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What changed in Allbirds, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Allbirds, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+310 added−355 removedSource: 10-K (2025-03-12) vs 10-K (2024-03-13)

Top changes in Allbirds, Inc.'s 2024 10-K

310 paragraphs added · 355 removed · 244 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAll of our offset projects must be certified to an internationally recognized offset standard such as Gold Standard and Verified Carbon Standard, and are screened against criteria like permanence, additionality, leakage, and vintage year. 10 Table of Contents Social People (Our Flock) Our thriving culture and talented employees, also known as our “flock,” have been a critical factor in our success to date and will be critical to our success in the future.
Biggest changeSocial People (Our Flock) Our thriving culture and talented employees, also known as our “flock,” have been a critical factor in our success to date and will be critical to our success in the future. Further, as a PBC, employees are an important stakeholder in our business as are the communities that extend beyond our walls.
To build a business that is compatible with less than 1.5° Celsius warming, we have an ambitious plan to dramatically reduce the per unit carbon footprint for each of our products by 50% by the end of 2025 and by 95% by 2030, in each case, relative to a baseline of what our average carbon emissions would be per unit in 2025 without any further action to limit emissions.
Reduce To build a business that is compatible with less than 1.5° Celsius warming, we have an ambitious plan to dramatically reduce the per unit carbon footprint for each of our products by 50% by the end of 2025 and by 95% by 2030, in each case, relative to a baseline of what our average carbon emissions would be per unit in 2025 without any further action to limit emissions.
Supply Chain and Operations Our unique combination of sourcing, manufacturing, and distribution capabilities create a foundation from which we can continue to innovate and scale across the globe. Strong relationships with our suppliers ensure our relatively small supply chain can make a difference in the drive toward innovation and lighter impact on the environment.
Our unique combination of sourcing, manufacturing, and distribution capabilities create a foundation from which we can continue to innovate and scale across the globe. Strong relationships with our suppliers ensure our relatively small supply chain can make a difference in the drive toward innovation and lighter impact on the environment.
Our typical customers are younger, live an active and curious lifestyle, care about health and well-being, are willing to pay for premium products, frequently purchase products online, live in urban center settings, and appreciate socially conscious brands.
Our typical customers live an active and curious lifestyle, care about health and well-being, are willing to pay for premium products, frequently purchase products online, live in urban center settings, and appreciate socially conscious brands.
Copies of our reports on Form 10-K, Form 10-Q, Form 8-K, and amendments to those reports may also be obtained, free of charge, electronically through our investor relations website located at ir.allbirds.com as soon as reasonably practical after we file such material with, or furnish it to, the SEC. 13 Table of Contents
Copies of our reports on Form 10-K, Form 10-Q, Form 8-K, and amendments to those reports may also be obtained, free of charge, electronically through our investor relations website located at www.ir.allbirds.com as soon as reasonably practical after we file such material with, or furnish it to, the SEC. 10 Table of Contents
A PBC is also 8 Table of Contents required to assess its benefit performance internally and to disclose to its stockholders at least biennially a report detailing the corporation’s success in meeting its public benefit objectives. As provided in our certificate of incorporation, the public benefit that we promote, and pursuant to which we manage our company, is environmental conservation.
A PBC is also required to assess its benefit performance internally and to disclose to its stockholders at least biennially a report detailing the corporation’s success in meeting its public benefit objectives. As provided in our certificate of incorporation, the public benefit that we promote, and pursuant to which we manage our company, is environmental conservation.
We believe we are well-positioned to compete in this industry given our unique combination of innovative materials and products, purpose-driven lifestyle brand, deep connection with our community of customers, global vertical retail distribution offering, and infrastructure ready for scale.
We believe we are well-positioned to compete in this industry given our unique combination of innovative materials and products, purpose-driven lifestyle brand positioning, deep connection with our community of customers, global distribution offering, and infrastructure ready for scale.
Item 1. Business Overview Allbirds is a global lifestyle brand that innovates with sustainable materials to make better footwear and apparel products in a better way, while treading lighter on our planet.
Item 1. Business Overview Allbirds is a purpose-driven lifestyle brand that innovates with sustainable materials to make better footwear and apparel products in a better way, while treading lighter on our planet.
Our plan to help reverse climate change has three strategic priorities: Regenerative Agriculture, Renewable Materials, and Responsible Energy. These initiatives are underpinned by five foundational areas: Fair Labor, Water, Chemistry, Animal Welfare, and Traceability and Transparency. These priorities have been defined through a materiality process informed by input from various stakeholder groups including employees, investors, customers, and suppliers.
Our plan has three strategic priorities: Regenerative Agriculture, Renewable Materials, and Responsible Energy. These initiatives are underpinned by five foundational areas: Fair Labor, Water, Chemistry, Animal Welfare, and Traceability and Transparency. These priorities have been defined through a materiality process informed by input from various stakeholder groups including employees, investors, customers, and suppliers.
Governance In addition to our status as a PBC and certification as a B Corp, we also focus on the following areas of governance: Oversight and Our Board of Directors We regularly require that ESG issues are represented at the highest level of decision making.
