Allbirds Inc

Previous wording

We generate our revenue via sales of footwear and apparel products, primarily through our direct business, a digitally-led vertical retail distribution strategy. We generally market directly to consumers via our localized multilingual digital platform and our physical footprint of 57 stores as of March 31, 2024. In addition to our direct business, we selectively partner with third-parties, including retailers and distributors, to sell our products through their channels, which helps us reach more consumers and increase brand awareness.

Current wording

We generate our revenue via sales of footwear and apparel products, primarily through our direct business, a digitally-led vertical retail distribution strategy. We generally market directly to consumers via our localized multilingual digital platform and our physical footprint of 43 stores as of June 30, 2024. In addition to our direct business, we selectively partner with third-parties, including retailers and distributors, to sell our products through their channels, which helps us reach more consumers and increase brand awareness.

Previous wording

For the three months ended March 31, 2024 and 2023:

Current wording

For the three and six months ended June 30, 2024 and 2023:

Previous wording

Our product and brand initiatives include increasing focus on our core franchises, through a concentration on comfort and quality and better commercialization of our innovative materials, as well as a highly focused brand strategy that reconnects with core consumers. We expect these initiatives to begin to impact the business in 2024.

Current wording

Our product and brand initiatives include increasing focus on our core franchises, through a concentration on comfort and quality and better commercialization of our innovative materials, as well as a highly focused brand strategy that reconnects with core consumers. We expect these initiatives to begin to impact the business in the second half of 2024.

Previous wording

Our store-based distribution initiatives in the United States include optimizing our existing store fleet and selectively expanding our third party distribution channels. Store optimization will include slowing the pace of new store openings, closing certain stores that do not meet our profitability targets, and investing in corporate and retail store talent and store marketing. As of March 31, 2024, we had completed all planned new store openings and we continue to evaluate ways to optimize our existing store fleet, which includes the planned closure of 10-15 stores in 2024. We closed three stores during the three months ended March 31, 2024.

Current wording

Our store-based distribution initiatives in the United States include optimizing our existing store fleet and selectively expanding our third-party distribution channels. Store optimization will include slowing the pace of new store openings, closing certain stores that do not meet our profitability targets, and investing in corporate and retail store talent and store marketing. As of June 30, 2024, we had completed all planned new store openings and we continue to evaluate ways to optimize our existing store fleet, which includes the planned closure of approximately 10-15 stores in the United States 2024. We closed 3 stores in the United States in the first quarter of 2024 and 10 stores in the United States during the second quarter of 2024, for a total closure of 13 stores during the six months ended June 30, 2024.

Previous wording

Our international go-to-market strategy initiative encompasses evaluating ways to reduce complexity and grow internationally in a cost- and capital-efficient manner. In the third quarter of 2023, we signed distribution agreements with independent third-party distributors in South Korea and Canada, and completed the transition of these businesses. In the fourth quarter of 2023 and first quarter of 2024, we signed distribution agreements with independent third-party distributors in existing regions of Australasia and Japan, respectively, with transitions expected in mid-year 2024, and in the first quarter of 2024, we signed distribution agreements with independent third-party distributors in the Gulf Countries and Southeast Asia, which are new regions. Distributors oversee the distribution of our products, purchased from us, across eCommerce, brick and mortar, and wholesale channels in their respective territories and are required to allocate dedicated brand and marketing resources to their operations for us. We may continue to enter into similar distribution arrangements with third parties in other international markets, which we expect to impact both our short and long term results of operations. The distributor model will result in a reduction to net revenue and gross profit in the near term, because the selling price to distributors will be below the full price we have historically sold to our direct consumers. Because we expect lower operating expenses as compared to the direct model, we also expect these transitions to improve adjusted EBITDA profitability and inventory efficiency, while also helping to reduce overall complexity in our business.

