Q4 2024 Allbirds Inc Earnings Call

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

Good afternoon, ladies and gentlemen, and welcome to the all birds fourth quarter and full year 'twenty 'twenty four conference call.

All participants have been placed in a listen only mode.

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

After management 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, Ambassador Relations of the Blue Shirt Group. Ma'am, you may begin.

Christine Greenie: Now I would like to turn the call over to Christine Greenie Investor Relations of the Blue shirt group.

Speaker Change: Ma'am you may begin.

Christine Greany: Good afternoon, everyone. And thank you for joining us.

Speaker Change: Good afternoon, everyone and thank you for joining US with me on the call today are Joe for Nacho.

Christine Greany: With me on the call today are Joe Vernachio, CEO and Annie Mitchell, CFO.

Speaker Change: C E O and Andy Mitchell CFO.

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, 2025 full year and Q1 guidance targets, Impact, Duration of External Headwinds, Strategic Transformation Plan and Related Planned Efforts, Go-to-Market Strategy, and International Market. 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.

Speaker Change: 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.

Speaker Change: And cash flow and adjusted EBITDA expectation 2025, full year and Q1 guidance target.

Speaker Change: Impact duration of external headwinds, our strategic transformation plan and related planned efforts go to market strategy.

Speaker Change: But in the international market.

Speaker Change: Anticipated distributor model arrangements expected profitability cost savings target.

Speaker Change: Margin estimates product land timelines and expectation marketing strategy and investment product and brand strategy and other matters referenced in our earnings release issued today.

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

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.

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.

Christine Greany: Please refer to our SEC filings, including our report on Form 10-Q for the quarter ending September 30, 2024, for a more detailed description of the risk factors that may affect our results.

Speaker Change: Please refer to our SEC filings, including our report on Form 10-Q for the quarter ending September 32024 for a more detailed description of the risk factors that may affect our results.

Christine Greany: Also during the 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 result. 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: Also during the 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.

Speaker Change: In today's earnings release.

Joe Vernachio: Now, I would like to turn the call over to Joe to begin the formal remarks. Good afternoon. Thanks for joining us today. We're happy to share that our fourth quarter results came in as expected on the top and bottom line.

Joe: Now I would like to turn the call over to Joe to begin the formal remarks.

Joe: Good afternoon, thanks for joining us today.

Joe: Happy to share that our fourth quarter results came in as expected on the top and bottom line.

Joe Vernachio: It's been a year since I stepped in as CEO. And from day one, we've been focused on rebuilding the company for future growth and profitability. Over the past year, we've made real progress. Strengthening Our Operating Model, bringing together a team of experienced, talented, and motivated people. and most importantly, reigniting our product and marketing engine. We believe this puts us on a path to reclaim our place in the market. while also strengthening our foundation for long-term success.

Joe: It's been a year since I stepped in as CEO and from day, one we've been focused on rebuilding the company for future growth and profitability.

Joe: Over the past year, we've made real progress strengthening our operating model, bringing together a team of experienced talented and motivated people.

Joe: And most importantly, reigniting, our product and marketing engine.

Joe: We believe this puts us on a path to reclaim our place in the market.

Joe: While also strengthening our foundation for long term success.

Joe Vernachio: With our new assortments starting to hit the market this fall, we expect to return to top-line growth for the fourth quarter of 2025.

Joe: With our new Assortments starting to hit the market. This fall, we expect to return to top line growth for the fourth quarter of 2025.

Joe Vernachio: Before we dive into our plans for the new year, I want to take a few minutes to highlight what we accomplished in the key building blocks we put in place as part of our brand transformation. First, we laid the groundwork to strengthen our gross margin profile through two major initiatives, reducing our cost of goods with strategic sourcing and product development and a focus on full-price selling, which is critical for the long-term health of our brand. Next, we streamlined our cost structure, reducing our SG&A by over $20 million in full year 2024. We also reduced our U.S.

Before we dive into our plans for the new year I'm going to take a few minutes to highlight what we accomplished in the key building blocks, we've put in place as part of our brand transformation.

Joe: First we laid the groundwork to strengthen our gross margin profile through two major initiatives, reducing our cost of goods with strategic sourcing and product development.

Joe: And a focus on full price selling which is critical for the long term health of our brand.

Joe: Next we streamlined our cost structure, reducing our SG&A by over $20 million in full year 2024.

Joe: Also reduced our U S store footprint closing 15 locations.

Joe Vernachio: store footprint, closing 15 locations. Since the start of this year, we've closed another five, and we'll continue to take a strategic approach to improve the productivity of our store portfolio.

Joe: The start of this year, we've closed another five and will continue to take a strategic approach to improve the productivity of our store portfolio.

Joe Vernachio: And finally, we successfully transitioned to a distributor model in all our targeted international regions while expanding into new markets. With this shift, our international business is now set up for profitable, scalable growth.

Joe: And finally, we successfully transitioned to a distributor model in all our targeted international regions, while expanding into new markets.

Joe: With this shift our international business is now set up for profitable scalable growth.