Governance In addition to our status as a PBC and certification as a B Corp, we also focus on the following areas of governance: Oversight and Our Board of Directors We regularly require that ESG issues are represented at the highest level of decision making. Management reports on ESG issues to our board of directors on a periodic basis.
We have established deep, long-standing relationships by directly partnering with their development, commercialization, manufacturing, and quality teams from ideation through production, and have embedded our employees within some key factories to oversee the product process. Our relationship-based approach has helped us be nimble and drive flexibility and agility to react to changes in macroeconomic conditions, customer demand, or internal priorities.
We have established deep relationships with certain suppliers by directly partnering on development, commercialization, manufacturing, and quality from ideation through production, and have embedded our employees within some key factories to oversee the production process. Our relationship-based approach has helped us be nimble and drive flexibility and agility to react to changes in macroeconomic conditions, customer demand, or internal priorities.
These actions will allow us to focus on ensuring that our retail stores are efficiently driving customer acquisition and communicating the brand in a consistent and engaging manner to provide our customers with a seamless shopping experience.
These actions have allowed us to focus on retail stores that are efficiently driving customer acquisition and communicating the brand in a consistent and engaging manner to provide our customers with a seamless shopping experience.
We conduct bi-annual surveys to collect feedback and understand employee sentiment and engagement, and host inclusive leadership training sessions. • Total Rewards Our total rewards strategy is designed to encourage employees to live our values while helping us to achieve company sustainability goals.
We conduct annual surveys to collect feedback and understand employee sentiment and engagement. • Total Rewards Our total rewards strategy is designed to encourage employees to live our values while helping us to achieve company sustainability goals.
In addition to communicating more effectively with our customers, these insights allow us to meet customers’ needs through the creation of new products and enhancements to our existing lines. Our digital channels include our website and mobile app, which showcase our product portfolio and our branded content, including information on our natural materials and sustainability.
In addition to communicating more effectively with our customers, these insights allow us to meet customers’ needs through the creation of new products and enhancements to our existing lines. Our eCommerce site showcases our product portfolio and our branded content, including information on our natural materials and sustainability.
In December 2015, we changed our name to Allbirds, Inc., and we became a Delaware PBC in February 2016. Our principal executive offices are located at 730 Montgomery Street, San Francisco, California 94111. Our telephone number is (628) 225-4848. Our U.S. website address is allbirds.com.
Corporate Information We were incorporated in Delaware in May 2015 as Bozz, Inc. In December 2015, we changed our name to Allbirds, Inc., and we became a Delaware PBC in February 2016. Our principal executive offices are located at 30 Hotaling Place, San Francisco, California 94111. Our telephone number is (628) 225-4848. Our U.S. website address is allbirds.com.
We require that all partners sign our Supplier Code of Conduct, or Supplier Code, which requires our suppliers to operate in full compliance with the applicable laws, rules, and regulations of the countries in which they operate. Our Supplier Code goes further, drawing upon International Labour Organization Core Labor Standards, in order to advance social and environmental responsibility.
We require that all of our suppliers sign our Supplier Code of Conduct, which requires them to operate in full compliance with the applicable laws, rules, and regulations of the countries in which they operate and certain International Labour Organization Core Labor Standards.
This powers many areas of our business including marketing, customer relationship management, inventory planning and logistics, and back office functions. Additionally, to protect and secure sensitive data such as customer information, we employ multi-factor authentication, a suite of security tools, systems monitoring and alerting, audit logs, and controls across our major systems, corporate devices, and business processes.
Additionally, to protect and secure sensitive data such as customer information, we employ multi-factor authentication, a suite of security tools, systems monitoring and alerting, audit logs, and controls across our major systems, corporate devices, and business processes.
Our products, which are predominantly manufactured in countries other than the United States and which are sold in over 35 countries across the world, may be subject to tariffs, treaties, and various trade agreements, as well as laws affecting the importation of consumer goods. We monitor changes in these laws and believe we are in material compliance with applicable laws.
Our products, which are predominantly manufactured in countries other than the United States and which are sold in countries across the world, 9 Table of Contents may be subject to tariffs, treaties, and various trade agreements, as well as laws affecting the importation of consumer goods.
Approximately 22% of our ’birds work in one of our corporate functions, with the remainder working in our retail stores and customer experience. We also hire seasonal employees in retail and customer experience, primarily during the peak holiday selling season. None of our employees are represented by a labor union with respect to his or her employment.
We also engage contractors and consultants from time to time and hire seasonal employees in retail and customer experience, primarily during the peak holiday selling season. None of our employees are represented by a labor union with respect to his or her employment.
In this way, we believe we empower our customers to make more informed purchasing decisions. Our Community A core tenet of our B Corp status is supporting the communities in which we operate. As an example, we have a long-standing partnership with Soles4Souls. Our generous 30-day return policy means that gently worn shoes get sent back to us.
In this way, we believe we empower our customers to make more informed purchasing decisions. 8 Table of Contents Our Community A core tenet of our B Corp status is supporting the communities in which we operate. As an example, we have a long-standing partnership with Soles4Souls.
It is our practice to enter into confidentiality and invention assignment agreements (or similar agreements) with our employees, consultants, and contractors involved in the development of intellectual property on our behalf.