Current wording

Our international go-to-market strategy initiative encompasses evaluating ways to reduce complexity and grow internationally in a cost- and capital-efficient manner. In the third quarter of 2023, we transitioned our South Korean and Canadian businesses to independent third-party distributors. In the first half of 2024, we signed distribution agreements with independent third-party distributors in the Gulf Countries, Southeast Asia, Benelux, and Scandinavia. In the second quarter of 2024, we transitioned our Australasian and Japanese businesses to independent third-party distributors. Subsequent to quarter end, the Company announced distribution and licensing agreements and transitioned an additional region, China. Distributors oversee the sale and distribution of our products, purchased from us, across eCommerce, brick and mortar, and wholesale channels in their respective territories and are required to allocate dedicated brand and marketing resources to their operations for us. We may continue to enter into similar distribution arrangements with third parties in other international markets, which we expect to impact both our short and long term results of operations. The distributor model will result in a reduction to net revenue and gross profit in the near term for regions we transitioned from a direct model, because the selling price to distributors will be below the retail price we have historically sold to our direct consumers. Because we expect lower operating expenses as compared to the direct model, we also expect these transitions to improve adjusted EBITDA profitability and inventory efficiency, while also helping to reduce overall complexity in our business.

Previous wording

Related to these initiatives, we recognized restructuring expenses of $0.8 million and $3.2 million for the three months ended March 31, 2024 and 2023, respectively, which are recorded within restructuring expense in the condensed consolidated statement of operations and comprehensive loss. These expenses primarily consist of employee-related benefits and third-party professional fees and other related charges.

Current wording

Related to these initiatives, we recognized restructuring expenses of $1.0 million and $1.8 million for the three and six months ended June 30, 2024, respectively, compared to $1.0 million and $4.3 million for the three and six months ended June 30, 2023, which are recorded within restructuring expense in the condensed consolidated statements of operations and comprehensive loss. These expenses primarily consist of employee-related benefits and third-party professional fees and other related charges.

Previous wording

In addition to seeking to acquire new customers, we continuously seek ways to engage with our base of existing customers. We aim to grow our closet share within our existing customer base by focusing and developing on our core franchises. We believe we must continue to both innovate with new products and focus on core products in order to drive consumer engagement and increase our closet share. While we continue to do this, we must constantly evaluate and improve our strategy to anticipate current and future consumer preferences and demands. At the same time, it is critical that we maintain our commitment to offering comfortable and sustainable products. In connection with our strategic transformation plan announced in March 2023, we are refocusing our product strategy on our core franchise products. Our growth within our existing customer base will depend in part on our success focusing our product strategy to appeal to our existing customers.

Current wording

In addition to seeking to acquire new customers, we continuously seek ways to engage with our base of existing customers. We aim to grow our closet share within our existing customer base by focusing on and developing our core franchises. We believe we must continue to both innovate with new products and focus on core products in order to drive consumer engagement and increase our closet share. While we continue to do this, we must constantly evaluate and improve our strategy to anticipate current and future consumer preferences and demands. At the same time, it is critical that we maintain our commitment to offering comfortable and sustainable products. In connection with our strategic transformation plan announced in March 2023, we are refocusing our product strategy on our core franchise products. Our growth within our existing customer base will depend in part on our success focusing our product strategy to appeal to our existing customers.

Previous wording

Our long-term growth strategy relies on our ability to grow across our digital and retail channels, while still maintaining our goal of long-term profitability. We believe an omni-channel buying experience is important to meeting the needs of our customer base. Although we continue to view retail stores as key to reaching new customers and increasing penetration of omni-channel customers, we plan to try to optimize our store fleet and focus on ensuring that our retail stores are efficiently driving customer acquisition. These optimization efforts include a combination of efforts, including evaluating new store openings, closing existing stores, investing in store marketing, expanding our third-party partnerships, and continuing the use of third-party distributors in certain international markets, such as the distribution agreements entered into as of the first quarter of 2024 and the additional distribution agreements we expect to enter into in other international markets.

