Allbirds, Inc. reported a loss of $31.6 million in the third quarter ended September 30 on a 21 percent revenue decline. However, sales were in line and the adjusted loss topped guidance and the eco-friendly footwear brand said it’s making progress under its transformation plan.

Q3 2023 Overview

  • Net revenue decreased 21.2 percent to $57.2 million versus a year ago and decreased 8.7 percent compared to Q3 2021. Guidance had called for sales in the range of $56 million to $61 million.
  • Net loss of $31.6 million, or $0.21 per basic and diluted share.
  • Adjusted EBITDA loss of $19.0 million. Guidance had called for an adjusted EBITDA loss between $23 million to $20 million.
  • Ending inventory of $79.9 million, representing a decrease of 37 percent versus a year ago.
  • Significantly reduced operating cash use in Q3; cash use of $5.4 million compared to $17.5 million a year ago.
  • Completed previously announced distribution agreements and transitioned to a new operating model in Canada and South Korea, representing continued progress under a key pillar within Allbirds’ Strategic Transformation Plan.

“Our third quarter results reflect another quarter of solid execution under our Strategic Transformation Plan,” said Joey Zwillinger, Co-Founder and CEO. “We made important progress on our key benchmarks of inventory reduction, operating cash use, and cost control, resulting in adjusted EBITDA ahead of our expectations. We also meaningfully advanced our strategy to transition from a direct distribution model to third-party distributors in key international markets. Nearing the end of our first year of transformation, our path remains clear and we are operating with discipline to deliver profitable growth and build shareholder value over the long term.”

Third Quarter Operating Results
Net revenue decreased 21.2 percent to $57.2 million compared to the third quarter of 2022 and decreased 8.7 percent compared to the third quarter of 2021. The year-over-year decrease is primarily attributable to a decrease in average selling price, driven by promotional activity, and a decrease in units sold, partially offset by a $0.3 million benefit from foreign exchange (FX). In addition, net revenue in the third quarter of 2023 was negatively impacted by an estimated $0.8 million as a result of the transition from a direct-selling model to a distributor model in South Korea and Canada in September 2023.

Gross profit totaled $24.9 million compared to $32.5 million in the third quarter of 2022, and gross margin declined to 43.5 percent compared to 44.8 percent in the third quarter of 2022. The decline in gross profit and gross margin is primarily due to the decrease in average selling price and units sold, partially offset by the decrease in inventory write-downs and lower freight, logistics, and product costs per unit.

Selling, general, and administrative expense (SG&A) was $43.5 million, or 76.1 percent of net revenue, compared to $44.6 million, or 61.4 percent of net revenue in the third quarter of 2022. The decrease is primarily attributable to decreases in stock-based compensation expense and personnel and related expenses.

Marketing expense totaled $10.2 million, or 17.8 percent of net revenue, compared to $12.7 million, or 17.4 percent of net revenue in the third quarter of 2022, reflecting a reduction in marketing spend compared to the same period in 2022, driven by decreased digital advertising spend.

Restructuring expense totaled $1.2 million, or 2.2 percent of net revenue compared to $0.7 million, or 1.0 percent of net revenue in the third quarter of 2022, primarily as a result of higher professional service fees and employee-related benefits associated with execution of the strategic transformation plan announced in March 2023.

Net loss was $31.6 million compared to $25.2 million in the third quarter of 2022, and net loss margin was 55.2 percent compared to 34.7 percent in the third quarter of 2022.

Adjusted EBITDA was a loss of $19.0 million, compared to a loss of $14.8 million in the third quarter of 2022, and adjusted EBITDA margin declined to (33.1) percent compared to (20.4) percent in the third quarter of 2022.

Nine-Month Operating Results
Net revenue in the first nine months of 2023 decreased 14.8 percent to $182.1 million compared to $213.6 million in the first nine months of 2022 and increased 1.0 percent compared to the first nine months of 2021. The year-over-year decrease is primarily attributable to a decrease in average selling price, driven by promotional activity, a decrease in units sold, and a $1.2 million impact of FX.