It is our practice to enter into confidentiality and invention assignment agreements (or similar agreements) with our employees, consultants, and contractors involved in the development of intellectual property on our behalf. We also enter into confidentiality agreements with other third parties in order to limit access to, and disclosure and use of, our confidential information and proprietary information.
Seasonality Our business is affected by general seasonal trends common to the retail footwear and apparel industry, with sales typically lower in the first quarter of the year and typically higher during the end-of-year holiday period that falls within our fourth quarter. Corporate Information We were incorporated in Delaware in May 2015 as Bozz, Inc.
We monitor changes in these laws and believe we are in material compliance with applicable laws. Seasonality Our business is affected by general seasonal trends common to the retail footwear and apparel industry, with sales typically lower in the first quarter of the year and typically higher during the end-of-year holiday period that falls within our fourth quarter.
Our approach to natural materials innovation generates high quality inputs and traceability, helping ensure that our supply chain remains aligned with our brand values. Because of the high standards we promise our consumers, we both partner with certification bodies and do our own work to ensure our suppliers are meeting standards for quality, ethical practices, and environmental sustainability. • Manufacturing.
Because of the high standards we promise our consumers, we both partner with certification bodies and do our own work to ensure our suppliers are meeting standards for quality, ethical practices, and environmental sustainability.
Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged.
While we continue to view retail stores as brand beacons to increase our brand awareness, drive site traffic, and enable us to offer cross-platform shopping, we plan to try to optimize our store fleet via the planned closure of 10 to 15 stores in 2024 based on our review of profitability metrics.
While we continue to view retail stores as brand beacons to increase our brand awareness, drive site traffic, and enable us to offer cross-platform shopping, we closed 15 retail stores in the United States in 2024.
While this market is highly fragmented, many of our competitors are larger, with strong worldwide brand recognition, and have substantially greater resources than us. In addition, access to offshore manufacturing and the growth of digital have made it easier for new companies to enter the markets in which we compete, further increasing competition in the footwear and apparel industries.
In addition, access to offshore manufacturing and the growth of digital have made it easier for new companies to enter the markets in which we compete, further increasing competition in the footwear and apparel industries.
Our Customers For too long, the footwear and apparel industry has offered customers a false trade-off between sustainable products and great products. We offer great products that are also sustainable, and make it easy for our customers to understand the impact of the products they buy through our carbon footprint labels.
We offer great products that are also sustainable, and make it easy for our customers to understand the impact of the products they buy.
In certain countries in which we operate, we are subject to, and comply with, local labor law requirements, which include works councils and industry-wide collective bargaining agreements.
In certain countries in which we operate, we are subject to, and comply with, local labor law requirements, which include works councils and industry-wide collective bargaining agreements. We have not experienced any work stoppages, and we consider our relations with our employees to be good. We have invested substantial time and resources in building our team.
Dual Class Common Stock Structure Since the beginning of our history, our founders have been singularly focused on building a sustainable business that demonstrates profitable growth because it is sustainable. This is also true for the stockholders who have partnered with us since the early stages of our journey.
The sustainability, nomination, and governance committee of our board of directors is responsible for overseeing ESG matters. Dual Class Common Stock Structure Since the beginning of our history, our founders have been singularly focused on building a sustainable business that demonstrates profitable growth because it is sustainable.
As a primarily vertically integrated company that has a direct relationship with our customers, we couple an organic marketing approach with our vast data ecosystem to construct a well-balanced and diversified marketing funnel with the goal of consistently driving return on advertising spend. 6 Table of Contents We are focused on increasing brand awareness and consumer touchpoints through the following marketing initiatives: • Extending our reach and connecting with our customers through digital and performance marketing, social media, TV and other media, stores as physical brand beacons, and customer experience. • Spreading our message through word-of-mouth, thought leadership, public relations campaigns, partnerships, and community.
We are focused on increasing brand awareness and consumer touchpoints through the following marketing initiatives: • Extending our reach and connecting with our customers through digital and performance marketing, social media, CTV and other media, stores as physical brand beacons, and customer experience. • Spreading our message through storytelling that celebrates human nature, word-of-mouth, thought leadership, public relations campaigns, partnerships, and community.
Our strong brand equity is fueled by our differentiated footwear and apparel products created by sustainability-driven innovation.
Our strong brand equity is fueled by our differentiated footwear and apparel products created by sustainability-driven innovation. Our Products Our product development engine is a fully integrated ecosystem, bringing together strategy, sustainability, design, sourcing, development, and production.
We did this for two reasons: to hold ourselves accountable to reducing our impact over time, and to help our customers develop a sense for the climate impact 9 Table of Contents of the things they buy.
We did this for two reasons: to hold ourselves accountable to reducing our impact over time, and to help our customers develop a sense for the climate impact of the things they buy. According to a survey we conducted of 1,300 U.S. customers in 2020, 92% of our customers trust us to deliver reliable information, tools, and advice around sustainability.
Remove Since 2019 we have supported offset projects that either avoid or remove emissions, as we work to reduce the carbon footprint of our business. To do that, we incorporated a cost of carbon emissions into our business by implementing an internal carbon tax across all of our sourcing and business decisions.
