Q2 2025 Allbirds Inc Earnings Call

Speaker #1: Including the section titled Risk Factors in our Report on Form 10-q for the quarter ending March 31st , 2025 . For a more description of the risk detailed factors that may affect our results .

Speaker #1: These forward looking statements are based on information as of August 7th , 2025 , and except as required by law , we assume no obligation to publicly update or revise our forward looking statements .

Speaker #1: Additionally , we will be discussing certain non-GAAP financial measures . These non-GAAP financial measures are in addition to , and not a substitute for , measures of financial performance prepared in accordance with GAAP .

Speaker #1: A reconciliation of our non-GAAP measures to the most directly comparable GAAP measures can be found to the extent reasonably available in today's earnings release .

Speaker #1: Now , I would like to turn the call over to Jo to begin the formal remarks . Jo .

Speaker #2: Good afternoon everyone . Thanks for joining us today . We're pleased to conclude the first half of the year , well positioned for what's ahead .

Speaker #2: Our operating and financial results reflect strong execution among our teams , and continued progress on our path to reignite the Allbirds brand . In the second quarter , we delivered top line results at the high end of our expectations , and adjusted EBITDA exceeded our guidance range .

Speaker #2: The pace of change and the progress we've made over the past several quarters is significant and has set the stage for growth . Over the past year , we've been focusing on strengthening the foundation of our business , making it leaner , more efficient and better positioned for long term success .

Speaker #2: And most recently , we took actions to enhance our financial position . With that groundwork firmly in place . We've reignited the engine that powers our future product marketing and the customer experience .

Speaker #2: What's now coming to life is a carefully sequenced strategy to reintroduce Allbirds , starting from our roots and building toward a clear , reimagined future .

Speaker #2: As a modern lifestyle footwear brand . Beginning this month and continuing through the end of the year , we plan to drop new products every month and introduce new marketing content every week .

Speaker #2: We are confident in what the future holds as we turn the page on a new era of growth . The current macro environment creates some uncertainty around consumer spending , but it does not change our conviction in the work we have done and the compelling product , marketing and customer experience we're bringing to the market .

Speaker #2: The reintroduction of our brand , our products and our new sensibility began in earnest in July . We started with The Tree Runner NZ , an improved version of our best selling style , familiar but better .

Speaker #2: Alongside it , the cruiser , brand new and also crafted from our signature eucalyptus derived tree material . Shoes for people on the move , traveling in the hot weather .

Speaker #2: Chasing summer daylight . Just this week , we returned to our roots , retelling our origin story to the wool runner NZ as one of our most beloved styles .

Speaker #2: It continues to be the purest expression of who we are . This relaunch gave the silhouette a fresh perspective , putting merino wool breathable , luxurious and naturally derived back in the spotlight .

Speaker #2: With it , we honored both the design and the material that first put Allbirds on the map a decade ago . Next , we plan to introduce the new Wool Cruiser in more than 15 colorways .

Speaker #2: This bold expression of color will come to life through a special collaboration , reinforcing a quality customers have always loved about us vibrant , joyful color .

Speaker #2: As we head into autumn , we expect to launch our first ever waterproof collection , perfectly timed for cold mornings , wet commutes , and slushy sidewalks .

Speaker #2: Then in November , we have plans to debut the Kiwi collection a slipper , a clog and a low boot . Footwear designed for life at home and quick trips out to the mailbox , the market or neighbor's doorstep .

Speaker #2: Cozy step in comfort and intentionally casual , these styles are made for how people really live during the holidays . Not dressed up , but warm , easy and inviting .

Speaker #2: This season , we're introducing a broader range of new styles and materials than ever before , bringing depth , discovery and innovation across the line .

Speaker #2: We're expanding into new textures and finishes like velvet , tweed and sculpted knit patterns , with new drops expected to arrive every few weeks .

Speaker #2: In total , we expect to launch 19 new styles this season , a major step forward from a year ago . Perhaps the most interesting of these is remix .

Speaker #2: We're once again highlighting our commitment to making better things in a better way . With the launch of remix , a step forward in circularity in partnership with Blue Maca , a leader in foam upcycling and circ , a pioneer in textile to textile recycling .

