Allbirds, Inc. — Form 10-Q Summary
Entity note: The request identifies “Smartbird, Inc.,” but the supplied filing is for Allbirds, Inc. The summary below covers the filing as submitted.
Business context and reporting period
Unaudited results for the quarter and six months ended June 30, 2023, compared with the same periods in 2022. Allbirds is a global footwear and apparel brand, with most revenue generated through its digital and retail channels. It operated 62 stores in nine countries at quarter-end.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Net revenue | $70.5 million | $78.2 million | $124.8 million | $140.9 million |
| Gross profit | $30.1 million | $28.2 million | $52.0 million | $60.8 million |
| Gross margin | 42.8% | 36.1% | 41.6% | 43.1% |
| Operating loss | $29.6 million | $29.3 million | $65.3 million | $49.3 million |
| Net loss | $28.9 million | $29.4 million | $64.1 million | $51.2 million |
| Adjusted EBITDA loss | $18.3 million | $20.8 million | $39.9 million | $33.1 million |
Q2 net loss per share was $0.19, versus $0.20; six-month loss per share was $0.43, versus $0.35. Adjusted EBITDA is a non-GAAP measure.
For the six months, operating cash outflow was $20.1 million, investing cash outflow $7.0 million, and financing cash inflow $0.3 million. Cash, cash equivalents and restricted cash declined $27.2 million to $140.5 million; balance-sheet cash and cash equivalents were $139.9 million, versus $167.1 million at December 31, 2022.
At June 30, current assets were $253.2 million and current liabilities $45.2 million. Inventory was $92.8 million, down from $116.8 million at year-end; its reserve rose to $12.5 million from $8.3 million. Total liabilities were $142.0 million, including $110.6 million of operating lease liabilities. No borrowings were outstanding under the revolving credit facility. The facility commitment was amended to $50 million, with up to $50 million of additional uncommitted capacity, and maturity extended to April 17, 2026.
Material changes versus comparable periods
- Revenue fell 9.8% in Q2 and 11.4% for the first half. Management attributed the declines mainly to lower average selling prices from promotions and foreign-exchange effects; higher unit sales partly offset the declines. U.S. revenue fell while international revenue increased slightly in both comparisons.
- Q2 gross margin improved 6.7 percentage points, principally due to lower inventory write-downs and freight and logistics costs, and a higher international sales mix. First-half margin declined 1.5 points, with promotional activity more than offsetting those benefits.
- SG&A rose 10.8% in Q2 and 10.6% for the first half, including higher store-related personnel, rent, depreciation and stock-based compensation. Marketing expense declined 20.8% and 19.0%, respectively.
- Restructuring expense was $1.0 million in Q2 and $4.3 million for the first half, versus none in 2022. Six-month operating cash use improved from $64.6 million, helped by a reduction in inventory and lower capital expenditures.
- Six-month net loss increased by $12.9 million year over year; the Q2 net loss was slightly lower. The first-half adjusted EBITDA loss also widened, despite a smaller Q2 adjusted EBITDA loss.
Outlook, management commentary and risks
Management expects soft revenue trends to continue through the remainder of 2023 and anticipates a full-year revenue decrease versus 2022. It expects promotions to continue, potentially weighing on near-term gross profit. Product and brand initiatives are expected to begin affecting results in 2024. The company says existing cash, operating cash flow and facility availability should meet requirements over the next 12 months; longer-term needs may also rely on cash flow, borrowing or securities offerings.
The March 2023 transformation plan targets renewed product and brand focus, U.S. store optimization and slower openings, more efficient international distribution, and cost and capital-efficiency improvements. The company reduced its corporate workforce by about 9% in May and plans to complete a transition to a new footwear manufacturing partner by year-end 2023. August letters of intent with potential distributors in Canada and South Korea are non-binding; agreements and expected results remain uncertain.
Key risks include persistent losses and cash use, weaker discretionary consumer demand, execution of the transformation and distributor strategy, promotional pressure, inventory forecasting and write-downs, store lease obligations, concentrated manufacturing and supply-chain risks, foreign exchange and inflation, and brand and sustainability-related risks. Two securities class actions alleging misleading statements about the company’s business, operations and prospects were consolidated in July 2023; the company intends to defend them. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the intended issuer: the filing is for Allbirds, Inc., not Smartbird, Inc.
- Track revenue, gross margin, promotions, inventory reserves and cash use against management’s expectations for the rest of 2023.
- Assess whether transformation actions produce sustainable cost savings without impairing sales, customer demand or brand value.
- Monitor completion and economics of the footwear manufacturing transition and whether the Canada and South Korea distributor LOIs become definitive agreements.
- Review facility availability and covenants, lease obligations, potential financing needs, and developments in the securities litigation.