Q2 2024 Allbirds Inc Earnings Call

August 7, 2024

Operator: music playing music playing music playing music playing music playing Music, Good afternoon, ladies and gentlemen, and welcome to the Allbirds' second quarter 2024 conference call. All participants have been placed in a listen-only mode.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Allbirds second quarter 2024 conference call. All participants have been placed in a listen-only mode.

Good afternoon, ladies and gentlemen, and welcome to the Allbirds' second quarter 2024 conference call. All participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question and answer session, at which time instructions will follow.

Christine Greany: After management's prepared remarks, there will be a question and answer session, at which time instructions will follow. Now, I would like to turn the call over to Christine Greany of the Blue Shirt group. Good afternoon, everyone, and thank you for joining us. With me on the call today are Joe Vernachio, CEO, and Annie Mitchell, CFO. Before we start, I'd like to remind you that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about our financial outlook, including cash flow and adjusted EBITDA expectations for 2024, as well as our Q3 guidance targets. Impact and duration of the external head wound

Operator: After management's prepared remarks, there will be a question-and-answer session, at which time instructions will follow.

Christine Greany: Now, I would like to turn the call over to Christine Greany of the Blue Shirt Group.

Operator: All participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session, at which time instructions will follow. Now, I would like to turn the call over to Christine Greany of the Blue Shirt Group.

Christine Greany: Now I would like to turn the call over to Christine Greany of the Blue Shirt Group.

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

Christine Greany: Good afternoon, everyone, and thank you for joining us. With me on the call today are Joe Vernachio, CEO, and Annie Mitchell, CFO. Before we start, I'd like to remind you that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about our financial outlook, including cash flow and adjusted EBITDA expectations, and our 2024 full year and Q3 guidance targets. Impact and duration of external headwinds, Strategic Transformation Plan and Related Planned Efforts, Go-to-Market Strategy, and Transitions to a Distributor Model in Certain International Markets

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

Unnamed Speaker: Before we start, I'd like to remind you that we will make certain statements today that are forward-looking, within the meaning of the federal securities laws, including statements about our financial outlook, including cash flow and adjusted expectation, 2024 full year and Q3 guidance targets. Impact in duration of external headings, strategic transformation plans, and related planned efforts, go-to-market strategy, transitions to a distributor model in certain international markets, anticipated distributor model arrangements, expected profitability, cost savings targets, gross margin estimates, product plan timelines and expectations, marketing strategy and investment, product and brand strategy and other matters referenced in our earnings release issued today.

Christine Greany: Anticipated Distributor Model Arrangements, Expected Profitability, Cost Savings Targets, Gross Margin Estimates, Product Plan Timelines and Expectations, Marketing Strategy and Investment, Product and Brand Strategy, and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise any statements to reflect changes that occur after this call. Please refer to our SEC filings, including our quarterly report on Form 10-Q for the quarter ending March 31, 2024, for a more detailed description of the risk factors that may affect our results.

Christine Greany: Strategic Transformation Plan and related planned efforts, including a go-to-market strategy and transitions to a distributor model in certain international markets. Anticipated Distributor Model Arrangements, Expected Profitability, Cost Savings Targets, Gross Margin at, product plan timelines and expectations, marketing strategy and investment, product and brand strategy, and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise any statements to reflect changes that occur after this call. Please refer to our SEC filings, including our quarterly report on Form 10-Q for the quarter ended March 31, 2024, for a more detailed description of the risk factors that may affect our results.

Christine Greany: Before we start, I'd like to remind you that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about our financial outlook, including cash flow and adjusted EBITDA expectations,

2024 Full Year and Q3 Guidance Targets.

Impact and Duration of External Headwinds, Strategic Transformation Plan and Related Planned Efforts, Go-to-Market Strategy, Transitions to a Distributor Model in Certain International Markets,

Anticipated Distributor Model Arrangements, Expected Profitability, Cost Savings Targets,

Christine Greany: Gross Margin Estimates, Product Plan Timelines and Expectations, Marketing Strategy and Investments, Product and Brand Strategy, and other matters referenced in our earnings release issued today.

Unnamed Speaker: These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially.

Unnamed Speaker: Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise any statements to reflect changes that occur after this call.

Unnamed Speaker: Please refer to our SEC filing, including our quarterly report on Form 10-Q for the quarter ended March 31, 2024, for a more detailed description of the risk factors that may affect our results.

Christine Greany: Please refer to our SEC filing, including our quarterly report on Form 10-Q for the quarter ending March 31, 2024, for a more detailed description of the risk factors that may affect our results.

Unnamed Speaker: Also, during this call, we will discuss non-GAAP financial measures that adjust our GAAP results to eliminate the impact of certain items. These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures to the extent reasonably available in today's earnings release.

Christine Greany: Also, during this call, we will discuss non-GAAP financial measures that adjust our GAAP results to eliminate the impact of certain items. These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures to the extent reasonably available in today's earnings release. Now, I'll turn the call over to Joe to begin the formal remarks.

Christine Greany: Also, during this call, we will discuss non-GAAP financial measures that adjust our GAAP results to eliminate the impact of certain items. These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. You will find additional information regarding these non-GAAP financial measures, and a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures to the extent reasonably available in today's earnings release.

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

Joe Vernachio: Now I'll turn the call over to Joe to begin the formal remarks. Hello everyone, and thanks for joining us today. We are pleased to report another quarter of strong execution and performance in line with our expectations. Our key two results reflect continuing progress both operationally and financially as we set the business on a path to return to top line growth in 2025. We are on a trajectory to reignite our product and brand.

Joe Vernachio: Now I'll turn the call over to Joe to begin the formal remarks. Hello, everyone, and thanks for joining us today. We are pleased to report another quarter of strong execution and performance in line with our expectations. Our Q2 results reflect continuing progress, both operationally and financially, as we set the business on a path to return to top-line growth in 2020. We are on a trajectory to reinvigorate our product and brand. But before we talk about this next chapter, let's take a look at what we've accomplished over the past week.

Joe Vernachio: Hello everyone, and thanks for joining us today. We are pleased to report another quarter of strong execution and performance in line with our expectations. Our Q2 results reflect continuing progress both operationally and financially as we set the business on a path to return to top-line growth in 2020. We are on a trajectory to reinvigorate our product and brand. But before we talk about this next chapter, let's take a look at what we've accomplished over the past. Since the announcement of our Strategic Transformation Plan, we have reset the business. Establishing the foundation for the next phase of Allbirds.

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

Joe Vernachio: Hello everyone and thanks for joining us today. We are pleased to report another quarter of strong execution and performance in line with our expectations.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Allbirds Second Quarter 2024 conference call. All participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question and answer session, at which time instructions will follow.

Joe Vernachio: Our Q2 results reflect continuing progress, both operationally and financially, as we set the business on a path to return to top-line growth in 2025.

Christine Greany: Now, I would like to turn the call over to Christine Greany of the Blue Shirt Group. Good afternoon, everyone, and thank you for joining us. With me on the call today are Joe Vernachio, CEO, and Annie Mitchell, CFO. Before we start, I'd like to remind you that we will make certain statements today that are forward-looking, within the meaning of the federal security's laws, including statements about our financial outlook, including cash flow and adjusted expectation, 2024 full year and Q3 guidance targets.

Joe Vernachio: But before we talk about this next chapter, let's take a look at what we've accomplished over the past 18 months. Since the announcement of our strategic transformation plan, we have reset the business, establishing the foundation for the next phase of all those changes. Unfortunately, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan.

Joe Vernachio: We are on a trajectory to reignite our product and brand.

Joe Vernachio: But before we talk about this next chapter, let's take a look at what we've accomplished over the past 18 months.

Joe Vernachio: Since the announcement of our strategic transformation plan, we have reset the business, establishing the foundation for the next phase of Allbirds' journey. Importantly, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan. I'd like to provide a quick recap of our actions since March of 2020, starting with Retail Story. We have closed 14 underperforming U.S. locations to move us towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail fleet. Next is international.

Joe Vernachio: since the announcement of our strategic transformation plant we have reset the business establishing the foundation for the next phase of all berststream

Christine Greany: Impact in duration of external headings, strategic transformation plans, and related planned efforts, go to market strategy, transitions to a distributor model in certain international markets, anticipated distributor model arrangements, expected profitability, cost savings targets, gross margin estimates, product plan timelines and expectations, marketing strategy and investment, product and brand strategy and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially.

Joe Vernachio: Importantly, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan. I'd like to provide a quick recap of our actions since March of 2020, starting with Retail Store. We have closed 14 underperforming U.S. locations to move us towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail footprint. Next is international.

Joe Vernachio: Importantly, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan.

Joe Vernachio: I'd like to provide a quick recap of our actions since March of 2023. Starting with retail stores. We have closed 14 underperforming US locations to buy us towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profit. We have successfully transitioned to a distributor model in the five targeted regions where we were previously selling direct. We also opened four new regions where we have the opportunity to partner with leading distributors and leverage our strong brand affinity. We believe this distributor model positions us to achieve profitable and scalable growth internationally.

Joe Vernachio: We have successfully transitioned to a distributor model in the five targeted regions where we were previously selling direct. We have also opened four new regions where we have the opportunity to partner with leading distributors and leverage our strong brand affinity. We believe this distributor model positions us to achieve profitable and scalable growth internationally.

Joe Vernachio: I'd like to provide a quick recap of our actions since March of 2023.

Joe Vernachio: Starting with retail stores, we have closed 14 underperforming U.S. locations to buy us towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail fleet.

Joe Vernachio: Next is international. We have successfully transitioned to a distributor model in the five targeted regions where we were previously selling direct.

Joe Vernachio: We also opened four new regions where we have the opportunity to partner with leading distributors and leverage our strong brand affinity.

Joe Vernachio: We believe this distributor model positions us to achieve profitable and scalable growth internationally.

Joe Vernachio: Looking at costs of goods, our shifts to a new factory along with material optimizations is enabling us to capture significant cogsavings, driving longer term growth margin expansion. We're also generating off-ex savings. We have rebuilt the wireframe of the company, and we're operating with greater overall efficiency. We believe this positions us to drive long term profitability as we scale.

Joe Vernachio: Our shift to a new factory, along with material optimizations, is enabling us to capture significant cog savings, driving longer-term gross margin expansion. We're also generating OPEX savings. We have rebuilt the wireframe of the company, and we're operating with greater overall efficiency. We believe this positions us to drive long-term profitability as we scale and turn to our balance sheet. We cut our inventory by more than half and drove an improvement in working capital in 2023 versus the prior year.

Joe Vernachio: Our shift to a new factory, along with material optimizations, is enabling us to capture significant COG savings, driving longer-term gross margin expansion. We're also generating OPEX savings. We have rebuilt the wireframe of the company, and we're operating with greater overall efficiency. We believe this positions us to drive long-term profitability as we scale and turn to our balance sheet. We cut our inventory by more than half and drove an improvement in working capital in 2023 versus the prior year.

Joe Vernachio: Looking at cost of goods, our shift to a new factory along with material optimizations is enabling us to capture significant COG savings.

Christine Greany: Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise any statements to reflect changes that occur after this call. Please refer to our SEC filing, including our quarterly report on form 10Q for the quarter ended March 31, 2024, for a more detailed description of the risk factors that may affect our results. Also, during this call, we will discuss non-gap financial measures that adjust our gap results to eliminate the impact of certain items.

Joe Vernachio: driving longer-term gross margin expansion.

Joe Vernachio: We're also generating OPEX savings. We have rebuilt the wireframe of the company and we're operating with greater overall efficiency. We believe this positions us to drive long-term profitability as we scale.

Joe Vernachio: Turning to our balance sheet, we cut our inventory by more than half and drove improvement in working capital in 2023 versus prior year. We entered 2024 in a very healthy position, and we're carefully managing inventory going forward.

Speaker Change: And turning to our balance sheet, we cut our inventory by more than half and drove improvement in working capital in 2023 versus prior year. We entered 2024 in a very healthy position and we're carefully managing inventory going forward.

Christine Greany: These non-gap items should be used in addition to and not as a substitute for any gap results. You will find additional information regarding these non-gap financial measures and a reconciliation of these non-gap measures to their most directly comparable gap measures to the extent reasonably available in today's earnings release.

Joe Vernachio: We entered 2024 in a very healthy position, and we're carefully managing inventory going forward. Against that backdrop, we are now prioritizing three main focus areas: making great products, telling compelling stories, and providing customers with an engaging shopping experience. Creating a great product is paramount to our long-term success. Getting the product engine ignited has been amongst my highest priorities since taking over the product range last November. After bringing in a new chief design officer in December, we built a roadmap to evolve our forward product and brand strategy.

Joe Vernachio: Against that backdrop, we are now prioritizing three main focus areas: making great product, telling compelling stories, and providing customers with an engaging shopping experience. Creating great product is paramount to our long-term success. Getting the product engine ignited has been amongst my highest priorities since taking over the product range. After bringing in a new chief design officer in December, we built a roadmap to evolve our Go Forward product and brand strategy. The first critical step was to edit the line to more closely reflect our evolving strategy. As a result, we have limited a number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrates our customer is asking for units from Allbirds.

Joe Vernachio: Against that backdrop, we are now prioritizing three main focus areas.

Joe Vernachio: making great product, telling compelling stories, and providing customers with an engaging shopping experience.

Joe Vernachio: Creating a great product is paramount to our long-term success. Getting the product engine ignited has been amongst my highest priorities since taking over the product range last November. After bringing in a new chief design officer in December, we built a roadmap to evolve our forward product and brand strategy. The first critical step was to edit the line to more closely reflect our evolving strategy.

Speaker Change: creating a great product is paramount to our long-term success getting the product engine ignited has been amongst my highest priorities since taking over the product grains lastack

Joe Vernachio: Our key two results reflect continuing progress both operationally and financially as we set the business on a path to return to top line growth in 2025. We are on a trajectory to reignite our product and brand.

Speaker Change: After bringing in a new chief design officer in December, we built a roadmap to evolve our go-forward product and brand strategy.

Joe Vernachio: The first critical step was to edit the line to more closely reflect our evolving strategy. As a result, we have limited the number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrate our customer is asking for newness from Allbirds. The Woolrunner 2, TreeRunner Go, and Canvas Piper have all met with positive consumer response.

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

Joe Vernachio: As a result, we have limited the number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrate our customer is asking for newness from Allbirds. The Woolrunner 2, TreeRunner Go, and Canvas Piper have all met with positive consumer responses. Up next is the launch of our TreeGlider in just a few weeks. We then set out to inject newness as quickly as possible.

Speaker Change: as a result we have limited a number of recent product introductions to just a p launches all of which have performed well thus l and demonstrates our customer is asking for a units from alvertts

Joe Vernachio: The wool runner two, tree runner go and canvas piper have all met with positive consumer response. Up next is the launch of our tree glider in just a few weeks. We then set out to inject newness as quickly as possible. Using our existing tooling, we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 2024 in the first half of 2025. You'll first see this reflected in the fall when we plan to introduce corridoring, as well as more rugged versions of our water resistance collection.

Speaker Change: TheWoolRunner2, TreeRunnerGo, and Canvas Piper have all met with positive consumer response. Up next is the launch of our TreeGlider in just a few weeks.

Joe Vernachio: Up next is the launch of our TreeGlider in just a few weeks. We then set out to inject newness as quickly as possible. Using our existing tooling, we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 24 and the first half of 2025. You'll first see this reflected in the fall, when we plan to introduce corduroy, as well as more rugged versions of our water-resistant collection.

Joe Vernachio: Using our existing tooling, we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 24 and the first half of 2025. You'll first see this reflected in the fall, when we plan to introduce corduroy, as well as more rugged versions of our water-resistant collection. Looking ahead to our Fall 25 and Spring 26 collections, we are creating these product lines from the ground up, with an elevated design and product architecture that emphasizes Allbirds' lifestyle brand position.

Speaker Change: We then set out to inject newness as quickly as possible.

Joe Vernachio: Starting with retail stores. We have closed 14 underperforming US locations to buy us towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profit. We have successfully transitioned to a distributor model in the five targeted regions where we were previously selling direct. We also opened four new regions where we have the opportunity to partner with leading distributors and leverage our strong brand affinity.

Speaker Change: Using our existing tooling, we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 2024 and the first half of 2025.

Speaker Change: you'll first see this reflected in the fall when we plan to introduce quaring as well as more rugged versions of our water resistant collection

Joe Vernachio: We are creating these product lines from the ground up with an elevated design and product architecture that emphasizes Allbirds' lifestyle brand positioning. We are in the intensive phase of designing and developing a robust line of products that will begin to launch in the second half of next year. We are very motivated by the progress we are seeing with each sample that arrives from our development center. We have more than 10 new product launches planned across these two seasons. The collections will not only enhance our product range but also reinforce our dedication to quality, comfort, style, and sustainability.

Speaker Change: Looking ahead to our Fall 25 and Spring 26 collections, we are creating these product lines from the ground up with an elevated design and product architecture that emphasizes Allbirds lifestyle brand positioning.

Joe Vernachio: We believe this distributor model positions us to achieve profitable and scalable growth internationally. Looking at costs of goods, our shifts to a new factory along with material optimizations is enabling us to capture significant cogsavings, driving longer term growth margin expansion. We're also generating off-ex savings. We have rebuilt the wireframe of the company and we're operating with greater overall efficiency. We believe this positions us to drive long term profitability as we scale.

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

Speaker Change: we are very motivated by the progress we are seeing with each sample that arrived from our development center

Joe Vernachio: We have more than 10 new product launches planned across these two seasons. The collections will not only enhance our product range but also reinforce our dedication to quality, comfort, style, and sustainability, in preparation for our new product launches in mid 2025. We will be telling compelling marketing stories, utilizing a new brand narrative called Allbirds by Nature. This narrative celebrates the duality of the word nature. Connecting our design philosophy inspired by the natural world while also encouraging people to embrace their innate and unique human nature.

Speaker Change: We have more than 10 new product launches planned across these two seasons. The collections will not only enhance our product range, but also reinforce our dedication to quality, comfort, style, and sustainability.

Joe Vernachio: In preparation for our new product launches in mid-2025, we will be telling compelling marketing stories, utilizing a new brand narrative called Allbirds by Nature. This narrative celebrates the duality of the word nature, connecting our design philosophy inspired by the natural world while also encouraging people to embrace their innate and unique human nature. Allbirds by Nature will enable us to inspire and engage the consumer with a wide range of topics, from product benefits to universal human experiences. For example, breathable by nature will highlight our use of natural and recycled materials and knit constructions that offer exceptional breathability.