To do that, we incorporated a cost of carbon emissions into our business by implementing an internal carbon tax across all of our sourcing and business decisions. Support for offset projects is a credible tool only if you also have a robust plan to reduce emissions.
Third-Party Distribution Strategy In addition to our direct business, we selectively choose third-party retail and distributor partners in the United States and internationally to sell our products.
Third-Party Distribution Strategy In addition to our direct business, we selectively choose distributor and third-party retail partners internationally and in the United States to sell our products. Our distributor strategy includes appointing exclusive distributors in certain international markets that sell products purchased from us across eCommerce, brick and mortar, and wholesale channels in their respective markets.
Direct Business Strategy We reach our customers primarily through our direct business, a digitally-led vertical retail distribution strategy, which combines our digital offerings with our retail stores so we can make a strong connection with our customers and meet them where they are, delivering both value and convenience.
By harnessing the best of nature; human and from the earth, we continue to inspire a movement toward a more sustainable, well-balanced future. 4 Table of Contents Direct Business Strategy In the United States, we reach our customers primarily through our direct business, a digitally-led vertical retail distribution strategy, which combines our eCommerce site with our retail stores so we can make a strong connection with our customers and meet them where they are, delivering both value and convenience.
Climate change is a complex issue that can be summarized simply: the climate is changing because humans are releasing too many greenhouse gasses into the atmosphere.
Environmental, Social, and Governance 6 Table of Contents Environmental We believe that the effects of climate change are a significant threat and one of the main issues facing humanity and the global economy. Climate change is a complex issue that can be summarized simply: the climate is changing because humans are releasing too many greenhouse gasses into the atmosphere.
According to a survey we conducted of 1,300 U.S. customers in 2020, 92% of our customers trust us to deliver reliable information, tools, and advice around sustainability. We empower people to make better decisions for the planet by providing them with objective and quantitative information about the impact of the product they’re buying.
We empower people to make better decisions for the planet by providing them with objective and quantitative information about the impact of the product they’re buying.
While there are emissions that we are not able to abate today, we recognize the importance of investing in high quality carbon offset projects, with a focus on shifting to projects that remove or sequester emissions. We know all carbon offsets are not created equal, so we work with trusted partners to source projects we believe in.
We are taking steps, through regenerative agriculture, materials innovation, and clean energy, to reduce emissions within our direct footprint and within our supply chain. While there are emissions that we are not able to abate today, we recognize the importance of investing in high quality carbon offset projects, with a focus on shifting to projects that remove or sequester emissions.
When shoes are returned to Allbirds, those that can’t go back onto the shelf are donated to Soles4Souls. Soles4Souls 11 Table of Contents works with partner organizations in developing countries. Since our first sale in 2016, we have donated more than 270,000 pairs of shoes to Soles4Souls.
When shoes are returned to Allbirds, those that can’t go back onto the shelf are donated to Soles4Souls. Soles4Souls works with partner organizations in various communities in the U.S. as well as developing countries.
We rely solely on third-party logistics providers for these distribution centers, as well as last-mile carriers to distribute finished products from our warehouse locations to our stores and individual orders directly to consumers. Our U.S. business is serviced through two locations in Kentucky and California that enable a quick digital click-to-home while minimizing transportation costs and carbon impact.
We rely solely on third-party logistics providers for these distribution centers, as well as last-mile carriers to distribute finished products from our warehouse locations to our stores and individual orders directly to consumers. Competition The market in which we primarily operate in is highly competitive. Our competitors include athletic and leisure footwear companies, and athletic and leisure apparel companies.
To create our digital customer experience, we leverage a common core set of application programming interfaces (“APIs”) and tools that enable localization and speed-to-market. We have a sophisticated data infrastructure and toolset that allows our global teams to make informed decisions across key aspects of the business.
We have a sophisticated data infrastructure and toolset that allows our teams to make informed decisions across key aspects of the business, including marketing, customer relationship management, inventory planning and logistics, and back office functions.
We expect that these two targets would both reduce costs and positively impact gross margin such that we can achieve all of our targets at a cost savings to the business. By proactively creating a climate-resilient business, we believe we are well-positioned to profitably grow and lead a new age of sustainable manufacturing.
We expect that these two 7 Table of Contents targets would both reduce costs and positively impact gross margin such that we can achieve all of our targets at a cost savings to the business. Remove Since 2019 we have supported offset projects that either avoid or remove emissions, as we work to reduce the carbon footprint of our business.
As of December 31, 2023, our physical retail channel consists of 60 company-operated stores spread across seven countries, with the majority in the United States.
The seamless online experience from search to order to fulfillment creates the convenient shopping experience that our customers desire. As of December 31, 2024, our physical retail channel consists of 33 company-operated stores in the United States and United Kingdom, with the majority in the United States.
Our innovative approach consists of leveraging materials that are both more sustainable than synthetic alternatives and have tangible benefits for our customers, such as comfort, temperature regulation, and odor control.
Our products contain natural and recycled materials that are both more sustainable and have tangible benefits for our customers, such as comfort, temperature regulation, and odor control. Some of these include include superfine ZQ certified merino wool, tree fibers, and sugarcane. Footwear is the foundation of our brand and represents the majority of our revenue.
