Allbirds (BIRD) 8 May 242024 Q1 Earnings call transcript

Good afternoon and thank you for standing by. At this time, I would like to welcome everyone to Allbirds' First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. (Operator Instructions) I would now like to turn the call over to Christine Greany, Investor Relations. Please go ahead.

thank joining and everyone, afternoon, you us. for Good today Vernachio, CEO; me on Annie Joe call the With and are Mitchell, CFO.

any addition financial not will eliminate items. factors be non-GAAP a to the and to this in our to for call, our we plan I'd plans statements transition of XXXX opinions may impact that certain external to affect after that differ that GAAP forward-looking including cash XXXX, Before of results. for will changes guidance including discuss forward-looking refer statements to the statements Please of XX, targets, results. start, as like today. our model items other product obligation and and of this These our during partnership as of distributor XX-K and financial you laws, forward-looking These strategic efforts, and gross note reflect remind headwinds, we outlook, our more risk detailed cost a also anticipated and that third-party distributor in a strategy reflect the issued federal make go-to-market date could the securities SEC certain should that uncertainties impact of substitute estimates, markets, planned call the savings adjusted Form year a undertake revise materially. today filings, and within Also, matters for any this are only results statements flow related duration no occur about involve certain that referenced adjust strategy, used GAAP transformation model meaning to the report of cause statements plan these to to description margin we including non-GAAP risks profitability, annual EBITDA call. we expectations, that expectations, results actual marketing Please measures international timelines in our and arrangements, on ended number our expected strategy, release targets, earnings December

find measures these measures reasonably will to a directly information release. regarding reconciliation comparable earnings financial GAAP these non-GAAP non-GAAP additional today's and measures You the extent to in available their most of

the remarks. to to Joe turn I'll call formal the begin Now over

loss pleased at I'm needs with the here first been headline see to our significant purpose. executing CEO. know nearly operating in today hand Hello. line are be and transformation gratifying to call been that ability our first tasks with we quarter were XX results teams that pleased as we're my seat and earnings urgency. our hosting leaning Today's to coalesced is the into it's We're I've with achieve plan, and around days, highlighted We're for transformation be to and distributor share efficiency. done, substantial underway with what to by reductions expectations, in and in adjusted strategic that brand, which transformation despite year cost benefits. our narrow and transitioning cost progress and EBITDA first capital gross a strong our profitability, international our made across pillars against We U.S. in transitions improvement key this the our delivering plan, markets, XX% optimizing are: distribution of product store generating model to and decline. sales distributor in execution margin initiatives a under our stores, improving and reigniting and well

one QX, of planned had the recognize brand. we improved this create year is through activity, March. near-term long-term selling. just promotional promotion, we but sales, impact we growth imperatives strategic a XXXX. Among brand position XXXX right After up shift decision as for will in set to year return know regain to event the product and the and In a have for of storytelling a to it's full We in topline momentum the health price our

to a expect consumer-driven can limited you moments year. cadence Going connected similar of throughout forward, promotions the to see

year, believe will a this we product updated deliver later of start more consumer to offering respond. the robust fresh, we As

core to robust feedback in It's opportunity has We Allbirds with when color well that we some known addition the encouraging silhouettes our on still and our and to our to the are have additional customers date from introduced the of shoe product is color coming Runner It runner it's Most shoots upgrades. and for green laser-focused brought been creating performing years. new we X have newness. our comfort. been love. drop period we women's. extremely almost a in consumer our franchise, the style, have the one innovates subsequent X-week newness for the customers strategy limited conversion And rates positive, launch, and has that early, icon franchises highest and recently, innovations of Tree bring inspiration This Go. seen best-selling to cohesive latest but the leaves celebrates been months.Initial in men's see draws responding both to And with upon

Following launch franchise the success last our for and have to this strategy resonating, tells more that Wool us fall of X November, we come holiday. and our is Runner offense

Importantly, advance direction product we we done thrilled our how midyear, The are being taking in-market the now with will moving in as is are XXXX. work design and quickly as pipeline be possible to shape.

to and focused their season, meet all across consumers their and designing through on a stories needs day, core throughout consumer-led the and week, of With we brand to brand our be will colors the through position to In product design, keep a We anchoring insights message. our position are term, sharpen we efficient. rejuvenated lens. and short our plan spend inventory very beginning marketing and healthy

flow to we healthy, distribution. incremental during In broaden U.S. are reach customers. make marketplace, upper product in As brand a which awareness and of our store to with and our to updated to new investments expect profitability half efforts optimizing we funnel taking brand, we the second year, balanced marketing, the create parallel includes reignite product offerings actions begin and in our

