Allbirds Sees 16 Percent Growth In Q3

09 Nov Allbirds Sees 16 Percent Growth In Q3

Allbirds, Inc. maintained its outlook for the year as sales and losses in the third quarter ended September 30 came in ahead of Wall Street’s targets.

Third Quarter Highlights

• Net revenue increased 16 percent to $72.7 million year over year (YoY) and increased 54 percent compared to 2020;
• Adjusted net revenue of $72.2 million increased 15 percent YoY, ahead of financial guidance targets;
• U.S. physical retail channel sales grew 53 percent compared to 2021; opened six stores in the U.S. during the quarter and 15 since the end of 2021, ending the period with 38 locations in the U.S.;
• GAAP net loss of $25.2 million, or $0.17 per basic and diluted share;
• Adjusted net loss of $22.4 million, or $0.15 per basic and diluted share;
• Adjusted EBITDA loss of $12.7 million, ahead of financial guidance targets; and
• Launched its 100 percent plastic-free, 100 percent vegan plant leather, producing “approximately 88 percent less carbon than traditional bovine leather and approximately 75 percent less carbon than other synthetic leather alternatives.”

The EPS loss of 15 cents topped Wall Street’s consensus target calling for a loss of 17 cents. Sales of $72.7 million exceeded Wall Street’s consensus estimate of $67.8 million.

“We delivered a strong quarter in what remains a highly dynamic operating environment. I am proud that we exceeded our Q3 adjusted revenue and adjusted EBITDA guidance targets while also delivering on our sustainability goals,” said Joey Zwillinger, co-founder and co-CEO. “Looking ahead to year-end and 2023, we continue to expect macro headwinds to persist but believe that our brand, our growth strategy, and simplification initiatives position us well to emerge strongly from this period. Thanks to the team’s hard work I remain confident in our ability to continue to execute into the holiday season and next year.”

“November also marks the one-year anniversary of our IPO, a critical step in building Allbirds into a 100-year brand while setting a new industry standard for sustainable business for others to follow. We recently released our “Flight Status” sustainability report for 2021, which shows that we were able to reduce our average product carbon footprint by 12 percent while growing our net revenues by 27 percent in 2021. We remain on track to deliver on our goal to cut our already low per-product carbon footprint in half by 2025 and achieve near zero by 2030, while also delivering on our Sustainability Principles and Objectives Framework commitments first enumerated in our S-1. I could not be more proud of what we have achieved and remain tremendously optimistic about the future.”

Third-Quarter Operating Results
Net revenue increased 15.9 percent YoY to $72.7 million and increased 53.8 percent compared to the third quarter of 2020. This increase is primarily attributable to an increase in orders driven by retail sales, and an increase in average order value. This was partially offset by an estimated 355 bps negative impact from foreign exchange. Adjusted net revenue increased 15.1 percent YoY to $72.2 million, adjusted for non-recurring revenue related to end-of-life inventory liquidation in connection with the simplification initiatives announced last quarter.

Gross profit totaled $32.5 million compared to $33.9 million in the third quarter of 2021, and gross margin declined to 44.8 percent compared to 54.1 percent in the third quarter of 2021. The decrease in gross margin primarily reflects costs related to our simplification initiatives, higher logistics costs, and the impact of unfavorable FX rates. Excluding the impact of our simplification initiatives, adjusted gross profit1 increased 1.7 percent YoY to $34.5 million, and adjusted gross margin was 47.8 percent compared to 54.1 percent in the third quarter of 2021. The decline in adjusted gross margin was primarily driven by higher logistics costs and the impact of unfavorable FX rates, partially offset by a higher mix of margin-accretive retail store sales.

SG&A was $45.4 million, or 62.5 percent of net revenue, compared to $33.0 million, or 52.6 percent of revenue, in the third quarter of 2021. The increase is primarily attributable to expenses for the opening of eight new stores during the period and operational expenses for 23 additional stores opened since the third quarter of 2021, increased headcount and recurring public company operating costs.

Adjusted SG&A1 was $44.5 million, or 61.6 percent of adjusted net revenue, compared to $33.0 million, or 52.6 percent of adjusted net revenue, in the third quarter of 2021. Adjusted SG&A excludes the impact of our simplification initiatives to streamline the corporate operating structure.

Marketing expenses totaled $12.7 million compared to $12.8 million and improved as a percentage of revenue to 17.4 percent from 20.4 percent a year ago, due to improvements in marketing efficiency.

Net loss was $25.2 million compared to $13.8 million in the third quarter of 2021, and the net loss margin was 35.0 percent compared to 22.0 percent in the third quarter of 2021. Adjusted for the impact of the simplification initiatives, and corresponding estimated income tax on such items, the adjusted net loss was $22.4 million, and the adjusted net loss margin1 was 31.0 percent.

Adjusted EBITDA was a loss of $12.7 million compared to a loss of $6.3 million in the third quarter of 2021, and adjusted EBITDA margin1 declined to (17.6) percent compared to (10.1) percent in the third quarter of 2021.

