Allbirds, Inc. Q2 FY2025 earnings call

Product Launch and Innovation

• In July, started reintroducing the brand with styles like Tree Runner NZ, Cruiser. Plan to launch new Wool Cruiser in over 15 colorways, first-ever waterproof collection, Kiwi collection, etc. Launched 19 new styles this season, including Remix using recycled materials in partnership with Blumaka and Circ.

Marketing Efforts

• Dramatically scaled marketing content output from 5 - 10 assets per month to over 100, fueling paid media strategy. Activating brand through PR and experiential efforts like ads in TSA security trays, PR events, etc.

Customer Experience

• Mid-July went live with fully redesigned website with modern navigation, richer product detail pages. Refreshed in-store experience in 3 locations, seeing measurable increases in average daily sales performance, and plan to continue refreshing additional locations.

Future Plans

• In early 2026, plan to debut Terralux material for an elevated collection and Aerie material for lightweight breathability. Spring 2026 sales meeting feedback was positive, beginning to sell into footwear specialty accounts. Took deliberate approach to wholesale channel strategy.

In the second quarter, net revenue totaled $40 million, at the high end of the guidance range. Q2 gross margin was 40.7% compared to 50.5% a year ago. SG&A was down 28% versus prior year. Adjusted EBITDA loss in Q2 improved to $13 million, exceeding the high end of the guidance range. Ended the quarter with $33 million of cash and cash equivalents and inventories down 21% versus a year ago. For the full year, net revenue outlook is adjusted to a range of $165 million to $180 million, including approximately $20 million to $25 million impact from store closures and distributor transitions. Third quarter net revenue guidance is $33 million to $38 million. Full year adjusted EBITDA guidance remains at negative $65 million to $55 million, with expected third quarter adjusted EBITDA loss in the range of $20 million to $16 million.

• Full year net revenue outlook adjusted to $165 million to $180 million, including $20 million to $25 million impact from store closures and distributor transitions, with net revenue expected to grow ~3% at midpoint of updated range when stripping out structural changes.
• Third quarter net revenue guidance is $33 million to $38 million.
• Reiterated full year adjusted EBITDA guidance at negative $65 million to $55 million, with expected third quarter adjusted EBITDA loss in the range of $20 million to $16 million.
• Confident in Q4 growth despite conservative view on top line for the rest of the year due to convergence of initiatives.

• Uncertainty in the current macro environment around consumer spending.
• Tariff landscape evolution which may impact costs.
• Impact of store closures and distributor transitions on top line and profitability.

Q: 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 compared to your initial expectations?

A: Overall, when planning at the start of the year, the impact was estimated at $18 million to $23 million. With additional door closures in Q2, it's increased to $20 million to $25 million. Pursuing distributor model for international regions is immediately profitable on the bottom line and has working capital benefits. Retail doors closed are largely unprofitable ones.

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

A: Ended the quarter with inventory down 21% year-over-year. Will have strong inventory management, with appropriate buying even with new products. Implemented operational changes like ship from store to manage inventory while having great assortments in stores to fulfill e-com orders.

Q: Is that right that your expectations on the core of the business haven't changed, just the incremental store closure and distributor dynamic happening?

A: Yes, the change in top line guidance is due to structural factors like retail door closures and macro. The additional door closures not initially planned are about $2 million incremental, and the rest is associated with the overall macro economy. But customers respond to newness and strong value proposition.

Q: Where are you like furthest along relative to where you thought you'd be when this first all started and what's maybe been a little bit more of a pain point than you thought?

A: We're exactly where we wanted to be, actually slightly ahead. Relaunched the website earlier than planned, store refreshes have gone well, product is delivering on time. Don't really see a pain point, we're slightly ahead of plan.