Current wording

Our long-term growth strategy relies on our ability to grow across our digital and retail channels, while still maintaining our goal of long-term profitability. We believe an omni-channel buying experience is important to meeting the needs of our customer base. Although we continue to view retail stores as key to reaching new customers and increasing penetration of omni-channel customers, we plan to try to optimize our store fleet and focus on ensuring that our retail stores are efficiently driving customer acquisition. These optimization efforts include a combination of efforts, including evaluating new store openings, closing existing stores, investing in store marketing, expanding our third-party partnerships, and continuing the use of third-party distributors in certain international markets, such as the distribution agreements entered into as of the first half of 2024 and the additional distribution agreements we expect to enter into in other international markets.

Previous wording

To grow our business, we intend to continue to improve our operational and capital efficiencies and thoughtfully optimize our infrastructure. Our ability to scale relies upon our supply chain infrastructure. We believe our investments in direct and meaningful relationships with all of our partners, from raw materials suppliers to Tier 1 manufacturers and logistics providers, helps put us on a path of achieving profitable growth in the future. We will continue to make similar investments in developing relationships across the full supply chain. Most importantly, we

Current wording

To grow our business, we intend to continue to improve our operational and capital efficiencies and thoughtfully optimize our infrastructure. Our ability to scale relies upon our supply chain infrastructure. We believe our investments in direct and meaningful relationships with all of our partners, from raw materials suppliers to Tier 1 manufacturers and logistics providers, helps put us on a path of achieving profitable growth in the future. We will continue to make similar investments in developing relationships across the full supply chain. Most importantly, we are firmly committed to reducing our carbon footprint and our environmental impact. This commitment may require current and future investments, which may result in higher expenses.

Previous wording

1 In the third quarter of 2023, we transitioned the operations of two stores in Canada and one store in South Korea to unrelated third-party distributors, resulting in a reduction of three international stores. In the first quarter of 2024, we closed the operations of three stores in the US.

Current wording

2 In the third quarter of 2023, we transitioned the operations of two stores in Canada and one store in South Korea to unrelated third-party distributors, resulting in a reduction of three international stores. In the second quarter of 2024, we transitioned the operations of two stores in Japan and one store in New Zealand to unrelated third-party distributors, resulting in a reduction of three international stores. In the second quarter of 2024, we closed one store in Europe.

Previous wording

We generate net revenue primarily from sales of our products. We sell products directly through our own digital channels, our leased retail stores, and third-party retailers and distributors. As of March 31, 2024, the majority of our sales are through our digital channels and leased retail stores. Revenue is recognized when we satisfy our performance obligation by transferring control of the promised goods to the customer, net of allowances for returns, discounts, and any taxes collected from customers. This occurs either upon shipment or upon receipt, depending on the terms of sale. We expect overall sales to decline in 2024, driven by the lower overall demand, the planned closure of 10-15 stores in the United States, and the international transitions as described above.

Current wording

We generate net revenue primarily from sales of our products. We sell products directly through our own digital channels, our leased retail stores, and third-party retailers and distributors. As of June 30, 2024, the majority of our sales are through our digital channels and leased retail stores. Revenue is recognized when we satisfy our performance obligation by transferring control of the promised goods to the customer, net of allowances for returns, discounts, and any taxes collected from customers. This occurs either upon shipment or upon receipt, depending on the terms of sale. We expect overall sales to decline in 2024, driven by lower unit sales in our direct business, the planned closure of retail stores in the United States, and the international transitions as described above.

Previous wording

We expect our strategic transformation plan, as announced in March 2023, to reduce certain costs included in SG&A expense, however, the changing prices of goods and services caused by inflation and other macroeconomic factors may cause fluctuations in SG&A expense, notwithstanding our cost control actions.

Current wording

Through strategic initiatives, we expect to reduce certain costs included in SG&A expense, however, the changing prices of goods and services caused by inflation and other macroeconomic factors may cause fluctuations in SG&A expense, notwithstanding our cost control actions.

Previous wording

Marketing expense consists of advertising costs incurred to acquire new customers, retain existing customers, and build our brand awareness. We expect marketing expense as a percentage of net revenue to continue to decrease as we manage our costs and respond to the promotional environment, and are prioritizing our marketing spend to align with our product strategy.