Speaker #2: We're giving manufacturing waste a second life on the new Runner and cruiser platform . We will turn foam scraps , textile waste , poly cotton blends , material destined for landfill into beautiful , comfortable shoes .

Speaker #2: We've often said that to win in this market , you need a relentless flow of compelling product , and we're delivering on that .

Speaker #2: Our new product launches are now wrapped in a wave of fresh marketing content . Breaking through today's crowded landscape requires both volume and variety , and we're responding by dramatically scaling our output where we once created 5 to 10 assets per month .

Speaker #2: We're now producing over 100 . This marks a meaningful shift in our marketing approach , aimed at significantly expanding our reach and impact .

Speaker #2: These additional assets will significantly fuel our paid media strategy . Beyond paid media , we're activating the brand through high impact PR and experiential efforts .

Speaker #2: For example , we recently placed ads in TSA security trays across all terminals at Seattle Airport . A strong market for us . We're also hosting PR events , in-store activations in New York and San Francisco , supported by tactics like wild postings around our store locations .

Speaker #2: Together , these immersive and intentional efforts are designed to reengage our existing consumers and invite new ones into the brand . On the customer experience front , we went live with a fully redesigned website in mid-July .

Speaker #2: The site features modern navigation , richer product detail pages , and an updated aesthetic that reflects our brand evolution . We're thrilled with the design and functionality , and anticipate this will drive improved dwell times and higher conversion rates for our in-store shoppers .

Speaker #2: We're refreshing our fleet with relatively modest updates to layout , fixtures , navigation , and merchandising . We've significantly improved the in-person experience , enhancing the way people shop and engage with the brand .

Speaker #2: After completing refreshes at three locations San Francisco , New York City and the Stanford Shopping Center , we are seeing measurable increases in the average daily sales performance .

Speaker #2: This gives us confidence in our strategy . We plan to continue refreshing additional locations , with more coming in the next few months .

Speaker #2: Looking further ahead into the first half of 2026 , our commitment to our three focus areas remains just as strong . On the product innovation front , two key launches helped illustrate what's next .

Speaker #2: First , we plan to debut a new material that we have branded Terra Luxe . It's an innovative material designed to provide leather like aesthetics and performance .

Speaker #2: It looks and feels and performs like leather , made using plant proteins , biopolymers and recycled materials that would otherwise be put in landfill .

Speaker #2: Trucks will anchor a curated capsule called the Elevated Collection , designed to meet rising consumer demand for comfort in more refined style forward moments .

Speaker #2: We believe this category represents a significant growth opportunity and anticipate bringing it to market in early 2026 . Also planned to launch next year is our Aerie material , a new upper mesh fabric derived from our popular tree fiber and engineered for lightweight breathability in all day cooling during the hottest months of the year .

Speaker #2: It's another example of how we're using material innovation to meet consumer demand . These are just two of many innovations in the pipeline , each one advancing our mission to lead in comfort , style and sustainability .

Speaker #2: In late May , we held our spring 2026 sales meeting , where we previewed what's coming for our external partners . Over the course of two days , we hosted our distributors from around the world , as well as our new sales agents representing the US marketplace .

Speaker #2: The assortment was very well received and it was validating to receive such positive feedback from our trusted partners , who have a keen sense of the market .

Speaker #2: With the product momentum we're building , we believe we're now better positioned to advance our wholesale channel strategy with the broadest assortment Allbirds has ever had .

Speaker #2: We're beginning to sell into footwear specialty accounts for spring 2026 . We're taking a very deliberate and measured approach to the channel , one that grows over the seasons to come .

Speaker #2: Entering the second half of the year , taking into account the global macro environment , we're assuming a more conservative view of the top line .

Speaker #2: However , what's unchanged is our expectation that the convergence of our initiative will drive sales growth in the fourth quarter . We've been talking about this moment for many quarters , and now it's here live in the marketplace .

Speaker #2: Today is the first wave of our new product , marketing and customer experience . We invite you to explore the new site , try the new shoes , and experience the storytelling .

Speaker #2: We're proud of this reintroduction of Allbirds , and confident that it marks the beginning of a new chapter that will drive growth . Building a strong foundation for sustained profitability and create long term shareholder value .

Speaker #2: Before turning the call to Annie , I'd like to thank our teams who have remained laser focused on our plans . We would not have reached this important juncture without their hard work and strong desire to win .

