Shared micromobility company Bird has lost nearly all of its value since going public through a special purpose acquisition merger last year, falling from a 52-week high of $9.05 per share to around 23 cents per share this afternoon. In its short life on the public markets, Bird has garnered a reputation for burning through cash as it tries to be everywhere at once.
Bird’s free fall has investors and industry watchers questioning the company’s future and the state of the industry overall.
The upshot? Bird CEO and president Shane Torchiana predicts a major consolidation in the industry, with two or three companies coming out on top. Bird, he said, has a chance to be one of those companies.
That bullishness might prompt the rise of a few investor eyebrows considering the last year.
Bird has gone through a major restructuring, an executive shakeup, a round of layoffs, an exodus from multiple markets, a delisting warning from the New York Stock Exchange, a confession that it had overstated revenue for the past two years and a warning to investors that Bird may not have enough funds to continue operating for the next 12 months.
Torchiana contends the turmoil has forced Bird to take action and develop a strategy that drives down costs, improves efficiency and eventually even leads to profitability.
His plan includes increasing battery-swappable scooters, taking more control over asset allocation and making nice with cities. The company aims to be free cash flow positive by next year and to become adjusted EBITDA positive on a full-year basis, even if it needs to sacrifice some growth to achieve that.
Money, vehicles, ridership and staying lean
First things first: Bird needs to raise some more money so it can become a self-sufficient company. It closed out the third quarter with $38.5 million in free cash flow and operating expenses at $29.4 million.
Torchiana said he thinks around 3% or 4% of what Bird has raised historically should get the company out of its hole and into self-sustaining territory. Bird wouldn’t disclose its total funding amount, but per Crunchbase, the company has raised $883 million to date. That means it’ll need to scrounge together another $26 million to $35 million.
The problem is, given Bird’s shaky track record, investors are understandably dubious of claims that it can succeed. Tom White, an analyst at D.A. Davidson investment bank, said he isn’t sure which investors would throw Bird a bone at this point.
“Given Bird’s market cap, raising any significant amount of money would most likely mean substantial dilution for existing equity holders,” White told TechCrunch. “The white knight scenario here could be a strategic investment, where someone invests a lot of money for a decent-sized stake in the business.”
White pointed to Yahoo’s investment in Taboola this week as a potential example of the type of transaction that Bird would benefit from … if there were a large strategic player that made sense for Bird. (Yahoo, it should be disclosed, is TechCrunch’s parent company.)
“Think about the most logical strategic players in this space,” said White. “They already have their partnerships and tie-ups and outright investments in micromobility companies. You’ve got Uber and Lime, Lyft and Spin. The list of possible strategics that would be in a position to do something seems pretty small, unless it’s maybe somebody a little more left field like an auto company, but I don’t know what the appetite from OEMs is for micromobility right now.”
Considering Ford sold off Spin to Tier, I’d say the hunger isn’t there.
Swappable batteries goals
A big part of Bird’s plan to be the micromobility underdog of the 2020s involves buying new vehicles with swappable batteries. Bird has been a stalwart for the now-antiquated method of physically hauling scooters to a warehouse to charge and then putting them back on the ground — a seriously labor-intensive and costly process. Proponents of swappable batteries say this also makes for decreased asset efficiency, in large part because it means vehicles are off the streets for extended periods of time while they charge.
Currently, only 10% of Bird’s current fleet is built to swap. That’ll change going forward, Torchiana said: By next year, Bird is hoping to have “tens of thousands” of scooters on the ground with swappable batteries across the U.S. and Europe.
You might notice I wrote above “buying new vehicles,” not “making new vehicles.” That’s because Bird sees buying off-the-shelf vehicles today as a path toward keeping costs down and quality up. A couple of years ago, buying off-the-shelf scooters meant buying vehicles with short lifespans and a high likelihood of breaking down. Today, Torchiana said, third-party vendors — the main players we’ve identified are Segway and Okai —are advanced enough in their designs and execution that it would be silly for Bird, an operator, to continue funneling money into being a scooter manufacturer as well.
“I think developing that internally versus frankly buying something off the shelf that looks like it’s pretty good, is a little bit cheaper and has less of a lead time for the orders, seems super logical,” Torchiana said. “You can buy vehicles from third-party vendors in three months now versus if you design it yourself, you need to put cash out 18 months before you receive it. And then of course you don’t have to spend tens of millions of dollars on vehicle R&D yourself when others are already doing that.”