Speaker Change: in preparation for our new product launches in mid two thousand and twenty-five

Joe Vernachio: Turning to our balance sheet, we cut our inventory by more than half and drove improvement in working capital in 2023 versus prior year. We entered 2024 in a very healthy position and we're carefully managing inventory going forward.

Speaker Change: We will be telling compelling marketing stories, utilizing a new brand narrative called Allbirds by Nature.

Speaker Change: This narrative celebrates the duality of the word nature.

Speaker Change: Connecting our design philosophy inspired by the natural world while also encouraging people to embrace their innate and unique human nature.

Joe Vernachio: Against that backdrop, we are now prioritizing three main focus areas, making great product, telling compelling stories and providing customers with an engaging, shopping experience. Creating great product is paramount to our long-term success. Getting the product engine ignited has been amongst my highest priorities since taking over the product range. After bringing in a new chief design officer in December, we built a roadmap to evolve our Go Forward product and brand strategy. The first critical step was to edit the line to more closely reflect our evolving strategy.

Joe Vernachio: Allbirds by Nature will enable us to inspire and engage the consumer with a wide range of topics, from product benefits to universal human experiences. For example, Breathable by Nature will highlight our use of natural and recycled materials and knit constructions that offer exceptional breathability. Comfortable by Nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own skin.

Joe Vernachio: Allbirds by Nature will enable us to inspire and engage the consumer with a wide range of topics. For example, Breathable by Nature will highlight our use of natural and recycled materials in knit constructions that offer exceptional breathability. Comfortable by Nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own shoes.

Speaker Change: all birds by nature will enable us to inspire and engage the consumer of the wide range of topics from product benefits to universal human experiences

Speaker Change: For example, breathable by nature will highlight our use of natural and recycled materials in knit constructions that offer exceptional breathability.

Joe Vernachio: Comfortable by nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own skin. To amplify this narrative, we are prioritizing increased marketing investment starting in the second half of the year, with a phased ramp-up planned to continue throughout 2025.

Speaker Change: Comfortable by Nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own skin.

Joe Vernachio: To amplify this narrative, we are prioritizing increased marketing investment starting in the second half of the year, with a phased ramp-up planned to continue throughout 2025. More on this from Annie shortly. Our efforts will be centered around driving awareness through an upper funnel strategy that tells the Allbirds brand and product story in a fresh, engaging, and consistent manner. Specifically, our initiatives are designed to convey our brand message and product attributes through the lenses of rational, emotional, and cultural connection. By incorporating these elements, we are creating a richer, more engaging narrative that resonates with the values and aspirations of Allbirds consumers.

Speaker Change: To amplify this narrative, we are prioritizing increased marketing investment starting in the second half of the year with a phased ramp up planned to continue throughout 2025.

Joe Vernachio: As a result, we have limited a number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrates our customer is asking for units from all birds. The wool runner two, tree runner go and canvas piper have all met with positive consumer response. Up next is the launch of our tree glider in just a few weeks. We then set out to inject newness as quickly as possible.

Joe Vernachio: More on this from Annie shortly. Our efforts will be centered around driving awareness to an upper funnel strategy that tells the Allbirds brand and product story in a fresh, engaging, and consistent manner. Specifically, our initiatives are designed to convey our brand message and product attributes to the lenses of rational, emotional, and cultural connections. By incorporating these elements, we are creating a richer, more engaging narrative that resonates with the values and aspirations of the Allbirds consumer.

Speaker Change: More on this from Annie shortly.

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

Annie Mitchell: Specifically, our initiatives are designed to convey our brand message and product attributes through the lenses of rational, emotional, and cultural connections.

Joe Vernachio: Using our existing tooling, we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 2024 in the first half of 2025. You'll first see this reflected in the fall when we plan to introduce corridoring, as well as more rugged versions of our water resistance collection. We are creating these product lines from the ground up with an elevated design and product architecture that emphasizes allbirds' lifestyle brand positioning.

Joe Vernachio: By incorporating these elements, we are creating a richer, more engaging narrative that resonates with the values and aspirations of Allbirds. As we bring fresh, updated products to the market and amplify our marketing, providing customers with an engaging shopping experience is our other key priority. We are enhancing the in-store consumer journey, starting with an improved assortment presentation, wayfinding, and floor display. In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop at. You'll hear much more about this in the quarters to come.

Speaker Change: By incorporating these elements, we are creating a richer, more engaging narrative that resonates with the values and aspirations of the Allbirds consumer.

Joe Vernachio: As we bring fresh, updated product to the market and amplify our marketing, providing customers with an engaging shopping experience is our other key priority. We are enhancing the in-store consumer journey, starting with an improved assortment presentation, weight finding, and floor displays. In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop.

Joe Vernachio: As we bring fresh, updated products to the market and amplify our marketing, providing customers with an engaging shopping experience is our other key priority. We are enhancing the in-store consumer journey, starting with an improved assortment presentation, wayfinding, and floor displays. In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop at. You'll hear much more about this in the quarters to come.

Speaker Change: As we bring fresh, updated products to the market and amplify our marketing, providing customers with an engaging shopping experience is our other key priority.

Speaker Change: We are enhancing the in-store consumer journey, starting with an improved assortment presentation, wayfinding, and floor displays.

Speaker Change: In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop.

Joe Vernachio: We are in the intensive phase of designing and developing a robust line of products that will begin to launch in the second half of next year. We are very motivated by the progress we are seeing with each sample that arrives from our development center. We have more than 10 new product launches planned across these two seasons. The collections will not only enhance our product range but also reinforce our dedication to quality, comfort, style, and sustainability.

Joe Vernachio: You'll hear much more about this in the quarters to come. As we embark on the next phase of our journey, our track record of execution over the past 18 months gives us confidence in our ability to advance our three main focus areas of making great products. Telling compelling stories and providing customers with an engaging shopping experience. We have bolstered our organization with key hires and internal promotions, creating a team that is coalesced around a clear path forward. We're continuing to operate with urgency and remain committed to building shareholder value over the long term.

Joe Vernachio: As we embark on the next phase of our journey, our track record of execution over the past 18 months gives us confidence in our ability to advance our three main focus areas of making great products, telling compelling stories, and providing customers with an engaging shopping experience. We have bolstered our organization with key hires and internal promotions, creating a team that is coalesced around a clear path forward. We're continuing to operate with urgency and remain committed to building shareholder value over the long term. We appreciate your support and look forward to keeping you updated on our progress. Now I'll turn the call over to Annie to discuss the finances. Joe and good afternoon, everyone.

Joe Vernachio: As we embark on the next phase of our journey, our track record of execution over the past 18 months gives us confidence in our ability to advance our three main focus areas of making great products, telling compelling stories, and providing customers with an engaging shopping experience. We have bolstered our organization with key hires and internal promotion, creating a team that is coalesced around a clear path forward. We're continuing to operate with urgency and remain committed to building shareholder value over the long term. We appreciate your support and look forward to keeping you updated on our progress. Now I'll turn the call over to Annie to discuss the final.

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

Speaker Change: As we embark on the next phase of our journey, our track record of execution over the past 18 months gives us confidence in our ability to advance our three main focus areas of making great product,

Speaker Change: telling compelling stories and providing customers with an engaging shopping experience.

Speaker Change: We have bolstered our organization with key hires and internal promotions, creating a team that is coalesced around a clear path forward. We're continuing to operate with urgency and remain committed to building shareholder value over the long term.

Joe Vernachio: We appreciate your support and look forward to keeping you updated on our progress.

Speaker Change: We appreciate your support and look forward to keeping you updated on our progress.

Annie Mitchell: Now I'll turn the call over to Annie to discuss the financials. Thanks, Joe, and good afternoon, everyone. We are pleased to deliver another quarter of performance within or exceeding our expectations, reflecting consistent execution by our teams. Net revenue came in within our guidance range, and adjusted EBITDA exceeded the expectations outlined last quarter. Notably, we delivered another quarter of gross margin expansion and a 25 percent year-over-year improvement in adjusted EBITDA. Q2 revenue total 52 million. The results are primarily attributable to lower unit sales, partially offset by higher ASPs within our direct business. The return of full price selling is a critical component of our long-term strategy.

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

Annie Mitchell: Thanks, Joe, and good afternoon, everyone. We are pleased to deliver another quarter of performance within or exceeding our expectations, reflecting consistent execution by our team. Net revenue came in within our guidance range, and adjusted EBITDA exceeded the expectations outlined last quarter. Notably, we delivered another quarter of gross margin expansion and a 25% year-over-year improvement in adjusted EBITDA. Q2 revenue totaled $52 million.

Annie Mitchell: We are pleased to deliver another quarter of performance within or exceeding our expectations, reflecting consistent execution by our team. Net revenue came in within our guidance range, and adjusted EBITDA exceeded the expectations outlined last quarter. Notably, we delivered another quarter of gross margin expansion and a 25% year-over-year improvement in adjusted EBITDA. Q2 revenue totaled $52 million.

Annie Mitchell: Thank you. Thank you. Thank you.

Annie Mitchell: Thanks Joe and good afternoon everyone. We are pleased to deliver another quarter of performance within or exceeding our expectations reflecting consistent execution by our team.

Joe Vernachio: For example, breathable by nature will highlight our use of natural and recycled materials and knit constructions that offer exceptional breathability. Comfortable by nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own skin. To amplify this narrative, we are prioritizing increased marketing investment starting in the second half of the year, with a phase ramp up planned to continue throughout 2025.

Annie Mitchell: net revenue came in within our guidance range and adjusted ebitda exceed the expectations the outined last quarter notably we delivered another quarter of gross margin expansion and a twenty-five percent year-over-year improvement in adjusted ebitda

Annie Mitchell: The results are primarily attributable to lower unit sales partially offset by higher ASPs within our direct system. The return to full-price selling is a critical component of our long-term strategy. However, it is creating a near-term headwind for sales. Additionally, revenue was impacted by our international distributor transition and planned retail stores. While the transition to a distributor model and the closure of retail doors are reducing our top line and the associated gross profit dollars, these actions are done with intention as they support our cost management and efficiency efforts and are offset by savings in marketing and SG&A, which I will discuss. Second quarter gross margin improved 50.5%, up 360 basis points sequentially and 770 basis points versus the prior year.

Speaker Change: q two revenue tool fifty-two m the results are primarily attributable to lower unit sales partially offset by higher asps within our direct business

Annie Mitchell: However, it is creating a near-term headwinded sales. Additionally, revenue was impacted by our international distributor transition and plan-to-detail store closure. While the transition to a distributor model and the closure of retail doors are reducing our top line and the associated gross profit dollars, these actions are done with intention as they support our cost management and efficiency efforts and are offset by savings in marketing and S-GNA, which I will discuss in a moment. Second quarter gross margin improved to 50.5 percent, up 360 basis points sequentially and 770 basis points versus the prior year. The year-over-year expansion is attributable to the continued benefits from a healthier inventory position, lower rate cost, and lower promotional activity in the direct business, as well as COGS savings captured from our factory shifts and materialization.

Speaker Change: The return to full price selling is a critical component of our long-term strategy. However, it is creating a near-term headwind to sales.

Joe Vernachio: More on this from Annie shortly. Our efforts will be centered around driving awareness to an upper funnel strategy that tells the Allbirds brand and product story in a fresh, engaging and consistent manner. Specifically, our initiatives are designed to convey our brand message and product attributes to the lenses of rational, emotional, and cultural connections. By incorporating these elements, we are creating a richer, more engaging narrative that resonates with the values and aspirations of the Allbirds consumer.

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

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

Annie Mitchell: These actions are done with intent, as they support our cost management and efficiency efforts and are offset by savings in marketing and SG&A, which I will discuss. Second quarter gross margin improved 50.5%, up 360 basis points sequentially and 770 basis points versus the prior year.

Annie Mitchell: Second quarter gross margin improved to 50.5%, up 360 basis points sequentially and 770 basis points versus the prior year.

Joe Vernachio: As we bring fresh, updated product to the market and amplify our marketing, providing customers with an engaging, shopping experience is our other key priority. We are enhancing the in-store consumer journey, starting with an improved assortment presentation, weight finding, and floor displays. In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop.

Annie Mitchell: The year-over-year expansion is attributable to the continued benefit from a healthier inventory position and lower Breakup, as well as COGS savings captured from our factory shift and materials installation. Year-over-year improvement in gross margins is expected to continue in the second half of 2024, although not to the same magnitude that we've seen year to date. We continue to expect Q3 and Q4 growth margins to be in the mid 40s, reflecting the

Annie Mitchell: The year over year expansion is attributable to the continued benefit from a healthier inventory position, lower breakup, and Lower Promotional Activity in the Directive, as well as COGS savings captured from our factory shift and materials installation. Year-over-year improvement in gross margins is expected to continue in the second half of 2024, although not to the same magnitude that we've seen here today. We continue to expect Q3 and Q4 growth margins to be in the mid 40s, reflecting the combination of retail foreclosures.

Annie Mitchell: The year-over-year expansion is attributable to the continued benefit from a healthier inventory position, lower break costs, and lower promotional activity in the direct business, as well as cost savings captured from our factory shifts and materials installation.

Annie Mitchell: Year-over-year improvement in gross margins is expected to continue in the second half of 2024, although not the same magnitude that we've seen here today. We continue to expect Q3 to Q4 gross margins to be in the mid-40s, reflecting the combination of retail store closures, transitions to international distributors, and planned promotional activity around the holidays. Looking at S-GNA, are teams to great work controlling costs in the quarter. S-GNA dollars excluding stock-based compensation and depreciation and amortization totaled 28 million, down 22 percent versus the prior year. The decrease can primarily be traced for lower personnel expenses and occupancy costs.

Annie Mitchell: Year-over-year improvement in gross margins is expected to continue in the second half of 2024, although not at the same magnitude that we've seen year-to-date.

Annie Mitchell: We continue to expect Q3 and Q4 growth margins to be in the mid-40s, reflecting the combination of retail store closures, transitions to international distributors, and planned promotional activity around the holidays.

Annie Mitchell: Transitions to International Distributors and Planned Promotional Activity around the College. Looking at SG&A, our teams did great work controlling costs in the quarter. SG&A dollars, excluding stock-based compensation and depreciation and amortization, totaled $28 million, down 22% versus the prior year.

Annie Mitchell: Transitions to International Distributors and Planned Promotional Activity around the holiday. Looking at SG&A, our teams did great work controlling costs in the quarter. SG&A dollars, excluding stock-based compensation and depreciation and amortization, totaled $28 million, down 22% versus the prior year. The decrease can primarily be traced to lower personnel expenses and occupancy. This was partially offset by costs associated with our retail store closures, as planned. During the quarter, we closed 10 U.S. doors, followed by one additional closure subsequent to the quarter end.

Annie Mitchell: Looking at SG&A, our teams did great work controlling costs in the quarter. SG&A dollars, excluding stock-based compensation and depreciation and amortization, totaled $28 million, down 22% versus the prior year.

Annie Mitchell: The decrease can primarily be traced to lower personnel expenses and occupancy, although this was partially offset by costs associated with our retail store closures as planned. During the quarter, we closed 10 U.S. doors, followed by one additional closure subsequent to the quarter end. This brings us to 14 stores year to date, putting us at the high end of our plan to close 10 to 15 U.S. stores in 2024, and we continue to evaluate opportunities to optimize our retail. In connection with these store closures, plus one internationally, we incurred one-time cash charges of $3 million in Q2. Q2 marketing spend totaled $12 million, down 6% year-over-year.

Annie Mitchell: The decrease can primarily be traced to lower personnel expenses and occupancy costs.

Annie Mitchell: This was partially offset by cost associated with our retail store closures as planned. During the quarter, we closed 10 U.S. doors, followed by one additional closure subsequent to quarter S. This brings us to 14 stores year-to-date, putting us at the high end of our plan to close 10 to 15 U.S. doors in 2024. and we continue to evaluate opportunities to optimize our retail fleet. In connection with these store closures, but one internationally, we incurred one-time cash charges of 3 million in Q2. Q2 marketing spend total 12 million, down 6% year-over-year. As Joe mentioned, in the second half of 2024, we plan to increase our marketing investment to begin driving awareness through top-of-funnel spend in the lead-up to our 2025 product introduction.

Annie Mitchell: This was partially offset by costs associated with our retail store closures as planned.

Annie Mitchell: During the quarter, we closed 10 U.S. doors, followed by one additional closure subsequent to quarter end.

Annie Mitchell: This brings us to 14 stores year to date, putting us at the high end of our plan to close 10 to 15 U.S. stores in 2024, and we continue to evaluate opportunities to optimize our retail. In connection with these store closures, Buck One Internationally, we incurred one-time cash charges of $3 million for future. Q2 marketing spend totaled $12 million, down 6% year-over-year.

Joe Vernachio: We appreciate your support and look forward to keeping you updated on our progress.

Annie Mitchell: This brings us to 14 stores year-to-date, putting us at the high end of our plan to close 10 to 15 U.S. stores in 2024.

Annie Mitchell: And we continue to evaluate opportunities to optimize our retail fleet.

Annie Mitchell: in connection with these store closure plus one internationally we inoccurred one-time cash charges of three million in q two

Annie Mitchell: Q2 marketing spend totaled $12 million, down 6% year-over-year.

Annie Mitchell: as joe mentioned in the second half of two thousand and twentyfour we plan to increase our marketing investment to begin driving awareness through top offinal spend in the leadup to our two thousand and twenty-five product introductions

Annie Mitchell: While total marketing dollars are expected to be down on a year-over-year basis, Q3 and Q4, we anticipate that our U.S. Spend will be up. Recall that under our new distributor model, in-region marketing cost effectively go to zero following a transition. With five regions now transitioning to distributors, the year-over-year savings are expected to more than offset the investments we're planning to make in our remaining direct market, the U.S., UK, and EU.

Annie Mitchell: Q2 revenue total 52 million. The results are primarily attributable to lower unit sales partially offset by higher ASPs within our direct business. The return of full price selling is a critical component of our long-term strategy. However, it is creating a near-term headwinded sales. Additionally, revenue was impacted by our international distributor transition and plan-to-detail store closure. While the transition to a distributor model and the closure of retail doors are reducing our top line and the associated gross profit dollars, these actions are done with intention as they support our cost management and efficiency efforts and are offset by savings and marketing and S-GNA, which I will discuss in a moment.

Speaker Change: While total marketing dollars are expected to be down on a year-over-year basis in Q3 and Q4, we anticipate that our U.S. spend will be up.

Annie Mitchell: Recall that under our new distributor model, in-region marketing costs effectively go to zero following a transition.