Joe Vernachio: Looking at our Q4 performance, we wrapped up 2024 with another quarter of strong execution. During this period, we took a focused approach by limiting new product introductions, making sure that our select launches aligned with our long-term strategy. As planned, we scaled back year-over-year marketing spend in Q4, prioritizing investment in lower funnel tactics, while setting the stage for top-of-funnel brand marketing in 2025. I'll get to that more in a bit. On the promotional side, we stayed competitive during the holiday season, driving strong conversion on key days, while also reducing our overall days on promotion by nearly 20% compared to last year.

Joe: Looking at our Q4 performance, we wrapped up 2024 with another quarter of strong execution.

Joe: During this period, we took a focused approach by limiting new product introductions, making sure that our select launches aligned with our long term strategy.

Joe: As planned we scaled back year over year marketing spend in Q4 prioritizing investment in lower funnel tactics, while setting the stage for top of funnel brand marketing in 2025, I'll get to that more in a bit.

Joe: On the promotional side, we stayed competitive during the holiday season, driving strong conversion on key days, while also reducing our overall days on promotion by nearly 20% compared to last year.

Joe Vernachio: Most importantly, we maintain financial discipline, putting us on a strong position heading into 2025 with the flexibility we need to execute our plan.

Joe: Importantly, we maintain financial discipline, putting us in a strong position heading into 2025 with the flexibility we need to execute our plans.

Joe Vernachio: With that in mind, we have a lot for the consumer to look forward to in 2025. Our teams are fully aligned on what matters most, making great products, telling great stories and creating an engaging shopping experience for our customers. Their dedication to this turnaround is truly inspiring. We all want to win, and they're putting in the hard work to make it happen.

Joe: With that in mind, we have a lot for the consumer to look forward to in 2025. Our teams are fully aligned on what matters, most making great products, telling great stories, and creating an engaging shopping experience for our customers.

Joe: Their dedication to this turnaround is truly inspiring.

Joe: We all want to win and they are putting in the hard work to make it happen.

Joe Vernachio: When I started in this role a year ago, my top priority was igniting the product engine, and we've made faster progress than I anticipated. Overhauling a product engine takes time. You need the right team, a clear strategy, and the discipline to execute. We've moved quickly to get our product engine humming. Our new design studio in San Francisco is turning out design after design, while our development center in Vietnam is delivering new concepts, materials, and prototypes every day.

Speaker Change: When I started in this role a year ago My top priority was igniting the product engine and we've made faster progress than I anticipated.

Joe: Overhauling our product engine takes time.

Joe: And the right team, a clear strategy and the discipline to execute.

Joe: We've moved quickly to get our product engine humming.

Joe: Our new design studio in San Francisco is turning out design after design.

Joe: Our development center in Vietnam is delivering new concepts materials and prototypes everyday.

Joe Vernachio: It's an exciting time at Allbirds, and the work we're doing now will come to life in the back half of 25 and into 2026. This fall, we're planning to launch a refreshed lineup of core products, headlined by an updated runner, our most iconic franchise. At the heart of this refresh is our signature gray heather wool, reinforcing our ownership of the runner silhouette and celebrating a color our customers know, love, and buy in high volume. Shortly after the runner launch, we expect to introduce a new court-inspired shoe, designed for all-day comfort and versatility, available in more than 18 colors.

Joe: It's an exciting time at all birds and the work we're doing now will come to life in the back half of 'twenty and into 2026.

Joe: This fall we are planning to launch a refresh lineup of core products headlined by an updated runner our most iconic franchise.

Joe: At the heart of this refresh is our signature gray Heather we'll reinforcing our ownership of the runner silhouette and celebrating a color our customers know love and buy in high volume.

Joe: Shortly after the runner launch we expect to introduce a new court inspired shoe designed for all day comfort and versatility available in more than 18 colors.

Joe Vernachio: Then, as the weather turns cold and wet, we'll roll out our first fully waterproof collection, alongside a cozy lineup of slip-ons perfect for at-home and holiday gifts.

Joe: Then as the weather turns cold and wet well rollout our first fully waterproof collection alongside a cozy lineup of slip bonds perfect for at home and holiday gifting.

Joe Vernachio: In total, our Fall 25 lineup will bring a much broader range of products and colors than the year before, and we can't wait to get them on people's feet.

Joe: In total our fall 25 lineup will bring a much broader range of products and colors than the year before and we can't wait to get them on people's feet.

Joe Vernachio: As we gear up for the fall 25 season launch, we'll be deploying a multi-tiered approach to marketing to bring Allbirds back to the forefront by actively engaging in the cultural conversation. At the top of the funnel is our new brand campaign, Cards on the Table, created in collaboration with Academy Award-nominated actor Stanley Tucci. We developed a four-part, long-form series intended to create narratives that pull in our customers and make them feel connected to our brand in a way that lasts. The series brings together a carefully curated mix of unexpected guests, each known for their curiosity, creativity, and authenticity.

Joe: As we gear up for the fall 25 season launch will be deploying a multi tiered approach to marketing to bring all birds.