QX close XX store outlined the underperforming U.S. closed U.S. XX with that this locations track and optimization initiative stores to We quarter. on last are year. plan We to we in X

merchandising As conversion, where gain to drive reach be can we including the another stores, Wholesale will our remaining new attempts continue enhanced on that both traction. to of is to productivity maximizing we don't a to culture, we of customers. ensure resident conservative we strategies beginning the and assort new digital we're selling focus we and term, are In that our existing portfolio products. channel near critical have over encouraged before

it but You've repeating. say previously, us heard this bears

add We're companies. long-term will a to we become The partners fortunate profitable we that ensure channel show This forward reach and channel, decision in additional are. offering that last excite our to to our extension doors as DICK's this We have inventory brand's presence could moving where are customers in to to We're fruit and digital plan they our book pulled strengthen the game wanted of up as Allbirds a now Goods, clean them. outpacing partners and these compelling with product back bearing these a marketplace year Nordstrom is the positioned including in better their compelling with an and intentionally relationships a Sporting REI. in We to Amazon expectations. and wholesale meet deliver is to of exceptional XXXX products. allows

of model. we in track New Japan substantial transitioned international, transition in our months. Canada in short with South year, are QX have and of and Korea the last to period a progress and next to a Australia transition time made Zealand while now distributor Turning to X on

have we in Additionally, agreements regions we of are drive international Gulf be the pursuing and distribution Southeast By to the coming growth our importantly, Continental expect marketplaces the distributors and to opportunities and stronger key entering also throughout of scalable recently geographies. over regional a knowledge, the Allbirds Asia. announced the of capabilities brand across new to XXXX, marketplace utilizing expression local localize expertise years. Europe. end wholesale We're much we Countries key Most will

of actions view Annie to a strategic for stair is about as As high-quality all Underlying these our transition taking that the generate the revenue last bottom to throughout we we trade-off year different the make step as discipline. line. necessary we're stronger markets quarter, at and times allows talked cost flow-through XXXX

rebuilding achieve and the structure, shortly workforce to the realize savings of store our are we'll from to from begin frame across transitions significant cash cost operating progress also while our to year, this and reductions, materials resulting lay making innovation factory shifts on and wire This We savings the the profitability. expense COGS from groundwork international company, More Annie. inventory capturing closures.

right wholesale, are international product balanced strategy, size continuing transformation follows: as a retail U.S. to storefronts refreshing of key building year Our to selling, returning teams message, marketplace and pillars, are executing our focus brand our full where and structure. transition, and our brand creating icon our areas position a cost digital, cohesive executing this price within across our our

We come. our shareholders we're As our urgency. quarters have dedication our this the of appreciate stakeholders greatly our years keeping forward the teams on progress you I our executing plan, in said for of we to support driving Allbirds. earlier, and and at updated all and the with value We time look transformational during and to

turn to discuss over Now financials. call the the I'll to Annie

our operational Thanks, consecutive financial under to quarter strategic progress pleased transformation Joe, and fifth of plan. good afternoon, and report We're a everyone.

factors: related improvement our delivered QX return shifts in includes strategic EBITDA to lower closures. impact basis decline. well first and adjusted ago our Our in factory margin reflects expansion decision from sales revenue significant demand realize retail expansion the direct our strong we full in million, inventory innovation, quarter store primarily revenue $XX anticipated on initial at to position, points benefits key teams EBITDA reflects overall our of gross guidance. transitions to XX% distributor cost we as came by savings channels. levels and from with price year healthier This X% That a versus our a a a return product actions. start Notably, a the to execution performance strategic few reflecting full our a and selling Gross margin and price as materials exceeding as to meeting international adjusted and selling our totaled and XX.X%. XXX

in of expect in at to Looking remainder some due QX we margin be planned promotions. the with the to mid-XXs moderation year, the seasonal gross

as down distributor We ongoing prior and with associated as and This our The partially totaled $XX results primarily well store in expenses. traced dollars, payroll operating to and compensation SG&A transition. also was year. costs improvement saw retail X% costs occupancy offset excluding by discipline. and cost depreciation million, versus closures stock-based be lower can amortization,

U.S. planned, we stores X during Allbirds quarter, the closed As in the

this charges track expect with one-time of the cash We In previously close store and incur charges closures XX on to QX, early XXXX. stores connection communicated in to U.S. next quarter us our of squarely incurred XX expect the in to with $X plan year. additional we and for putting the tranche closings, in QX million

expect begin and year-over-year, until half second of line spend distributor down to new We begin closures from around $X maintain conservative offering year. and strategic million. marketing QX store half of came to at incremental transitions savings with to an our plan actions year. the the capturing expanded in our in flow That's sequentially in expense in the the in product second of we

Additionally, our and reflective international QX distributor transitions. lesser of is a to degree, lower spend

down continue be U.S. XXXX of to to We half in expect XXXX. the investments planned the spend with in incremental full marketing back year versus

balance and sheet to the cash Moving flow.