Current wording

Marketing expense consists of advertising costs incurred to acquire new customers, retain existing customers, and build our brand awareness. We expect marketing expense as a percentage of net revenue to increase as we prioritize marketing spend to align with our updated product strategy.

Previous wording

Interest income (expense) primarily consists of interest income generated from our cash and cash equivalents, offset by interest expense associated with our credit agreement with JPMorgan Chase Bank, N.A. We expect interest income and expense to fluctuate based on our future bank balances, credit line utilization, and the interest rate environment.

Current wording

Interest income primarily consists of interest income generated from our cash and cash equivalents, offset by interest expense associated with our credit agreement with JPMorgan Chase Bank, N.A. We expect interest income and expense to fluctuate based on our future bank balances, credit line utilization, and the interest rate environment.

Previous wording

Our provision for income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We record deferred tax assets and liabilities based on differences between the book and tax bases of assets and liabilities. The deferred tax assets and liabilities are calculated by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. Because we have a recent history of pre-tax book losses and are expected to be in a pre-tax book loss position in the near term, a valuation allowance was maintained against the deferred tax assets in the United States, Vietnam, Canada, Hong Kong, China, and South Korea as of March 31, 2024.

Current wording

Our provision for income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We record deferred tax assets and liabilities based on differences between the book and tax bases of assets and liabilities. The deferred tax assets and liabilities are calculated by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. Because we have a recent history of pre-tax book losses and are expected to be in a pre-tax book loss position in the near term, a valuation allowance was maintained against the deferred tax assets in the United States, Vietnam, Hong Kong, Canada, South Korea, and New Zealand as of June 30, 2024.

Previous wording

(1)Includes stock-based compensation expense of $3.3 million and $5.7 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1)Includes stock-based compensation expense of $2.9 million and $6.3 million for the three and six months ended June 30, 2024, respectively, and $5.3 million and $11.0 million for the three and six months ended June 30, 2023, respectively.

Previous wording

(2)Includes depreciation and amortization expense of $4.8 million and $5.1 million for the three months ended March 31, 2024, and 2023, respectively.

Current wording

(2)Includes depreciation and amortization expense of $2.6 million and $7.4 million for the three and six months ended June 30, 2024, respectively, and $5.0 million and $10.1 million for the three and six months ended June 30, 2023, respectively.

Previous wording

Cost of revenue decreased by $11.7 million, or 35.9%, for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was primarily driven by the decrease in units sold, a decrease in inventory write-downs and adjustments, lower freight and logistics costs, and lower product costs.

Current wording

Cost of revenue decreased by $14.8 million, or 36.7%, for the three months ended June 30, 2024 as compared to the same period in 2023. The decrease was primarily driven by the decrease in units sold, lower freight and duty costs, and a decrease in inventory write-downs and adjustments.

Previous wording

Gross profit decreased by $3.4 million, or 15.4%, for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease in gross profit was driven by the decrease in the number of units sold, partially offset by lower freight and duties costs, lower product costs, and decreases in inventory write-downs and adjustments.

Current wording

Gross profit decreased by $4.1 million, or 13.6%, for the three months ended June 30, 2024 as compared to the same period in 2023. The decrease in gross profit was driven by the decrease in the number of units sold, partially offset by lower freight and duty costs and decreases in inventory write-downs and adjustments.

Previous wording

Our gross margin increased to 46.9% for the three months ended March 31, 2024 from 40.1% in the same period in 2023, primarily due to lower freight and duties costs, lower product costs, and decreases in inventory write-downs and adjustments.

Current wording

Our gross margin increased to 50.5% for the three months ended June 30, 2024 from 42.8% in the same period in 2023, primarily due to lower freight and duty costs per unit and decreases in inventory write-downs and adjustments.

Previous wording

Selling, general, and administrative expense decreased by $3.1 million, or 7.2%, for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was primarily driven by decreases in stock-based compensation expense and personnel and related expenses, primarily as a result of lower corporate headcount. This was partially offset by an increase in other miscellaneous operating expenses and fees.