As of December 31, 2023, people of color and women made up 52% and 51% of our U.S. workforce, respectively. • Talent Development and Engagement We enable the flock to operate at their highest potential by building critical skills and leadership capabilities across all levels.
We have eight employee resource groups that bring employees together to support both our business and each other through various programs, educational opportunities, and community engagement. • Talent Development and Engagement We enable the flock to operate at their highest potential by building critical skills and leadership capabilities across all levels.
Competition The market in which we primarily operate in is highly competitive. Our competitors include athletic and leisure footwear companies, and athletic and leisure apparel companies. This competition takes place both in physical retail locations as well as online.
This competition takes place both in physical retail locations as well as online. While this market is highly fragmented, many of our competitors are larger, with strong worldwide brand recognition, and have substantially greater resources than us.
For example, we provide our full-time employees with 16 hours of paid time off each year specifically for volunteer activities performed during working hours, as well as charitable donation matching up to $500 in 2023. Furthermore, a portion of our executive compensation for director level and above is explicitly tied to a target reduction in company-wide emissions.
For example, we provide our full-time employees with 16 hours of paid time off each year specifically for volunteer activities performed during working hours. Our Customers For too long, the footwear and apparel industry has offered customers a false trade-off between sustainable products and great products.
Our apparel and other non-footwear products are primarily manufactured in Vietnam and Peru, with China, the United States, and Guatemala supporting a smaller subset across six vendors. • Logistics and distribution. We prioritize customer experience with distribution centers in all of our key markets to manage pick, pack, and ship activities, including retail fulfillment and returns management.
Our distribution network, comprised of four primary distribution centers across three countries (the United States, the United Kingdom, and the Netherlands), helps us prioritize customer experience with quick and efficient pick, pack, and ship activities, including retail fulfillment and returns management.
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Our Products Our product development engine consists of a fully integrated team across strategy, sustainability, design, sourcing, development, and production, both in our U.S. headquarters and within our manufacturing and supply chain innovation partners, combining to deliver Super Natural Comfort with sustainability at the core and distinctly simple design and performance comfort in mind.
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With teams operating in our U.S. headquarters and alongside our global manufacturing and supply chain innovation partners, we unite cutting-edge design with comfort to create distinctly modern, products. Guided by modern design principles and sustainable materials, our approach to footwear and apparel prioritizes longevity, versatility, and responsible innovation.
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We offer many different products across our footwear and apparel categories, including lifestyle and performance products. Each product adheres to our product design principles, with a goal of creating a timeless, fad-resistant product. Footwear represents the vast majority of our revenue and is the foundation of our brand.
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We offer a thoughtfully curated range of lifestyle products for men and women, each crafted with our core values at the forefront. Our goal is to create products that endure—through both responsible craftsmanship and the unmistakable Allbirds aesthetic .
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Our core franchises include lifestyle and performance shoes, such as the Dasher and the Runner. We think of each franchise as a unique design that can leverage new materials innovations, colors, partnerships, and adjacent stylings to create freshness for the brand and our customers.
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Our core franchises, including the Dasher and the Runner, serve as platforms for continuous evolution—leveraging material innovations, fresh colorways, partnerships, and adjacent styles to bring ongoing excitement to our customers.
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Our unique technical expertise in footwear and materials research and development is a basis for our secondary apparel offerings, such as classic tees, sweats, socks, and underwear. Materials and Innovation We have examined every component that goes into our products to ensure we deliver design, comfort, and performance.
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Our deep expertise in footwear and materials research also informs our secondary apparel offerings, from classic tees and sweats to socks and underwear, ensuring the same commitment to comfort, sustainability, and timeless design across all categories. Marketing Strategy and Brand At Allbirds, we believe in the power of balance—between nature and innovation, sustainability and style, performance and comfort.
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Materials research and development involves our Innovation team, with expertise in biomaterials commercialization and polymer science and experts in the fields of biomechanics, polymer development, green chemistry, biotechnology, and sustainable venture investments.
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Inspired by Mother Nature and human nature, our brand exists to help people tread lighter on the planet while living more fully in it. With a vertically integrated approach, we maintain a direct relationship with our customers, allowing us to pair an organic marketing strategy fueled with elevated valuable content, with a rich data ecosystem.
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We bring these materials to market with our Product Development team to ensure that products meet or exceed our customers’ quality and performance standards before they are ready for commercialization. We have developed distinctive “Hero” materials platforms that provide the foundation for our product innovation, which include superfine ZQ certified merino wool, tree fibers, and sugarcane.
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This enables us to cultivate a balanced and diversified marketing funnel, which begins by earning our consumers attention and is consistently optimizing return on investment.
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Marketing Strategy and Brand Our purpose-driven lifestyle brand inspires consumers to live life in better balance, a goal central to our marketing and that we believe creates deep affinity and loyalty with our customers, who associate our brand with sustainability and high-quality product experiences.
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As of December 31, 2024, we had international distributor partners covering more than 40 countries, including Canada, China and Japan. We plan to add additional distributor partners covering additional countries in the future.
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The seamless online experience from search to order to fulfillment creates the convenient shopping experience that our customers desire. Our mobile app also allows customers to gain early access to our new product launches, purchase exclusive product drops, and try on footwear virtually, creating further engagement between our brand and our customer.
