The 2023 annual report for Bridger Aerospace has been released. In the report, the Company reported that it had a net annual loss of $77 million during 2023 and a long term debt of $205 million at the end of 2023. So, during the three years of its operation, the Company has lost 6 + 42 + 77 = $125 million, which to most Montanans (but maybe not to Montana’s oligarchs) would be considered “real money.”
To me, it is ironic that some of Tim Sheehy’s recent political ads bemoan our Federal government’s “reckless spending” when his Company consistently spends a lot more money than it takes in. Does that mean that he will fit right in as a senator?
Doubt about Company’s Ability to Continue as a Going Concern
In an excellent example of “burying the lede,” on page 69 of that report, the independent CPA who audited the Company’s financial statements for 2022 and 2023 noted the following (my emphasis):
“As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, operating cash flow deficits, debt covenant violations, and insufficient liquidity to fund its operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1.”
In Note 1 on page 75, the Company (under Tim’s signature) described the situation in the following terms (my emphasis):
“The Company is not in compliance with the DSCR [debt service coverage ratio on the $160 million in municipal bonds it obtained with the help of Gallatin County] covenant as of December 31, 2023 and management anticipates the Company to continue to not be in compliance with the DSCR covenant at future quarterly measurement periods in the next 12 months. . . . management anticipates that without additional cash funding the Company will not have sufficient cash on hand to fund operations. . . or to comply with the minimum liquidity covenant within the next 12 months, or until the Company begins to collect cash from its seasonal firefighting operations in 2024.”
The Company also mentioned that undisclosed “cost reduction measures” have been implemented and that further dilution of the value of its stock are under consideration (my emphasis):
“In addition to the cost reduction measures implemented in November 2023, the Company plans to seek additional cash funding through a number of potential avenues, including additional sales of our common stock through our at-the-market offering. . . and issuing additional shares of common stock pursuant to our shelf registration statement. These additional sources of working capital are not currently assured, and consequently do not sufficiently mitigate the risks and uncertainties disclosed above.“
Agreeing with the independent CPA, the Company admitted (my emphasis):
“Current and anticipated noncompliance with financial covenants and uncertainty regarding the Company’s ability to diligently prosecute the cost reduction plan and to raise additional cash funding for operations, including required interest payments associated with the Series 2022 Bonds, raise substantial doubt about the Company’s ability to continue as a going concern within 12 months following the issuance date of the consolidated financial statements as of and for the period ended December 31, 2023.”
Inexperienced and Overpaid CEO
Reviewing the Company’s statement of operations, it is interesting to note that “selling, general, and administrative expense” more than doubled between 2022 and 2023, rising from $35 million to $83 million. One can only wonder if the unstated “cost reduction measures” will include reducing directors’ and executives’ compensation. For example Tim’s 2023 compensation has been criticized for being “above average for companies of similar size in the US market” with Tim being characterized as “inexperienced” as a CEO.
Number of Employees Decreases
It is unfortunate that the number of Bridger employees has decreased from 166 at the end of 2022 to 148 at the end of 2023. Whether that decrease is part of the Company’s “cost reduction measures” is also unstated. Montana needs all the wildfire-suppression capabilities and good-paying jobs it can get.
It was surprising and disappointing that the Company did not address the usual (and critical) topics of “corporate governance” and “executive compensation” in its 2023 annual report. On page 113 of the report, the Company stated that that information “will be filed with the SEC within 120 days after the end of the fiscal year. . . . in connection with the solicitation of proxies for our 2024 Annual Meeting of Stockholders. . . . .” So, we may have to wait until the final days of April to see if the compensation that has been raining down on the Company’s executives (like Tim) while the Company’s cash reserves burn away will be curtailed by the Board of Directors (that the executives essentially control).
Dilution of Shareholders’ Ownership Percentage
The annual report noted that the number of issued and outstanding shares of the Company’s common stock increased by 14.6 percent, from 39,081,744 at the end of 2022 to 44,776,926 at the end of 2023. Thus, the existing public common shareholders’ ownership percentage of the Company decreased as a result of the Company’s issuing new equity during 2023, which is called dilution.
Revenue Received from Few Customers
The Company is still reliant on receiving most of its revenue from a few customers. In 2023, the Company reported that “Sales to our three largest customers in the aggregate represented 88%, sales to our largest customer represented 65% of our total revenues . . . and two customers accounted for 73% of accounts receivable. ”
Tim Would Face Significant Conflicts of Interest If Elected
The Company noted that as of the end of 2023 “the executive officers of Bridger and Mr. Matthew Sheehy (a co-founder and director of Bridger and the brother of Mr. Timothy Sheehy, the Bridger CEO), collectively beneficially [directly or indirectly] owned 53.3% of the outstanding Common Stock. . . . As a result, Bridger has a small number of significant stockholders who could significantly influence its business and operations. In addition, the BTO [Blackstone Technical Opportunities] Stockholders collectively beneficially owned 19.7% . . . of the outstanding Common Stock. . . .”
Thus, if Tim were to become one of Montana’s US senators, he would face significant conflicts of interest as a major stockholder in a Company that is reliant both on receiving most of its revenue from the Federal government and cooperation from Blackstone Inc., a firm that has $1 trillion of assets under management.
Warning: Take the above numbers “with a grain of salt” because the Company also reported on pages 35 and 36 that “A material weakness is a deficiency or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. . . . We have identified material weaknesses in our internal control over financial reporting, which we are in the process of, and are focused on, remediating. . . . Although we plan to complete this remediation process as quickly as possible, we are unable, at this time, to estimate how long it will take, and our efforts may not be successful in remediating the identified material weaknesses.”
2024 Is an All-Hands-on-Deck Situation for the Company
Even if the numbers in the Company’s annual report are approximate, it is clear that the year 2024 is going to be an all-hands-on-deck situation for the survival of the Company. For Tim Sheehy, CEO of Bridger Aerospace, to be distracted at this critical time by his US Senate campaign is unfortunate. Both Bridger’s management and its outside, independent CPA auditor agree that the Company must be turned around, and soon. Relying on the wildfire situation to be worse this year than last is not a plan. Tim’s “vision to build a global enterprise to fight wildfires” is at risk. Why Tim wants to leave the battlefield so early in the battle is inexplicable and some would say inexcusable. He owes his employees, and himself, more.