Speaker #3: Thanks , Joe , and good afternoon everyone . We continue to deliver strong execution in Q2 with top line results that were in line with our guidance and adjusted EBITDA that exceeded our expectations .

Speaker #3: Our teams continue to demonstrate financial rigor , prioritizing cost , discipline , careful inventory management , and cash conservation . Looking at the PNL , net revenue for the quarter totaled 40 million .

Speaker #3: At the high end of our guidance range . Q2 gross margin came in at 40.7% , compared to 50.5% a year ago . This is roughly in line with our anticipated cadence for the year , and reflects a particularly tough comparison to last year .

Speaker #3: The year over year decline is attributable to the following planned promotional activity inventory adjustments associated with the transition of the European market , a shift in channel mix from our distributor transitions and store closures , and increased per unit freight and duty costs .

Speaker #3: While the tariff landscape continues to evolve , we remain confident in our ability to deliver full year gross margins in the mid 40s .

Speaker #3: We are prepared to mitigate the 20% tariff that takes effect this month . There are a couple of key factors enabling us to offset tariff impacts this year .

Speaker #3: In the second half , we will have a higher mix of new products that have been designed and developed at lower cost . Additionally , beginning in Q4 , we expect to go to market with modestly higher prices on select new products .

Speaker #3: For context , we plan to do this on a scale that still conveys value to the consumer and allows us to stay within our planned pricing architecture .

Speaker #3: Turning now to Q2 expenses . We brought down by 28% versus prior year . The improvement primarily reflects lower payroll and occupancy costs , driven by our distributor transitions and fewer retail stores during Q2 .

Speaker #3: We took advantage of opportunities to exit an additional four retail doors . That brings us to nine store closures year to date , and a current US store count of 21 .

Speaker #3: We also announced two new distributor agreements in the quarter , furthering our expansion into new international regions . These new deals cover multiple countries across Central and South America and Southern Europe .

Speaker #3: Subsequent to quarter end , we announced three additional agreements for multiple countries throughout Eurasia . Many of these new distributors are ramping up their Allbirds business starting in the second half of this year .

Speaker #3: Looking at marketing expense , the second quarter came in at $9 million , or 21% of revenue . That's down to last year , when we were investing behind the launch of our Tree Runner go !

Speaker #3: In Q2 , we started investing in middle funnel and performance marketing initiatives in anticipation of our fall product introductions , which , as Joe noted , are just beginning to hit the market on a full year basis .

Speaker #3: We anticipate marketing expense on a dollar basis , and as a percentage of sales will increase compared to 2020 . For from a bottom line perspective , Q2 adjusted EBITDA loss improved to 13 million .

Speaker #3: This exceeded the high end of our guidance range by over $3 million , reflecting our commitment to cost control and driving a healthy , efficient cost structure that will support long term , profitable growth .

Speaker #3: Moving to the balance sheet , we ended the quarter with $33 million of cash and cash equivalents and inventories down 21% versus a year ago .

Speaker #3: We narrowed our operating cash use to $9 million in Q2 . That's down on a sequential basis , reflecting the seasonal cadence of working capital , as well as the upper funnel marketing investments we made in Q1 .

Speaker #3: As planned , we will be ramping up our marketing investments going into the second half of the year to support our new products .

Speaker #3: This increased spend , as well as normal working capital fluctuations , will result in higher operating cash use in the third quarter relative to Q2 .

Speaker #3: Looking at the capital structure , we are pleased to have completed a comprehensive financing package including a new revolving credit facility . This added flexibility will help support our growth plan .

Speaker #3: Turning to guidance . As noted in today's press release , we're adjusting our full year revenue outlook and reiterating our adjusted EBITDA guidance .

Speaker #3: Let me provide some context . Starting with the top line , we're updating our full year outlook for net revenue to a range of 165 to 180 million , which includes approximately 20 to 25 million of impact associated with our distributor transitions and store closures .

Speaker #3: This is 2 million higher than our previous estimate and reflects the incremental door closures in Q2 , stripping out the impact of those structural changes .

Speaker #3: Net revenue is expected to grow approximately 3% at the midpoint of our updated guidance range . We're also introducing third quarter net revenue guidance of 33 to 38 million .