Joe: Back to the forefront by actively engaging in the cultural conversation.

Joe: At the top of the funnel is our new brand campaign cards on the table create.

Joe: Created in collaboration with Academy Award nominated actor Stanley Tucci weeds.

Joe: We developed a four part long form series intended to create narratives that toll in our customers and make them feel connected to our brand in a way that lasts.

Joe: The series brings together a carefully curated mix of unexpected guests each known for their curiosity creativity and authenticity.

Joe Vernachio: values at the heart of our brand. Hosted by Stanley, these dream dinner parties spark personal, unscripted conversations that offer our audience a rare glimpse into the lives of a diverse group. from a Formula One driver and a Michelin Green Star chef to a world-renowned physicist and an Emmy Award-winning comedian. The lineup is as dynamic as the stories they share. The first episode aired March 4th, featuring television host and designer Tan France, Formula One driver Carlos Sanz, and pop icon Melanie C. The series reflects the warmth, authenticity, and creativity we want people to associate with Allbirds.

Joe: Values at the heart of our brand.

Stanley Tucci: Posted by Stanley. These dream dinner parties spark personal unscripted conversations that offer our audience a rare glimpse into the lives of a diverse group from.

Stanley Tucci: From a formula one driver and a Michelin Green Star chef to a world renowned physicist and an Emmy Award winning comedian the lineup is as dynamic as the stories they share.

Stanley Tucci: The first episode aired March four featuring TV host in designer Tan, France Formula One driver Carlos fans.

Melanie: And pop icon Melanie.

Melanie: The series reflects the warmth authenticity and creativity, we want people to associate with all <unk> and.

Joe Vernachio: In addition to running this on Allbirds social channels and sites, we've partnered with Rolling Stone to distribute on their YouTube channel, bringing the series to an even wider audience.

Melanie: In addition to running this on all bridge social channels with sites, we partner with Rolling stone to distribute.

Melanie: Their Youtube channel, bringing the series to an even wider audience.

Joe Vernachio: Initial results around consumer sentiment, engagement and reach had been extremely positive. In week one, our organic social reach exceeded five million viewers and earned media coverage of the series had a combined potential reach of over one billion.

Melanie: Initial results around consumer sentiment and engagement and reach have been extremely positive.

Melanie: In week, one our organic social reach exceeded 5 million viewers and earned media coverage of the series had a combined potential reach of over $1 billion.

Joe Vernachio: We're also running a more traditional marketing campaign through Q2, spotlighting three seasonally relevant shoes under the Allbirds by Nature platform. One example features chef and Emmy-nominated Top Chef host Kristen Kisch wearing our TreeRunner GO. As a longtime fan of the brand, Kristen embodies our ethos of drawing inspiration from nature while also offering broad consumer appeal. And finally, to complement these brand investments, we're refining our performance marketing strategy to drive stronger returns. By aligning our upper funnel efforts with both traditional and performance marketing, we expect to expand brand awareness, increase traffic, and boost conversion.

Melanie: We're also running a more traditional marketing campaign through Q2, spotlighting three seasonally relevant shoes under the all birds by nature platform.

Melanie: One example features chef and Emmy nominated top chef host Kristen Kish wearing our tree runner go.

As a longtime fan of the brand Kristen embodies our ethos of drawing inspiration from nature, while also offering broad consumer appeal.

Melanie: And finally to complement these brand investments, we're refining our performance marketing strategy to drive stronger returns by aligning our upper funnel efforts with both traditional and performance marketing, we expect to expand brand awareness increased traffic and boost conversion.

Joe Vernachio: That brings us to the consumer journey. Creating a shopping experience that's easy, enjoyable, and seamless, whether online or in-store.

Melanie: That brings us to the consumer journey create.

Melanie: Creating a shopping experience, that's easy and enjoyable and seamless whether online or in stores at.

Joe Vernachio: At the center of this effort is a redesigned website, which we expect to launch in the back half of this year. The new site will more effectively showcase our updated brand language and product architecture, making it easier to navigate and more inspiring to share. We'll be improving landing and product pages to highlight key features while also offering styling inspiration. something our customers have been asking. With one-step checkout, faster load times, and a major content upgrade, the experience is being designed to feel frictionless from start to finish. We expect these improvements to drive a meaningful increase in conversion.

Melanie: At the center of this effort is a redesigned web site, which we expect to launch in the back half of this year.

Melanie: The new site or more effectively showcase our updated brand language and product architecture.

Melanie: Making it easier to navigate and more inspiring to shop.

Melanie: We will be improving landing and product pages to highlight key features while also offering styling inspiration.

Something our customers have been asking for.

Melanie: With one step checkout faster load times and a major content upgrade the experience is being designed to feel frictionless from start to finish we expect these improvements to drive a meaningful increase in conversion.

Joe Vernachio: Next, we started prototyping an updated Allbirds store presentation in our San Francisco location, making the space feel more engaging to shoppers. The update will give us the flexibility to tell different stories, whether it's about use occasion, materials, or colors, providing customers new ways to experience and connect with our products. Our store team has seen a notable shift in how consumers interact with the space.

