Allbirds, Inc. Q2 FY2024 earnings call

• Closed 14 underperforming U.S. retail locations to optimize physical footprint. - Transitioned to distributor model in international regions and opened new regions with distributors. - Achieved COGS savings through factory shift and material optimization, leading to gross margin expansion. - Cut inventory by more than half in 2023, entered 2024 in healthy position. - Focus areas: Making great product (new product launches like Wool Runner 2, Tree Runner Go, Canvas Piper; upcoming Tree Glider; fall/winter 2025 and spring 2026 collections), telling compelling stories (new brand narrative 'Allbirds by Nature' with marketing ramp-up in H2 2024 and 2025), providing engaging shopping experience (enhancing in-store consumer journey and website).

Q2 revenue totaled $52 million. The results are primarily attributable to lower unit sales partially offset by higher ASPs within the Direct business. Second quarter gross margin improved to 50.5%, up 360 basis points sequentially and 770 basis points versus the prior year. Year-over-year gross margin expansion is due to healthier inventory position, lower freight costs, lower promotional activity in direct business, and COGS savings from factory shift and materials innovation.

• Full year 2024 net revenue expected $190 million to $210 million. - Q3 revenue expected $40 million to $43 million (U.S. $33M-$35M, international $7M-$8M). - Q3 adjusted EBITDA loss expected $19 million to $16 million. - Gross margin in H2 2024 expected mid-40s. - Return to full price selling contributing to gross margin expansion and setting up for topline growth in 2025.

• Freight costs as a pressure point, but managed and not seen as significant headwind. - Impact of retail store closures and international distributor transitions on topline, but offset by cost savings in marketing and SG&A.

Q: Could you give more color on freight and how it's incorporated into gross margin guide?

A: Similar to industry, freight is a pressure point but considered in plans and actively managed, not a significant headwind.

Q: Are you seeing differences in how newer launches are resonating in US vs international markets?

A: Strong response in all markets. U.S. launches had very strong response; internationally, momentum continued post-distributor transitions.

Q: What KPIs show positive consumer response and how back half of 2025 launches are different strategically?

A: Focus on new customers and MCA from new products. Differently, focused on being a lifestyle footwear brand with breadth across seasons, gender, use occasions, creating collections vs single items.

Q: Near-term top line trend and Q4 inflection?

A: Q3 impact from transitions grows to 10-15 points, underlying business down mid-teens. Q4 similar to Q3 with full transition impact, and new products like upcoming launch carry into Q4.