Gross profit in the first nine months of 2023 totaled $76.9 million compared to $93.3 million in the first nine months of 2022, while gross margin declined to 42.2 percent in the first nine months of 2023 versus 43.7 percent in the same period a year ago. The decrease in gross profit and gross margin is primarily due to the decrease in average selling price and units sold, partially offset by the decrease in inventory write-downs, lower freight costs, and a higher mix of international sales.

SG&A in the first nine months of 2023 was $132.5 million, or 72.8 percent of net revenue, compared to $125.1 million, or 58.6 percent of net revenue, in the first nine months of 2022, with the increase primarily attributable to an increase in operational expenses for 11 additional stores opened since the first nine months of 2022, including depreciation expense and rent and utility expense.

Marketing expense in the first nine months of 2023 totaled $34.2 million compared to $42.3 million in the first nine months of 2022 and improved as a percentage of net revenue to 18.8 percent from 19.8 percent for the same period last year due to a reduction in marketing spend compared to the same period in 2022, driven by decreased digital advertising spend.

Restructuring expense in the first nine months of 2023 totaled $5.5 million, or 3.0 percent of net revenue, compared to $0.7 million, or 0.3 percent of net revenue, in the same period in 2022, primarily as a result of higher professional fees and employee-related expenses associated with the execution of the strategic transformation plan announced in March 2023.

Net loss in the first nine months of 2023 was $95.7 million compared to $76.5 million in the first nine months of 2022, and net loss margin was 52.5 percent compared to 35.8 percent in the first nine months of 2022.

Adjusted EBITDA loss in the first nine months of 2023 was $58.9 million compared to a loss of $47.9 million in the first nine months of 2022, and adjusted EBITDA margin) declined to (32.4) percent compared to (22.4) percent for the first nine months of 2022.

Strategic Transformation Designed to Drive Sustained and Profitable Growth
During the third quarter, Allbirds made continued progress with the execution of its strategic transformation plan designed to reignite growth in the coming years, as well as improve capital efficiency and drive improved profitability. The plan, announced in March 2023, focuses on four key areas:

  • Reignite product and brand: Executing a highly focused brand strategy that reconnects with core consumers.
  • Optimize U.S. distribution and store profitability: Driving traffic and conversion to our U.S. fleet and selectively expanding our third-party channel.
  • Evaluate transition of international go-to-market strategy: Transitioning to distributor partners in certain international markets to grow internationally in a cost- and capital-efficient manner.
  • Improve cost savings and capital efficiency: Building upon and further accelerating 2022 cost and cash optimization initiatives to accelerate the cost of revenue savings and SG&A savings, and improve cash optimization.

Subsequent to the close of the third quarter, Allbirds entered into a non-binding letter of intent with a distributor partner in Japan and a non-binding letter of intent with a distributor partner in Australia/New Zealand. The transition to these distributors contemplated by these letters of intent is expected to be finalized in mid-2024. The New Zealand letter of intent is subject to the completion of an employee consultation process.

Balance Sheet Highlights
Allbirds ended the quarter with $132.5 million of cash and cash equivalents, reflecting a significant improvement in operating cash use. The company’s operating cash use was $5.4 million for the three months ended September 30, 2023, compared to operating cash use of $17.5 million in the same period a year ago.

Inventories totaled $79.9 million, a decrease of 31.6 percent compared to $116.8 million at the end of 2022, and a decrease of 36.8 percent compared to $126.5 million at the end of the third quarter of 2022. The decrease from the end of 2022 is primarily attributable to fewer units of on-hand inventory.

Q4 2023 Financial Guidance Targets
Allbirds is providing the following financial guidance targets for the fourth quarter of 2023, which reflects a negative impact to revenue associated with the transition from a direct selling model to a distributor model in Canada and South Korea, as well as the company’s plans for heightened promotional activity during the holiday season:

  • Net revenue of $66 million to $72 million, a decrease of 22 percent to 15 percent versus the fourth quarter of fiscal 2022.
  • Adjusted EBITDA loss of $(26) million to $(23) million.