cost-reduction plan in November 2023 and may seek additional funding through its ATM facility and other equity or debt financings. On April 15, 2024, the Company issued 2,183,366 common shares in a registered direct offering for approximately $9.2 million of net proceeds. As of May 10, 2024, approximately $5.9 million remained available under the ATM program.
The Company has a right, but not an obligation, to acquire four Spanish Scoopers after return-to-service work funded through MAB. If the aircraft are not acquired or sold under specified arrangements, the Company could owe up to $15.0 million. Management estimates renovation and upgrade costs of approximately $8 million to $12 million per aircraft if acquired.
The Company reported three material weaknesses in internal control over financial reporting: accounting for complex transactions, IT general controls and period-end account reconciliation and financial statement review controls. Disclosure controls and procedures were not effective as of March 31, 2024. Remediation is in progress, but the Company cannot estimate when it will be completed and provides no assurance that remediation will be successful.
Other notable items include $361.0 million of Series A Preferred Stock carrying and redemption value, 32.8 million common shares issuable upon conversion of the preferred stock, and $8.5 million of contingent consideration related to the Ignis acquisition.
Important facts for investors to verify
- Whether the Company remedies the Series 2022 Bonds covenant violations and maintains the required $8.0 million unrestricted liquidity.
- Whether seasonal 2024 firefighting operations generate sufficient cash to reduce the going-concern risk.
- The timing, pricing and dilution associated with additional ATM or other equity financing.
- The Company’s ability to reduce costs while maintaining aircraft readiness and service capacity.
- The concentration and renewal status of major government customers and related accounts receivable collections.
- The potential cash obligation of up to $15.0 million related to the Spanish Scoopers arrangements.
- The status and effectiveness of remediation efforts for the three material weaknesses in internal control.
- The cash interest burden, debt maturity schedule and potential consequences of debt acceleration.