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Technology, Supply Chain and Operations We leverage technology across channels which enables us to rely on partners, such as Shopify, to more effectively scale. To create our digital customer experience, we leverage a common core set of application programming interfaces (“APIs”) and tools that enable localization and speed-to-market.
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Our distributor strategy includes appointing exclusive distributors in certain international markets, including Canada and South Korea, that sell products purchased from us across eCommerce, brick and mortar, and wholesale channels in their respective markets. Technology We leverage modern technology across physical and digital channels which enables us to rely on partners such as Shopify to more effectively scale.
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Our approach to sourcing and manufacturing products, many of which include innovative natural materials, includes careful selection of a small group of Tier 1 factories as our partners. We believe this generates high quality inputs and traceability, helping ensure that our supply chain remains aligned with our brand values.
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Our distribution network, comprised of seven primary distribution centers across eight countries (the United States, the United Kingdom, 7 Table of Contents the Netherlands, China, Japan and New Zealand), puts us close to the customer, allowing us to reach over 35 countries in a matter of days with quick, reliable service. • Responsible sourcing program and small, tight-knight supply chain.
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Our 5 Table of Contents footwear products are manufactured in Vietnam. Our apparel and other non-footwear products are manufactured in the United States, China, Peru, and Mexico.
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We have carefully selected a small group of Tier 1 factories as our partners to help us make world-class products, helping to develop the technical expertise needed to work with our sustainable materials via an extensive iteration process.
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We know all carbon offsets are not created equal, so we work with trusted partners to source projects we believe in. All of our offset projects must be certified to an internationally recognized offset standard such as Gold Standard and Verified Carbon Standard, and are screened against criteria like permanence, additionality, leakage, and vintage year.
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We also expect our supplier factories to undertake an onsite social assessment by an independent, third-party social assessment firm. These social assessments ensure suppliers meet our minimum expectations with regards to working conditions as specified in our Supplier Code.
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As of December 31, 2024, we employed 542 ’birds, approximately 90% of whom were located in the United States. Approximately 31% of our ’birds work in one of our corporate functions, with the remainder working in our retail stores and customer experience.
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In addition to conducting our own audits when necessary, we sometimes accept audits that use third-party, mutually recognized standards to reduce audit fatigue at factories and to help ensure safe, lawful, humane, and ethical manufacturing practices. As of December 31, 2023, our footwear products are manufactured in Vietnam.
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We are highly dependent on our flock and it’s crucial that we continue to attract, develop and retain valuable employees. To facilitate talent attraction, development, and retention we are committed to creating a safe and supportive workplace environment where everyone feels valued.
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Environmental, Social, and Governance Environmental Our intention is to help reverse climate change through better business. We believe that climate change is an existential threat and the number one issue facing humanity and the global economy.
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We believe our success as a company relies on implementing effective practices that foster opportunities for our employees to grow and develop in their careers.
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According to a 2020 McKinsey and Global Fashion Agenda report, the global fashion industry accounted for approximately 4% of global greenhouse gas emissions in 2018, or 2.1 billion tonnes of carbon dioxide equivalent emissions, or CO2e, and over 70% of those emissions were related to upstream activities like materials production, preparation, and processing.
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This is also true for the stockholders who have partnered with us since the early stages of our journey.
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Reduce By using natural and renewable materials along with responsible manufacturing practices, Allbirds produces footwear today with approximately 45% less emissions than what we estimate is the carbon footprint of a standard sneaker.
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If we assume all 24 billion pairs of shoes produced by the industry in 2019 had a 45% lower carbon footprint relative to our estimate of the carbon footprint of a standard sneaker, the industry would have saved 15,698 million tonnes of CO2e, which is equivalent to taking 33 million cars off the road in the same timeframe.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

119 edited+31 added−37 removed458 unchanged
Biggest changeAmong others, these provisions include those that: • provide for a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, even if they own significantly less than a majority of the outstanding shares of our common stock; • restrict the forum for certain litigation against us to Delaware or the federal courts, as applicable; • provide that our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • divide our board of directors into three classes, Class I, Class II, and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • provide that a special meeting of stockholders may be called only by the chair of our board of directors, a chief executive officer, or our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • provide that our board of directors may alter our amended and restated bylaws without obtaining stockholder approval; • require the approval of holders of at least two-thirds of the voting power of the shares of capital stock entitled to vote at an election of directors to adopt, amend, or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • require the approval of holders of at least two-thirds of the voting power of the shares of capital stock entitled to vote at an election of directors to amend or repeal any provisions of our amended and restated certificate of incorporation relating to our status as a PBC; • require the approval of holders of at least two-thirds of the voting power of the shares of capital stock entitled to vote at an election of directors to merge or consolidate with or into another entity if, as a result of such merger or consolidation, the capital stock of Allbirds would become, or be converted into or exchanged for the right to receive, shares or other equity interests in a domestic or foreign corporation that is not a public benefit corporation or similar entity and the certificate of incorporation (or similar governing document) of which does not contain a public benefit provision identical to ours; • require that stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to our board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and • authorize our board of directors to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer. 46 Table of Contents Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which generally prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Biggest changeAmong others, these provisions include those that: 44 Table of Contents • provide for a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, even if they own significantly less than a majority of the outstanding shares of our common stock; • restrict the forum for certain litigation against us to Delaware or the federal courts, as applicable; • provide that our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • divide our board of directors into three classes, Class I, Class II, and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • provide that a special meeting of stockholders may be called only by the chair of our board of directors, a chief executive officer, or our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • provide that our board of directors may alter our amended and restated bylaws without obtaining stockholder approval; • require the approval of holders of at least two-thirds of the voting power of the shares of capital stock entitled to vote at an election of directors to adopt, amend, or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • require the approval of holders of at least two-thirds of the voting power of the shares of capital stock entitled to vote at an election of directors to amend or repeal any provisions of our amended and restated certificate of incorporation relating to our status as a PBC; • require the approval of holders of at least two-thirds of the voting power of the shares of capital stock entitled to vote at an election of directors to merge or consolidate with or into another entity if, as a result of such merger or consolidation, the capital stock of Allbirds would become, or be converted into or exchanged for the right to receive, shares or other equity interests in a domestic or foreign corporation that is not a public benefit corporation or similar entity and the certificate of incorporation (or similar governing document) of which does not contain a public benefit provision identical to ours; • require that stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to our board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and • authorize our board of directors to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
Additionally, as part of a transition from a direct to a distributor model in certain countries, we may incur expenses and charges, including but not limited to, those associated with employees, inventory, leases and long-lived assets, that could have a material adverse effect on our our business, financial condition, results of operations, and cash flows.
