Business context and reporting period
The supplied filing identifies the registrant as Allbirds, Inc., not Smartbird, Inc. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2021, compared with the corresponding 2020 periods. Allbirds sells footwear and apparel primarily through its own digital channels and retail stores; it operated 31 stores at quarter-end.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net revenue | $62.7m | $47.2m | $180.3m | $140.0m |
| Gross profit | $33.9m | $25.0m | $97.9m | $73.3m |
| Gross margin | 54.1% | 52.9% | 54.3% | 52.4% |
| Operating loss | $11.9m | $7.2m | $26.5m | $19.6m |
| Net loss | $13.8m | $7.0m | $34.9m | $16.5m |
| Adjusted EBITDA (non-GAAP) | $(6.3)m | $(3.8)m | $(12.1)m | $(10.1)m |
Revenue rose 32.7% in Q3 and 28.7% year to date, driven by more orders, higher average order value, and retail recovery. Gross margin improved 1.2 percentage points in Q3 and 1.9 points year to date, aided by product mix, apparel sales, and lower product costs; higher warehouse and logistics costs partly offset gains. Losses widened as selling, general and administrative costs and other expense increased. Q3 adjusted EBITDA margin was (10.1%), versus (8.1%); nine-month margin was (6.7%), versus (7.2%).
Cash, liquidity, and debt
Cash and cash equivalents were $65.4m at September 30, 2021, down from $126.6m at December 31, 2020. For the nine months, operating cash use was $45.5m, investing cash use $18.3m, and financing cash provided $2.3m; cash decreased $61.9m. Inventory increased to $99.3m from $59.2m, primarily to support growth and product expansion. No borrowings were outstanding under the $40m revolving credit facility, which matures in February 2024; the company reported covenant compliance. Management said cash, operating cash flow, and available borrowing capacity were expected to cover working capital and capital expenditures for at least 12 months.
Material changes and notable items
- Q3 SG&A increased 64.3% to $33.0m, including higher personnel costs, stock-based and warrant expense, store rent, and other operating and professional costs. Nine-month marketing expense rose 22.6% to $38.8m, reflecting higher digital advertising costs and product launches.
- Other expense was $8.0m for the first nine months, versus $1.1m of other income a year earlier. A $7.2m increase in the preferred-stock warrant liability’s fair value was a major driver; this noncash remeasurement also weighed on reported results.
- After quarter-end, the November 5, 2021 IPO sold 23.2m Class A shares at $15 per share, including secondary shares. The company reported approximately $237m net of underwriting discounts and before approximately $6m in offering costs (about $231m after those costs). IPO proceeds and the preferred-stock conversion are not reflected in September 30 balances.
- COVID-19 disruptions, shipping and logistics costs, supply constraints, and retail recovery remained relevant. Stores had reopened by September 30, but same-store sales remained below 2019 levels.
Outlook, risks, and contingencies
No specific numerical financial guidance is provided in the filing. Management expected continued investment in customer acquisition, product innovation, stores, supply chain, and public-company operations, with SG&A and marketing costs likely to increase in absolute dollars. It stated that these investments may delay profitability and gave no assurance about when profitability will be achieved. The business is seasonal, with sales typically peaking in the fourth quarter.
Key disclosed risks include continued losses; discretionary consumer demand and pandemic uncertainty; competition and customer-acquisition costs; inventory forecasting; reliance on a limited supplier and manufacturer base; freight, raw-material, and inflation pressures; execution of store expansion and product innovation; foreign-exchange and trade risks; and reputational, legal, and cost risks tied to sustainability claims and targets. As a public benefit corporation, the board must balance stockholder interests with stakeholder interests and the stated environmental purpose. The company reported ordinary-course legal matters and did not expect them to materially affect financial position or operations as of September 30, 2021. It expected a material right-of-use asset and lease liability upon adopting lease accounting in 2022.
Investor verification points
- Confirm the intended issuer: the filing names Allbirds, Inc., whereas the request names Smartbird, Inc.
- Assess whether revenue growth and gross-margin improvement can persist after accounting for higher operating costs and ongoing logistics pressures.
- Track inventory levels, cash consumption, and working-capital needs; inventory rose substantially during the period.
- Distinguish operating performance from the noncash warrant fair-value charge and review the company’s adjusted EBITDA reconciliation.
- Verify the IPO proceeds on a consistent basis: approximately $237m after underwriting discounts but before offering costs, or about $231m after offering costs; secondary-sale proceeds went to selling holders.
- Monitor store productivity, same-store sales versus 2019, supplier and shipping constraints, and progress against sustainability targets.