Allbirds (BIRD) 7 Aug 242024 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the Allbirds' Second Quarter 2024 Conference Call. [Operator Instructions]

Now I would like to turn the call over to Christine Greany of The Blueshirt Group.

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

including distributor like today certain model strategy, go-to-market expected transformation investment, you plan marketing the and and international to that the referenced of our strategy distributor securities strategic targets, markets, I'd model planned strategy make we other brand anticipated meaning headwinds, product adjusted start, lines in savings and financial cost external earnings targets, transitions federal in estimates, statements our impact plan full certain are arrangements, a profitability, laws, QX efforts, EBITDA and we expectations, margin to cash issued year and release that remind will and matters related gross of product time expectations, outlook, XXXX Before including about and flow guidance statements forward-looking duration within and today.

a quarterly to the These on description that reflect this our after opinions Please Form to risk obligation factors a of the statements cause of our differ our and no results to to could XX, forward-looking including filings, risks forward-looking we this XX-Q statements affect revise reflect occur refer that for XXXX, March results. quarter SEC detailed also these ended call. for changes involve report more may that and the uncertainties undertake date actual as that of statements Please number materially. call, of any note only our

addition impact not our items certain a non-GAAP during to results Also, items. will we the in GAAP for non-GAAP any as be that this call, of and used results. substitute should GAAP measures discuss to eliminate financial adjust These

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

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

joining us and Hello, today. for everyone, thanks

to our performance and pleased in of quarter report expectations. are line with We another strong execution

as operationally growth on path we set reflect a top and the progress results financially to continuing return QX Our both line XXXX. to business in

and talk chapter, reignite we've to look We are past we at product a this trajectory next our the over But months. brand. before XX accomplished on let's take what a about

announcement the journey. the establishing have for the business, of foundation the plan, transformation phase reset strategic we next of Since our Allbirds'

Importantly, to we our our demonstrated a a quick execute like XXXX. ability provide that and deliver have plan. plan on actions then formulate of since to of recap March and I'd

Starting with retail stores.

locations a our better footwear to We footprint U.S. profitable a build that our bias smaller have fleet. goal serves to retail closed advances and strategy XX physical underperforming towards product

Next is international.

to we a have the X We direct. successfully transitioned targeted distributor selling previously where model in were regions

achieve we to our regions leverage We opened us where strong this leading partner distributor scalable profitable with believe internationally. growth have model and X also positions distributors brand opportunity to new We affinity. and the

Looking at of goods. cost

Our enabling to a significant with longer-term OpEx factory capture savings. generating shift We're expansion. to new COGS us along material also gross optimizations driving is margin savings,

scale. We We to company, long-term profitability with this the believe of have and we operating wireframe positions us we're efficiency. as greater rebuilt drive the overall

to inventory improvement very a sheet. XXXX our and position, balance capital half cut in we're healthy than more our drove and turning entered forward. in versus And XXXX We carefully by We year. in managing prior working inventory going

Providing now product go-forward to strategy. last Creating the Product, Customers over and Great Against product Getting paramount we highest Compelling product has Experience. bringing been built to product a Chief engine ignited taking focus priorities map evolve success. a since long-term great reins areas: new After in with December, brand that my Design Telling Officer November. are Making amongst Shopping main our the an backdrop, is X Engaging we our prioritizing and Stories in road

our evolving reflect was to step critical first The strategy. the more closely edit to line

customer with As Allbirds. have which of far for recent the have Piper from demonstrates the limited well our met performed Glider of our positive a introductions thus launch response. asking Up we consumer just The Runner and few Go to result, all launches, is few Canvas in of product number newness is next Wool Runner Tree and all Tree weeks. have just X, a a

We and half for out half into of then to 'XX us our XXXX. freshness quickly and tooling, of into to line, the set materials product the we new is introduced as allowing which Using our the offering existing newness second inject as possible. infuse first swiftly colors

rugged collection. You'll first more corduroy see when as water-resistant versions reflected this in well our introduce the we as to of plan fall

Spring Looking product ahead an and positioning. architecture brand 'XX the creating lifestyle Allbirds' that lines ground from product our these Fall with are design emphasizes elevated and to 'XX we collections, up

We of of next year. half in that of the robust designing are launch and developing intensive in products a phase to begin will the second line

We are from with very motivated by development that our center. the are progress each arrives we seeing sample