Additionally, as part of a transition from a direct to a distributor model in certain countries, we may incur expenses and charges, including but not limited to, those associated with employees, inventory, leases and long-lived assets, that could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
While our sustainability strategy and practices and the level of transparency with which we are approaching them are foundational to our business, they expose us to several risks, including: • that we may fail or be unable to fully achieve one or more of the 2025 Targets or the 2030 Goal due to a range of factors within or beyond our control (including a failure for governments and other third parties to make the investments that are required to make infrastructure improvements, such as greater availability of cleaner energy grids), or that we may adjust or modify our stated goals in light of new information, adjusted projections, or a change in business strategy, any of which could negatively impact our brand, reputation, and business; • that achieving the 2025 Targets and/or 2030 Goal may require us to expend significant resources, which could divert the attention of our senior management and key personnel, delay the time by which we can achieve profitability, harm us competitively, or otherwise limit our ability to make investments in our growth; • that our disclosures related to ESG may result in heightened scrutiny from stakeholders or other third parties of our ESG performance, activities, and decisions; • that a failure to or perception of a failure to disclose metrics and set goals that are rigorous enough or in an acceptable format, a failure to appropriately manage selection of goals, a failure to or perception of a failure to make appropriate disclosures, stakeholder perception of a failure to prioritize the “correct” ESG goals, or an unfavorable ESG-related rating by a third party could negatively impact our brand, reputation, and business; • that certain metrics we utilize receive limited or no assurance from and/or verification by third parties, may involve a less rigorous review process than assurance sought in connection with more traditional audits, such a review process may not identify errors and may not protect us from potential liability under the securities laws, and, if we were to seek more extensive assurance or attestation with respect to such ESG metrics, we may be unable to obtain such assurance or attestation or may face increased costs related to obtaining and/or maintaining such assurance or attestation; • that the third-party data used in our carbon footprint calculations are determined to be wrong or become unavailable to us for whatever reason, which would require us to find a new source of quality third-party data or develop our own, either of which could require significant resources, a temporary suspension of sharing a carbon footprint for each product, or an adjustment to carbon footprint numbers because of variations in the underlying 24 Table of Contents data, and if our stakeholders react unfavorably to any such situation or we fail to adequately manage any transition, it could negatively impact our brand, reputation, and business; • that the ESG or sustainability standards, norms, or metrics, which are constantly evolving, change in a manner that impacts us negatively or requires us to change the content or manner of our disclosures, and our stakeholders or third parties view such change(s) negatively, we are unable to adequately explain such changes, or we are required to expend significant resources to update our disclosures, any of which could negatively impact our brand, reputation, and business; • that our brand reputation, and business, could be negatively impacted if we are perceived, alleged or found to be in violation of, or non-compliant with, newly adopted or constantly evolving ESG- and sustainability-related laws and disclosure requirements that are applicable to us; and • that our brand, reputation, and business could be negatively impacted if any of our disclosures, including our carbon footprint numbers, reporting to third-party ESG standards, or reporting against our 2025 Targets, 2030 Goal, or other goals, are inaccurate, perceived to be inaccurate, or alleged to be inaccurate.
