Allbirds, Inc. — Form 10-Q summary
Reporting period: Quarter and six months ended June 30, 2022. The supplied filing identifies the registrant as Allbirds, Inc. (Nasdaq: BIRD), notwithstanding the request metadata naming Smartbird, Inc. Financial statements are unaudited.
Business context and financial performance
Allbirds sells footwear and apparel, primarily directly to consumers through digital channels and stores. It operated 46 stores at quarter-end and reported one operating and reportable segment.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net revenue | $78.2m | $67.9m | $140.9m | $117.5m |
| Gross profit | $28.2m | $38.1m | $60.8m | $63.9m |
| Gross margin | 36.1% | 56.1% | 43.1% | 54.4% |
| Operating loss | $(29.3)m | $(4.2)m | $(49.3)m | $(14.6)m |
| Net loss | $(29.4)m | $(7.6)m | $(51.2)m | $(21.1)m |
| Adjusted EBITDA (non-GAAP) | $(9.2)m | $1.1m | $(21.4)m | $(5.8)m |
Revenue rose 15.1% in Q2 and 19.9% for the six-month period. Management attributed growth mainly to U.S. order volume, average order value, and price increases; international performance faced COVID-19 restrictions, the Ukraine crisis, and unfavorable currency movements. Q2 selling, general and administrative expense increased 43.8% year over year to $41.7m, while marketing expense increased 18.9% to $15.8m.
Adjusted gross margin, which excludes the inventory write-down, was 51.0% in Q2 and 51.4% for the first half. These and other adjusted figures are non-GAAP measures and should be considered alongside GAAP results.
Cash, liquidity, debt, and balance sheet
- Cash and cash equivalents were $207.3m at June 30, 2022; cash, cash equivalents, and restricted cash totaled $207.9m.
- Operating activities used $64.6m of cash in the first half, versus $22.5m in the prior-year period. Investing activities used $16.9m, primarily for property and equipment; financing activities provided $2.3m.
- Inventory was $122.3m, up from $106.9m at year-end 2021. Total assets were $428.5m, total liabilities $74.2m, and stockholders’ equity $354.3m.
- No borrowings were outstanding under the $40m revolving credit facility, which matures February 2024. The company reported compliance with its covenants and said available liquidity should meet cash requirements over the next 12 months.
Material changes, outlook, and risks
- Inventory write-down: Q2 cost of revenue included an $11.6m non-cash inventory write-down, primarily involving first-generation apparel after demand underperformed and the apparel strategy changed. The charge materially reduced reported gross margin and profit.
- Cost and margin pressure: Management cited higher distribution and logistics costs, inventory charges, unfavorable foreign exchange, and lower international sales mix. It expected these factors to continue affecting gross margin for the remainder of 2022. Inflation, freight, raw-material costs, and potential further price increases were also discussed.
- August 2022 initiatives: After quarter-end, the company announced simplification measures targeting supply-chain and operating costs, including logistics changes, inventory optimization, slower corporate hiring, workforce reductions, and reduced office space. It cautioned that the savings and timing were uncertain. The filing also reports post-quarter workforce reductions and plans to cease use of U.S. corporate office leases; estimated related costs were expected to be immaterial, though the timing and fair value for one planned lease cessation were not yet estimable.
- Key risks: Discretionary consumer demand and economic uncertainty; continued COVID-19 and supply-chain disruption; competition and product-trend risk; inventory forecasting and excess-stock exposure; reliance on concentrated suppliers and third-party logistics; sustainability commitments and related reputational or cost risks; and foreign-exchange and inflation exposure. The company reported a $188.6m accumulated deficit and expected continued losses for the foreseeable future.
- Other disclosures: Ordinary-course legal claims were disclosed, with no material financial effect expected from proceedings known at June 30. Management concluded disclosure controls were effective at a reasonable-assurance level; no material change in internal control over financial reporting was reported for the quarter. The company has a dual-class structure, with Class B shares carrying ten votes per share versus one vote for Class A.
The filing does not provide a clear numerical revenue or earnings forecast. Management’s stated outlook focuses on continuing margin headwinds, implementation of cost initiatives, and anticipated adequacy of liquidity for the next 12 months.
Important facts for investors to verify
- Whether apparel-strategy changes and inventory actions prevent further markdowns or write-downs, and whether inventory levels convert into sales and cash.
- Whether reported gross margin recovers from 36.1% in Q2 and whether the non-GAAP adjusted margin is a useful indicator given the excluded charge.
- Cash-burn trajectory, the pace of store and infrastructure investment, and the assumptions behind management’s 12-month liquidity assessment.
- Actual savings, execution costs, and operational effects of the post-quarter workforce, logistics, and office-space initiatives.
- How consumer demand, foreign exchange, inflation, COVID-19 restrictions, and supply-chain costs affect international sales and profitability.