Current wording

Selling, general, and administrative expense decreased by $12.7 million, or 27.4%, for the three months ended June 30, 2024 as compared to the same period in 2023. The decrease was primarily driven by decreases in personnel and related expenses, occupancy costs, and stock-based compensation expense.

Previous wording

Marketing expense decreased by $3.7 million, or 32.5%, for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was primarily driven by decreased digital advertising spend for performance marketing.

Current wording

Marketing expense decreased by $0.8 million, or 6.3%, for the three months ended June 30, 2024 as compared to the same period in 2023. The decrease was primarily driven by decreased digital advertising spend for performance marketing.

Previous wording

Interest income increased by $0.2 million, or 26.2% from $0.8 million for the three months ended March 31, 2023 to $1.0 million for the three months ended March 31, 2024, primarily driven by an increase in interest income as a result of our short-term investments in money market funds, partially offset by interest expense related to our Credit Agreement.

Current wording

Interest income increased by $0.2 million, or 18.8%, from $1.0 million for the three months ended June 30, 2023 to $1.2 million for the three months ended June 30, 2024, primarily driven by our short-term investments in money market funds, partially offset by interest expense related to our Credit Agreement.

Previous wording

Other income (expense) increased by $1.8 million, from a loss of $0.1 million for the three months ended March 31, 2023 to income of $1.7 million for the three months ended March 31, 2024, primarily due to $2.5 million in gains on the termination and modification of certain operating leases, offset by $0.4 million from the impairment of a note receivable associated with our Canadian third-party distributor and $0.3 million in foreign currency losses.

Current wording

Other income (expense) changed by $0.6 million, from a loss of $0.1 million for the three months ended June 30, 2023 to income of $0.6 million for the three months ended June 30, 2024, primarily due to gains on the termination and modification of certain operating leases and the reversal of the impairment of a note receivable associated with our Canadian third-party distributor, partially offset by foreign currency losses.

Previous wording

Income tax provision remained flat at $0.2 million for both the three months ended March 31, 2024 and March 31, 2023. This is due to the mix of geographic income and associated effective tax rates for the comparative periods.

Current wording

Income tax provision increased by $0.3 million, or 100.0%, to $0.6 million compared to $0.3 million for the three months ended March 31, 2024 as compared to the same period in 2023. This was due to the mix of geographic income and associated effective tax rates for the comparative periods.

Previous wording

Net revenue decreased by $15.0 million, or 27.6%, for the three months ended March 31, 2024 as compared to the same period in 2023. Our sales decrease was primarily driven by a decrease in the number of units sold as a result of lower demand and lower relative prices offered to our distributors in the regions that were transitioned in the second half of 2023.

Current wording

Net revenue decreased by $33.9 million, or 27.2%, for the six months ended June 30, 2024, as compared to the same period in 2023. Our sales decrease was primarily driven by a decrease in the number of units sold within our direct business, our transition to third-party distributors in certain international markets, and retail store closures.

Previous wording

Restructuring expense decreased by $2.4 million, or 75.3%, for the three months ended March 31, 2024 as compared to the same period in 2023, and consisted primarily of lower professional service fees and employee-related benefits incurred as part of the strategic transformation plan announced in March 2023.

Current wording

Restructuring expense decreased by $2.5 million, or 59.0%, for the six months ended June 30, 2024 as compared to the same period in 2023, primarily due to lower fees incurred related to the execution of the strategic transformation plan announced in March 2023.

Previous wording

Adjusted EBITDA loss decreased by $0.8 million for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was primarily driven by decreased net loss, which was driven primarily by the reductions in selling, general, and administrative expense and marketing expense during the period.

Current wording

Adjusted EBITDA loss decreased by $4.6 million and $5.3 million, respectively, for the three and six months ended June 30, 2024 as compared to the same periods in 2023. The decreases were primarily driven by decreased net loss, which was driven primarily by the reductions in operating expenses during the periods.

Previous wording

Adjusted EBITDA margin declined from (39.8)% to (53.1)% for the three months ended March 31, 2024 as compared to the same period in 2023. The changes were primarily driven by the same factors as noted in the adjusted EBITDA discussion above.