The new product seasons. will XX to not enhance and but dedication launches across range, our planned than collections reinforce these more comfort, style also sustainability. have We product our X quality, only

new utilizing human natural while narrative also we unique by encouraging Allbirds Nature. called philosophy preparation and new compelling embrace will This narrative a nature, connecting people our to world product design launches inspired of innate by telling in word the their brand for mid-XXXX, our the celebrates be In nature. the marketing duality stories,

by and us experiences. topics enable human will universal the inspire of engage range consumer with a benefits product to Allbirds to Nature from wide

shoes encouraging knit their own our Breathable exceptional and Comfortable while the offer skin. natural use showcase of example, materials will to By Nature, recycled by also in of Nature people comfortable will For and breathability. constructions feel that highlight comfort our

investment from narrative, are throughout with year, continue of this phased planned in ramp-up this marketing to shortly. we the the the starting More prioritizing increased second XXXX. on amplify To half Annie

an story manner. Our Allbirds the product engaging a centered upper efforts and driving through funnel fresh, that will and strategy awareness be brand around in tells consistent

are more By engaging lenses the and rational, creating product connections. consumer. initiatives through Specifically, resonates our brand with emotional we our richer, are that aspirations of and of attributes cultural to convey a elements, narrative Allbirds the these values designed and the message incorporating

our and Providing an our product amplify bring Shopping the we priority. with to is marketing, As key Experience other fresh market Customers updated Engaging

the enhancing to wayfinding improved the to and easier journey, enjoyable shop. floor In starting steps both and we to are assortment take displays. further and in-store with experience plan by presentation, websites We consumer XXXX, enhance stores consumer an our making more

You'll hear much more come. to about this the quarters in

over with Providing Engaging next an to Making Compelling Telling XX areas phase Great our embark our our past of advance track of main the As Experience. gives of record us focus months execution confidence we Product, Shopping ability in on X the our Customers Stories and journey,

urgency remain keeping our and team and look updated promotions, committed clear you on hires path building bolstered key forward shareholder continuing with the our long progress. operate creating and a coalesced have over We around organization to We're your a internal that with value to term. to is We support forward. appreciate

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

Thanks, Joe, and good afternoon, everyone.

We EBITDA another margin performance improvement outlined within are expectations, XX% we in and by of execution revenue to exceeding EBITDA. exceeded consistent we deliver quarter pleased last year-over-year range, came Net our or another the within a expansion of in adjusted delivered quarter team. Notably, reflecting gross and adjusted expectations quarter. guidance our our

critical offset are full to is sales, return $XX component unit ASPs QX to primarily revenue lower The The results long-term selling partially million. attributable of a price strategy. higher direct within by totaled our business. our

a to creating it However, headwind is near-term sales.

was by retail revenue transition Additionally, distributor impacted our planned store and international closures.

with and are to model profit done associated in the by While dollars, the savings transition support reducing SG&A, cost of actions discuss I gross are offset closure a the are top these doors efforts they in management our our intention, and which efficiency distributor moment. and marketing retail line and a will and as

freight direct well and basis half year-to-date. business not and The XX.X%, points COGS in second year-over-year XXXX, to as margin versus expected savings activity to points basis from is and as captured promotional factory costs a materials lower the same sequentially the healthier continue gross in continued margin the up XXX expansion shift year. the Second the XXX position, magnitude quarter of inventory from benefit attributable improvement improved seen that at we've our to is prior gross innovation. Year-over-year although in lower

the gross transition international promotional combination to the expect in holidays. We the continue reflecting around to be to planned activity QX retail closures, margin store and and distributors of QX mid-XXs,

our SG&A, and was as depreciation great and did work totaled decrease retail million, compensation by can amortization, to offset and with partially in our stock-based costs. excluding planned. at dollars, closures, controlling This XX% teams occupancy Looking SG&A versus costs traced costs primarily down lower the year. expenses $XX The store quarter. personnel associated be prior the

optimize to putting to XX we In close to closure stores, quarter onetime store our quarter, And the million by of opportunities the high we followed year-to-date, us with connection cash U.S. stores closed to in incurred end. our $X to additional XX fleet. During end we of X in plan subsequent This brings U.S. at evaluate plus XX us XX QX. retail closures, continue these charges XXXX. X internationally, to stores

marketing X% down year-over-year. $XX QX totaled spend million,

XXXX the of investment through the product we half our top driving XXXX, increase mentioned, lead second in to to introductions. of begin to As Joe marketing plan up our and funnel awareness spend

to U.S. that marketing our be in distributor costs total QX, anticipate in-region will Recall our we are a expected QX go X marketing year-over-year regions distributors, be markets: EU. to and under to are expected down up. planning dollars U.S., than investments While new offset now on model, and to U.K. savings X we're basis spend effectively following the With more our the make year-over-year transitioned to the transition. remaining direct in that the