Melanie: Next we started prototyping and updated Albert store presentation, and our San Francisco location.

Melanie: Taking the space feel more engaging to shoppers.

Melanie: The update will give us the flexibility to tell different stories, whether it's about use occasion materials or colors, providing customers new ways to experience and connect with our products.

Melanie: Our store team has seen a notable shift in how consumers interact with this space.

Joe Vernachio: We expect to finalize the prototype by the end of Q1 and start rolling out the new concept to select locations throughout the year.

Melanie: We expect to finalize the prototype by the end of Q1, we start rolling out the new concept to select locations throughout the year.

Joe Vernachio: We have a lot to look forward to in 2025.

Melanie: We have a lot to look forward to in 2025.

Joe Vernachio: But there is no question we're operating against a challenging macro backdrop that is pressuring consumer behavior. This is reflected in our Q1 sales guidance.

Melanie: But there's no question, we're operating against a challenging macro backdrop that is pressuring consumer behavior.

Melanie: This is reflected in our Q1 sales guidance.

Joe Vernachio: The full year outlook we're providing today anticipates a return to top line growth in the fourth quarter of 2025 as our initiatives take hold. As our three key focus areas of product, marketing, and experience come to life, the changes we have made will be impossible to miss. Those who already know Allbirds will see a sharper, more focused brand. And for those discovering us for the first time, they'll find a modern lifestyle footwear brand that connects on a rational, emotional and cultural level.

Melanie: The full year outlook, we're providing today anticipates a return to topline growth in the fourth quarter of 2025 as our initiatives take hold.

Melanie: As our three key focus areas of product marketing and experience come to life. The changes we have made will be impossible to miss.

Melanie: Those who already know all birds, we will see a sharper and more focused brand.

Melanie: And for those discovering us for the first time they'll find a modern lifestyle footwear brand that connects on a rational emotional and cultural level.

Joe Vernachio: I have tremendous confidence in our team to execute our plan and take the bold actions needed to claim our position in the market. We believe the work done to strengthen our operating model over the past two years and the plans for actioning around product, marketing, and experience have us on a path to long-term profitable growth.

Melanie: I have tremendous confidence in our team to execute our plan and take the bold actions needed to claim our position in the market.

Melanie: We believe the work done to strengthen our operating model over the past two years and the plans, we're actioning around product marketing and experience have.

Melanie: On a path to long term profitable growth.

Joe Vernachio: We have the bench strength and balance sheet to continue advancing our strategies and remain committed to building lasting value for our shareholders.

Melanie: We have the bench strength and balance sheet to continue advancing our strategies and remain committed to building lasting value for our shareholders.

Annie Mitchell: With that, I'll turn it over to Annie to walk us through the financials. Thank you, Joe, and good afternoon, everyone. We are pleased to conclude 2024 with Q4 results in line with our expectations on the top line and slightly above on the bottom line. Net revenue for the fourth quarter totaled $56 million at the midpoint of our guidance. As planned, we reduced the number of days on promotion versus a year ago, while remaining competitive during the holiday season. Our Q4 sales decline also reflects international distributor transitions and retail store closures. The full year impact of these strategic actions was just over $22 million.

Melanie: With that I'll turn it over to Andy to walk us through the financials.

Andy: Thank you Joe and good afternoon, everyone.

Speaker Change: We are pleased to conclude 2024 with Q4 results in line with our expectations on the top line and slightly above on the bottom line.

Speaker Change: Net revenue for the fourth quarter totaled $56 million at the midpoint of our guidance.

Speaker Change: As planned we reduced the number of days on promotion versus a year ago, while remaining competitive during the holiday season.

Speaker Change: Our Q4 sales decline also reflects international distributor transitions and retail store closures.

Speaker Change: The full year impact of the strategic actions was just over $22 million.

Annie Mitchell: Gross margin of 31.3% can be traced to several factors, most of which are having an outsized impact on margin due to the smaller sales base in Q4.

Speaker Change: Gross margin of 31, 3% can be traced to several factors most of which are having an outsized impact on margin due to the smaller sales base in Q4.

Annie Mitchell: Let me unpack these for you. The first impact is coming from inventory adjustments, which were isolated to Q4. Next, although we lowered our year-over-year promotional levels, conversion on sale days was stronger than we anticipated. Third, we incurred incremental air freight. And lastly, we had our highest mix of international distributor sales today. As a reminder, these sales carry a lower growth margin, however, they have a higher flow through to the bottom line.

Speaker Change: Let me unpack these for you.

Speaker Change: The first impact is coming from inventory adjustments, which were isolated to Q4.

Speaker Change: Next although we lowered our year over year promotional levels conversion on sale days was stronger than we anticipated.

Speaker Change: Third we incurred incremental airfreight and.

Speaker Change: And lastly, we had our highest mix of international distributor sales to date.

Speaker Change: As a reminder, these sales carry a lower gross margin. However, they have a higher flow through to the bottom line.