Annie Mitchell: With five regions now transitioned to distributors, the year-over-year savings are expected to more than offset the investments we're planning to make in our remaining direct markets. U.S., U.K. Now, turning to the balance sheet and cash flow, the company is in strong financial condition with a solid balance. Inventories at the end of Q2 remained healthy, totaling $53 million, that's down 43% year over year and down 7% from the end of 2023. We closed the second quarter with $87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver.

Annie Mitchell: With five regions now transitioned to distributors, the year-over-year savings are expected to more than offset the investments we're planning to make in our remaining direct market. The U.S., U.K. Now, turning to the balance sheet and cash flow. The company is in strong financial condition with a solid balance sheet. Inventories at the end of Q2 remained healthy, totaling $53 million. That's down 43% year over year and down 7% from the end of 2023. We close the second quarter with $87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver. Operating cash used was $16 million.

Annie Mitchell: Now, turning to the balance sheet and cash flow, the company is in strong financial condition with a solid balance sheet. Inventories of the end of Q2 remain healthy, totaling $53 million. That's down 43% year-over-year and down 7% from the end of 2023. We close the second quarter with 87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver. Offerting cash used was 16 million. That's down to quenchedly from Q1, reflecting our seasonal working capital cadence, and up versus the prior year. What inventory was a material source of cash due to our creative efforts throughout 2023.

Annie Mitchell: Now, turning to the balance sheet and cash flow, the company is in strong financial condition with a solid balance sheet.

Annie Mitchell: Inventories at the end of Q2 remained healthy, totaling $53 million. That's down 43% year-over-year and down 7% from the end of 2023.

Annie Mitchell: Second quarter gross margin improved to 50.5 percent, up 360 basis points sequentially and 770 basis points versus the prior year. The year-over-year expansion is attributable to the continued benefits from a healthier inventory position, lower rate cost, and lower promotional activity in the direct business, as well as cogs savings captured from our factory shifts and materialization. Year-over-year improvement in gross margins is expected to continue in the second half of 2024, although not the same magnitude that we've seen here today.

Annie Mitchell: We close the second quarter with $87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver.

Annie Mitchell: That's down sequentially from Q1, reflecting our seasonal working capital cadence, but up versus the prior year when inventory was a material source of cash due to our cleanup efforts throughout the 2020 period. Our three focus areas of making great products, telling compelling stories, and providing customers with an engaging shopping experience, combined with other strategic actions we are taking this year, are positioning the business to return to top line growth in 2025 and set us up to deliver profitability in future years.

Annie Mitchell: Operating cash use was $16 million, that's down sequentially from Q1, reflecting our seasonal working capital cadence and up versus the prior year when inventory was a material source of cash due to our cleanup efforts throughout 2020. Our three focus areas of making great products, telling compelling stories, and providing customers with an engaging shopping experience, combined with other strategic actions we are taking this year, are positioning the business to return to top line growth in 2025 and set us up to deliver profitability in the future. A foundational step in our plan to restore growth is the return to full price.

Annie Mitchell: Operating cash use was $16 million. That's down sequentially from Q1, reflecting our seasonal working capital cadence, and up versus the prior year when inventory was a material source of cash due to our cleanup efforts throughout 2023.

Annie Mitchell: Our three focus areas of making-rate products, telling compelling stories, and providing customers with an engaging shopping experience, combined with other strategic actions we are taking this year, are positioning the business to return to top line growth in 2025 and set us up to deliver profitability in future years. A foundational step on our plan to restore growth is the return to full-price selling. We are committed to this model following a promotional 2023 and pleased to see the benefits begin to manifest, which is reflected in our year-to-date gross margin expansion. Looking at other key initiatives, as I just noted, we've taken swift action related to our U.S.

Speaker Change: our three focus areas of making ray product telling compelling stories and providing customers with engaging dropping experience

Annie Mitchell: We continue to expect Q3 to Q4 gross margins to be in the mid-40s, reflecting the combination of retail store closures, transitions to international distributors, and plan promotional activity around the holidays. Looking at S-GNA are teams to great work controlling costs in the quarter. S-GNA dollars excluding stock-based compensation and depreciation and amortization totaled 28 million, down 22 percent versus the prior year. The decrease can primarily be traced for lower personnel expenses and occupancy costs.

Annie Mitchell: combined with other strategic actions we are taking this year are positioning the business to return to top-line growth in 2025 and set us up to deliver profitability in future years.

Annie Mitchell: A foundational step in our plan to restore growth is the return to full price. We are committed to this model following a promotional 2023, and please see the benefits begin to manifest, which is reflected in our year-to-date gross margin. Looking at other key initiatives, as I just noted, we've taken swift action related to our U.S. retail fleet. And on the international front, we continue to partner with distributors in new regions, with Benelux and Scandinavia signing this quarter. We have transitioned the majority of our existing regions to a distributor model. During the second quarter, we completed transitions in Japan and Australasia.

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

Annie Mitchell: We are committed to this model following a promotional 2023, and I'm pleased to see the benefits begin to manifest, which is reflected in our year-to-date gross margin. Looking at other key initiatives, as I just noted, we've taken swift action related to our U.S. retail fleet. And on the international front, we continue to partner with distributors in new regions, with Benelux and Scandinavia signed this quarter. We have transitioned the majority of our existing regions to a distributor model. During the second quarter, we completed transitions in Japan and Australasia.

Annie Mitchell: We are committed to this model following a promotional 2023 and pleased to see the benefits begin to manifest, which is reflected in our year-to-date gross margin expansion.

Annie Mitchell: retail fleet. And on the international front, we continue to partner with distributors in new regions, with Benelux and Scandinavia signed this quarter. We have transitioned the majority of our existing regions to a distributor model. Through the second quarter, we completed transitions in Japan and Australia. And last week, we announced the transition in China, an important region for our brand. We're pleased to be working with leading distributors who have both regional and industry expertise to help us send a brand reach and position us to achieve profitable and scalable growth internationally.

Annie Mitchell: Looking at other key initiatives, as I just noted, we've taken swift action related to our U.S. retail fleet.

Annie Mitchell: This was partially offset by cost associated with our retail store closures as planned. During the quarter, we closed 10 U.S, doors, followed by one additional closure subsequent to quarter S. This brings us to 14 stores year-to-date, putting us at the high end of our plan to close 10 to 15 U.S, doors in 2024, and we continue to evaluate opportunities to optimize our retail fleet.

Speaker Change: And on the international front, we continue to partner with distributors in new regions with Benelux and Scandinavia signed this quarter.

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

Annie Mitchell: And last week, we announced the transition of China, an important region for our brand. We're pleased to be working with leading distributors who have both regional and industry expertise to help us extend our brand reach and position us to achieve profitable and scalable growth internationally. Moving to guidance, we are reiterating our full-year sales outlook, and based on performance year-to-date, we are increasing our gross margin range by 100 basis points and bringing up the bottom end of our adjusted EBITDA range by 3 million.

Annie Mitchell: during the second quarter we completed transitions in japan and australasia and last week we announced the transition of china and important region for our brand

Speaker Change: we're pleased to be working with leading distributor to have both regionals and industry expertise to help us exspend our brand reach have positioned us to achieve profitable and scalable growth internationally

Annie Mitchell: In connection with these store closures, but one internationally, we inferred one time cash charges of 3 million in Q2. Q2 marketing spend total 12 million down 6% year over year. As Joe mentioned in the second half of 2024, we plan to increase our marketing investment to begin driving awareness through top of funnel spend in the lead up to our 2025 product introduction. While total marketing dollars are expected to be down on a year over year basis in Q3 and Q4, we anticipate that our U.S, spend will be up.

Annie Mitchell: Moving to guidance, we are reiterating our full-year sales outlook, and based on performance year-to-date, we are increasing our gross margin range by 100 basis and bringing up the bottom end of our adjusted EBITDA range by 3-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1 of $10 million. Full year net revenue is expected to be in a range of $109 to $210 million. The full year impact from our retail store closures and international transition is now expected to be in the range of $25 to $30 million versus our prior expectation of $32 to $37 million. Let me help out that for you. The impact from retail is higher than anticipated due to the speed of which we've been able to exit these.

Annie Mitchell: Full year net revenue is expected to be in the range of $190 to $210 million. The full year impact from our retail store closures and international transition is now expected to be in the range of $25 to $30 million versus our prior expectation of $32 to $37 million. Let me unpack that for you.

Annie Mitchell: We are reiterating our full-year sales outlook, and based on performance year-to-date, we are increasing our gross margin range by 100 basis points and bringing up the bottom end of our adjusted EBITDA range by 3 million. Full year net revenue is expected to be in the range of $190 to $210 million. The full year impact from our retail store closures and international transition is now expected to be in the range of $25 to $30 million versus our prior expectation of $32 to $37 million. Let me unpack that for you.

Speaker Change: Moving to guidance.

Speaker Change: We are reiterating our full-year sales outlook, and based on performance year-to-date, we are increasing our gross margin range by 100 basis points and bringing up the bottom end of our adjusted EBITDA range by $3 million.

Speaker Change: Full year net revenue is expected to be in the range of $190 to $210 million.

Speaker Change: The full year impact from our retail store closures and international transition is now expected to be in the range of $25-30 million versus our prior expectation of $32-37 million.

Annie Mitchell: Recall that under our new distributor model, in region marketing cost, effectively go to zero following in a transition. With five regions now transition to distributors, the year over year savings are expected to more than offset the investments, we're planning to make in our remaining direct market, the U.S., U.K., and EU.

Annie Mitchell: The impact from retail is higher than anticipated due to the speed at which we've been able to exit. The impact from international transitions is lower than expected due to the timing of this year's transitions, combined with slightly higher initial orders from our distributors. In the geographical market, full year 2024, U.S. net revenue is expected to be in the range of $150 to $165 million, and this includes approximately $10 to $12 million of impact resulting from our U.S. storefront.

Annie Mitchell: The impact on retail is higher than anticipated due to the speed at which we've been able to exit. The impact from international transitions is lower than expected due to the timing of this year's transition, combined with slightly higher initial orders from our A geographical market. Full year 2024, U.S. net revenue is expected to be in the range of $150 to $165 million and includes approximately $10 to $12 million of impact resulting from our U.S. store. Full year international net revenue is expected to be between $40 and $45 million and includes approximately $15 to $18 million of Growth margin is now expected to be in the range of 43% to 46%, up from prior guidance of 42% to 45%.

Speaker Change: Let me unpack that for you.

Speaker Change: the impact on retail is higher than anticipated due to the speed in which we've been able to exceit theis

Annie Mitchell: The impact from international transitions is lower than expected due to the timing of this year's transition, combined with slightly higher initial orders from our distributors. A geographical market, full year 2024, US net revenue is expected to be in a range of $150 to $165 million and includes approximately 10 to 12 million of impact resulting from our US store closures. Full year international net revenue is expected to be between $40 and $45 million and includes approximately 15 to 18 million of impact resulting from our transition to a distributor model in certain international markets. Growth margin is now expected to be in the range of 43 to 46 percent, up from prior guidance of 42 to 45 percent.

Speaker Change: The impact from international transitions is lower than expected due to the timing of this year's transitions, combined with slightly higher initial orders from our distributors.

Annie Mitchell: Now, turning to the balance sheet in cash flow, the company has in strong financial condition with a solid balance sheet. Inventories of the end of Q2 remain healthy, totaling $53 million. That's down 43% year over year and down 7% from the end of 2023. We closed the second quarter with 87 million of cash attached equivalent and no outstanding borrowings under our 50 million dollar revolver. Operating cash use was $15 million. That's down sequentially from Q1, reflecting our seasonal working capital cadence, and up versus a prior year, with inventory with a material source attached due to our creative efforts throughout 2023.

Speaker Change: By geographical market, full year 2024, U.S. net revenue is expected to be in the range of $150 to $165 million and includes approximately $10 to $12 million of impact resulting from our U.S. store closures.

Annie Mitchell: Full year international net revenue is expected to be between $40 and $45 million and includes approximately $15 to $18 million of impact resulting from our transition to a distributor model in certain international markets. Growth margin is now expected to be in the range of 43 to 46%, up from prior guidance of 42 to 45%. Key drivers include reduced promotional intensity compared to 2023, lower Inbound and Outbound Crane, and initial savings from our factory shift to Vietnam and materials innovation.

Speaker Change: Full year international net revenue is expected to be between $40 and $45 million and includes approximately $15 to $18 million of impact, resulting from our transition to a distributor model in certain international markets.

Speaker Change: Gross margin is now expected to be in the range of 43 to 46 percent, up from prior guidance of 42 to 45 percent.

Annie Mitchell: Key drivers include reduced promotional intensity compared to 2023, lower inbound and outbound rate, and initial savings from our factory shift to Vietnam and materials innovation. Full year adjusted even a loss is now expected to be in the range of $75 to $63 million, which compares to prior guidance for a loss of $78 to $63 million. While there are a number of dynamics that play on the top line, we've focused on improving the bottom line, and you can see the results of that this year.

Annie Mitchell: Key drivers include reduced promotional intensity compared to 2023, lower Inbound and Outbound Brake, and initial savings from our factory shift to Vietnam and materials innovation. Full-year adjusted EBITDA loss is now expected to be in the range of $75 to $63 million, which compares to prior guidance for a loss of $78 to $62 million.

Annie Mitchell: Our three focus areas of making rate product, telling compelling stories, and providing customers with an engaging shopping experience, combined with other strategic actions we are taking this year, are positioning the business to return the top line growth in 2025, and set us up to deliver profit of the future years. A foundational step in our plan to restore growth is the return to full price value. We are committed to this model following a promotional 2023, and please to see the benefits begin to manifest, which is reflected in our year-to-day growth margin expansion.

Speaker Change: Key drivers include reduced promotional intensity compared to 2023.

Speaker Change: Lower inbound and outbound freight, and initial savings from our factory shift to Vietnam and materials innovation.

Annie Mitchell: Full-year adjusted EBITDA loss is now expected to be in the range of $75 to $63 million, which compares to prior guidance for a loss of $78 to $63 million. While there are a number of dynamics at play on the top line, we've remained focused on improving the bottom line, and you can see the results of that this year. Turning now to the Q3 Guide. Third quarter net revenue is expected to be between $40 and $43 million.

Speaker Change: Full year adjusted EBITDA loss is now expected to be in the range of $75 to $63 million, which compares to prior guidance for a loss of $78 to $63 million.

Annie Mitchell: While there are a number of dynamics at play on the top line, we've remained focused on improving the bottom line, and you can see the results of that this year. Third quarter net revenue is expected to be between $40 and $43 million. This comprises U.S. revenue in the range of $33 to $35 million and international revenue in the range of $7 to $8 million. Q3 adjusted EBITDA loss is expected to be between $19 million and $16 million.

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

Annie Mitchell: Turning out to Q3 guidance, third quarter net revenue is expected to be between $40 and $43 million. This comprises US revenue in the range of $33 to $35 million and international revenue in the range of $7 to $8 million. Q3 adjusted, even a loss is expected to be between 19 and 15 million. We'll please with our first half format and proud of the way our teams are executing have to enter the next phase of our journey.

Speaker Change: Turning now to Q3 Guidance.

Speaker Change: Third quarter net revenue is expected to be between $40 and $43 million.

Annie Mitchell: This comprises U.S. revenue in the range of $33 to $35 million and international revenue in the range of $7 to $8 million. Q3 adjusted EBITDA loss is expected to be between $19 and $16 million. We're pleased with our first half performance and proud of the way our teams are executing as we enter the next phase of our journey. With that, I'll ask the operator to open the call to questions.

Annie Mitchell: Looking at other key initiatives, as I just noted, we've taken swift actions related to our U.S, retail police. And on the international front, we continue to partner with the distributors in new regions, with phenolux and Scandinavius signed this quarter. We have transitioned the majority of our existing regions to a distributor model. Through the second quarter, we completed transitions in Japan and Australia. In last week, we announced the transition to China, an important region for our brand.

Speaker Change: This comprises U.S. revenue in the range of $33 to $35 million and international revenue in the range of $7 to $8 million.

Annie Mitchell: We're pleased to be working with leading distributors who have both regional and industry expertise to help us extend our brand reach, have positioned us to achieve profitable and scalable growth internationally.

Speaker Change: Q3 adjusted EBITDA loss is expected to be between $19 and $16 million.

Operator: We're pleased with our first half performance and proud of the way our teams are executing as we enter the next phase of our. With that, I'll ask the operator to open the call to questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: We're pleased with our first half's performance and proud of the way our teams are executing as we enter the next phase of our journey.

Operator: With that, I'll ask the operator to open the call to question. Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit to one question and one follow-up question. One moment will we compile the Q&A roster.

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

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and one follow-up question. Please wait a moment while we compile the Q&A rough. Our first question comes from the line of Janine Stichter with BTIG. Your line is now open. Hey everyone.

Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question, please press star 1 1 again. Please limit to one question and one follow-up question. One moment while we compile the Q&A roster.

Annie Mitchell: Moving to guidance. We are reiterating our full-year sales outlook, and based on performance year-to-date, we are increasing our growth margin range by 100 basis points, and bringing up the bottom end of our dress-of-eabeter range by three years, of $10 million. Full year net revenue is expected to be in a range of $109 to $210 million.

Janine Stichter: Our first question comes from the line of Janine Stichter with BTIG. Your line is now open.

Operator: Please limit to one question and one follow-up question. One moment while we compile the Q&A room. Our first question comes from the line of Janine Stichter with BTIG. Your line is now open. Hey everyone, you got Ethan Saghi on for Janine tonight.

Speaker Change: Our first question comes from the line of Janine Stichter with BTIG. Your line is now open.

Ethan Saghi: Hey everyone, you got Ethan Saggy on for Janine tonight. Just a couple for me. First, just was wondering if you could give a little more color on freight, what you're currently seeing there with spot rates and just how you're incorporating that into the gross margin guide.

Ethan Sagi: Hey everyone, you got Ethan Sagi on for Janine tonight. Just a couple questions for me. First, just was wondering if you could give a little more color on freight, you know, what you're currently seeing there with spot rates and just how you're incorporating that into the gross margin guide.

Ethan Sagi: Hey everyone, you got Ethan Sagi on for Janine tonight. Just a couple from me. First, just was wondering if you could give a little more color on freight, you know, what you're currently seeing there with spot rates and just how you're incorporating that into the gross margin guide.

Annie Mitchell: The full year impact from our retail store closures and international transition is now expected to be in the range of $25 to $30 million versus our prior expectation of $32 to $37 million. Let me help out that for you. The impact from retail is higher than anticipated due to the speed of which we've been able to exit these. The impact from international transitions is lower than expected due to the timing of this year's transition, combined with slightly higher initial orders from our distributors.