] The Now balance QX a turning million. the flow. of at XX% strong XXXX. end company and XX% financial sheet. [ down Inventories year-over-year balance and down healthy, in of with end the totaling That's $XX (sic) to from cash is remained sheet the X% condition solid

with million XXXX. working sequentially Operating under equivalents $XX source closed versus borrowings outstanding was second cash We of million. down our prior cash That's quarter material QX, year inventory efforts of reflecting a capital $XX seasonal use and cadence our was and the cleanup our due cash $XX from million the no up cash when and to revolver. throughout

of focus years. profitability Compelling business X top Engaging positioning Providing strategic year Great combined other are Product, an this and deliver taking are and line future up to return in areas the in with Telling us to Experience, actions XXXX Stories Customers growth set Our Shopping with to Making we

the in restore is A plan growth price foundational step selling. to full our return to

this following benefits XXXX see in reflected committed which and pleased We gross expansion. margin manifest, year-to-date begin is our are to a promotional to the to model

other at initiatives. key Looking

Benelux on noted, partner new action just regions with signed in And international related we the distributors Scandinavia I U.S. our with As front, fleet. retail we've this to taken and continue swift to quarter.

regions majority existing a model. have distributor our to We the of transitioned

an achieve China, important we During for We're the our And expertise both reach last and leading second with who quarter, to our completed help in brand. we region working Japan position profitable be us of distributors us internationally. industry Australasia. to the growth announced to and scalable extend transitions and and week, pleased have brand regional transition

Moving to guidance.

are year XXX by We range margin $X full our are and reiterating of basis points bottom EBITDA up performance sales million. based increasing the our range end our gross on adjusted bringing by year-to-date, outlook, we and

net million to revenue full million $XXX million be expected $XX of is now retail international and million year is Full to in from range The $XXX $XX of to be to to million. our of expectation range expected year in store $XX our the prior closures impact million. transition versus $XX the

Let for me unpack that you.

at than anticipated higher impact which timing leases. initial due combined with higher slightly retail to transition than due transition, year's The speed is orders we've expected been lower international is from exit The of able the the to this impact from distributors. to our from

revenue is to model impact and million between expected U.S. includes store approximately markets. impact XXXX revenue $XXX in be our to expected and U.S. resulting net to million distributor certain from approximately year $XX $XX net be to full million in $XX million market, and geographical resulting international $XX million from million of million $XX includes to year the transition to international is million of range By a Full $XX $XXX of our closures.

to up and in of outbound our from innovation. to promotional guidance prior be intensity Gross savings of Vietnam inbound drivers initial to Key and now margin the and compared shift reduced freight is to from XX%, XXXX, XX%. factory materials include XX% XX% to expected lower range

$XX EBITDA expected adjusted now to guidance million of which compares to in of prior a range million $XX loss $XX for Full million. million, to $XX the loss be year to is

year. at of there play line, While results are we a on improving you number can that remained this on top the dynamics of the focused see line, the and bottom

to now guidance. QX Turning

pleased EBITDA million million in $XX first million range the Third $X half U.S. revenue to be QX $XX the executing teams quarter our is our million the revenue between $XX our in million. expected and enter proud $XX loss to to expected $XX international the range be and we is journey. $X are revenue million million. net of $XX This between We're adjusted comprises and and with million. way next of to of performance phase as of

With call to open that, the I'll the to ask operator questions.

[Operator of Janine the comes from Stichter line BTIG. Instructions] question Our first with

for You got Ethan Janine Saghi on tonight.

Just a couple me. for

First, rates? wondering And guide? give what the freight, just could into incorporating more how on spot currently was you're seeing you little a if you're margin just there color with that gross

a and managing to point, headwind considered question others a but timely. in view significant plans, we've it we're is this as our actively your the pressure yes, us. Similar that Ethan, is in freight don't for industry, and

And last me. That's one for then it. helpful. just Got

how Just with any in newer versus launches customers resonating are seeing of you the differences international are some U.S. your markets? in

Yes, nice Ethan, to new strong with speak launches our of all are to our response Yes. seeing you. actually markets. in we