Speaker Change: Turning to expenses, our teams did an exceptional job of controlling costs throughout the year.

Annie Mitchell: Turning to expenses, our teams did an exceptional job of controlling costs throughout the year. Q4 SG&A dollars, excluding stock-based compensation and depreciation and amortization, total $24 million. That's down 24% versus a year ago, driven by lower occupancy costs and personnel expenses. We closed one additional store in Q4, bringing the total number of U.S. closures to 15 in 2024. Subsequent to Quarter End, we close another five retail doors. We are pleased with our progress on this front and will continue to opportunistically evaluate our fleet going forward. Fourth quarter marketing expense totaled $12 million, or 22% of net revenue.

Speaker Change: Q4, SG&A dollars, excluding stock based compensation and depreciation and amortization totaled $24 million.

Speaker Change: That's down 24% versus a year ago, driven by lower occupancy costs and personnel expenses.

Speaker Change: We closed one additional store in Q4, bringing the total number of U S closures to 15 in 2024.

Speaker Change: Subsequent to quarter end, we closed another 500 retail doors.

Speaker Change: We are pleased with our progress on this front and we will continue to Opportunistically evaluate our fleet going forward.

Speaker Change: Fourth quarter marketing expense totaled $12 million or 22% of net revenue.

Annie Mitchell: As planned, this was down 17% on a dollar basis compared to prior year, and reflects our strategic decision to hold back top of funnel spend until the first quarter of 2025. More on this shortly when I discuss our financial guidance. Q4 Adjusted EBITDA was better than our expectations. coming in approximately flat to last year at a loss of $19.

Speaker Change: As planned this was down 17% on a dollar basis compared to prior year and reflects our strategic decision to hold back top of funnel spend until the first quarter of 2025 more on this shortly when I discuss our financial guidance.

Speaker Change: Q4, adjusted EBITDA was better than our expectations coming in approximately flat to last year at a loss of $19 million.

Annie Mitchell: Turning now to the balance sheet and cash flow. The company remains in solid financial condition with cash and cash equivalents of $67 million and no outstanding borrowings under our $50 million revolver. We ended the year with inventory totaling $44 million, that's down 24% versus a year ago, and allowed us to enter 2025 with healthy overall levels. Q4 operating cash use of $11 million was approximately flat on a sequential basis. Given our inventory and cash balances, we are well positioned to execute against our plan. We expect improvement in operating cash use in 2025. From a working capital perspective, I would point out that consistent with prior years, we anticipate that Q1 will be our seasonal That reflects the combination of normal course payables and our smallest sales quarter, as well as our strategic decision to invest in upper funnel marketing ahead of our second half process.

Speaker Change: Turning now to the balance sheet and cash flow.

Speaker Change: Company remains in solid financial condition, with cash and cash equivalents of $67 million and no outstanding borrowings under our $50 million revolver.

Speaker Change: We ended the year with inventory totaling $44 million.

Speaker Change: That's down 24% versus a year ago and allowed us to enter 2025 with healthy overall level.

Speaker Change: Q4, operating cash use of $11 million was approximately flat on a sequential basis.

Given our inventory and cash balances, we are well positioned to execute against our plans.

Speaker Change: We expect improvement in operating cash use in 2025.

From a working capital perspective, I would point out that consistent with prior years, we anticipate that Q1 will be our seasonal peak that.

Speaker Change: It reflects the combination of normal course payables in our smallest sales quarter as well as our strategic decision to invest in upper funnel marketing ahead of our second half product launches.

Annie Mitchell: Moving now to financial guidance. full year 2025, we expect the fall. net revenue of $175 million to $195 million, which includes approximately $18 to $23 million of negative impact associated with our distributor transitions and store closures. Stripping out the impact of those structural changes, net sales are expected to grow approximately 10% at the midpoint versus 2024. For added perspective, we anticipate the impact will be spread roughly evenly across Q1 to Q3, with slightly less impact in Q4. Looking at the top line by region, we expect U.S. net revenue of $145 million to $160 million and international net revenue of $30 million to $35 million.

Speaker Change: Moving now to financial guidance.

Speaker Change: Full year 2025, we expect the following.

Speaker Change: Net revenue of $175 million to $195 million, which includes approximately $18 million to $23 million of negative impact associated with our distributor transitions and store closures.

Speaker Change: Stripping out the impact of the structural changes net sales are expected to grow approximately 10% at the midpoint versus 2024.

Speaker Change: For added perspective, we anticipate the impact will be spread roughly evenly across Q1 to Q3 with slightly less impact in Q4.

Speaker Change: Looking at the topline by region, we expect U S. Net revenue of $145 million $260 million in international net revenue of $30 million to $35 million.

Annie Mitchell: Adjusted EBITDA loss is expected to be in the range of $65 million to $55 million.

Speaker Change: Adjusted EBITDA loss is expected to be in the range of 65 million to $55 million.

Speaker Change: From a cadence perspective, we expect the year to be second half weighted returning to topline growth in the fourth quarter, driven by our product and marketing initiatives, which Joe discussed.