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

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

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

Ethan Saghi: All right, got it. That's helpful.

Ethan Sagi: All right, got it. That's helpful. And then just one last one for me, are you seeing any differences in how some of your newer launches are responding with customers, you know, in the US versus international markets?

Ethan Saghi: And then just a lesson for me, are you seeing any differences in how some of your newer launches are resonating with customers in the U.S.? versus International markets?

Annie Mitchell: A geographical market, full year 2024, US net revenue is expected to be in a range of $150 to $165 million and includes approximately 10 to 12 million of impact resulting from our US store closures. Full year international net revenue is expected to be between $40 and $45 million and includes approximately 15 to 18 million of impact resulting from our transition to a distributor model in certain international markets. Growth margin is now expected to be in the range of $43 to $46 percent up from prior guidance of $42 to $45 percent.

Ethan Sagi: All right, got it, that's helpful. And then just a last one for me, just are you seeing any differences in how some of your newer launches are resonating with customers, you know, in the U.S. versus international markets?

Joe Vernachio: Yeah, hi Ethan, nice to speak with you. Yeah, we are actually seeing a strong response to our new launches in all of our markets. Specifically, in the United States, the last three launches have met with a very, very strong response. They've actually been our strongest launches over the last two years. And internationally, we saw momentum as we were transitioning to the new distributors. So we were able to hand them a product that was moving in a fantastic direction, and they were very pleased with that. And they've continued that. The transitions have moved quite swiftly and efficiently, and they've just stepped basically right into the path that we left.

Ethan Saghi: Just a couple for me first. I just was wondering if you could give a little more color on freight. You know what you're currently seeing there with spot rates and just how you're incorporating that into the gross margin guide. Hi, Ethan.

Ethan Saghi: Yeah, hi Ethan, nice to speak with you. Yeah, we are actually seeing a strong response to our new launches in all of our markets. Specifically in the United States, the last three launches haven't met with a very, very strong response. It's actually been our strongest launches over the last two years. And internationally, we saw momentum as we were transitioning to the new distributors. So we were able to hand them a momentum that was moving in a fantastic direction. And they were very pleased with that. And they've continued that the transitions have moved quite swiftly and efficiently.

Speaker Change: Yeah, we are actually seeing strong response to our new launches in all of our markets.

Speaker Change: Specifically in the United States, the last three launches have met with very, very strong response. They've actually been our strongest launches over the last two years.

Speaker Change: and internationally we saw momentum as we were transitioning to the new distributors. So we were able to hand them a

Ethan Saghi: And they've just stepped basically right into the path that we left. Got it, that's helpful.

Annie Mitchell: While there are a number of dynamics that play on the top line, we've focused on improving the bottom line and you can see the results of that this year.

Unnamed Speaker: Thank you. See that.

Alex Straton: Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Your line is now open. Great, thanks for taking the questions. One for Joe, one for Annie here. Joe, maybe on the positive consumer response you're seeing, you mentioned that a few times or the strong response. Can you just follow me through like what KPIs are telling you that? And then just bigger picture, how should we think about how that back half of 25 those launches are going to be different? Just strategically. Sure. Yeah, so the, I mean, let me zoom out a little bit and then give some context to it all.

Speaker Change: Got it. That's helpful. Thank you. See you, Matt.

Annie Mitchell: Turning out to Q3 guidance, third quarter net revenue is expected to be between $40 and $43 million. This comprises US revenue in the range of $33 to $35 million and international revenue in the range of $7 to $8 million. Q3 adjusted even a loss is expected to be between 19 and 15 million.

Alex Straton: Our next question comes from the line of Alex Straton with Morgan Stanley. Your line is now open. Great. Thanks all for taking the questions.

Ethan Saghi: And then just a last one for me, just, are you seeing any differences in how some of your newer launches are responding with customers, you know, in the US versus international markets? Yeah. Hi, Ethan.

Matt: Thank you.

Matt: Our next question comes from the line of Alex Straton with Morgan Stanley . Your line is now open.

Alex Straton: Great. Thanks a lot for taking the questions. One for Joe, one for Annie here. Joe, maybe on the positive consumer response you're seeing, you mentioned that a few times, or the strong response, can you just walk me through, like, what KPIs are telling you that? And then, just bigger picture, how should we think about how the back half of 25, those launches are going to be different, just strategically?

Joe Vernachio: Nice to speak with you. Yeah, we are actually seeing a strong response to our new launches in all of our markets. Specifically in the United States, the last three launches have met with a very, very strong response. They've actually been our strongest launches over the last two years, and internationally, we saw momentum as we were transitioning to the new distributors. So we were able to hand them a momentum that was moving in a fantastic direction, and they were very pleased with that, and they've continued that. The transitions have moved quite swiftly and efficiently, and they've just stepped basically right into the path that we left. I got it.

Alex Straton: Great. Thanks a lot for taking the questions. We've got one for Joe, one for Annie here. Joe, maybe on the positive consumer response you're seeing, you mentioned that a few times, or the strong response.

Ethan Saghi: That's helpful. Thank you. Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Your line is now open.

Annie Mitchell: We'll please with our first half format and proud of the way our teams are executing have to enter the next phase of our journey.

Alex Straton: Can you just walk me through, like, what KPIs are telling you that, and then, just bigger picture, how should we think about how that back half of 25, those launches are going to be different, just strategically?

Operator: With that, I'll ask the operator to open the call to question. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit to one question and one follow-up question. One moment will we compile the Q&A roster.

Alex Straton: Great. Thanks a lot for taking the questions. We've got one for Joe and one for Annie here.

Alex Straton: Joe, maybe on the positive consumer response you're seeing, or the strong response. Can you just walk me through, like, what KPIs are telling you that? And then just bigger picture, how should we think about how the back half of 25, those launches are going to be different, just strategically? Sure. Um, yeah, so the... I mean, let me just zoom out a little bit and then give some context to it all.

Matt: Cheers!

Joe Vernachio: zoom out a little bit and then give some context to it all, and where these new products fit into our strategy and our go-forward path towards growth. I think it's just really important to first pause on just what we've done to reset the foundation of the business. The work we've done in stores, international or COG savings or OPEX, and the urgency that we are proceeding with. So then, layered on top of that, now, we have to do these three things, right? We've got to get the product ignited. We've got to get it moving through the pipeline.

Joe Vernachio: Um, yeah, so the...

Joe Vernachio: So and where these new products fit into our strategy and our go forward path towards growth. I think it's just really important to first pause on just what we've done to reset the foundation of the business. The work we've done in stores, international or COG savings or OPEX, and inventory reduction. Any one of these in isolation would have been a major accomplishment, but putting all these together in the time that we've done and getting the results that we're getting, I think just bodes very strongly to how well the team has coalesced around the task at hand and the urgency that we are proceeding with. So then, on top of that, now, we have to do these three things, right?

Joe Vernachio: I mean let me let me just zoom out a little bit and then give some context to it all so and where these new products fit into our strategy and our go-forward path towards growth.

Joe Vernachio: And where these new products fit into our strategy and our go-forward path towards growth.

Joe Vernachio: I think it's just really important to first pause on just what we've done to reset the foundation of the business. The work we've done in stores, international or cogfabings or optics, work and the inventory reduction; any one of these in isolation would have been a major accomplishment, but putting all these together in the time that we've done and getting the results that we're getting. I think just boats very strongly to how well the team is coalesced around the and the urgency that we are proceeding with. So then layered on top of that now, we have to do these three things, right?

Joe Vernachio: tom

Speaker Change: I think it's just really important to first pause on just what we've done to reset the foundation of the business.

Ethan Saghi: Our first question comes from the line of Janine Stichter with BTIG. Your line is now open. Hey everyone, you got Ethan Saggy on for Janine tonight. Just a couple for me. First, just was wondering if you could give a little more color on freight, what you're currently seeing there with spot rates and just how you're incorporating that into the gross margin guide. Hi Ethan. Yes, your question is timely. Similar to others in the industry, freight is a pressure point but we've considered that in our plans and we're actively managing this and don't view it as a significant headwind for us.

Tom: The work we've done in stores, international, or COGS savings, or OPEX,

Tom: work and the inventory reduction. Any one of these

Matt: in isolation would have been a major accomplishment. But putting all these together in the time that we've done and getting the results that we're getting, I think just bodes very strongly to how well the team has coalesced around the task at hand.

Matt: and the urgency that we are proceeding with

Matt: So then layered on top of that now, we have to do these three things, right? We've got to get the product ignited. We've got to get it moving through the pipeline. So part of that is design which is

Joe Vernachio: We've got to get the product ignited. We've got to get it moving through the pipeline. So part of that is design, which is the most important part of a product, right? All the energy in a product comes through design. I have this saying that I use with the team, and that is, if a brand is an orange, design is the juice. And if you've ever had an orange with no juice, it's not very good, right?

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

Ethan Saghi: All right, got it, that's helpful. And then just a lesson for me, are you seeing any differences in how some of your newer launches are resonating with customers in the U.S, versus international markets? Yeah, hi Ethan, nice to speak with you. Yeah, we are actually seeing strong response to our new launches in all of our markets. Specifically in the United States, the last three launches haven't met with very, very strong response.

Joe Vernachio: So part of that is design, which is the most important part of a product, right? All the energy in a product comes through design. I have this saying that I use with the team, and that is, if a brand is an orange, design is the juice. And if you've ever had an orange with no juice, it's not very good, right?

Speaker Change: Thank you. Bye bye.

Speaker Change: a quality part of product.

Matt: All the energy in product comes through design.

Matt: with the team, and that is, if a brand is an orange, design is the juice.

Joe Vernachio: So we are spending a lot of time and energy and momentum creating that juice that we are going to be using to then apply to a product line and a product offering. And you specifically ask, like, "What's different about it?" I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand. And there is so much opportunity and so much breadth and dimension that we can give to it across seasons, across genders, and across usage occasions that we haven't even begun to take this brand where its potential is going.

Joe Vernachio: So we are spending a lot of time and energy and momentum creating that juice that we are going to be using to then apply to a product line and a product offering. And you asked specifically, like, "What's different about it?" I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand. And there is so much opportunity and so much breadth and dimension that we can give to it across seasons, across genders, and across usage occasions.

Matt: And if you've ever had an orange with no juice, it's not very good, right?

Matt: So we are spending a lot of time and energy and momentum in creating that.

Ethan Saghi: It's actually been our strongest launches over the last two years. And internationally, we saw momentum as we were transitioning to the new distributors. So we were able to hand them a momentum that was moving in a fantastic direction. And they were very pleased with that. And they've continued that the transitions have moved quite swiftly and efficiently. And they've just stepped basically right into the path that we left. Got it, that's helpful. Thank you. See that.

Matt: That juice that we are going to be using to then apply to a product line and a product offering. And you asked specifically, like, what's different about it? I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand.

Joe Vernachio: And you ask specifically, like, what's different about it? I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand. And there is so much opportunity and so much breadth and dimension that we can give to that across seasons, across gender, and across use occasions. We've even begun to take this brand where its potential is going. So while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward. And so we've edited the line to make sure we don't feed the near term with products that will go out of the line soon so that we don't end up with inventory problems. And we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline.

Ethan Saghi: Thank you.

Matt: and there is so much opportunity and so much breadth and dimension that we can give to that across seasons, across gender, and across use occasions, that we haven't even begun to take this brand where its potential is going. So while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward.

Joe Vernachio: And we've even begun to take this brand where its potential is going. So while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward. And so we've edited the line to make sure we don't feed the near term with products that will go out of the line soon so that we don't end up with inventory problems. And we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline. And that's going to be coming out in the middle part of next year.

Alex Straton: Our next question comes from the line of Alex Straton with Morgan Stanley. Your line is now open. Great, thanks for taking the questions.

Matt: And so we've edited the line to make sure we don't feed the near term with products that will go out of the line.

Joe Vernachio: One for Joe, one for Annie here. Joe, maybe on the positive consumer response you're seeing, you mentioned that a few times or the strong response. Can you just follow me through like what KPIs are telling you that? And then just bigger picture, how should we think about how that back half of 25 those launches are going to be different? Just strategically.

Joe Vernachio: And we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline. And that's going to be coming in the middle part of next year, and, um, along with that, we'll be layering on top of that all the marketing that we'll be adding to the business. And all of that is what engages consumers and gets people excited. At the end of the day, it's about the stuff. It's about the shoe.

Matt: Soon, so that we don't end up with inventory problems, and we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline, and that's going to be coming in the middle part of next year.

Joe Vernachio: And that's going to be coming in the middle part of next year. Along with that, we'll be layering on top of that all the marketing that will be adding to the business, and all of that is what engages consumers and gets people excited. At the end of the day, it's about the stuff, it's about the shoe and the KPIs that you asked specifically around the KPIs. One of the things that we're really focused on is the new customers, the NTA that's coming in with those new products and the messaging. Paramount to the new products, we have to get new customers into our business.

Joe Vernachio: M M M M M, Along with that, we'll be layering on top of that all the marketing that we'll be adding to the business. And all of that is what engages consumers and gets people excited. At the end of the day, it's about the stuff. It's about the shoe.

Matt: umandum

Joe Vernachio: Sure. Yeah, so the, I mean, let me zoom out a little bit and then give some context to it all. And where these new products fit into our strategy and our go-forward path towards growth. I think it's just really important to first pause on just what we've done to reset the foundation of the business. The work we've done in stores, international or cogfabings or optics, work and the inventory reduction, any one of these in isolation would have been a major accomplishment, but putting all these together in the time that we've done and getting the results that we're getting.

Matt: Along with that, we'll be layering on top of that all the marketing that we'll be adding to the business.

Matt: And all of that is what engages consumers and gets people excited. At the end of the day, it's about the stuff. It's about the shoe. And the KPIs, I think you asked specifically around the KPIs, one of the things that we're really focused on is...

Joe Vernachio: And the KPIs, I think you asked specifically about the KPIs, one of the things that we're really focused on is new customers, the NCA that's coming in with those new products and the messaging. Paramount to the new products, we have to get new customers into our business. And so we're really focused on that performance. And then, of course, we're doing all these new products at full price. So there's no discounting associated with it.

Joe Vernachio: And the KPIs, I think you asked specifically about the KPIs, one of the things that we're really focused on is new customers, the MCA that's coming in with those new products and the messaging. Paramount to the new products, we have to get new customers into our business. And so we're really focused on... on that performance. And then, of course, we're doing all these new products at full price. So there's no discounting associated with it.

Matt: The new customers, the NCA that's coming in with those new products and the messaging, paramount to the new products, we have to get new customers into our business. And so we're really focused on...

Joe Vernachio: So we're really focused on that performance. And then, of course, we're doing all these new products at full price. So there's no discounting associated with it. So making sure that we stay at full price on all these new products is really, really important. So all of this combined, we feel really positive about where we're headed. We think we're just the very, very beginning of the process. That's great.

Joe Vernachio: So making sure that we stay at full price on all these new products is really, really important. So, all of this combined, we feel really positive about where we're headed. We think we're just at the very, very beginning of the pandemic.

Matt: on that performance and then of course we're doing all these new products at full price so there's no discounting associated with it so making sure that we stay at full price on all these new products is really really important

Joe Vernachio: I think just boats very strongly to how well the team is coalesced around the and the urgency that we are proceeding with. So then layered on top of that now, we have to do these three things, right? We've got to get the product ignited, we've got to get it moving through the pipeline. So part of that is design, which is the most important part of product, right? All the energy in product comes through design.

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

Annie Mitchell: Just thinking through the near-term top line trend, I don't think you have much of an improvement built in for the third quarter. So just wondering, kind of, is that what you're seeing quarter to date? And then just on the third quarter in full year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Joe Vernachio: That's great. Super comprehensive. Annie, maybe one for you, just thinking through the near term top line trend. I don't think you have much of an improvement built in for the third quarter.

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

Unnamed Speaker: Super comprehensive.

Alex Straton: Annie, maybe one for you to think you through the near term top line trend. I don't think you have much of an improvement built in for third quarter. So just wondering, kind of, is that what you're seeing quarter today?

Matt: That's great. Super comprehensive. Annie, maybe one for you. Just thinking through the near-term top-line trend, I don't think you have much of an improvement built in for third quarter. So just wondering, kind of, is that what you're seeing quarter-to-date?

Annie Mitchell: And then just on the third quarter and four year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Joe Vernachio: I have this saying that I use with the team and that is if a brand is an orange design is the juice. And if you've ever had an orange with no juice, it's not very good, right? So we are spending a lot of time and energy and momentum and creating that juice that we are going to be using to then apply to a product line and a product offering. And you ask specifically, like, what's different about it?

Speaker Change: And then just on the third quarter and full year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Annie Mitchell: Oh, thanks very much for the question. So when we're looking at Q3, you know, this guide has us relatively similar to where we were in Q1 and Q2, being down about in the high 20s. In Q2 specifically, the impact of the transitions for retail, international, we're worth about four points for us. However, when we go into Q3, those become bigger impacts. You know, the doors would be closed in Q2, might have been partially through the quarter. We transition Japan and Australia near the end of the quarter. We've since transitioned China. So, as a result, that sort of four point impact from Q2 actually grows to be closer to 10 to 15 points.

Alex Straton: So just wondering, kind of, is that what you're seeing quarter to date? And then just on the third quarter and full year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Annie Mitchell: Alex, thanks very much for the questions. So when we're looking at Q3, this guide has us relatively similar to where we were in Q1 and Q2, being down about in the high 20s. In Q2 specifically, the impact of the transitions for retail international was worth about four points for us. However, when we go into Q3, those impacts will be bigger. You know, the doors would be closed in Q2, might have been partially through the quarter.

Annie Mitchell: When we're looking at Q3, you know, this guide has us relatively similar to where we were in Q1 and Q2, being down about in the high 20s. In Q2, specifically, the impact of the transitions for retail international was worth about four points for us. However, when we go into Q3, those become bigger impacts. You know, the doors would be closed in Q2, and might have been partially through the quarter. We transitioned Japan and Australia near the end of the quarter, and we've since transitioned China.

Annie Mitchell: Thanks very much for the questions.

Annie Mitchell: So when we're looking at Q3, you know, this guide has us relatively similar to where we were in Q1 and Q2, being down about in the high 20s.

Joe Vernachio: I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand. And there is so much opportunity and so much breadth and dimension that we can give to that across seasons, across gender, and across use occasions. We've even begun to take this brand where its potential is going. So while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward.

Speaker Change: In Q2 specifically, the impact of the transitions for retail and international were worth about 4 points for us.

