Allbirds(US:BIRD)2023-08-08 16:00Part I Financial Statements (Unaudited) Allbirds' unaudited financials as of June 30, 2023, reflect decreased assets, a wider net loss, and improved operating cash flow Condensed Consolidated Balance Sheets Total assets decreased to $405.8 million as of June 30, 2023, from $462.4 million at year-end 2022, primarily due to lower cash and inventory Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $139,909 | $167,136 | | Inventory | $92,849 | $116,796 | | Total current assets | $253,220 | $308,934 | | Total assets | $405,820 | $462,364 | | Liabilities & Equity | | | | Total current liabilities | $45,156 | $50,012 | | Total liabilities | $141,974 | $145,595 | | Total stockholders' equity | $263,846 | $316,769 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net revenue decreased for both three and six-month periods ended June 30, 2023, with the six-month net loss widening to $64.1 million Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $70,480 | $78,174 | $124,832 | $140,937 | | Gross profit | $30,148 | $28,191 | $51,965 | $60,794 | | Loss from operations | $(29,624) | $(29,329) | $(65,302) | $(49,308) | | Net loss | $(28,937) | $(29,368) | $(64,103) | $(51,247) | | Net loss per share | $(0.19) | $(0.20) | $(0.43) | $(0.35) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $263.8 million as of June 30, 2023, from $316.8 million at year-end 2022, primarily due to the net loss - The primary driver for the reduction in stockholders' equity during the first six months of 2023 was the net loss of $64.1 million486 Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly improved to $20.1 million for the six months ended June 30, 2023, from $64.6 million in the prior year Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,085) | $(64,632) | | Net cash used in investing activities | $(6,997) | $(16,933) | | Net cash provided by financing activities | $313 | $2,342 | | Net decrease in cash | $(27,222) | $(80,652) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, inventory reserves, a Q1 2023 restructuring plan, an amended $50 million credit agreement, and legal proceedings - In March 2023, the company initiated a strategic transformation plan, resulting in restructuring charges for professional fees and severance557 - On April 17, 2023, the company amended its credit agreement, increasing the committed amount from $40.0 million to $50.0 million and extending the maturity date to April 17, 20265 - The company is facing two substantially similar securities class action lawsuits filed in April and May 2023, alleging violations of the Securities and Exchange Act of 1934 and the Securities Act of 193342 Inventory Reserve (in thousands) | Date | Reserve Amount | | :--- | :--- | | June 30, 2023 | $12,495 | | Dec 31, 2022 | $8,269 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses an 11.4% decrease in net revenue for the first six months of 2023, a strategic transformation plan, and sufficient liquidity with $139.9 million cash Recent Developments Recent developments include a strategic transformation plan initiated in March 2023, a 9% workforce reduction, and a transition to a new footwear manufacturing partner - A strategic transformation plan was announced in March 2023 to reignite growth, improve capital efficiency, and drive profitability50 - Cost-saving initiatives include a 9% reduction in the global corporate workforce in May 2023 and transitioning to a new footwear manufacturing partner by the end of 202351 - The company is evaluating a transition to a distributor model in certain international markets, signing non-binding letters of intent for Canada and South Korea in August 2023630 Results of Operations For the six months ended June 30, 2023, net revenue decreased 11.4% to $124.8 million, and net loss widened to $64.1 million, driven by lower prices and increased operating expenses Comparison of Six Months Ended June 30, 2023 and 2022 (in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $124,832 | $140,937 | $(16,105) | (11.4)% | | Gross Profit | $51,965 | $60,794 | $(8,829) | (14.5)% | | Gross Margin | 41.6% | 43.1% | - | (3.5)% | | Total Operating Expense | $117,267 | $110,102 | $7,165 | 6.5% | | Net Loss | $(64,103) | $(51,247) | $(12,856) | 25.1% | - SG&A expenses for the six months increased by $8.5 million (10.6%), driven by higher depreciation, rent, personnel costs due to more stores, and stock-based compensation8182 - Marketing expenses for the six months decreased by $5.6 million (19.0%) due to reduced digital advertising spend73 - Restructuring expenses of $4.3 million were incurred in the first six months of 2023 related to the new strategic plan, with no comparable expense in 202283 Non-GAAP Financial Measures Adjusted EBITDA, a key non-GAAP measure, showed an increased loss of $39.9 million for the six months ended June 30, 2023, compared to the prior year - Adjusted EBITDA is defined as net loss excluding stock-based compensation, depreciation & amortization, impairment, restructuring expense, other income/expense, interest, and taxes88 Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(28,937) | $(29,368) | $(64,103) | $(51,247) | | Adjusted EBITDA | $(18,284) | $(20,839) | $(39,943) | $(33,052) | Liquidity and Capital Resources As of June 30, 2023, the company held $139.9 million in cash, with an amended $50 million credit facility, and expects sufficient liquidity for the next 12 months - The company held $139.9 million in cash and cash equivalents as of June 30, 2023106 - In April 2023, the credit agreement was amended to increase the committed amount to $50.0 million and extend the maturity to April 202694 - Net cash used in operating activities for the six months ended June 30, 2023, was $20.1 million, a significant improvement from $64.6 million in the prior year, primarily due to a $16.3 million decrease in inventory96109 - Management believes existing cash and available credit will be sufficient to meet cash requirements over the next 12 months134 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks including interest rate, foreign currency, and inflation, though a 10% change in rates would not have a material impact as of June 30, 2023 - The company is exposed to interest rate risk on its variable-rate credit facility, but had no amounts outstanding as of June 30, 2023115144 - Foreign currency risk exists due to international subsidiaries, with translation adjustments recorded in other comprehensive income (loss), resulting in a $0.5 million loss for the six months ended June 30, 2023116145419 - Inflation risk could increase supply chain, materials, and labor costs, potentially impacting gross margin if not offset by price increases or cost reductions117146 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level119 - There were no material changes to the company's internal control over financial reporting during the quarter ended June 30, 2023150 Part II—Other Information Legal Proceedings The company and certain executives are defendants in consolidated securities class action lawsuits filed in April and May 2023, which the company intends to vigorously defend - Allbirds and certain executives were named as defendants in two securities class action lawsuits in April and May 2023, which have since been consolidated42 - The lawsuits allege materially false and/or misleading statements about the company's business, operations, and prospects; the company intends to defend itself vigorously42152 Risk Factors The company faces numerous risks, including challenges in executing its strategic transformation plan, economic uncertainty, intense competition, supply chain concentration, and its dual-class stock structure - The company may be unable to successfully execute its strategic transformation plan announced in March 2023, which is designed to reignite growth, optimize stores, and improve cost savings124421 - Economic uncertainty and inflationary pressures may continue to adversely affect consumer demand for discretionary items like the company's products181410 - The business is subject to the risk of manufacturer concentration, having transitioned all new footwear manufacturing to a single partner in Vietnam during 2023253278 - The dual-class stock structure concentrates voting control with co-founders and insiders, limiting the influence of other stockholders708453 Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities760795 Defaults Upon Senior Securities This section reports no defaults upon senior securities - There were no defaults upon senior securities761 Mine Safety Disclosures This section is not applicable to the company - Not applicable786 Other Information This section reports no other information - There is no other information to report796 Exhibits This section lists exhibits filed with the quarterly report, including officer certifications and XBRL data files, incorporating previously filed documents by reference - The exhibits include officer certifications pursuant to the Sarbanes-Oxley Act of 2002 and XBRL data files787