Specifically actually we our been saw in X strongest the have momentum launches with years. the launches United met last And last the were response. as very, the X to we strong distributors. internationally, very new transitioning They've over States,

for we that So that. they direction, were fantastic have And to into The right swiftly left momentum them that they've we quite and a basically was hand with moved path the efficiently. moving them. able pleased and And very stepped that. a continued just they've transitions in were

question from comes of Stanley. the next Alex with Morgan Straton line Our

those just maybe KPIs that? how you One be Joe, And for about are mentioned the me through, 'XX, that bigger to you positive you on going Joe, different, walk times what you're seeing, strategically? a few for Annie consumer a or launches here. one response. half like of back picture, response are we then that just think strong should just telling how Can

Yes. Sure.

me let the little -- and bit all. I So it then context a mean some give zoom out to

strategy path these So and our our towards where and -- new into fit products growth. go-forward

time done just the I to OpEx at the think the international, we've we've that done inventory putting we're and stores, done it's well these together and any COGS we foundation The But one of on the coalesced getting, isolation the of the have pause to all to work that these our that are important first accomplishment. in reduction, reset major what a the business. team really strongly is in how think work very hand just just urgency getting been around in our would proceeding we've bodes results I with. task and the savings,

these it get on to So the got top things, ignited. have to product pipeline. right? X the now, through then that get do to we We've got moving of We've layered

And of juice. a comes brand an momentum So the spending the is So of juice, part and design to a to offering. a And team. a which is not product of an had with line ever saying we right? energy creating is then products, that that and that that product is to product that time the part lot we I it's in with be apply going juice no are are good, orange, and if in most energy is All design, you've using very through I important have this the design. use right? if orange

And like about you specifically what's it. asked different

about that on we being it is I think are. what's who different are focused we

give potential seasons, and brand even is we lifestyle opportunity going. we to dimension are occasions across that so begun breadth use there and across We that gender is so a footwear take where much to have this across that much its and and brand, can

will those So particular we of one have a collection line, model forward. item in going in a we the might have line while of products the

be with and don't we've with feed edited the can near will end products out the out and middle in products of these that coming line the don't that so And pipeline, going new inventory working to swiftly year. so line are of up new of go we problems, into brand sure all make are next as and term we the designs these we as we that the soon that's to part get on to

KPIs, focused with that stuff. is It's one of we're on new that, be about gets and the to the think people business. shoe. I of And adding we'll NCA things day, around products that's specifically consumers the top that coming all engages the end the in really and you about new it's on the of all layering the we'll with customers, be those that, the what the asked Along messaging. that the marketing excited. At the And the of is KPIs,

to new to new customers into the get products, Paramount we business. have our

that we're these at And full so then, course, all price. focused really And performance. products doing of new we're on

it. no there's discounting So associated with

making full really, these that important. really all at new stay sure So we price on products is

all about the So very, feel really this just of beginning where we're combined, very headed. we're We the at process. positive of think we

Annie, comprehensive. That's you. for one great. maybe Super

trend, don't of for thinking Just top in quarter. an through near-term I third you have built the line much improvement the think

kind just the imply what then a and So on quarter. in top the of pretty seems fourth line year wondering And guidance, third is big just seeing -- that to the in quarter-to-date? improvement quarter full it you're

your So just through can confidence me there? you what walk that inflection, creates big

very thanks Alex, question. for the much

where in specifically, the when in us high were So has X relatively and us. about about of impact at for -- points being XXs retail the we worth QX in looking QX guide QX international were similar we're for QX, to down this transitions

We have might of been the near since we we However, Japan in partially become We've The through bigger those go China. into quarter. impacts. QX, end Australia quarter. transited QX and the when transition closed that the doors

actually X result, be to that closer to of a QX, grows point XX from So impact to points. sort XX as

And the the when same underneath, versus actually business more our in it's we mid-XXs. like look so down like-for-like at or mid-teens we're

the some they're It's is in business. because line. on as of improvement underlying these the top obvious the there So having impacts just transition topics not and

in look quite these similar all at we'll of to sense When full the impact we it's transitions. QX, of that QX, of be going to more where have

our a a We'll Joe products need last we comping promotional. quite but we do necessarily huge have as to know next us nice overview behind our And launch, over actually so QX we're will to the month, in have gave that more shortly that few big and were year, also a going philosophy we terms we're of this and don't We're well. product. as into excited have uptick, coming. carry

Thank you. it turn I'm closing time. this showing for now Vernachio further no back would to I to at like remarks. Joe questions

Thank you, Allbirds. appreciate joining for forward to with your We everyone, really next today. speaking support of you again quarter. continued look We

your today's participation for the you conference. This Thank in conclude does program.

may now You disconnect.