Current wording

Adjusted EBITDA margin declined from (25.9)% to (26.6)% for the three months ended June 30, 2024 as compared to the same period in 2023. The changes were primarily driven by the same factors as noted in the adjusted EBITDA discussion above.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $102.1 million. Our operations have been funded primarily through cash flows from the sale of our products and net proceeds from sales of equity securities, including our IPO.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $87.2 million. Our operations have been funded primarily through cash flows from the sale of our products and net proceeds from sales of equity securities, including our IPO in 2021.

Previous wording

During thethree months ended March 31, 2024, net cash used in operating activities was $26.2 million, which consisted of a net loss of$27.3 million, offset by a net change of $(9.2) million in our operating assets and liabilities and non-cash charges of $10.3 million. The change in operating assets and liabilities was primarily due to a decrease of$5.8 million for operating lease right of use assets and short-term and long-term lease liabilities as a result of retail store closures and$4.0 million in inventory as a result of higher on-hand inventory.

Current wording

During thesix months ended June 30, 2024, net cash used in operating activities was $41.8 million, which consisted of a net loss of$46.5 million, offset by a net change of $(11.2) million in our operating assets and liabilities and non-cash charges of $15.9 million. The change in operating assets and liabilities was primarily due to a decrease of$8.9 million for operating lease right of use assets and short-term and long-term lease liabilities as a result of retail store closures.

Previous wording

During the three months ended March 31, 2023, net cash used in operating activities was $20.9 million, which consisted of a net loss of $35.2 million and a net change of $1.1 million in our operating assets and liabilities, partially offset by non-cash charges of $13.1 million. The change in operating assets and liabilities was primarily due to a decrease of $8.0 million in accounts payable due to payments made, offset by a decrease of $5.1 million in inventory as a result of lower on-hand inventory and a decrease of $3.3 million in accounts receivable due to cash received.

Current wording

During thesix months ended June 30, 2023, net cash used in operating activities was $20.1 million, which consisted of a net loss of$64.1 million, offset by a net change of $15.5 million in our operating assets and liabilities and non-cash charges of $28.6 million. The change in operating assets and liabilities was primarily due to a decrease of$16.3 million in inventory as a result of lower on-hand inventory and a decrease of$4.6 million in accounts receivable due to timing of cash received, partially offset by a decrease of$8.0 million in accounts payable due to payments made.

Previous wording

Net cash used in investing activities primarily relates to capital expenditures to support our growth and investment in property and equipment for expansion of our business.

Current wording

Net cash used in investing activities typically relates to capital expenditures to support our growth and investment in property and equipment for expansion of our business.

Previous wording

During thethree months ended March 31, 2024, net cash used in investing activities was $0.8 million, and consisted primarily of cash outflows for the purchases of property and equipment to support the ongoing operations of our retail stores, offset by $0.3 millionof proceeds from the sale of our Korean subsidiary in the third quarter of 2023.

Current wording

During thesix months ended June 30, 2024, net cash provided by investing activities was $0.1 million, and consisted primarily of $1.3 millionof proceeds from the sale of our businesses and a decrease of $1.2 million in security deposits related to our closed retail stores, partially offset by cash outflows for the purchases of property and equipment to support the ongoing operations of our retail stores and corporate development,

Previous wording

During the three months ended March 31, 2023, net cash used in investing activities was$3.1 million, and consisted primarily of cash outflows for the purchases of property and equipment to support the opening of retail stores.

Current wording

During the six months ended June 30, 2023, net cash used in investing activities was$7.0 million, and consisted primarily of cash outflows for the purchases of property and equipment to support the opening of retail stores.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 and 2023 was$33 thousand and$0.1 million, respectively, primarily due to net proceeds from exercises of stock options, offset by taxes withheld related to employee stock awards.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2024 and 2023 was$0.2 million and$0.3 million, respectively, primarily due to proceeds from the exercise of stock options and proceeds from the issuance of common stock under our employee stock purchase plan, offset by taxes withheld related to employee stock awards.