Speaker Change: However, when we go into Q3, those become bigger impacts. You know, the doors would be closed in Q2, might have been partially through the quarter, we transitioned Japan and Australia near the end of the quarter, we've since transitioned

Annie Mitchell: We transitioned to Japan and Australia near the end of the quarter. We've since transitioned to China.

Annie Mitchell: So as a result, that sort of four point impact from Q2 actually grows to be closer to 10 to 15 points. And so when we actually look at our same or like for like business underneath, it's more like we're down in the mid teens versus the mid 20s. So there is some improvement in the underlying business; it's just not as obvious because of these transition topics and the impacts they're having on the top line.

Speaker Change: China. So as a result that sort of four point impact from Q2 actually grows to be closer to 10 to 15 points.

Annie Mitchell: And so when we actually look at our same or like for like business underneath, it's more like we're down in the mid teens versus the mid 20s. So there is some improvement in the underlying business. It's just not as obvious because of these transition topics and the impacts that are happening on the top line. When we look at Q4, it's going to be quite similar in that sense to Q3, where we'll have more of the full impact of all of these transitions. And so we don't necessarily need to have a huge uptick, but we do know that as we're comping over last year, we were quite promotional.

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

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

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

Annie Mitchell: When we look at Q4, it's going to be quite similar in that sense to Q3, where we'll have more of the full impact of all of these transitions. And so we don't necessarily need to have a huge uptick.

Matt: When we look at Q4 it's going to be quite similar in that sense to Q3 where we'll have more of the full impact of all of these transitions.

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

Annie Mitchell: But we do know that as we compare to last year, we were quite promotional. We'll have a few more products coming. Joe gave a nice overview in terms of the philosophy behind our product. We're excited. And shortly, this month, we're actually going to have our next big launch. And that will also carry us into Q4 as well.

Annie Mitchell: But we do know that as we compared to last year, we were quite promotional. We'll have a few more products coming. Joe gave a nice overview in terms of the philosophy behind our product. We're excited.

Matt: And so we don't necessarily need to have a huge uptick.

Annie Mitchell: We'll have a few more products coming. Joe gave a nice overview in terms of the philosophy behind our product. We're excited, and shortly this month we're actually going to have our next big launch. And that will also carry us into Q4 as well.

Matt: But we do know that as we're comping over last year, we were quite promotional. We'll have a few more products coming.

Matt: Joe gave a nice overview in terms of the philosophy behind our product. We're excited and shortly, this month, we're actually going to have our next big launch and that will also carry us into Q4 as well.

Unnamed Speaker: Thanks a lot, good luck guys. Thank you.

Alex Straton: Thanks a lot. Good luck, guys. Thank you.

Joe Vernachio: Paramount to the new products, we have to get new customers into our business. So we're really focused on that performance. And then of course, we're doing all these new products at full price. So there's no discounting associated with it. So making sure that we stay at full price on all these new products is really, really important. So all of this combined, we feel really positive about where we're headed. We think we're just the very, very beginning of the process.

Joe Vernachio: Thanks a lot. Good luck, guys. Thank you. Thank you.

Unnamed Speaker: I'm showing no further questions at this time.

Joe Vernachio: I am showing no further questions at this time. I would now like to turn it back to Joe Vernachio for closing remarks.

Joe Vernachio: That's great. Super comprehensive.

Joe Vernachio: I would now like to turn it back to Joe Vernachio for closing remarks. Thank you, everyone, for joining today. We really appreciate your continued support of all birds. We look forward to speaking with you again next quarter. Thank you for your participation in today's conference.

Matt: Thank you.

Matt: I am showing no further questions at this time. I would now like to turn it back to Joe Vernachio for closing remarks.

Joe Vernachio: Thank you, everyone, for joining today. We really appreciate your continued support of Allbirds. We look forward to speaking with you again next quarter. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. [music]

Annie Mitchell: And shortly this month, we're actually going to have our next big launch. And that will also carry us into Q4 as well. Thanks a lot.

Joe Vernachio: Thank you everyone for joining today. We really appreciate your continued support of Allbirds.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. [music] [music] Good afternoon, ladies and gentlemen, and welcome to the Allbirds second quarter 2024 conference call. All participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question and answer session, at which time instructions will follow. Now, I would like to turn the call over to Christine Greany of the Blue Shirt Group.

Annie Mitchell: Just thinking through the near term top line trend, I don't think you have much of an improvement built in for the third quarter. So just wondering, kind of, is that what you're seeing quarter to date? And then just on the third quarter in full year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Alex Straton: Good luck, guys. Thank you. I am asking no further questions at this time.

Christine Greany: Good afternoon, everyone, and thank you for joining us. With me on the call today are Joe Vernachio, CEO, and Annie Mitchell, CFO. Before we start, I'd like to remind you that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about our financial outlook, including cash flow and adjusted EBITDA expectations, 2024 full year and Q3 guidance targets, impact and duration of external headwinds, strategic transformation plan and related planned efforts, go-to-market strategy, and transitions to a distributor model in certain international markets.

Matt: We look forward to speaking with you again next quarter.

Christine Greany: Anticipated Distributor Model Arrangements, Expected Profitability, Cost Savings Targets, Gross Margin Estimates, Product Plan Timelines and Expectations, Marketing Strategy and Investment, Product and Brand Strategy, and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise any statements to reflect changes that occur after this call. Please refer to our SEC filings, including our quarterly report on Form 10-Q for the quarter ended March 31, 2024, for a more detailed description of the risk factors that may affect our results.

Annie Mitchell: Thanks, Joe, and good afternoon, everyone. We are pleased to deliver another quarter of performance within or exceeding our expectations, reflecting consistent execution by our team. Net revenue came in within our guidance range, and adjusted EBITDA exceeded the expectations we outlined last quarter. Notably, we delivered another quarter of gross margin expansion and a 25% year-over-year improvement in adjusted EBITDA. Q2 revenue totaled $52 million.

Joe Vernachio: I would now like to turn it back to Joe Vernachio for closing remarks. Thank you, everyone, for joining us today. We really appreciate your continued support of Allbirds. We look forward to speaking with you again next quarter. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. [music] [inaudible] Thanks for watching! [inaudible] [music] [music] Good afternoon, ladies and gentlemen, and welcome to the Allbirds' second quarter 2024 conference call. All participants have been placed in a listen-only mode.

Operator: This does conclude the program.

Annie Mitchell: The results are primarily attributable to lower unit sales partially offset by higher ASPs within our direct list. The return to full price selling is a critical component of our long-term strategy. However, it is creating a near-term headwind to sales. Additionally, revenue was impacted by our international distributor transition and planned retail stores. While the transition to a distributor model and the closure of retail doors are reducing our top line and the associated growth profit dollars, these actions are done with intention as they support our cost management and efficiency efforts and are offset by savings in marketing and SG&A, which I will discuss. Second quarter gross margin improved 50.5%, up 360 basis points sequentially and 770 basis points versus the prior year.

Annie Mitchell: That's down sequentially from Q1, reflecting our seasonal working capital cadence, and up versus the prior year when inventory was a material source of cash due to our cleanup efforts throughout 2023. Our three focus areas are making great products, telling compelling stories, and providing customers with an engaging shopping experience. Combined with other strategic actions we are taking this year, they are positioning the business to return to top line growth in 2025 and setting us up to deliver profitability in future years.

Christine Greany: After management's prepared remarks, there will be a question and answer session, at which time instructions will follow. Now, I would like to turn the call over to Christine Greany of the Blue Shirt Group. Good afternoon, everyone, and thank you for joining us. With me on the call today are Joe Vernachio, CEO, and Annie Mitchell, CFO. Before we start, I'd like to remind you that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about our financial outlook, including cash flow and adjusted EBITDA expectations for 2024, as well as our Q3 guidance targets. Impact and duration of external head wounds

Operator: You may now disconnect.

Joe Vernachio: Hello everyone, and thanks for joining us today. We are pleased to report another quarter of strong execution and performance in line with our expectations. Our Q2 results reflect continuing progress, both operationally and financially, as we set the business on a path to return to top-line growth in 2020. We are on a trajectory to reinvigorate our product and brand. But before we talk about this next chapter, let's take a look at what we've accomplished over the past. Since the announcement of our Strategic Transformation Plan, we have reset the business. Establishing the foundation for the next phase of Allbirds.

Annie Mitchell: Lower Breakup, and Lower Promotional Activity in the Direct Business, as well as Cog Savings, CAPTUR3D, Smart Factory Shift, and Materials and Spaces. Year over year improvement in gross margins is expected to continue in the second half of 2024, although not to the same magnitude that we've seen here today. We continue to expect Q3 and Q4 growth margins to be in the mid 40s.

Christine Greany: Strategic Transformation Plan and related planned efforts, including a go-to-market strategy and transitions to a distributor model in certain international markets. Anticipated Distributor Model Arrangements, Expected Profitability, Cost Savings Targets, Gross Margin, product plan timelines and expectations, marketing strategy and investment, product and brand strategy, and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise any statements to reflect changes that occur after this call. Please refer to our SEC filings, including our quarterly report on Form 10-Q for the quarter ending March 31, 2024, for a more detailed description of the risk factors that may affect our results.

Speaker Change: thank you for your participation in today's conference this does conclude the program you may now disconnect

Annie Mitchell: Reflecting the combination of retail foreclosures, transitions to international distributors, and planned promotional activity around the holidays, Looking at SG&A, our teams did great work controlling costs in the quarter. SG&A dollars, excluding stock-based compensation and depreciation and amortization, totaled $28 million, down 22% versus the prior year. The decrease can primarily be traced to lower personal expenses and occupancy.

Christine Greany: Also, during this call, we will discuss non-GAAP financial measures that adjust our GAAP results to eliminate the impact of certain items. These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. You will find additional information regarding these non-GAAP financial measures, and a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures to the extent reasonably available in today's earnings release.

Annie Mitchell: This was partially offset by costs associated with our retail store closures, as planned. During the quarter, we closed 10 U.S. doors, followed by one additional closure subsequent to the quarter end. This brings us to 14 stores year to date, putting us at the high end of our plan to close 10 to 15 U.S. stores in 2024, and we continue to evaluate opportunities to optimize our retail. In connection with these store closures, plus one internationally, we incurred one-time cash charges of $3 million in Q2. Q2 marketing spend totaled $12 million, down 6% year-over-year.

Annie Mitchell: As Joe mentioned, in the second half of 2024, we plan to increase our marketing investment to begin driving awareness through top of the funnel spend in the lead up to our 2025 product introduction. While total marketing dollars are expected to be down on a year over year basis in Q3 and Q4, we anticipate that our U.S. spend will be up. Recall that under our new distributor model, in-region marketing costs effectively go to zero following the transition. With five regions now transitioned to distributors, the year-over-year savings are expected to more than offset the investments we're planning to make in our remaining direct market. The U.S., U.K., and Canada are all in this together.

Annie Mitchell: The impact on retail is higher than anticipated due to the speed at which we've been able to exit. The impact from international transitions is lower than expected due to the timing of this year's transitions, combined with slightly higher initial orders from our distributors. Geographically, full year 2024, U.S. net revenue is expected to be in the range of $150 to $165 million and includes approximately $10 to $12 million of impact resulting from our U.S. store. Full year international net revenue is expected to be between $40 and $45 million and includes approximately $15 to $18 million of impact resulting from our transition to a distributor model in certain international markets.

Joe Vernachio: Since the announcement of our strategic transformation plan, we have reset the business, establishing the foundation for the next phase of Allbirds' journey. Importantly, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan. I'd like to provide a quick recap of our actions since March of 2020, starting with retail stores. We have closed 14 underperforming U.S. locations to move us towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail fleet. Next is international.

Annie Mitchell: Now, turning to the balance sheet and cash flow. The company is in strong financial condition with a solid balance sheet. Inventories at the end of Q2 remained healthy, totaling $53 million.

Annie Mitchell: Growth margin is now expected to be in the range of 43% to 46%, up from prior guidance of 42% to 45%. Key drivers include reduced promotional intensity compared to 2023. Lower Inbound and Outbound Braids, and initial savings from our factory shift to Vietnam and materials innovation. Full-year adjusted EBITDA loss is now expected to be in the range of $75 to $63 million, which compares to prior guidance for a loss of $78 to $63 million.

Annie Mitchell: That's down 43% year over year and down 7% from the end of 2023. We closed the second quarter with $87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver. Operating cash use was $16 million.

Joe Vernachio: As a result, we have limited the number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrate our customer is asking for Nuna's from Allbirds. TheWoolRunner2, TreeRunnerGo, and Canvas Piper have all met with positive consumer responses. Up next is the launch of our tree glider in just a few weeks. We then set out to inject newness as quickly as possible.

Joe Vernachio: The first critical step was to edit the lines to more closely reflect our evolving strategy. As a result, we have limited the number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrate our customer is asking for newness from Allbirds. TheWoolRunner2, TreeRunnerGo, and Canvas Piper have all met with positive consumer responses.

Annie Mitchell: Annie, maybe one for you to think you through the near term top line trend. I don't think you have much of an improvement built in for third quarter. So just wondering, kind of, is that what you're seeing quarter today? And then just on the third quarter and four year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Joe Vernachio: We have more than 10 new product launches planned across these two seasons. The collections will not only enhance our product range but also reinforce our dedication to quality, comfort, style, and sustainability, in preparation for our new product launches in mid 2025. We will be telling compelling marketing stories, utilizing a new brand narrative called Allbirds by Nature. This narrative celebrates the duality of the word nature, connecting our design philosophy inspired by the natural world while also encouraging people to embrace their innate and unique human nature.

Joe Vernachio: To amplify this narrative, we are prioritizing increased marketing investment starting in the second half of the year, with a phased ramp-up planned to continue throughout 2025. More on this from Annie shortly. Specifically, our initiatives are designed to convey our brand message and product attributes through the lenses of rational, emotional, and cultural connection. By incorporating these elements, we are creating a richer, more engaging narrative that resonates with the values and aspirations of Allbirds.

Joe Vernachio: As we bring fresh, updated products to the market and amplify our marketing, providing customers with an engaging shopping experience is our other key priority. We are enhancing the in-store consumer journey, starting with an improved assortment presentation, wayfinding, and floor display. In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop at. You'll hear much more about this in the quarters to come.

Annie Mitchell: The results are primarily attributable to lower unit sales partially offset by higher ASPs within our direct system. The return to full price selling is a critical component of our long-term strategy. However, it is creating a near-term headwind to sales. Additionally, revenue was impacted by our international distributor transition and planned retail stores. While the transition to a distributor model and the closure of retail doors are reducing our top line, the associated growth profit dollars.

Annie Mitchell: The year-over-year expansion is attributable to the continued benefit from a healthier inventory position, Lower Breakup, and Lower Promotional Activity in a Direct Business, as well as Cog Savings, CAPTUR3D, Smart Factory Shift, and Materials and Spaces. Year over year improvement in gross margins is expected to continue in the second half of 2024, although not to the same magnitude that we've seen here today. We continue to expect Q3 and Q4 growth margins to be in the mid 40s.

Annie Mitchell: Reflecting the combination of retail store closures, transitions to international distributors, and planned promotional activity around the College. Looking at SG&A, our teams did great work controlling costs in the quarter. SG&A dollars, excluding stock-based compensation and depreciation and amortization totaled $28 million, down 22% versus the prior year. The decrease can primarily be traced to lower personal expenses and occupancy.

Annie Mitchell: This was partially offset by costs associated with our retail store closures, as planned. During the quarter, we closed 10 U.S. doors, followed by one additional closure subsequent to the quarter end. This brings us to 14 stores year to date, putting us at the high end of our plan to close 10 to 15 U.S. stores in 2024, and we continue to evaluate opportunities to optimize our retail. In connection with these store closures, plus one internationally, we incurred one-time cash charges of $3 million for the future. Q2 marketing spend totaled $12 million, down 6% year-over-year.

Annie Mitchell: That's down 43% year over year and 7% from the end of 2023. We closed the second quarter with $87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver. Operating cash use was $16 million, that's down sequentially from Q1, reflecting our seasonal working capital cadence and up versus the prior year when inventory was a material source of cash due to our cleanup efforts throughout 2020. Our three focus areas of making great products, telling compelling stories, and providing customers with an engaging shopping experience, combined with other strategic actions we are taking this year, are positioning the business to return to top line growth in 2025 and set us up to deliver profitability in the future. A foundational step in our plan to restore growth is the return to full price.

Annie Mitchell: And last week, we announced the transition of China, an important region for our brand. We're pleased to be working with leading distributors who have both regional and industry expertise to help us extend our brand reach and position us to achieve profitable and scalable growth. Moving to guidance, we are reiterating our full-year sales outlook, and based on performance year to date, we are increasing our gross margin range by 100 basis points and bringing up the bottom end of our adjusted EBITDA range by 3 million.

Annie Mitchell: The impact on retail is higher than anticipated due to the speed at which we've been able to exit. The impact from international transitions is lower than expected due to the timing of this year's transition, combined with a slightly higher initial order to market. Geographically, full year 2024, U.S. net revenue is expected to be in the range of $150 to $165 million and includes approximately $10 to $12 million of impact resulting from our U.S. store. Full-year international net revenue is expected to be between $40 and $45 million and includes approximately $15 to $18 million of impact resulting from our transition to a distributor model in certain international markets. Growth margin is now expected to be in the range of 43% Key drivers include reduced promotional intensity compared to 2023 and lower Inbound and Outbound Brake.

Annie Mitchell: And initial savings from our factory shift to Vietnam and materials innovation. Full-year adjusted EBITDA loss is now expected to be in the range of $75 to $63 million, which compares to prior guidance for a loss of $78 to $62 million. While there are a number of dynamics at play on the top line, we've remained focused on improving the bottom line, and you can see the results of that this year.

Annie Mitchell: Third quarter net revenue is expected to be between $40 and $43 million. This comprises U.S. revenue in the range of $33 to $35 million and international revenue in the range of $7 to $8 million. Q3 adjusted EBITDA loss is expected to be between $19 million and $16 million.

Operator: We're pleased with our first half's performance and proud of the way our teams are executing as we enter the next phase of our. With that, I'll ask the operator to open the call to questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Annie Mitchell: We transition Japan and Australia near the end of the quarter. We've since transitioned China. So as a result, that sort of four point impact from Q2 actually grows to be closer to 10 to 15 points. And so when we actually look at our same or like for like business underneath, it's more like we're down in the mid teens versus the mid 20s. So there is some improvement in the underlying business. It's just not as obvious because of these transition topics and the impacts that are happening on the top line.

