Allbirds, Inc. Q1 FY2025 earnings call

• Product: Product engine is staffed and focused, with fall lineup being strongest and most diverse ever, including reintroduced icons, new subcategory Remix with sustainable materials, fully waterproof collection, Elevated and Relaxed collections. New products' sales percentage grew from high single digits in Jan to over 20% in Mar.
• Marketing: Cards on the Table series hosted by Stanley Tucci was a standout with over 25M Instagram views, collaborative posts outperformed benchmarks. Increasing volume and range of content to support hero products and seasonal launches, focusing on comfort, style, quality, sustainability. Performance marketing efforts showed lower CAC, accelerated new customer acquisition, and higher conversion rates.
• Shopping experience: Website redesign on track for summer launch. Retail stores piloted refreshed concept at Hayes Valley, with improved layout, fixtures, etc., driving increased engagement and sales, and rolling out to SoHo and Stanford Shopping Center stores.

Net revenue for the quarter totaled $32 million. Q1 gross margin was 44.8%, down 210 basis points year-over-year but ahead of expectations. The decline was due to shift in sales to international distributors, sunsetting of products, and higher per unit freight in direct business, partially offset by $2 million gift card breakage. SG&A was down over $14 million in Q1 2025 due to lower occupancy and payroll costs and transition to international distributors. Q1 adjusted EBITDA loss was $19 million, a 11% year-over-year improvement. At quarter end, cash and cash equivalents were $39 million with no outstanding borrowings, and inventory was $43 million, down 29% year-over-year.

• Full-year 2025 net revenue expected in range of $175 million to $195 million, including $18 million to $23 million negative impact from distributor transition and store closures, with net sales expected to grow ~10% midpoint vs 2024. U.S. net revenue expected $145M - $160M, international $30M - $35M. Full-year adjusted EBITDA loss expected $65M - $55M.
• Q2 2025 net revenue expected $36M - $41M, down 25% midpoint vs prior year. U.S. net revenue $26M - $30M, international $10M - $11M. Adjusted EBITDA loss expected $19M - $16M.

• Evolving macro environment driven by shifting global trade policies.
• Near-term consumer behavior difficult to predict.
• Supply chain disruptions may occur as market adjusts to new tariffs.

Q: Annie, was hoping you could help us with the shape of the gross margin through the rest of the year. Obviously, a lot of puts and takes. How to think about the impact from the international distributor agreements? And then also how to think about tariffs. When do we start to see the higher tariff inventory flowing through? And when would we potentially start to see offsets in terms of price?

A: Great. Hi, Janine. Thanks for your question. Yes. There are quite a few moving parts going on in gross margin. Let's start a little bit with Q1 so you understand our starting point this year. And while our gross margin was down year-over-year, it was ahead of our expectations. The decline year-over-year is largely driven by that shift of sales internationally going from the direct model to distributors. Additionally, we have started to sunset some products in preparation for the new assortments that are coming in the back half of the year. There is a little bit of noise as well in terms of higher per unit freight in our direct business. That was then offset by a gift card breakage entry that we had that was $2 million, and it did increase our gross margin by 400 basis points in the quarter. One highlight that I wanted to make is that our lower average product COGS are coming to bear as expected from all of the great sourcing and material work that we have been doing over the past few years around our cost-saving initiatives. And so when we think about where do we go from here in terms of our overall gross margin, while we recorded the 44.8%, I am going to go ahead and have you take out, for comparison purposes, the 400 basis points associated with the gift card entry. That brings us to a gross margin of about 41% for Q1. And we do expect that we will improve sequentially each quarter. But really, where we start to see some of those better margins are in the back half of the year in Q3 and Q4. And that is because the second-half product that we are so excited about was built and designed with higher margin targets. And so we will be combining this new product coming at better margins. We are going to read the consumer. I think you asked a little bit about when do we start to feel the impact of the new tariff. There will be a very minor impact in Q2, but it really starts to show up in Q3 and Q4. And that has been contemplated in our guidance. Where we reiterated that we expect to be in the mid-forties for the full year, but again, increasing from that restated Q1 of 41% and then increasing each quarter. So we are excited about the product ahead. We will navigate the consumer. We will navigate changing tariffs. But we feel like we are well-positioned for the quarters ahead.