reflects levels from pleased are QX the XX% Inventories year-end, year progress we at versus have and sheet following a healthy XXXX. key revolver. ago through balance equivalents in was borrowings as factors. transformation. to X% down quarter and million. $XX the $XX cash totaled our strategic reflecting million no the million our closed That's solid our composition cash of cash We under and and of end a reset of outstanding up million a $XXX Operating in and use $XX with few quarter successful We

the a revenue working First, is peak our which needs lowest of in year. the as QX, reminder, capital quarter

million lastly, well Next, approximately products deployed including existing of build $X to underperforming million we color franchises. cash Tree $X such Runner exit to approximately used we Go as And the new leases. as inventory, as to updates

highlight to cash perspective use. added our in have full want year of flows cash that For important our XXXX, a nuances some bearing on understanding and I

initial when our new and inventory assets an First, a of we in all to distributor, they cash. in transitioned the purchased region, of resulted infusion which

$XX and of we beginning savings achieve see to on XXXX track $XX P&L are of basis benefits to to versus on flow million our a the Next, cost through volume-neutral by target remain million XXXX. goods

at a inventory will be last So, we to buying Therefore, cash are this compared source average inventory a to cost continue year. lower of year.

margin the expected our strategic We Importantly, million XXX year quarter up of the We're to guidance be with finished XX%, in over we to follows: the $XXX of as runway to financial full plan. inventories continue down revenue $XXX reiterating million to is range cash. and gross flexibility execute million. and basis have $XXX our transformation points,

value. $XX communicated, a key is model. $XX transition adjusted previously to U.S. to be in international international to are benefits this that EBITDA have to planned transitioned of expected revenue million markets to distributor actions resulting guidance, $XX a to of $XX be to to from That is to with of be headwind million. our million Adjusted stores million $XXX start and $XX resulting and is million business be range expected pleased way are million ask We're to million.Turning of Vietnam $XX gross These from guidance we promotional existing are of deliver to $XX proud to expected I'll profitable to in reflects we of to distributor $XX open to our questions. $XX million to look be U.S. and loss geographical million margins close of range year in the $X regions on revenue XXXX. includes $XX operator strategic the As call certain second expected $XX in revenue long-term factory to innovation. a margin our the expected to material is and and transition factors. transitions a and to few million by related our shift anticipated $XX to lower in $X markets. anticipated to million $XX teams and the lower as to offset in underperforming million savings be EBITDA to from XXXX, our to partially guidance range With year $XX revenue Reduced year markets, the the or million Taking Full our to outbound million approximately model and loss our million model Gross at includes international inbound million. distributor is solid of revenue a range approximately to impact U.S. to XX% $XX store freight, Full and closures. $XXX compared million the million a million be reflects of intensity $XX by to expected our path to quarter revenue international full international QX year initial to impact shareholder and million. includes of the executing U.S. is continue to transform XX% that, the more expected from

you. Thank

We question-and-answer line from will now Janine our of Instructions) begin from question the first BTIG. comes The session. Stichter (Operator

products. successful ask the sounds to prior like It X from the had about you've off of relaunches Runner wanted kind and Go. I Runner Wool of early first X Any learnings strategy. anything were into that? your you. Thank Maybe you've how and forward that then in you'll volume help be us learned those contextualize of important those terms X launches from carrying overall Tree

lift these and will the entire and within strategy us the line. cannibalization we the one Go icon we're for or for prove lift really a it's step sign our not Thanks franchise runner the designed can that and joining example seen in have slightly any your an different business. important occasion. early strategy. different This entire the leaning that very important icon we customers, the a a call right shoe Runner is new really question. attracting The use Tree with and add that of is to and to our it that into Not represents one also version across franchises is ourselves long-term but is just only how hi. our the It's Yes, to franchise of franchise the

we rest Now to all our bring need just have the we the pipeline. in through of products that

for Great. as marketing to product And half then that support you newer the of just of think back clarify. in about the year, some wanted

expect U.S. to to would we year-over-year you expect it lesser start a I Should Or in think the expense degree? about basis? you still be down on increasing to building a year-over-year talked it just

to we overall thinking full the savings spend of and happen the year in When anticipate that we transitions, from that that the next investment back spend year for driving will quarter be about XXXX. is be and to incremental set the yes, we'll to start awareness, year. new down plan by but marketing each make, the into Janine. of some of market this will What international especially the really we these putting some upper as funnel, get timing, offset products to do of bring and marketing later half Hi, towards