Nine-Month Operating Results
Net revenue increased 18.5 percent to $213.6 million compared to $180.3 million YoY and increased 52.5 percent compared to the first nine months of 2020. The increase is attributable to an increase in the number of orders and an increase in average order value. This was partially offset by unfavorable FX rates that had an estimated 259 bps negative impact on net revenue. In the U.S., where net revenue increased 23.6 percent YoY to $164.2 million, retail store sales were the primary driver. International net revenue increased 4.1 percent YoY to $49.4 million, as the business was negatively impacted by external headwinds, including continuing COVID-19 restrictions in China, a decrease in discretionary consumer spending as a result of increasing inflation the crisis in Ukraine in Europe, and unfavorable FX rates that had an estimated 9.8 percent negative impact. Adjusted net revenue increased 18.2 percent to $213.1 million compared to the first nine months of 2021, adjusted for non-recurring revenue related to end-of-life inventory liquidation in connection with the simplification initiatives announced last quarter.

Gross profit totaled $93.3 million compared to $97.9 million in the first nine months of 2021, while gross margin declined to 43.7 percent versus 54.3 percent YoY. The decrease in gross margin primarily reflects costs related to our simplification initiatives, higher logistics costs, a lower mix of international sales, and unfavorable foreign exchange rates. Excluding the impact of our simplification initiatives to optimize inventory of $13.6 million, year-to-date adjusted gross profit increased 9.3 percent YoY to $106.9 million, and adjusted gross margin was 50.2 percent compared to 54.3 percent for the first nine months of 2021. The decline in adjusted gross margin primarily relates to higher distribution center and logistics costs, lower mix of international sales, and unfavorable FX rates, partially offset by a higher mix of margin accretive retail store sales.

SG&A was $125.9 million, or 58.9 percent of revenue, compared to $85.5 million, or 47.5 percent of revenue, in the first nine months of 2021, with the increase primarily driven by expenses for the opening of 19 new stores during the period and operating expenses for 23 additional stores opened since the third quarter of 2021, increased headcount, and recurring public company operating costs. Adjusted SG&A was $124.9 million, or 58.6 percent of adjusted net revenue, compared to $85.5 million, or 47.5 percent of adjusted net revenue, in the third quarter of 2021. Adjusted SG&A excludes the impact of our simplification initiatives to streamline its corporate operating structure.

Marketing expenses totaled $42.3 million versus $38.8 million compared to the first nine months of 2021 and improved as a percentage of revenue to 19.8 percent from 21.5 percent a year ago, due to improvements in marketing efficiency.

Net loss was $76.5 million compared to $34.9 million in the first nine months of 2021, and the net loss margin was 35.8 percent compared to 19.4 percent in the first nine months of 2021. Adjusted for the impact of the simplification initiatives, and corresponding estimated income tax on such items, the adjusted net loss was $62.3 million and the net loss margin was 29.2 percent.

Adjusted EBITDA loss was $34.1 million compared to a loss of $12.1 million in the first nine months of 2021, and adjusted EBITDA margin declined to (16.0) percent compared to (6.7) percent for the first nine months of 2021.

Simplification Initiatives
As announced last quarter, Allbirds implemented its simplification initiatives to generate cost of revenue savings, streamline workflows and lower operating costs. Supply chain cost and carbon reduction include:

• Reducing logistics costs in the U.S. by transitioning to automated distribution centers and a dedicated returns processor;
• Optimizing inventory, including liquidating of excess end-of-life inventory, and accelerating logistics cost savings;
• Accelerating scaling of its manufacturing base to reduce product carbon footprint and product cost over time;
• Streamlining corporate operating structure; and
• Reducing corporate headcount and office space to reflect a hybrid work environment and to reduce organizational complexity.

Balance Sheet Highlights
Allbirds ended the quarter with $180.7 million of cash and cash equivalents and $40 million available under its revolving credit agreement. Inventories totaled $126.5 million, an increase of 27.4 percent compared to $99.3 million at Q3 2021 and an increase of 3.4 percent compared to June 30, 2022. The increase from the end of 2021 is attributable to a combination of higher in-transit inventory as a result of ongoing supply chain disruptions as well as the impact of higher inbound freight costs.

2022 Financial and Carbon Footprint Reduction Guidance Targets
Allbirds maintains its guidance targets for full year 2022 which exclude non-recurring revenue and costs with its simplification initiatives:

• Adjusted net revenue2 of $305 million to $315 million, representing growth in the range of 10 percent to 14 percent, including an estimated FX impact of 275-350 bps, versus fiscal 2021;
• Adjusted gross profit2 of $150.0 million to $157.5 million, which at the midpoint of its adjusted net revenue and adjusted gross profit targets represents a gross margin of 49.5 percent;
• Adjusted EBITDA loss of $42.5 million to $37.5 million, including an estimated $8 million of recurring public company costs; and
• Carbon footprint reduction target of 6 percent against its 2021 baseline for its top 10 products, aligned with its Flight Plan to reduce by 50 percent by the end of 2025 and 95 percent by 2030.

Full Year 2022 Guidance
Allbirds maintained its full-year guidance that called for revenue in the range of $305 million to $315 million, adjusted gross profit in the range of $150 million and $157.5 million, adjusted EBITDA in the range of a loss between $42.5 million and $37.5 million.

Mike Bufano, CFO, said, “Thanks to our team’s relentless focus on controlling what we can control, we were able to deliver strong financial performance, beating our adjusted revenue and adjusted EBITDA guidance, against a difficult operating backdrop. The investments we have made into our supply chain, coupled with our leaner infrastructure and strong cash balance, all position us to continue to grow the business and work towards improved profitability. I feel confident about how we are setting up our business for the future to become better operationally while continuing to deliver on our sustainability initiatives and create shareholder value.”