Annie Mitchell: From a cadence perspective, we expect the year to be second-half weighted, returning to top-line growth in the fourth quarter driven by our product and marketing initiatives, which Joe discussed. For modeling purposes, a few areas to highlight. As you think about our gross margin profile, we expect to achieve year over year improvement in 2020. On a full year basis, we anticipate that gross margins will be in the mid 40s, but there will be some phasing, which I'll unpack for you. First, there will be notable pressure in Q1, due primarily to channel mix and the sun setting of products as we prepare for our new assortments in the sector.

Speaker Change: For modeling purposes, a few areas to highlight.

Speaker Change: As you think about our gross margin profile, we expect to achieve year over year improvement in 2025.

Speaker Change: On a full year basis, we anticipate that gross margins will be in the mid forty's, but there will be some phasing, which I'll unpack for you.

Speaker Change: First there will be notable pressure in Q1, due primarily to channel mix and the sunsetting of products as we prepare for our new assortments in the second half.

Speaker Change: Following Q1, we expect gross margin to ramp throughout the year as our second half product has been designed with better margins.

Annie Mitchell: Following Q1, we expect gross margin to ramp throughout the year as our second half product has been designed with better margins.

Annie Mitchell: Looking at OPEX, we're very pleased with the work our teams have done on the cost side and view our Q4 2024 levels as an appropriate run rate going forward. Lastly, after two years of reduced marketing spend during our transformation, you can expect to see increased investments in 2025. We plan to be up both in dollars and as a percentage of sales on a full year basis, with variances quarter to quarter. Most notably, Q1 will have a disproportionate amount of spend due to the brand campaign we just launched.

Speaker Change: Looking at Opex, we're very pleased with the work our teams have done on the cost side and view, our Q4 2024 levels at an appropriate run rate going forward.

Speaker Change: Lastly, after two years of reduced marketing spend during our transformation you can expect to see increased investments in 2025.

Speaker Change: We plan to be up both in dollars and as a percentage of sales on a full year basis with variances quarter to quarter.

Speaker Change: Most notably Q1 will have a disproportionate amount of spend due to the brand campaign, we just launched.

Speaker Change: Turning now to our first quarter guidance.

Annie Mitchell: Turning now to our first quarter guidance. Net revenue is expected to be in the range of $28 million to $33 million. down 22% at the midpoint versus prior year. U.S. net revenue is expected to be $22 million to $25 million, and international net revenue is expected to be $6 million to $8 million. Adjusted EBITDA loss is expected to be in the range of $28 million to $25 million, reflecting the puts and takes I just described.

Net revenue is expected to be in the range of 28 million to $33 million down 22% at the midpoint versus prior year.

Speaker Change: U S. Net revenue is expected to be 22 million to $25 million in international net revenue is expected to be 6 million to $8 million.

Speaker Change: Adjusted EBITDA loss is expected to be in the range of 28 million to $25 million, reflecting the puts and takes I just described.

Annie Mitchell: When thinking about 2025, this really is a tale of two halves. We are confident that our investments in the first half will support second half improvement in trend and position Allbirds to return to top-line growth in the fourth quarter of this year, setting us up to deliver long-term profitable growth.

Speaker Change: When thinking about 2025. This really is a tale of two halves.

Speaker Change: We are confident that our investments in the first half will support second half improvement in trend and position Hulbert's to return to topline growth in the fourth quarter of this year.

Speaker Change: Setting us up to deliver long term profitable growth.

Operator: We appreciate your time this afternoon, and we'll now open the call to questions. Thank you.

Speaker Change: We appreciate your time this afternoon, and we will now open the call to questions.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, to ask a question, please press star 1 on your telephone, then wait for your name to be announced.

Speaker Change: Ladies and gentlemen to ask a question. Please press star one on your telephone and wait for your name to be announced.

Operator: We ask that you withdraw your question so you can start 1-1 again. We ask that you limit yourself to one question and one follow-up.

Speaker Change: To withdraw your question. Please press star one again, we ask that you limit yourself to one question and one follow up please.

Operator: Please stand by while we compile the Q&A roster.

Speaker Change: Please standby, while we compile the Q&A roster.

Janine Stichter: Our first question comes from the line of Janine Stichter. ETIG, your line is open. Hi, good afternoon. I was hoping you could elaborate a bit on some of the factors that give you the confidence in the return to growth in Q4. And then maybe along those lines, you mentioned the challenge macro backdrop. I'm curious if you could expand on that. Is that something that you're currently seeing signs of, and how is that reflecting in your business right now? Or is that just more what you're hearing in terms of the headlines? Just want to understand how that's factored into the guidance.

Unnamed: Our first question comes from the lineup Janine Stitcher.

Speaker Change: With <unk> your line is open.

Janine Stitcher: Hi, good afternoon.

Speaker Change: Hoping you could elaborate a bit on some of them.

Speaker Change: The factors that give you the confidence in returning to growth in Q4, and then maybe along those lines you mentioned the challenged macro backdrop curious if you could expand on that is that something that you are currently seeing signs of and how is that reflecting in your business right now or is that just more what youre hearing in terms of the headlines just want to understand how that factored into the guidance. Thank you.