Annie Mitchell: When we look at Q4, it's going to be quite similar in that sense to Q3 where we'll have more of the full impact of all of these transitions. And so we don't necessarily need to have a huge uptick, but we do know that as we're comping over last year, we were quite promotional. We'll have a few more products coming. Joe gave a nice overview in terms of the philosophy behind our product. We're excited and shortly this month we're actually going to have our next big launch. And that will also carry us into Q4 as well.

Alex Straton: Thanks a lot, good luck guys. Thank you.

Ethan Saghi: Just a couple for me. First, I was wondering if you could give a little more color on freight, you know, what you're currently seeing there with spot rates and just how you're incorporating that into the gross margin guide. Hi, Ethan. Yes, your question is timely. Similar to others in the industry, freight is a pressure point, but we've considered that in our plans, and we're actively managing this, and we don't view it as a significant headwind for us. All right, I got it. That's helpful.

Annie Mitchell: And then just a last one for me, just, are you seeing any differences in how some of your newer launches are responding with customers, you know, in the US versus international markets? Yeah. Hi, Ethan.

Ethan Saghi: Thank you. Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Your line is now open.

Alex Straton: Great. Thanks a lot for taking the questions. We've got one for Joe and one for Annie here.

Joe Vernachio: Joe, maybe on the positive consumer response you're seeing, or the strong response. Can you just walk me through, like, what KPIs are telling you that? And then just bigger picture, how should we think about how the back half of 25, those launches are going to be different, just strategically? Sure. Um, yeah, so the... I mean, let me just zoom out a little bit and then give some context to it all.

Joe Vernachio: So part of that is design, which is the most important part of the product, right? All the energy in the product comes through design. I have this saying that I use with the team, and that is, if a brand is an orange, design is the juice. And if you've ever had an orange with no juice, it's not very good, right?

Joe Vernachio: So we are spending a lot of time and energy and momentum creating that juice that we are going to be using to then apply to a product line and a product offering. And you asked specifically, like, "What's different about it?" I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand. And there is so much opportunity and so much breadth and dimension that we can give to it across seasons, across genders, and across usage occasions that we haven't even begun to take this brand where its potential is going.

Joe Vernachio: So while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward. And so we've edited the line to make sure we don't fill it in the near term with products that will go out of the line soon so that we don't end up with inventory problems. And we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline. And that's going to be coming in the middle part of next year.

Joe Vernachio: M M M M, Along with that, we'll be layering on top of that all the marketing that we'll be adding to the business. And all of that is what engages consumers and gets people excited. At the end of the day, it's about the stuff. It's about the shoe.

Joe Vernachio: And the KPIs, I think you asked specifically about the KPIs, one of the things that we're really focused on is new customers, the NCA that's coming in with those new products and the messaging. Paramount to the new product, we have to get new customers into our business. And so we're really focused on that performance. And then, of course, we're doing all these new products at full price. So there's no discounting associated with it.

Joe Vernachio: That's great. It's super comprehensive. Annie, maybe one for you, just thinking through the near-term top line trend. I don't think you have much of an improvement built in for the third quarter. So just wondering, kind of, is that what you're seeing quarter to date? And then just on the third quarter and full year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Annie Mitchell: We transitioned to Japan and Australia near the end of the quarter. We've since transitioned to China.

Alex Straton: Alex, thanks very much for the questions. So, when we're looking at Q3, this guide has us relatively similar to where we were in Q1 and Q2, being down about in the high 20s. In Q2 specifically, the impact of the transitions for retail international was worth about four points for us. However, when we go into Q3, those impacts will be bigger. You know, the doors would be closed in Q2, might have been partially through the quarter.

Ethan Sagi: All right, got it. That's helpful. And then just one last one for me, just, are you seeing any differences in how some of your newer launches are responding with customers, you know, in the US versus international markets?

Joe Vernachio: Yeah, hi Ethan, nice to speak with you. Yeah, we are actually seeing a strong response to our new launches in all of our markets. Specifically, in the United States, the last three launches have met with a very, very strong response. They've actually been our strongest launches over the last two years. And internationally, we saw momentum as we were transitioning to the new distributors. So we were able to hand them a momentum that was moving in a fantastic direction, and they were very pleased with that, and they've continued that. The transitions moved quite swiftly and efficiently, and they've just stepped basically right into the path that we left.

Alex Straton: Our next question comes from the line of Alex Straton with Morgan Stanley. Your line is now open. Great, thanks everyone for taking the questions.

Alex Straton: Great. Thanks a lot for taking the questions. We've got one for Joe and one for Annie here.

Joe Vernachio: Joe, maybe on the positive consumer response you're seeing, or the strong response. Can you just walk me through, like, what KPIs are telling you that? And then, just bigger picture, how should we think about how the back half of 25, those launches are going to be different, just strategically?

Joe Vernachio: Zoom out a little bit and then give some context to it all and where these new products fit into our strategy and our go-forward path towards growth. I think it's just really important to first pause on just what we've done to reset the foundation of the business. The work we've done in stores, international, COG savings, or OPEX, and the inventory reduction, any one of these in isolation would have been a major accomplishment, but putting all these together in the time that we've done and getting the results that we're getting, I think just bodes very strongly to how well the teams coalesced around the task at hand and the urgency that we are proceeding with. So then, layered on top We've got to get the product ignited. We've got to get it moving through the pipeline.

Joe Vernachio: So we are spending a lot of time and energy and momentum creating that juice that we are going to be using to then apply to a product line and a product offering. And you asked specifically, like, "What's different about it?" I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand. And there is so much opportunity and so much breadth and dimension that we can give to it across seasons, across genders, and across usage occasions that we haven't even begun to take this brand where its potential is going.

Joe Vernachio: So, you know, while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward. And so we've edited the line to make sure we don't fill it in the near term with products that will go out of the line soon so that we don't end up with inventory problems. And we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline. And that's going to be coming in the middle part of next year.

Joe Vernachio: And, along with that, we'll be layering on top of that all the marketing that we'll be adding to the business. And all of that is what engages consumers and gets people excited. At the end of the day, it's about the stuff. It's about the shoe.

Joe Vernachio: And the KPIs, I think you asked specifically about the KPIs, one of the things that we're really focused on is new customers, the NCA that's coming in with those new products and the messaging. Paramount to the new product, we have to get new customers into our business. And so we're really focused on... on that performance. And then, of course, we're doing all these new products at full price. So there's no discounting associated with it.

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

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Annie Mitchell: We're excited. And later this month, we're actually going to have our next big launch. And that will also carry us into Q4 as well.

Speaker Change: Version of the L🅱🅾🅾🅾🅾🆁🅴🎧🳼

Annie Mitchell: So, when we're looking at Q3, you know, this guide has us relatively similar to where we were in Q1 and Q2, being down about in the high 20s. In Q2, specifically, the impact of the transitions for retail international was worth about four points for us. However, when we go into Q3, those become bigger impacts. You know, the doors would be closed in Q2, and might have been partially through the quarter. We transitioned Japan and Australia near the end of the quarter, and we've since transitioned China.

Alex Straton: Thanks a lot. Good luck, guys. Thank you. I am showing no further questions at this time. I would now like to turn it back to Joe Vernachio for closing remarks. Thank you everyone for joining today. We really appreciate your continued support of Allbirds. We look forward to speaking with you again next quarter. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Allbirds' second quarter 2024 conference call. All participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question and answer session, at which time instructions will follow.

Speaker Change: Now I would like to turn the call over to Christine Greany of the Blue Shirt Group. Good afternoon, everyone, and thank you for joining us. With me on the call today are Joe Vernachio, CEO, and Annie Mitchell, CFO.

Christine Greany: 2024 Full Year and Q3 Guidance Targets

Speaker Change: Impact and Duration of External Headwinds, Strategic Transformation Plan and Related Planned Efforts, Go-to-Market Strategy, Transitions to a Distributor Model in Certain International Markets,

Speaker Change: Anticipated Distributor Model Arrangements, Expected Profitability, Cost Savings Targets, Gross Margin Estimates,

Speaker Change: product plan timelines and expectations, marketing strategy and investment, product and brand strategy, and other matters referenced in our earnings release issued today.

Speaker Change: These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially.

Speaker Change: Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise any statements to reflect changes that occur after this call.

Speaker Change: Please refer to our SEC filings, including our quarterly report on Form 10-Q for the quarter ending March 31, 2024, for a more detailed description of the risk factors that may affect our results.

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

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

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

Alex Straton: Thanks a lot. Good luck, guys. Thank you.

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

Joe Vernachio: Hello everyone and thanks for joining us today. We are pleased to report another quarter of strong execution and performance in line with our expectations.

Joe Vernachio: I am showing no further questions at this time. I would now like to turn it back to Joe Vernachio for closing remarks.

Joe Vernachio: Our Q2 results reflect continuing progress both operationally and financially as we set the business on a path to return to top-line growth in 2025.

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

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Joe Vernachio: But before we talk about this next chapter, let's take a look at what we've accomplished over the past 18. Since the announcement of our strategic transformation plan, we have reset the business, establishing the foundation for the next phase of All Birds Gym. Importantly, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan.

Speaker Change: We are on a trajectory to reignite our product and brand.

Speaker Change: But before we talk about this next chapter, let's take a look at what we've accomplished over the past 18 months.

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

Speaker Change: Importantly, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan.

Joe Vernachio: I'd like to provide a quick recap of our action since March of 2023. Starting with retail stores, we have closed 14 under-performing US locations to buy us towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail fleet.

Speaker Change: I'd like to provide a quick recap of our actions since March of 2023.

Speaker Change: Starting with Retail Stores.

Speaker Change: We have closed 14 underperforming U.S. locations to buy us towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail fleet.

Joe Vernachio: Next is International. We have successfully transitioned to a distributor model in the five targeted regions where we were previously selling direct. We also opened four new regions where we have the opportunity to partner with leading distributors and leverage our strong brand affinity. We believe this distributor model positions us to achieve profitable and scalable growth internationally. Looking at costs of goods, our shift to a new factory along with material optimizations is enabling us to capture significant cost savings, driving longer-term growth margin expansion. We're also generating off-ex savings. We have rebuilt the wireframe of the company, and we're operating with greater overall efficiency.

Speaker Change: Next is international. We have successfully transitioned to a distributor model in the five targeted regions where we were previously selling direct. We also opened four new regions where we have the opportunity to partner with leading distributors and leverage our strong brand affinity.

Speaker Change: We believe this distributor model positions us to achieve profitable and scalable growth internationally.

Speaker Change: Looking at cost of goods.

Speaker Change: Our shift to a new factory, along with material optimizations, is enabling us to capture significant COG savings.

Speaker Change: driving longer-term gross margin expansion.

Speaker Change: We're also generating OPEX savings. We have rebuilt the wireframe of the company, and we're operating with greater overall efficiency.

Joe Vernachio: We believe this positions us to drive long-term profitability as we scale. And turning to our balance sheet, we cut our inventory by more than half and drove improvement in work in capital in 2023 versus prior year. We entered 2024 in a very healthy position, and we're carefully managing inventory going forward.

Speaker Change: We believe this positions us to drive long-term profitability as we scale.

Speaker Change: and turn to our balance sheet.

Speaker Change: We cut our inventory by more than half and drove improvement in working capital in 2023 versus prior year. We entered 2024 in a very healthy position, and we're carefully managing inventory going forward.

Joe Vernachio: Against that backdrop, we are now prioritizing three main focus areas. Making great product, telling compelling stories, and providing customers with an engaging shopping experience. Creating great product is paramount to our long-term success. Getting the product engine ignited has been amongst my highest priorities since taking over the product range last year. After bringing in a new chief design officer in December, we built a road map to involve our Go Forward product and brand strategy. The first critical step was to edit the line to more closely reflect our evolving strategy. As a result, we have limited a number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrates our customer is asking for units from Allbirds.

Speaker Change: Against that backdrop, we are now prioritizing three main focus areas.

Speaker Change: making great product.

Speaker Change: Telling compelling stories and providing customers with an engaging shopping experience.

Operator: I'm showing no further questions at this time.

Speaker Change: Creating a great product is paramount to our long-term success.

Joe Vernachio: I would now like to turn it back to Joe Vernachio for closing remarks. Thank you everyone for joining today. We really appreciate your continued support of all birds. We look forward to speaking with you again next quarter. Thank you for your participation in today's conference.

Speaker Change: Getting the product engine ignited has been amongst my highest priorities since taking over the product range last November .

Operator: This does conclude the program.

Operator: You may now disconnect.

Speaker Change: After bringing in a new chief design officer in December , we built a roadmap to evolve our go-forward product and brand strategy.

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

Operator: [inaudible] Thank you, thank you, thank you,[inaudible][inaudible] you, thank you, thank you, thank you, thank you,[inaudible] thank you, thank you, thank you, thank you, thank you, thank you, thank you, thank you, thank you, thank you,[inaudible][inaudible] Thank you, thank you, thank you, thank you, thank you[inaudible] These non-gap items should be used in addition to and not as a substitute for any gap results. You will find additional information regarding these non-gap financial measures and a reconciliation of these non-gap measures to their most directly comparable gap measures to the extent reasonably available in today's earnings release.

Joe Vernachio: Now I'll turn the call over to Joe to begin the formal remarks. Hello everyone and thanks for joining us today. We are pleased to report another quarter of strong execution and performance in line with our expectations. Our key two results reflect continuing progress both operationally and financially as we set the business on a path to return to top line growth in 2025. We are on a trajectory to reignite our product and brand.

Speaker Change: As a result, we have limited the number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrates our customer is asking for newness from Allbirds.

Joe Vernachio: But before we talk about this next chapter, let's take a look at what we've accomplished over the past 18. Since the announcement of our strategic transformation plan, we have reset the business, establishing the foundation for the next phase of all birds gym. Importantly, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan.

Joe Vernachio: The World Runner 2, Tree Runner Go, and Canvas Piper have all met with positive consumer response. Up next is the launch of our tree glider in just a few weeks. We then set out to inject newness as quickly as possible. Using our existing tooling, we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 24 in the first half of 2025. You'll first see this reflected in the fall when we plan to introduce quarterly, as well as more rugged versions of our water-resistant collection.

Speaker Change: TheWoolRunner2, TreeRunnerGo, and Canvas Piper have all met with positive consumer response.

Speaker Change: Up next is the launch of our TreeGlider in just a few weeks.

Speaker Change: We then set out to inject newness as quickly as possible. Using our existing tooling, we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 2024 and the first half of 2025.

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

Joe Vernachio: Next is international. We have successfully transitioned to a distributor model in the five targeted regions where we were previously selling direct. We also opened four new regions where we have the opportunity to partner with leading distributors and leverage our strong brand affinity. We believe this distributor model positions us to achieve profitable and scalable growth internationally. Looking at costs of goods, our shift to a new factory along with material optimizations is enabling us to capture significant cost savings, driving longer-term growth margin expansion. We're also generating off-ex savings. We have rebuilt the wireframe of the company and we're operating with greater overall efficiency. We believe this positions us to drive long-term profitability as we scale.

Joe Vernachio: Looking ahead to our Fall 25 and Spring 26 collections, we are creating these product lines from the ground up with an elevated design and product architecture that emphasizes Allbirds lifestyle brand positioning. We are in the intensive phase of designing and developing a robust line of products that will begin to launch in the second half of next year. We are very motivated by the progress we are seeing with each sample that arrives from our development center. We have more than 10 new product launches planned across these two seasons. The collections will not only enhance our product range, but also reinforce our dedication to quality, comfort, style, and sustainability.

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

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

Joe Vernachio: In preparation for our new product launches in mid 2025, we will be telling compelling marketing stories, utilizing a new brand narrative called Allbirds by Nature. This narrative celebrates the duality of the word nature, connecting our design philosophy inspired by the natural world while also encouraging people to embrace their innate and unique human nature. Allbirds by nature will enable us to inspire and engage the consumer with a wide range of topics from product benefits to universal human experiences. For example, breedable by nature will highlight our use of natural and recycled materials and knit constructions that offer exceptional breedability.

Speaker Change: in preparation for our new product launches in mid-2025.

Joe Vernachio: And turning to our balance sheet, we cut our inventory by more than half and drove improvement in work in capital in 2023 versus prior year. We entered 2024 in a very healthy position and we're carefully managing inventory going forward.

Speaker Change: We will be telling compelling marketing stories, utilizing a new brand narrative called Allbirds by Nature.

Speaker Change: This narrative celebrates the duality of the word nature.

Speaker Change: Connecting our design philosophy inspired by the natural world while also encouraging people to embrace their innate and unique human nature.

Speaker Change: yeah

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

Speaker Change: For example, breathable by nature will highlight our use of natural and recycled materials in knit constructions that offer exceptional breathability.

Joe Vernachio: Comfortable by nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own skin. To amplify this narrative, we are prioritizing increased marketing investment, starting in the second half of the year, with a phase ramp-up planned to continue throughout 2025.

Speaker Change: Comfortable by Nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own skin.

Joe Vernachio: The first critical step was to edit the line to more closely reflect our evolving strategy. As a result, we have limited a number of recent product introductions to just a few launches, all of which have performed well thus far and demonstrates our customer is asking for units from Allbirds. The World Runner 2, Tree Runner Go and Canvas Piper have all met with positive consumer response. Up next is the launch of our tree glider in just a few weeks.

Speaker Change: To amplify this narrative, we are prioritizing increased marketing investment starting in the second half of the year, with a phased ramp-up planned to continue throughout 2025.

Joe Vernachio: More on this from Annie shortly. Our efforts will be centered around driving awareness through an upper funnel strategy that tells the Allbirds brand and product story in a fresh, engaging, and consistent manner. specifically, our initiatives are designed to convey our brand message and product attributes to the lenses of rational, emotional, and cultural connections by incorporating these elements. We are creating a richer, more engaging narrative that resonates with the values and aspirations of the Allbirds consumer.

Speaker Change: More on this from Annie shortly.

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

Annie Mitchell: Specifically, our initiatives are designed to convey our brand message and product attributes through the lenses of rational, emotional, and cultural connections.

Joe Vernachio: We then set out to inject newness as quickly as possible. Using our existing tooling, we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 24 in the first half of 2025. You'll first see this reflected in the fall when we plan to introduce quarterly, as well as more rugged versions of our water resistant collection. Looking ahead to our fall 25 and spring 26 collections, we are creating these product lines from the ground up with an elevated design and product architecture that emphasizes Allbirds lifestyle brand positioning.

Speaker Change: By incorporating these elements, we are creating a richer, more engaging narrative that resonates with the values and aspirations of the Allbirds consumer.