Not every aspect of the vehicles will be outsourced, though. Bird has worked hard on its IoT device, which helps with scooter tracking, sidewalk riding detection and ensuring scooters are parked in virtual parking corrals, which is a big priority for Bird as it works to build trust with city partners.
Having this kind of tech onboard has become table stakes for companies looking to win city permits. Lime, Spin and Voi all use some form of camera-based computer vision technology to determine a rider’s exact location, but Bird and Superpedestrian use location-based positioning technology. Torchiana said the latter yields more accurate results now and is much cheaper, which is a priority for a company trying to keep down costs.
Moving some fleet manager operations in house
While Bird looks to win over cities, it might also downsize its fleet manager program, which currently makes up the majority of Bird’s fleet management, and move some of those operations in-house. Bird’s fleet managers are local entrepreneurs who contract with Bird to lease, manage and operate a fleet of e-scooters in their city. The system has been criticized in the past for being predatory and luring contract workers into debt, an accusation that Bird and many fleet managers dispute. It also puts off some cities that would rather see employees, not contractors, hired.
“Theoretically, I like the asset-light nature of the fleet manager model. Less fixed expenses and overheads in the market. And the fleet managers in theory have aligned incentives; they get paid on a potential revenue so they have an incentive to make sure the vehicles are taken care of and put in the right spots,” said White. “But it doesn’t seem to be a total silver bullet. [ … ] It seems like some regulators actually prefer the W2 model because they can point to these businesses as the job creators of their city.”
Bird’s win rate with cities has taken some hits since the early days when there was less competition. Today, Torchiana said it’s in the 80% range, but that it should be up over 90%.
“I think a small part of the reason for that is the fleet manager model,” Torchiana said. “We’re already doing about 6% of our cities in-house. If that winds up turning to 30% or 40%, that would be fine.”
Torchiana did note that he expects Bird for the foreseeable future to continue to rely predominantly on fleet managers in most cities.
Improving asset efficiency
Moving more operations in-house might not only make Bird more attractive to cities, but it could help improve asset efficiency. Bird aims to boost the amount of revenue per vehicle per day it makes while pushing its average deployment percentage into the 60% range. Fleet managers are effectively running their own businesses, so Bird can make recommendations as to where they should put vehicles and when, but the fleet managers don’t have to listen to Bird, which can make for a less cohesive system.
“To size that, 46% of our drops that we do in any given day we know are not yielding incremental trips, and that’s because [fleet managers] are not following the recommendation,” said Torchiana.
That problem can compound in cities with only so many really busy street corners, like Austin, Texas. If Bird increases its fleet size there, it might find that local fleet managers will all put their vehicles on the same main street corner rather than dispersing them.
“To a fleet manager, that’s just solving for the decision of where to drop the vehicles, and without information about the entire fleet, it makes a lot of sense. But when you think about the overall efficiency of the fleet, it’s actually quite hurtful,” Torchiana said.
Torchiana said Bird has to be better about incentivizing fleet managers to follow the recommendation and actually drop vehicles in the optimal zones. Torchiana said this will be better for Bird but also for the fleet managers.
For example, Bird will start reducing the available areas where fleet managers can drop vehicles if they don’t see those areas as profitable or fitting into the city’s overall scheme.
Staying lean and self-sustaining
The final piece of Bird’s strategy for the end of the year and into 2023 is to keep spending habits way down. This follows the cost-cutting measures that Bird has already implemented this year, including shutting down the company’s retail scooter product; leaving unprofitable markets like Norway, Sweden and Germany, along with several dozen markets in the U.S.; and laying off 23% of Bird’s staff.
“We had a $225 million run rate in the second quarter, and with the steps we’ve already taken — and it’ll take a few months to totally flow through our financials — that’s going to come down by about half. So it’ll come down to about $120 million,” Torchiana said. “When you think about being an economically sustainable company, it’s about going line by line and reviewing everything that we’re spending money on and saying no to the stuff that was nice to have, but not a need to have. [ … ] We frankly just don’t need to be a $250 million op-ex company to run anywhere near the scale we’re operating at.”
The company expects to see the savings from these decisions mostly completed in the fourth quarter and realize the full benefit in early 2023, per Bird’s Q3 earnings.
“If we’re free cash flow positive and we grow at even a modest clip, I don’t think we need an exit strategy,” Torchiana said in response to a question from TechCrunch on whether Bird was considering M&A. “I think we can be a standalone player now.”