Janine Stichter: Thank you.

Janine Stitcher: Hi, Janine good to hear from you.

Joe Vernachio: Hi, Janine. Good, good to hear from you. Yeah, I mean, we are the accumulation of all the work that we've done both in just rebuilding the framework of our business, with all the work we've done over the last year to reset the foundation of our of our business and now layering on top of that. this product engine that we've created that is creating a relentless flow of product. Then you layer on the marketing. You've just started to see the very beginning of the upper funnel work that we've been talking about. We said in the past that we would do long-form content to entertain and engage and earn people's attention.

Yes, I mean, we are the accumulation of all the work that we've done both in just re building the framework of our business.

Janine Stitcher: With all the work we've done over the last year to reset the foundation of our of our business and now layering on top of that.

Janine Stitcher: This product engine that we've created that is creating a relentless flow of product then you layer on the marketing you've just started to see the very beginning of the upper funnel work that we've been talking about we said in the past that we would do long form content two to entertain and engage in <unk>.

Janine Stitcher: And People's attention and I think hopefully gotten to see some of that and it's really starting to work for us and then underneath that.

Joe Vernachio: And I think hopefully you've gotten to see some of that. And it's really starting to work for us. Then underneath that, the redesigning of our website and our store experience. And it's not any one of these things. It's the accumulation of all of these things coming to bear in the middle of this year. that's really going to engage the consumer. And we feel really confident that the accumulation of all of this work that we've been doing for well over a year now is going to pay dividends in the back half of this year as they all come together.

Janine Stitcher: <unk>.

Janine Stitcher: The redesigning of our website and our store experience.

Janine Stitcher: And it's not any one of these things is the accumulation of all of these things coming to bear in the middle of this year.

Janine Stitcher: That's really going to engage the consumer and we feel really confident that the accumulation of all of this work that we've been doing.

Janine Stitcher: For well over a year now is going to pay dividends in the back half of this year as they all come together.

Speaker Change: Great and then just maybe anything on the macro what you're seeing.

Janine Stichter: Great.

Joe Vernachio: And then just maybe anything on the macro, what you're seeing. Oh, yeah, sure. I think, yeah, we're observing a lot of what you're hearing out there. There's definitely a change in consumer behavior. Some of that shows up in data through traffic. But some of the upper funnel work that we've done, feels like it's starting to offset some of it for us, but it's definitely very choppy out there. And we need to be just smart about what we see coming in the future. I mean, every day is a new set of headlines that consumers have to try to navigate through and make decisions on.

Speaker Change: Yes sure.

Speaker Change: I think we're yes, we're observing.

Speaker Change: A lot of what Youre hearing out there there is definitely a change in consumer behavior.

Speaker Change: Some of that shows up in data through traffic, but some of the up upper funnel work that we've done this feels like it's starting to offset some of it for us, but its definitely very choppy out there and we need to be.

Speaker Change: Smart about what we see coming in the future I mean everyday is a new set of headlines that consumers have to try to navigate through and make decisions on.

Joe Vernachio: But in total, right now, we feel confident about what we see. And we imagine that over the next period of weeks and months that things will stabilize, and we will start to see a new pattern emerge that we'll be able to react to.

Speaker Change: But in total.

Speaker Change: Right now we feel confident about what we see and we imagine that over the next period of weeks and months that things will stabilize and we will start to see a new pattern emerge that will be able to react to.

Annie Mitchell: Great, thanks so much. Best of luck. And, Janine, just to add a little bit of color to that, based on what Joe talked about, the inconsistency in terms of what we're seeing for the consumer right now, that has been factored into our Q1 guide.

Speaker Change: Great. Thanks, so much best of luck.

Speaker Change: Thank you Janine just add a little bit of color to that based on what Joe talked about the inconsistency in terms of what we're seeing the consumer right now that has been factored into our Q1 guide.

Janine Stichter: Got it. Thank you.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Alex Straton: Please stand by for our next question. Our next question comes from the line of Alex Straton with Morgan Stanley. Your line is open. Thanks a lot for taking the question. Just a couple for me.

Speaker Change: Please standby for our next question.

Speaker Change: Our next question comes from the line of Alex <unk> with Morgan Stanley. Your line is open.

Speaker Change: Okay.

Speaker Change: Thanks, a lot for taking the question just a couple for me maybe for Joe What are you monitoring most closely in the front half just for further confirmation in this back half inflection and returned to growth in the fourth quarter and then for any maybe what's different in the fourth quarter that enables growth compared to the third.

Alex Straton: Maybe for Joe, what are you monitoring most closely in the front half just for further confirmation in this back half inflection and return to growth in the fourth quarter? And then for Annie, maybe what's different in the fourth quarter that enables growth compared to the third? Only because I believe you're starting to launch that product in the third. So I'm just trying to understand that pivot between quarters to growth. Thanks.

Speaker Change: <unk> only because I believe you're starting to launch that product in the third so I'm just trying to understand that that pivot between quarters to growth. Thanks a lot.