Joe Vernachio: As we bring fresh, updated product to the market and amplify our marketing, providing customers with an engaging shopping experience is our other key priority. We are enhancing the in-store consumer journey, starting with an improved, disortment presentation, weight finding, and floor displays. In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop.

Speaker Change: As we bring fresh, updated products to the market and amplify our marketing, providing customers with an engaging shopping experience is our other key priority.

Speaker Change: We are enhancing the in-store consumer journey, starting with an improved assortment presentation, wayfinding, and floor displays.

Speaker Change: In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop.

Joe Vernachio: We are in the intensive phase of designing and developing a robust line of products that will begin to launch in the second half of next year. We are very motivated by the progress we are seeing with each sample that arrives from our development center. We have more than 10 new product launches planned across these two seasons. The collections will not only enhance our product range, but also reinforce our dedication to quality, comfort, style and sustainability.

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

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

Speaker Change: Telling compelling stories and providing customers with an engaging shopping experience.

Speaker Change: We have bolstered our organization with key hires and internal promotions.

Speaker Change: creating a team that is coalesced around a clear path forward.

Joe Vernachio: For example, breedable by nature will highlight our use of natural and recycled materials and knit constructions that offer exceptional breedability. Comfortable by nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own skin. To amplify this narrative, we are prioritizing increased marketing investment, starting in the second half of the year, with a phase ramp up planned to continue throughout 2025.

Speaker Change: We're continuing to operate with urgency and remain committed to building shareholder value over the long term.

Joe Vernachio: We appreciate your support and look forward to keeping you updated on our progress.

Speaker Change: We appreciate your support and look forward to keeping you updated on our progress.

Annie Mitchell: Now I'll turn the call over to Annie to discuss the financials. Thanks, Joe.

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

Annie Mitchell: In good afternoon, everyone. We are pleased to deliver another quarter of performance within or exceeding our expectations, reflecting consistent execution by our team. Next, revenue came in within our guidance range, and adjusted EBITDA exceeded the expectations to the outline last quarter. Notably, we delivered another quarter of gross marketing expansion and a 25% year-over-year improvement in adjusted EBITDA. Q2 revenue total 52 million. The results are primarily attributable to lower unit sales, partially offset by higher ASPs within our direct business. The return of full-price selling is a critical component of our long-term strategy. However, it is creating a near-term headwinded sale.

Annie Mitchell: Thanks, Joe, and good afternoon, everyone.

Annie Mitchell: We are pleased to deliver another quarter of performance within or exceeding our expectations, reflecting consistent execution by our team.

Annie Mitchell: Net revenue came in within our guidance range and adjusted EBITDA exceeded the expectations outlined last quarter.

Speaker Change: Notably, we delivered another quarter of gross margin expansion and a 25% year-over-year improvement in adjusted EBITDA.

Annie Mitchell: Q2 revenue total $52 million.

Annie Mitchell: The results are primarily attributable to lower unit sales partially offset by higher ASPs within our direct business.

Annie Mitchell: The return to full price selling is a critical component of our long-term strategy. However, it is creating a near-term headwind to sales.

Joe Vernachio: More on this from Annie shortly. Our efforts will be centered around driving awareness through an upper funnel strategy that tells the Allbirds brand and product story in a fresh, engaging and consistent manner, specifically our initiatives are designed to convey our brand message and product attributes to the lenses of rational, emotional and cultural connections by incorporating these elements. We are creating a richer, more engaging narrative that resonates with the values and aspirations of the Allbirds consumer.

Annie Mitchell: Additionally, revenue was impacted by our international distributor transition and plan-to-detail store closure. While the transition to a distributor model and the closure of regional doors are reducing our top line and the associated growth profit dollars, these actions are done with intention. As they support our cost management and efficiency efforts, and are offset by savings in marketing and S-G&A, which I will discuss in a moment. Second quarter gross margin improved to 50.5%, up 360 basis points sequentially and 770 basis points versus the prior year. The year-over-year expansion is attributable to the continued benefits from a healthier inventory position.

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

Annie Mitchell: While the transition to a distributor model and the closure of retail doors are reducing our top line in the associated growth profit dollars.

Annie Mitchell: These actions are done with intention, as they support our cost management and efficiency efforts, and are offset by savings in marketing and SG&A, which I will discuss in a moment.

Annie Mitchell: Second quarter gross margin improved 50.5%, up 360 basis points sequentially and 770 basis points versus the prior year.

Joe Vernachio: As we bring fresh, updated product to the market and amplify our marketing, providing customers with an engaging, shopping experience is our other key priority. We are enhancing the in-store consumer journey, starting with an improved, disortment presentation, weight finding and floor displays. In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop.

Annie Mitchell: The year-over-year expansion is attributable to the continued benefit from a healthier inventory position.

Annie Mitchell: Lower Breakup, and Lower Promotional Activity in the Direct Business, as well as Cobb Saving's Capture Smart Factory Shift and Materialization. Year-over-year improvement in gross margins expected to continue in the second half of 2024, although not the same magnitude that we've seen here today. We continue to expect Q3 to Q4 gross margins to be in the mid-40s, reflecting the combination of retail store closures, transitions to international distributors, and planned promotional activity around the holidays.

Annie Mitchell: lower break costs, and lower promotional activity in the direct business.

Annie Mitchell: as well as COGS savings captured from our factory shifts and materials installation.

Annie Mitchell: Year-over-year improvement in gross margins is expected to continue in the second half of 2024, although not at the same magnitude that we've seen year-to-date.

Joe Vernachio: You'll hear much more about this in the quarters to come. As we embark on the next phase of our journey, our track record of execution over the past 18 months gives us confidence in our ability to advance our three main focus areas of making great products, telling compelling stories and providing customers with an engaging, shopping experience. We have bolstered our organization with key hires and internal promotions, creating a team that is coalesced around a clear path forward. We're continuing to operate with urgency and remain committed to building shareholder value over the long term. We appreciate your support and look forward to keeping you updated on our progress.

Annie Mitchell: Looking at SG&A, are teams to great work controlling costs in the quarter. SG&A dollars excluding stock-based compensation and depreciation and amortization totaled 28 million, down 22 percent per second per year. The decrease can primarily be traced to the lower personnel expenses and occupancy costs. This was partially offset by cost associated with our retail store closures as planned. During the quarter, we closed 10 U.S. doors, followed by one additional closure subsequent to quarter-end. This brings us to 14 stores year to date, putting us at the high end of our plan to close 10 to 15 U.S.

Speaker Change: the decrease can primarily be traced the lower personnel expenses and offupcy cost

Speaker Change: This was partially offset by costs associated with our retail store closures as planned.

Annie Mitchell: During the quarter, we closed 10 U.S. doors, followed by one additional closure subsequent to quarter end.

Annie Mitchell: This brings us to 14 stores year-to-date, putting us at the high end of our plan to close 10 to 15 U.S. stores in 2024.

Annie Mitchell: doors in 2024. And we continue to evaluate opportunities to optimize our retail fleet. In connection with these store closures, but one internationally, we incurred one-time cash charges of 3 million in Q2. Q2 marketing spend total 12 million, down 6 percent year over year. As Joe mentioned, in the second half of 2024, we plan to increase our marketing investment to begin driving awareness through top-of-funnel spend in the lead-up to our 2025 products introduction. While total marketing dollars are expected to be down on a year-over-year basis, including Q4, we anticipate that our U.S. Spend will be up.

Annie Mitchell: Now I'll turn the call over to Annie to discuss the financials. Thanks, Joe.

Annie Mitchell: And we continue to evaluate opportunities to optimize our retail fleet.

Annie Mitchell: In good afternoon, everyone. We are pleased to deliver another quarter of performance within or exceeding our expectations, reflecting consistent execution by our team. Next, revenue came in within our guidance range and adjusted EBITDA exceeded the expectations to the outline last quarter. Notably, we delivered another quarter of gross marketing expansion and a 25% year-over-year improvement in adjusted EBITDA. Q2 revenue total 52 million. The results are primarily attributable to lower unit sales partially offset by higher ASPs within our direct business.

Annie Mitchell: In connection with these store closures, plus one internationally, we incurred one-time cash charges of $3 million in Q2.

Annie Mitchell: Q2 marketing spend totaled $12 million, down 6% year-over-year.

Annie Mitchell: As Joe mentioned, in the second half of 2024, we plan to increase our marketing investment to begin driving awareness through top-of-funnel spend in the lead-up to our 2025 product introduction.

Joe Vernachio: While total marketing dollars are expected to be down on a year-over-year basis in Q3 and Q4, we anticipate that our U.S. spend will be up.

Annie Mitchell: Recall that under our new distributor model, in-region marketing cost effectively go to zero following a transition. With five regions now transitioning to distributors, the year-over-year savings are expected to more than offset these investments we are planning to make in our remaining direct market, the U.S., UK, and EU.

Annie Mitchell: The return of full-price selling is a critical component of our long-term strategy. However, it is creating a near-term headwinded sale. Additionally, revenue was impacted by our international distributor transition and plan-to-detail store closure. While the transition to a distributor model and the closure of regional doors are reducing our top line and the associated growth profit dollars, these actions are done with intention. As they support our cost management and efficiency efforts, and are offset by savings and marketing and S-GNA, which I will discuss in a moment.

Speaker Change: Recall that under our new distributor model, in-region marketing costs effectively go to zero following a transition.

Speaker Change: With five regions now transitioned to distributors, the year-over-year savings are expected to more than offset the investments we're planning to make in our remaining direct markets, the U.S., U.K., and E.U.

Annie Mitchell: Now, turning to the balance sheet in cash flow, the company is in strong financial condition with a solid balance sheet. Inventories of the end of Q2 remain healthy, totaling 53 million dollars. That's down 43 percent year over year and down 7 percent from the end of 2023. We closed the second quarter with 87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver. Operating cash used was 16 million. That's down to quenchally from Q1, reflecting our seasonal working capital cadence, and up versus the prior year. What inventory was a material source of cash due to our creative efforts throughout 2023.

Annie Mitchell: Now, turn to the balance sheet and cash flow. The company is in strong financial condition with a solid balance sheet.

Annie Mitchell: Inventories at the end of Q2 remained healthy, totaling $53 million. That's down 43% year-over-year and down 7% from the end of 2023.

Annie Mitchell: Second quarter gross margin improved to 50.5%, up 360 basis points sequentially and 770 basis points versus the prior year. The year-over-year expansion is attributable to the continued benefits from a healthier inventory position. Lower Breakup, and Lower Promotional Activity in the Direct Business, as well as Cobb Saving's Capture Smart Factory Shift and Materialization. Year over year improvement in gross margins expected to continue in the second half of 2024, although not the same magnitude that we've seen here today.

Annie Mitchell: We close the second quarter with $87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver.

Annie Mitchell: Our three focus areas of making-rate products, telling compelling stories, and providing customers with an engaging shopping experience, combined with other strategic actions we are taking this year, are positioning the business to return to top line growth in 2025, instead of us to deliver profitability in future. here. A foundational step on our plan to restore growth is the return to full price value. We are committed to this model following a promotional 2023 and pleased to see the benefits begin to manifest, which is reflected in our year-to-date gross margin expansion. Looking at other key initiatives, as I just noted, we've taken swift action related to our U.S. retail fleet.

Speaker Change: Our three focus areas of Making Great Products, Telling Compelling Stories, and Providing Customers with an Engaging Shopping Experience

Annie Mitchell: We continue to expect Q3 to Q4 gross margins to be in the mid-40s, reflecting the combination of retail store closures, transitions to international distributors, and plan promotional activity around the holidays. Looking at SG&A are teams to great work controlling costs in the quarter. SG&A dollars excluding stock-based compensation and depreciation and amortization totaled 28 million, down 22 percent per second per year. The decrease can primarily be traced the lower personnel expenses and occupancy costs.

Annie Mitchell: Combined with other strategic actions we are taking this year, are positioning the business to return to top-line growth in 2025 and set us up to deliver profitability in future years.

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

Speaker Change: we are emcommitted to this model callall in a promotional two thousand and twenty three and please the feed of benefits begin to manifest which is resflected in our year-to-d's gross margin expansion

Annie Mitchell: Looking at other key initiatives, as I just noted, we've taken swift action related to our US retail fleet.

Annie Mitchell: And on the international front, we continue to partner with distributors in new regions, with Ben Alex and Scandinavia signed this quarter. We have transitioned the majority of our existing regions to a distributor model. Through the second quarter, we completed transitions in Japan and Australia. In last week, we announced the transition of China, an important region for our brand. We're pleased to be working with leading distributors who have both regional and industry expertise to help us spend our brand reach and positions up to achieve profitable and scalable growth internationally.

Annie Mitchell: This was partially offset by cost associated with our retail store closures as planned. During the quarter, we closed 10 U.S, doors, followed by one additional closure subsequent to quarter-end. This brings us to 14 stores year to date, putting us at the high end of our plan to close 10 to 15 U.S, doors in 2024. And we continue to evaluate opportunities to optimize our retail fleet. In connection with these store closures, but one internationally, we incurred one-time cash charges of 3 million in Q2.

Annie Mitchell: And on the international front, we continue to partner with distributors in new regions, with Benelux and Scandinavia signed this quarter.

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

Annie Mitchell: During the second quarter, we completed transitions in Japan and Australasia. And last week, we announced the transition of China, an important region for our brand.

Annie Mitchell: We're pleased to be working with leading distributors who have both regional and industry expertise to help us extend our brand reach and position us to achieve profitable and scalable growth internationally.

Annie Mitchell: Moving to guidance, we are reiterating our full-year sales outlook, and based on performance here today, we are increasing our gross margin range by 100 basis points and bringing up the bottom end of our adjusted EBITDA range by $3 million. Full-year net revenue is expected to be in the range of $109 to $210 million. The full-year impact from our retail store closures and international transitions is now expected to be in the range of $25 to $30 million, versus our prior expectation of $32 to $37 million. Let me impact that for you. The impact from retail is higher than anticipated due to the speed of which we've been able to exit these.

Annie Mitchell: Q2 marketing spend total 12 million, down 6 percent year over year. As Joe mentioned, in the second half of 2024, we plan to increase our marketing investment to begin driving awareness through top of funnel spend in the lead-up to our 2025 products introduction. While total marketing dollars are expected to be down on a year-over-year basis, including Q4, we anticipate that our U.S, spend will be up. Recall that under our new distributor model, in-region marketing cost, effectively go to zero following a transition.

Annie Mitchell: Thank you.

Speaker Change: Moving to guidance. We are reiterating our full-year sales outlook and based on performance year-to-date, we are increasing our gross margin range by 100 basis points and bringing up the bottom end of our adjusted EBITDA range by 3 million dollars.

Annie Mitchell: Full year net revenue is expected to be in the range of $190 to $210 million.

Annie Mitchell: The full-year impact from our retail store closures and international transitions is now expected to be in the range of $25 to $30 million versus our prior expectation of $32 to $37 million.

Annie Mitchell: With five regions now transition to distributors, the year-over-year savings are expected to more than offset these investments will planning to make in our remaining direct market, the U.S., UK, and EU. Now, turning to the balance sheet in cash flow, the company is in strong financial condition with a solid balance sheet. Inventories of the end of Q2 remain healthy, totaling 53 million dollars. That's down 43 percent year over year and down 7 percent from the end of 2023.

Speaker Change: Let me unpack that for you.

Annie Mitchell: The impact from retail is higher than anticipated due to the speed at which we've been able to exit leases.

Annie Mitchell: The impact from international transitions is lower than expected due to the timing of this year's transitions, combined with slightly higher initial orders from our distributors. By geographical market, full-year 2024, US net revenue is expected to be in the range of $150 to $165 million and includes approximately $10 to $12 million of impact resulting from our US store closures. Full-year international net revenue is expected to be between $40 to $45 million and includes approximately $15 to $18 million of impact resulting from our transition to a distributor model in certain international markets. Growth margin is now expected to be in the range of 43 to 46% from prior guidance of 42 to 45%.

Annie Mitchell: The impact from international transitions is lower than expected due to the timing of this year's transitions, combined with slightly higher initial orders from our distributors.

Annie Mitchell: A geographical market, full year 2024, U.S. net revenue is expected to be in the range of $150 to $165 million and includes approximately $10 to $12 million of impact resulting from our U.S. store closures.

Annie Mitchell: We closed the second quarter with 87 million of cash and cash equivalents and no outstanding borrowings under our $50 million revolver. Operating cash used was 16 million. That's down to quenchally from Q1, reflecting our seasonal working capital cadence, and up versus the prior year, what inventory was a material source of cash due to our creative efforts throughout 2023. Our three focus areas of making-rate products, telling compelling stories, and providing customers with an engaging shopping experience, combined with other strategic actions we are taking this year, are positioning the business to return to top line growth in 2025, instead of us to deliver profitability in future, here.

Annie Mitchell: Full year international net revenue is expected to be between $40 and $45 million and includes approximately $15 to $18 million of impact, resulting from our transition to a distributor model in certain international markets.

Annie Mitchell: Growth margin is now expected to be in the range of 43 to 46 percent, up from prior guidance of 42 to 45 percent.

Annie Mitchell: Key drivers include reduced promotional intensity compared to 2023, lower inbound and outbound rate, and initial savings from our factory shift to Vietnam and materials innovation. Full-year adjusted even a loss is now expected to be in the range of $75 to $60 million, which compares to prior guidance for a loss of $78 to $53 million. While there are a number of dynamics that play on the top line, we've remained focused on improving the bottom line, and you could see the results of that this year.

Annie Mitchell: Key drivers include reduced promotional intensity compared to 2023.

Annie Mitchell: lower inbound and outbound freight, and initial savings from our factory shift to Vietnam and materials innovation.

Annie Mitchell: Full year adjusted EBITDA loss is now expected to be in the range of $75 to $63 million, which compares to prior guidance for a loss of $78 to $63 million.

Annie Mitchell: A foundational step on our plan to restore growth is the return to full price value. We are committed to this model following a promotional 2023 and pleased to see the benefits begin to manifest, which is reflected in our year-to-date gross margin expansion. Looking at other key initiatives, as I just noted, we've taken swift action related to our US retail fleet. And on the international front, we continue to partner with distributors in new regions, with Ben Alex and Scandinavia signed this quarter.

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

Annie Mitchell: Turning out a Q3 guidance, third quarter net revenue is expected to be between $40 and $43 million. This comprises US revenue in the range of $33 to $35 million, and international revenue in the range of $7 to $8 million. Q3 adjusted even a loss with expected to be between $19 and $15 million. We're pleased with our first half performance and proud of the way our teams are executing as we enter the next phase of our journey.

Annie Mitchell: Turning now to Q3 Guidance.