Q: Great. Thanks so much. I know you all gave rationale for the post-first quarter sales improvement last call, that kind of back-half weighted dynamic to the top line. But obviously, things have changed with tariffs. So can we just talk about how your view on the back revenue improvement has changed now versus three months ago? And what degree of conviction you still have there?

A: Yeah. Hi. How are you? Nice to speak with you today. Yeah. We have been working on this plan now for well over a year, and we have been executing against it like a metronome. The product, the marketing, and the experience are really all coming together. In less than a hundred days from now, this will all start to come together to one point where the way we think about it is this is our starting line, not our finish line. Like, we are just getting started. And it only accelerates through the back half of this year. Yes, there is certainly uncertainty out there, and uncertainty does not necessarily lend itself well to consumer sentiment, but we are a very experienced team, and we have navigated through many of these types of situations over the years. You know, one little proof point or talking point around just how much is coming to give you a sense of it. You know, we will have only had three new products. In the 50% of our product that is delivering from July through the end of the year will be new product. And we have shown that when we deliver new product, the consumer responds. And we are getting these new products showing up in the top part of our selling ranking. And so we are just really excited and motivated by everything that is coming together. The road ahead might move and shift, but the way you get through that is with a clear plan and clear execution, and that is what we are focused on.

Q: Great. So first off, you recently ran what I thought was a very innovative advertising campaign, Cards on the Table. How has it all do you believe it contributed to your strong performance in the quarter? And it seems to me that one of the advantages of the effort is that it should have legs. So how should we think about its ability to contribute to sales for the remainder of 2025?

A: Great. Hi, Tom. Welcome to the call. We are very excited that you have chosen to follow the stock. We really appreciate it. Welcome to the team. Yeah. We are really pleased with the results of Cards on the Table. Remember, its purpose was to get us back in the conversation, to get people talking about us again, to put us in association with people that reflect our values, and that are part of the ongoing cultural conversation out in the world. And it absolutely achieved that. You know, the numbers that we talked about earlier, you know, twenty-five million Instagram views is a real number. And that momentum is showing up in places like our subscribers on Instagram. You know, we see real tangible results of getting people into our funnel, into our view, and being able to talk to them and communicate with them. And you are right to notice that part of this plan is that that was evergreen and is evergreen content. And if you actually look at it today, its viewership is only increasing. It is not like an advertisement campaign that goes up and goes down. It is accumulating because it is good valuable content. So people are constantly coming in to view and seeing this. And what you will see when we come into the back half of the year is we will create these little threads from that. And I will not go into the detail of how we are going to do that, but it will be through people and situations where we will connect the stories and the messaging that we are going to be delivering from July through the balance of the year to that work, and that will give us the chance to re-express that work again and resurface it for people so it continues to work for us through the balance of the year.

Q: I am just curious how you or sort of how you would contextualize the cadence of the quarter sort of improving there in March? If that coincides with a certain amount of marketing or new product. And you have sort of spoken to it several points on the call, kind of encouragement with new product. And I guess, you know, part of that is obviously sort of what you have flown in already. I just want to know if you could elaborate on that. And then part of that question also touches on just the marketing spend being relatively elevated. I am just curious kind of what you are spending into. If you are spending into a higher level of back-half sales, or when that ratio might kind of tamp down a bit.

A: So, yes, we have had quite the interesting start to 2025. Like many others, it was a slow start to the year in January and February. And then we saw quite a bit of momentum in March. We believe this is both macro, because we have heard from other folks, compounded then by the result of our Cards on the Table investment. And so we were really pleased to see how the trends picked up in March. Of course, then in early April, when the consumer got quite distracted with macro headlines, we have seen some choppiness. Similar to what others have reported. But really, when we think about it and we look forward to the rest of the year, it sounds like everybody across multiple industries is seeing the change in the consumer. But what we do know and what we believe is that there is appetite for a brand with authenticity and message. And we believe that our marketing and product places us in a competitive position. Which is why we are really excited about what we have done so far, the investments that we are making in marketing, the initial results from it, and how it is setting us up for success. In terms of a little bit of nuance with Q2, we do expect that our marketing spend in the quarter will be down slightly year-over-year. But that is really more about last year. You might recall that in Q2 of 2024 is when we had a meaningful launch with the Tree Runner Go. That was a high-volume launch supported with quite a bit of marketing. So we do expect year-over-year marketing spend to be down, but it is still overall. We are continuing to invest in the brand, and we will for the rest of the year. And so I will just turn it over to Joe to talk a little more about kind of the color on top of those financials.