Joe Vernachio: Yeah, I mean, the thing that we have our eye on right now is driving traffic. Right now, the basic shape of our business is really good. The margin, the conversion, all of those key lagging metrics are right where we want them to be. Now we need to drive traffic to drive growth. Some of the KPIs that we look at are things like a predictive lifetime value of a customer that we can see out as we bring in new customers. We want to make sure that we're bringing in high value customers that come in at full price and then make a second purchase at full price.

Speaker Change: Yeah, I mean, the thing that we have our eye on right now is <unk>.

Speaker Change: Driving traffic right now the basic shape of our business is really good.

Speaker Change: The margin the conversion.

All of those key lagging metrics are right, where we want them to be now we need to drive traffic to drive growth.

Speaker Change: Some of the some of the Kpis that we look at our are things like a predictive lifetime value of a customer that we can see out as we bring in new customers. We want to make sure that we're bringing in high value customers that come in at full price and then make a second purchase at full price those are some of the key thing.

Joe Vernachio: Those are some of the key things that we're looking at to make sure that we're building a long-term business that has profitability built in. And all of those metrics right now, we feel really good about and confident about where that's headed.

Speaker Change: <unk> that we're looking at to make sure that we're building a long term business that has profitability built in.

Speaker Change: And all of those metrics right now we feel really good about and confident about where that's headed.

Annie Mitchell: And building upon that, as we look at the full year, and as Joe mentioned, we have tremendous conviction about the new product assortments that we're bringing to market this fall. They will start to drop in Q3 and then see the full line really in Q4. And it's really again, this accumulation of all of our initiatives around product, marketing and consumer experience that make this possible. And it's not just about Q3 and Q4. We're not just betting on one specific product. It's these first components of our return to growth is the upper funnel work that you're just starting to see.

Speaker Change: And building upon that as we look at the full year unless Joe mentioned that we have tremendous conviction about the new product assortments that were bringing to market. This fall.

Speaker Change: They will start to drop in Q3, and then see the full line really in Q4.

Speaker Change: And it's really going to accumulation of all of our initiatives around product marketing and consumer experience that make this possible.

Speaker Change: And it's not just about Q3 and Q4, we're not just betting on one specific product.

Speaker Change: The first component of our return to growth is upper funnel work that you are just starting to see we will then continue building on that leading up to fall when youll see that broader assortment of new product collections.

Annie Mitchell: We'll then continue building on that leading up to fall when you'll see that broader assortment of new product collections.

Annie Mitchell: And in Q3, we do expect to see an improvement in trend, but not yet fully in the growth category. We think we might be a little closer to straddling growth. There's also some sort of specific drivers in Q3.

Speaker Change: And in Q3, we do expect to see an improvement in trend.

Speaker Change: But not yet fully in the growth category, and we think we might be a little bit closer to struggling growth. There's also some sort of specific drivers in Q3.

Annie Mitchell: When we look at the accumulation of door closures that we've done late last year and into early this year, additionally, in Q3, we have the EU transitioning from a direct market to a distributor. And last year in Q3, we actually had quite a big quarter for distributor sales, whereas this year we expect those orders to be smoothed out.

When we look at the accumulation of door closures that we've done late last year and into early this year. Additionally in Q3, we have the EU transitioning from a direct market to a distributor.

Speaker Change: And last year in Q3, we actually had quite a big quarter for distributor sales, whereas this year, we expect those orders to be smoothed out.

Annie Mitchell: And speaking of some of those changes, actually taking a step back and looking holistically, we do expect another year of top line impacts from the international transitions and the retail door closures. That's worth somewhere between $18 million to $23 million is what we're estimating. And excluding those, if I take the midpoint of our guide, that impact is about, excuse me, we're moving for that impact, we expect to grow 10% year over year. So it's this overarching impact of these structural changes and then the ramp and the build as we go from Q3 into Q4. Thanks a lot.

Speaker Change: And speaking of some of those changes actually taken a step back and looking holistically.

Speaker Change: <unk>.

Speaker Change: We do expect.

Speaker Change: Another year of top line impacts from the international transitions.

Speaker Change: And the retail door closures.

Speaker Change: That's worth somewhere between 18% to $23 million is what we're estimating.

Speaker Change: But excluding those if I take the midpoint of our guide that impact is about <unk>.

Speaker Change: We're moving to that impact, we expect to grow 10% year over year. So it's this overarching impact of these structural changes and then the ramp in the build as we go from Q3 into Q4.

Speaker Change: Thanks, a lot good luck.

Alex Straton: Good luck. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, I'm showing no further questions in the queue.

Speaker Change: Ladies and gentlemen, I'm showing no further questions in the queue.

Joe Vernachio: I would now like to turn the call back over to Joe Vernachio, CEO for closing remarks. Thank you, everyone, for joining. We'll see you in the next quarter.

Joseph: Now I'd like to turn the call back over to Joseph <unk> CEO for closing remarks.

Joseph: Thank you everyone for joining we'll see you in the next quarter.

Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.