Stanley. of Alex the from Next Straton line from Morgan question comes

Annie. embeds one to organization you're and to trend monitoring the the you return to with you success the got first new there or quarter topline the And less for quarter now leave for what this year us Annie, for Joe you next us maybe Thanks improvement talk same it you from year? as confidence Allbirds looks just role. full you're confidence ability to in know I've lot. your on to just KPIs talk Maybe a for about in one Can at I more CEO whether what guidance, welcome. level. and the like or the it an right execute revenue then Joe, turnaround. about gives to growth measure then first the maybe and

part. customer Yes, to January, full number you. of would And last I our be the saw some back Tree I'll our take really of full products getting healthy that price back price year, liquidating watching a KPIs returning seen inventory new full our brand. customer. Thank we Go. Runner to closely. full one and inventory and these a is one our Allbirds' I say And of And our key in say with DNA happy against selling. with that's the coming like off of price that price our is first would just one starting results we're indicators full that as especially we've I'm bringing

Great. and terms we QX will of And your the sort year-over-year, be similar cadence quarterly of year-over-year sales to Alex, about QX question anticipate growth. of that in relatively to QX

do now a year. into or each And few an few the of between and across uptick. takes As quarter end reasons get puts there's QX, we and the we a expect

transitioning be the some additional those in to offset into we QX. market, again, But We and and will couple continue Both largely year get topline. putting support of top the on headwinds in those close to will geographies. doors of as by products anticipate bringing product we QX when those to then in to marketing and additional And we then midyear, international a brand. overall be around launches. of behind early is dollars our the the the will It's farther and things strategy dampening the them to commitment line be

comes (Operator The Instructions) line next Blair. from from Carden question of William Dylan the

to guess the in mention thanks modeling, the Did that for on color for I some year? CapEx you cash all flow the statement.

And be the be that to the place is I and did we of will extremely minimal. it's did spend doors, really the sale almost that reason where immaterial to going CapEx. for it stopped I main rest not year. was not so used mention the why CapEx, Since opening we've

it If run the of that? quarter, than be to lower it? rate is think Or right would about you way first that even kind

OpEx at me, QX of look to me, were terms me. excuse CapEx, I excuse in -- If excuse

as general use a run yes. to fair rate, that that's think I

any for kind end And kind at store to of you year. have Do the closures reposition gave Great. stores that anticipate this you you anticipate international do of once -- of owned the business? you the

stores, evaluate to the our continue in overall will distributor continue of and European to look U.K., operate in and Yes. conjunction model retail our portions a at internationally, we'll shift specifically the potential in stores with If base the we at look for overall we to marketplace EU. our some

of million some probably what's guidance, just of as last $XX business of Got trying more the of sort think how taking envision revenue, yes, Kind think know then maybe or kind XX% that providing But your this dollar bit if the that million here target. model, potentially of from expense. to And the a as kind million revenue, time. sort leverage? for to going structure you've those so you steady-state OpEx don't you $XX it. pieces guess far of of model, the cost radically you sort margin are at engage I leaves you're $XXX operating amount positive you're there, drive distribution sort about in as wholesale right a moving as but XXXX you of so just a the of changed as one, to still I business of or level little capacity.

We size done Sure. work good about we've that structure. our the feel cost to right overall

impact You there there and mentioned there's of a little is. bit timing

down expect of have XXXX international For year partial the dollars a benefit prior expected year. model. be previous of from SG&A full will And year the and related store regions full the in that closures come and XXXX, transitioned we year to decline to savings effectively distributor versus the zero OpEx to workforce reductions

that the into go of impact year as go full have We we then XXXX. All ahead. -- will

I No, is your ruin great. want flow. don't This to

This the first of think timing half we of more If And a do have cost OpEx, the smaller than transitions. in year, closures due when reminder. is lowered kind grow scale. at we've a and this strengthened we model in to OpEx and I about those I the to year, the our positioning of simply achieve savings structure, second quick profitability half international our store will our operating and the state business the

kind double-digit of spend, you just map introduction, product And follow know States me, what but flat? you're guide, a I it as what kind kind in does looks United I strike comparison And might gave reintroduction of inflection guess something of fourth declines the out there to on low to what sort to you it. a kind a quarter say, the know of bit, -- last of some that basis, sort a as I business. Got for one of thinking marketing is but don't I around from cadence like of holiday? closer sort little want maybe drive if that that -- far Is

think It's in I just year the did spend inflection It's product of of an marketing the almost gaining and some in out a half introductions. good our looks what for base like a our of bit you back listing really job exactly us. momentum business. little

Excellent. all lot the Thanks detail. a for

no the concludes are the would at Q&A questions there call session. closing turn this back like to As further at brief over remarks. to queue time, I this our Joe Vernachio, CEO, for

everyone Well, forward seeing thank you, for quarter. we joining, next to you look and

and for conference Thank participation. this Ladies call. gentlemen, concludes today's you your

You now disconnect. may