Annie Mitchell: Third quarter net revenue is expected to be between $40 and $43 million.

Annie Mitchell: This comprises U.S. revenue in the range of $33 to $35 million and international revenue in the range of $7 to $8 million.

Annie Mitchell: Q3 adjusted EBITDA loss is expected to be between $19 and $16 million.

Annie Mitchell: We have transitioned the majority of our existing regions to a distributor model. Through the second quarter, we completed transitions in Japan and Australia. In last week, we announced the transition of China, an important regions for our brand. We're pleased to be working with leading distributors who have both regional and industry expertise to help us spend our brand reach and positions up to achieve profitable and scalable growth internationally.

Annie Mitchell: We're pleased with our first half's performance and proud of the way our teams are executing as we enter the next phase of our journey.

Operator: With that, I'll ask the operator to open the call to questions. Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit to one question and one follow-up question. One moment will we compile the Q&A roster.

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

Speaker Change: Thank you. At this time we will conduct the question and answer session. As a reminder, to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again. Please limit to one question and one follow-up question.

Annie Mitchell: Moving to guidance, we are reiterating our full-year sales outlook, and based on performance here today, we are increasing our gross margin range by 100 basis points, and bringing up the bottom end of our adjusted EBITDA range by $3 million. Full-year net revenue is expected to be in the range of $109 to $210 million. The full-year impact from our retail store closures and international transitions is now expected to be in the range of $25 to $30 million, versus our prior expectation of $32 to $37 million.

Speaker Change: One moment while we compile the Q&A roster.

Janine Stichter: Our first question comes from the line of Janine Stichter with BTIG.

Ethan Saghi: Your line is now open. Everyone, now you got Ethan Saghi on for Janine tonight. Just a couple for me. First, just was wondering if you could give a little more color on freight. You know, what you're currently seeing there with spot rates and just how you're incorporating that into the gross margin guide.

Speaker Change: Our first question comes from the line of Janine Stichter with BTIG. Your line is now open.

Annie Mitchell: Let me impact that for you. The impact from retail is higher than anticipated due to the speed of which we've been able to exit these. The impact from international transitions is lower than expected due to the timing of this year's transitions, combined with slightly higher initial orders from our distributors. By geographical market, full-year 2024, US net revenue is expected to be in the range of $150 to $165 million, and includes approximately 10 to $12 million of impact resulting from our US store closures.

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

Ethan Saghi: All right. Got it. That's helpful.

Ethan Saghi: And then just a lesson for me. Are you seeing any differences in how some of your newer launches are resonating with customers in the U.S.? burst International markets? Yeah.

Ethan Saghi: Hi Ethan. Nice to speak with you. Yeah, we are actually seeing a strong response to our new launches in all of our markets. Specifically in the United States, the last three launches have met with very, very strong response. They've actually been our strongest launches over the last two years. And internationally, we saw momentum as we were transitioning to the new distributors. So we were able to hand them a momentum that was moving in a fantastic direction, and they were very pleased with that. And they've continued that the transitions have moved quite swiftly and efficiently. And they've just stepped basically right into the path that we left.

Annie Mitchell: Full-year international net revenue is expected to be between $40 to $45 million, and includes approximately $15 to $18 million of impact resulting from our transition to a distributor model in certain international markets. Growth margin is now expected to be in the range of $43 to $46% of from prior guidance of $42 to $45%. Key drivers include reduced promotional intensity compared to 2023, lower inbound and outbound rate, and initial savings from our factory shift to Vietnam and materials innovation.

Speaker Change: Yeah, we are actually seeing strong response to our new launches in all of our markets.

Speaker Change: Specifically in the United States, the last three launches have met with very, very strong response. They've actually been our strongest launches over the last two years.

Speaker Change: and internationally we saw momentum as we were transitioning to the new distributors so we were able to hand them a

Annie Mitchell: Full-year adjusted even a loss is now expected to be in the range of $75 to $60 million, which compares to prior guidance for a loss of $78 to $53 million. While there are a number of dynamics that play on the top line, we've remained focused on improving the bottom line, and you could see the results of that this year.

Speaker Change: momentum that was moving in a fantastic direction and they were very pleased with that and they've continued that the transitions have moved quite swiftly and efficiently and and they've just stepped basically right into the path that we left.

Ethan Saghi: Got it. That's helpful.

Ethan Sagi: Thank you. Thank you.

Annie Mitchell: Turning out a Q3 guidance, third quarter net revenue is expected to be between $40 and $43 million. This comprises US revenue in the range of $33 to $35 million, and international revenue in the range of $7 to $8 million. Q3 adjusted even a loss with expected to be between 19 and $15 million. We're pleased with our first half performance and proud of the way our teams are executing as we enter the next phase of our journey.

Speaker Change: Got it. That's helpful. Thank you. You bet.

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

Speaker Change: Thank you.

Joe Vernachio: Your line is now open. Great. Thanks for taking the questions. One for Joe. One for Annie here. Joe, maybe on the positive consumer response you're seeing. You mentioned that a few times or the strong response. Can you just walk me through like what KPIs are telling you that? And then just bigger picture. How should we think about how that back half of 25 those launches are going to be different, just strategically? Sure. Yeah, so the, I mean, let me, let me zoom out a little bit and then give some context to it all. So, and where these new products fit into our strategy and our, and our go forward path towards growth.

Speaker Change: Our next question comes from the line of Alex Straton with Morgan Stanley . Your line is now open.

Operator: With that, I'll ask the operator to open the call to questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit to one question and one follow-up question. One moment will we compile the Q&A roster.

Annie Mitchell: Cheers!

Joe Vernachio: Um, yeah, so the...

Joe Vernachio: I mean let me let me just zoom out a little bit and then give some context to it all so and where these new products fit into our strategy and our go-forward path towards growth.

Joe Vernachio: I think it's just really important to first pause on just what we've done to reset the foundation of the business. The work we've done in stores, international or cogfaving or optics, work and the inventory reduction, any one of these in isolation would have been a major accomplishment, but putting all these together in the time that we've done and getting the results that we're getting. I think just bodes very strongly to how well the team is coalesced around the task at hand and the urgency that we are proceeding with. So then, layered on top of that now, we have to do these three things.

Speaker Change: Thank you.

Speaker Change: I think it's just really important to first pause on just what we've done to reset the foundation of the business.

Ethan Saghi: Our first question comes from the line of Janine Stichter with BTIG. Your line is now open. Everyone, now you got Ethan Saghi on for Janine tonight. Just a couple for me. First just was wondering if you could give a little more color on freight. You know, what you're currently seeing there with spot rates and just how you're incorporating that into the gross margin guide. Hi Ethan. Yes, your question is timely. Similar to others in the industry, freight is a pressure point, but we've considered that in our plans and we're actively managing this and don't view it as a significant headwind for us.

Joe Vernachio: The work we've done in stores, international, or COGS savings, or OPEX,

Joe Vernachio: work and the inventory reduction. Any one of these

Joe Vernachio: In isolation would have been a major accomplishment, but putting all these together in the time that we've done and getting the results that we're getting, I think just bodes very strongly to how well the team has coalesced around the task at hand.

Joe Vernachio: and the urgency that we are proceeding with.

Joe Vernachio: So then, layered on top of that now, we have to do these three things, right? We've got to get the product ignited, we've got to get it moving through the pipeline. So, part of that is design, which is...

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

Ethan Saghi: All right. Got it. That's helpful. And then just a lesson for me. Are you seeing any differences in how some of your newer launches are resonating with customers in the U.S, burst international markets? Yeah. Hi Ethan. Nice to speak with you. Yeah, we are actually seeing strong response to our new launches in all of our markets. Specifically in the United States, the last three launches have met with very, very strong response.

Speaker Change: The most important part of product, right? All the energy in product comes through design. I have this saying that I use...

Ethan Saghi: They've actually been our strongest launches over the last two years. And internationally, we saw momentum as we were transitioning to the new distributors. So we were able to hand them a momentum that was moving in a fantastic direction and they were very pleased with that. And they've continued that the transitions have moved quite swiftly and efficiently. And they've just stepped basically right into the path that we left. Got it. That's helpful. Thank you.

Annie Mitchell: with the team, and that is, if a brand is an orange, design is the juice.

Annie Mitchell: And if you've ever had an orange with no juice, it's not very good, right? So we are spending a lot of time and energy and momentum in creating that juice that we are going to be using to then apply to a product line and a product offering.

Joe Vernachio: And you ask specifically, what's different about it? I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand, and there is so much opportunity and so much breadth and dimension that we can give to that across seasons, across gender, and across use occasions. And we've even begun to take this brand where its potential is going. So, you know, while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward. And so we've edited the line to make sure we don't feed the near term with products that will go out of the line soon so that we don't end up with inventory problems. And we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline.

Annie Mitchell: and and you asked specifically like what's different about it. I think what's different about it is that we are we are focused on being who we are. We are a lifestyle footwear brand.

Annie Mitchell: And there is so much opportunity and so much breadth and dimension that we can give to that across seasons, across gender, and across use occasions, that we haven't even begun to take this brand where its potential is going. So while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward.

Alex Straton: Our next question comes from the line of Alex Stratton with Morgan Stanley. Your line is now open. Great. Thanks for taking the questions. One for Joe. One for Annie here. Joe, maybe on the positive consumer response you're seeing. You mentioned that a few times or the strong response.

Annie Mitchell: And so we've edited the line to make sure we don't feed the near term with products that will go out of the line.

Annie Mitchell: Soon, so that we don't end up with inventory problems, and we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline, and that's going to be coming in the middle part of next year.

Joe Vernachio: Can you just walk me through like what KPIs are telling you that? And then just bigger picture. How should we think about how that back half of 25 those launches are going to be different just strategically? Sure. Yeah, so the, I mean, let me, let me zoom out a little bit and then give some context to it all. So, and where these new products fit into our strategy and our, and our go forward path towards growth.

Joe Vernachio: And that's going to be coming in the middle part of next year. And along with that, we will be layering on top of that all the marketing that will be adding to the business. And all of that is what engages consumers and gets people excited. At the end of the day, it's about the stuff. It's about the shoe. And the KPIs that you ask specifically around the KPIs, one of the things that we're really focused on is the new customers, the NCA that's coming in with those new products and the messaging. Paramount to the new products, we have to get new customers into our business.

Annie Mitchell: Along with that, we'll be layering on top of that all the marketing that we'll be adding to the business.

Annie Mitchell: And all of that is what engages consumers and gets people excited. At the end of the day, it's about the stuff. It's about the shoe. And the KPIs, I think you asked specifically around the KPIs, one of the things that we're really focused on is...

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

Annie Mitchell: The new customers, the NCA that's coming in with those new products and the messaging. Paramount to the new products, we have to get new customers into our business. And so we're really focused on...

Joe Vernachio: And so we're really focused on that performance. And then, of course, we're doing all these new products at full price. So there's no discounting associated with it. So making sure that we stay at full price on all these new products is really, really important. So all of this combined, we feel really positive about where we're headed. We think we're just very, very beginning of the process.

Speaker Change: on that performance. And then, of course, we're doing all these new products at full price, so there's no discounting associated with it. So, making sure that we stay at full price on all these new products is really, really important.

Joe Vernachio: So then layered on top of that now, we have to do these three things. We've got to get the product ignited, we've got to get it moving through the pipeline. Part of that is design, which is the most important part of product. All the energy in product comes through design. I have this saying that I use with the team and that is if a brand is an orange design is the juice and if you've ever had an orange with no juice, it's not very good.

Annie Mitchell: so all of this combined we feel really positive about where we're headed we think we're just the very very beginning of the process

Unnamed Speaker: That's great, super comprehensive.

Annie Mitchell: Annie, maybe one for you, just thinking through the near-term top line trend. I don't think you have much of an improvement built in for third quarter, so just wondering, kind of, is that what you're seeing quarter to date? And then just on the third quarter and four year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Annie Mitchell: That's great. Super comprehensive. Annie, maybe one for you. Just thinking through the near-term top-line trend, I don't think you have much of an improvement built in for third quarter, so just wondering, kind of, is that what you're seeing quarter-to-date?

Joe Vernachio: So we are spending a lot of time and energy and momentum in creating that juice that we are going to be using to then apply to a product line and a product offering. And you ask specifically, what's different about it? I think what's different about it is that we are focused on being who we are. We are a lifestyle footwear brand and there is so much opportunity and so much breadth and dimension that we can give to that across seasons, across gender and across use occasions.

Speaker Change: And then, just on the third quarter and full year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So, can you just walk me through what creates that big inflection, your confidence there?

Annie Mitchell: Oh, thanks very much for the question. So when we're looking at Q3, you know, this guide has us relatively familiar to where we were in Q1 and Q2, being down about in the high 20th. In Q2 specifically, the impact of the transitions for retail, international, we're worth about four points for us. However, when we go into Q3, those become bigger impacts; you know, the doors of a closed in Q2 might have been partially through the quarter. We transact, read, transition, Japan and Australia near the end of the quarter. We've since transitioned China. So, as a result, that sort of four point impact from Q2 actually grows to be closer to 10 to 15 points.

Annie Mitchell: Oh, thanks very much for the questions.

Annie Mitchell: So when we're looking at Q3, you know, this guide has us relatively similar to where we were in Q1 and Q2, being down about in the high 20s.

Speaker Change: in cure specifically the impact of the transitions for retail international we're worth about four points for us

Speaker Change: However, when we go into Q3, those become bigger impacts. You know, the doors would be closed in Q2, might have been partially through the quarter. We transitioned Japan and Australia near the end of the quarter. We've since transitioned...

Joe Vernachio: And we've even begun to take this brand where its potential is going. So, you know, while we might have one item of a particular model in the line, we will have a collection of those products in the line going forward. And so we've edited the line to make sure we don't feed the near term with products that will go out of the line soon so that we don't end up with inventory problems.

Annie Mitchell: China. So as a result that sort of four point impact from Q2 actually grows to be closer to 10 to 15 points.

Joe Vernachio: And we are working as swiftly as we can to get all of these new products and these new designs that are on brand out into the pipeline. And that's going to be coming in the middle part of next year. And along with that, we will be layering on top of that all the marketing that will be adding to the business. And all of that is what engages consumers and gets people excited.

Annie Mitchell: And so when we actually look at our same or like for like business underneath, it's more like we're down in the mid teens versus the mid 20s. So there is some improvement in the underlying business. It's just not as obvious because of these transition topics and the impacts that happen on the top line. When we look at Q4, it's going to be quite similar in that sense to Q3, where we'll have more of the full impact of all of these transitions. And so we don't necessarily need to have a huge uptick, but we do know that as we're comping over last year, we were quite promotional. We'll have a few more products coming.

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

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

Annie Mitchell: When we look at Q4, it's going to be quite similar in that sense to Q3, where we'll have more of the full impact of all of these transitions.

Speaker Change: And so we don't necessarily need to have a huge uptick, but we do know that as we're comping over last year, we were quite promotional, we'll have a few more products coming.

Joe Vernachio: At the end of the day, it's about the stuff. It's about the shoe. And the KPIs that you ask specifically around the KPIs, one of the things that we're really focused on is the new customers, the NCA that's coming in with those new products and the messaging. Paramount to the new products, we have to get new customers into our business. And so we're really focused on that performance. And then of course, we're doing all these new products at full price.

Annie Mitchell: Joe gave a nice overview in terms of the philosophy behind our product. We're excited. And shortly this month, we're actually going to have our next big launch, and that will also carry us into Q4 as well.

Annie Mitchell: Joe gave a nice overview in terms of the philosophy behind our product. We're excited and shortly this month we're actually going to have our next big launch and that will also carry us into Q4 as well.

Unnamed Speaker: Thanks a lot, good luck guys. Thank you.

Joe Vernachio: Thanks a lot. Good luck guys. Thank you. Thank you.

Unnamed Speaker: I'm showing no further questions at this time.

Joe Vernachio: I would now like to turn it back to Joe Renatio for closing remarks. Thank you, everyone, for joining today. We really appreciate your continued support of all groups. We look forward to speaking with you again next quarter. Thank you for your participation in today's conference.

Joe Vernachio: Thank you.

Joe Vernachio: So there's no discounting associated with it. So making sure that we stay at full price on all these new products is really, really important. So all of this combined, we feel really positive about where we're headed, we think we're just very, very beginning of the process.

Joe Vernachio: I am showing no further questions at this time. I would now like to turn it back to Joe Vernachio for closing remarks.

Joe Vernachio: Thank you everyone for joining today. We really appreciate your continued support of Allbirds.

Joe Vernachio: We look forward to speaking with you again next quarter.

Operator: This does conclude the program. You may now disconnect.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Joe Vernachio: That's great, super comprehensive. Annie, maybe one for you, just thinking through the near term top line trend. I don't think you have much of an improvement built in for third quarter, so just wondering kind of, is that what you're seeing quarter today? And then just on the third quarter and four year guidance, it seems to imply a pretty big improvement in the top line in the fourth quarter. So can you just walk me through what creates that big inflection, your confidence there?

Joe Vernachio: Oh, thanks very much for the question. So when we're looking at Q3, you know, this guide has us relatively familiar to where we were in Q1 and Q2, being down about in the high 20th. In Q2 specifically, the impact of the transitions for retail, international, we're worth about four points for us. However, when we go into Q3, those become bigger impacts, you know, the doors of a closed in Q2 might have been partially through the quarter.

Joe Vernachio: We transact, read, transition, Japan and Australia near the end of the quarter. We've since transitioned China. So as a result, that sort of four point impact from Q2 actually grows to be closer to 10 to 15 points. And so when we actually look at our same or like for like business underneath, it's more like we're down in the mid teens versus the mid 20s. So there is some improvement in the underlying business.

Joe Vernachio: It's just not as obvious because of these transition topics and the impacts that happen on the top line. When we look at Q4, it's going to be quite similar in that sense to Q3 where we'll have more of the full impact of all of these transitions. And so we don't necessarily need to have a huge uptick, but we do know that as we're comping over last year, we were quite promotional, we'll have a few more products coming.

Joe Vernachio: Joe gave a nice overview in terms of the philosophy behind our product. We're excited. And shortly this month, we're actually going to have our next big launch, and that will also carry us into Q4 as well.

Alex Straton: Thanks a lot, good luck guys. Thank you.

Operator: I'm showing no further questions at this time.

Joe Vernachio: I would now like to turn it back to Joe Renatio for closing remarks. Thank you everyone for joining today. We really appreciate your continued support of all groups. We look forward to speaking with you again next quarter. Thank you for your participation in today's conference.

Operator: This does conclude the program. You may now disconnect.

Q2 2024 Allbirds Inc Earnings Call

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