Speaker #3: Our revised full year outlook primarily reflects the uncertain macro environment , as well as our decision to close additional stores in Q2 . We're pleased with the way our initiatives are coming together , giving us confidence in our Q4 outlook , which includes an implied top line growth rate of 17% at the midpoint .

Speaker #3: Despite the revision to our sales outlook , we are reiterating our full year adjusted EBITDA guidance as we continue to manage the business with financial rigor and discipline .

Speaker #3: Our full year adjusted EBITDA guidance range remains at -65 to 55 million and includes an expected third quarter adjusted EBITDA loss in the range of 20 million to 16 million .

Speaker #3: Approaching the balance of the year , our key initiatives are in flight and we feel good about our positioning from both an operational and financial perspective .

Speaker #3: We look forward to keeping you updated on our progress as we continue to focus on building towards long term , profitable growth and shareholder value .

Speaker #3: We appreciate your time this afternoon , and we'll now ask the operator to open the call to questions .

Speaker #4: At this time , if you would like to ask a question , press star followed by the number one on your telephone keypad .

Speaker #4: If you would like to withdraw your question , press star one . Again , again , that is star followed by the number one on your telephone keypad .

Speaker #4: We'll pause for just a moment to compile the Q&A roster . Your first question comes from Francesco Marmo with Maxim Group .

Speaker #5: Hi . Hey , guys . Thank you for taking my question . Two quick ones for me . First of all , you touched on this at the end of the opening remarks , but can you give us a bit more color on how the store closure and transition to distributor model process impacting top line and overall profitability compare to your initial expectations ?

Speaker #3: Hi , Francesco . Yes . Overall , when we went into this year and we're planning the impact from store closures and international transitions , we estimated the impact to be 18 to $23 million .

Speaker #3: With the decision to close additional doors in Q2 were increasing that range by 2 million to now be 20 to 25 million . As a reminder , the reason why we are pursuing the distributor model for international regions is although it impacts the top line , it is immediately profitable on the bottom line and additionally has working capital benefits to us .

Speaker #3: We transitioned to the EU at the end of Q2 , which is our last international transition . So we look forward to having more comparable comps year over year as we go forward .

Speaker #3: Retail doors . We've also targeted largely unprofitable doors for these closures . And so while we did close additional doors in Q2 compared to what we were planning to for the year , these were opportunistic .

Speaker #3: That came up for us and we decided to pursue them again with the interest of increasing the bottom line . So while this does impact our top line , it serves an effort of the bottom line improvements for year over year .

Speaker #5: Thank you . Yeah , this makes perfect sense because looking at the income statement that that benefit at the profitability level in cash terms is is actually evident .

Speaker #5: That's that's very insightful . Thank you . And then the second question real quick , if I may , on inventory , you're entering the second half of the year with a with a much leaner position , which is great .

Speaker #5: How should we think about your inventory strategy for the remainder of the year , particularly in light of the planned new product launches ?

Speaker #3: Great . Yes , we have done exceptional inventory management over the past two years . We ended the quarter down 21% year over year .

Speaker #3: And with this last transition of the international market , the EU , again , as we did at the end of Q2 , many of those year over year comparisons should now be evening out .

Speaker #3: With all those transitions complete , you should expect to see strong inventory management from us . And we've bought appropriately , even with all of these new products .

Speaker #3: And so you should not expect to see a meaningful increase or actually an increase at all in terms of inventory because of the strong overall inventory management to add a little bit of color , in addition to the traditional open to buy management that we've implemented over the past two years , we've also made operational changes , something as simple as ship from store .

Speaker #3: And so as we are buying into these new products , we can put the right amount of product in store , have great assortments , especially where we start to really bring in some beautiful colors .

Speaker #3: We can make sure the stores are representing the full line the way we want them to , but still have the ability then to use that inventory to fulfill E-com orders .

Speaker #3: So it's a combination again of the rigor of a strong open to buy , as well as these operational improvements that we've been making that give us confidence that even with the volume of new product and styles that will be coming , you can expect to continue to see strong inventory management from us .

Speaker #2: And Francesco , hello , this is Joe . Hey , Joe . I'm glad . I'm glad that you asked that question about inventory , because when you're when you're refreshing your line as much as we are and adding so much depth and color and and differentiation , it's critical that we keep our arms around the inventory because it is our inventory management that allows us to stay full price and to bring in full price customers , and to make this into a growing , high margin brand that we are building towards .

Speaker #2: So thank you for that question . Inventory is something we discussed literally every day here .

Speaker #5: Yeah , it makes sense . Very , very helpful . Very insightful . Thank you very much .

Speaker #2: Thank you .

Speaker #4: Your final question comes from Alex Stratton with Morgan Stanley.

Speaker #6: Great . Thanks so much . Maybe just a quick follow up on on that question . So just to be clear on on the sales guidance reduction , it sounds like your expectations on the core of the business haven't changed .

Speaker #6: It's just that you have this incremental store closure and distribution distributor dynamic happening . Is that right ?

Speaker #3: Yes . And hi Alex . There are two key factors behind the change in top line guidance . Structural as you just mentioned with the retail door closure closures and macro and the additional door closures that were not initially planned or worth about 2 million incremental , and the rest is really associated with the overall macro economy and being it's really increasingly uncertain over the past few months .

Speaker #3: So we believe it's prudent to assume a more conservative view of the top line . That being said , what we know is that consumers , while they are becoming more choiceful and seeking value , we also know that our customers respond to our brand when we show up with newness and a strong value proposition .

Speaker #3: And the new product that we're bringing , the comfort , quality and style , we're really excited about what this is going to mean for the consumer and help us to build towards growth .

Speaker #3: So we introduced three new styles in July . We just entered another one this week , and we'll have a few more this month .

Speaker #3: And this will continue to build over the course of Q3 and Q4 . And so we're building up between now and the end of the year .

Speaker #3: Additionally , as we look towards the back half of the year , some of this , though , structural impacts do start to lessen in terms of their sequential impact on each of our quarters .

Speaker #3: But ultimately , at the end of the day , we're confident that the convergence of our initiatives will help us to drive year over year sales growth in Q4 .

Speaker #6: Perfect . And maybe just for Joe , just on the on the transformation plan , bigger picture . Where are you , like furthest along relative to where you thought you'd be when this first all started ?

Speaker #6: And then maybe on the other side , what's maybe been a little bit more of a pain point than Just a big picture view on the plan .

Speaker #2: Yeah . Thanks . Thanks for that question , Alex . I'm just so delighted and pleased with where we are in this process .

Speaker #2: We have moved at light speed to to

Speaker #2: affect all of the different aspects . But most importantly , we've been building towards this literally this specific moment right now where all of the product efforts in design and product development and fit and materialization .

Speaker #2: affect all of the different aspects . But most importantly , we've been building towards this literally this specific moment right now where all of the product efforts in design you thought .

Speaker #2: And on the marketing side , you know , we started at the beginning of the year just waking our customer up with that cards on the table initiative , and then now bringing in a lot more lower funnel , very functional and performance driven marketing to really wake our customer back up again and get them to remind them of who we are and what we deliver to them .

Speaker #2: And it's coming in earnest . We we repeat this number all the time , and we have 19 new products coming into the marketplace over the next handful of months .

Speaker #2: We've only put 2 or 3 in the market . Depends on on how literally just a day ago , we put another another one in the market .

Speaker #2: And already we're seeing the consumer really gravitate to it . So as an example , in our retail stores of our top 15 styles , style colors , 12 of them are the new products and new colors that we're delivering .

Speaker #2: So they're just starving for new products , and we're going to feed that in the back half of this year . And we expect that to really start to accumulate .

Speaker #2: And this build will start in Q3 and should really to accelerate in Q4 . So we're exactly where we wanted to be at this point .

Speaker #2: We're actually slightly ahead . We relaunched the website about three weeks earlier than we had planned to . And it's it's given start our consumers a really great experience .

Speaker #2: The store refreshes have gone really well . All the product is delivering on time . I'd like to come up with something as to what I think we're falling behind on , but I'm really pleased with where we are .

Speaker #2: We're actually slightly ahead of everything that we had on plan .

Speaker #6: Great , thanks so much . Good luck .

Speaker #2: Thank you .

Speaker #4: That concludes our Q&A session . I'll now turn the conference back over to Joe Vernachio for closing remarks .

Speaker #2: Thank you everybody . Appreciate you joining and have enjoy the rest of your summer .