While our sustainability strategy and practices and the level of transparency with which we are approaching them are foundational to our business, they expose us to several risks, including: • that we may fail or be unable to fully achieve one or more of the 2025 Targets or the 2030 Goal due to a range of factors within or beyond our control (including a failure for governments and other third parties to make the investments that are required to make infrastructure improvements, such as greater availability of cleaner energy grids), or that we may adjust or modify our stated goals in light of new information, adjusted projections, or a change in business strategy, any of which could negatively impact our brand, reputation, and business; • that achieving the 2025 Targets and/or 2030 Goal may require us to expend significant resources, which could divert the attention of our senior management and key personnel, delay the time by which we can achieve profitability, harm us competitively, or otherwise limit our ability to make investments in our growth; • that our disclosures related to ESG may result in heightened scrutiny from stakeholders or other third parties of our ESG performance, activities, and decisions; • that a failure to or perception of a failure to disclose metrics and set goals that are rigorous enough or in an acceptable format, a failure to appropriately manage selection of goals, a failure to or perception of a failure to make appropriate disclosures, stakeholder perception of a failure to prioritize the “correct” ESG goals, or an unfavorable ESG-related rating by a third party could negatively impact our brand, reputation, and business; • that certain metrics we utilize receive limited or no assurance from and/or verification by third parties, may involve a less rigorous review process than assurance sought in connection with more traditional audits, such a review process may not identify errors and may not protect us from potential liability under the securities laws, and, if we were to seek more extensive assurance or attestation with respect to such ESG metrics, we may be unable to obtain such assurance or attestation or may face increased costs related to obtaining and/or maintaining such assurance or attestation; • that the third-party data used in our carbon footprint calculations are determined to be wrong or become unavailable to us for whatever reason, which would require us to find a new source of quality third-party data or develop our own, either of which could require significant resources, a temporary suspension of sharing a carbon footprint for each product, or an adjustment to carbon footprint numbers because of variations in the underlying data, and if our stakeholders react unfavorably to any such situation or we fail to adequately manage any transition, it could negatively impact our brand, reputation, and business; 23 Table of Contents • that the ESG or sustainability standards, norms, or metrics, which are constantly evolving, change in a manner that impacts us negatively or requires us to change the content or manner of our disclosures, and our stakeholders or third parties view such change(s) negatively, we are unable to adequately explain such changes, or we are required to expend significant resources to update our disclosures, any of which could negatively impact our brand, reputation, and business; • that our brand reputation, and business, could be negatively impacted if we are perceived, alleged or found to be in violation of, or non-compliant with, newly adopted or constantly evolving ESG- and sustainability-related laws and disclosure requirements that are applicable to us; and • that our brand, reputation, and business could be negatively impacted if any of our disclosures, including our carbon footprint numbers, reporting to third-party ESG standards, or reporting against our 2025 Targets, 2030 Goal, or other goals, are inaccurate, perceived to be inaccurate, or alleged to be inaccurate.
In March 2023 we announced a strategic transformation plan to (i) reignite product and brand, (ii) optimize U.S. stores and slow the pace of new store openings, (iii) evaluate a transition of our international go-to-market strategy and (iv) improve cost savings and capital efficiency, including through a further reduction in our global corporate workforce in May 2023 of 21 employees, which represented approximately 9% of our global corporate workforce.
In March 2023 we announced a strategic transformation plan to (i) reignite product and brand, (ii) optimize U.S. stores and slow the pace of new store openings, (iii) evaluate a transition of our international go-to-market strategy and (iv) improve cost savings and capital efficiency, including through a reduction in our global corporate workforce in May 2023 of 21 employees, which represented approximately 9% of our global corporate workforce.
The market price of our Class A common stock has experienced and may in the future experience high volatility and significant fluctuations in response to numerous factors, many of which are beyond our control, including: • changes to our business operations and strategy; • actual or anticipated fluctuations in our financial condition and results of operations; • the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, results of operations, or capital commitments; • changes in stock market valuations and operating performance of other footwear and apparel companies generally, or those in our industry in particular; • the sustainability targets we may provide to the public, any changes in these targets, or our failure to meet them; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • changes in our board of directors or management; • sales of large blocks of our Class A common stock, including sales by our co-founders or our other executive officers and directors or by their affiliates; • lawsuits threatened or filed against us; • anticipated or actual changes in laws, regulations, or government policies applicable to our business; • changes in our capital structure, such as future issuances of debt or equity securities; • short sales, hedging, and other derivative transactions involving our capital stock; • general economic conditions in the United States and globally; • other events or factors, including those resulting from war (such as Russia’s invasion of Ukraine and the ongoing conflict in the Middle East), pandemics (including COVID-19), incidents of terrorism, or responses to these events; and • the other factors described in this “Part II, Item 1A.
The market price of our Class A common stock has experienced and may in the future experience high volatility and significant fluctuations in response to numerous factors, many of which are beyond our control, including: • changes to our business operations and strategy; • actual or anticipated fluctuations in our financial condition and results of operations; • the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; 41 Table of Contents • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, results of operations, or capital commitments; • changes in stock market valuations and operating performance of other footwear and apparel companies generally, or those in our industry in particular; • the sustainability targets we may provide to the public, any changes in these targets, or our failure to meet them; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • changes in our board of directors or management; • sales of large blocks of our Class A common stock, including sales by our co-founders or our other executive officers and directors or by their affiliates; • lawsuits threatened or filed against us; • anticipated or actual changes in laws, regulations, or government policies applicable to our business; • changes in our capital structure, such as future issuances of debt or equity securities; • short sales, hedging, and other derivative transactions involving our capital stock; • general economic conditions in the United States and globally; • other events or factors, including those resulting from war (such as Russia’s invasion of Ukraine and the ongoing conflict in the Middle East), pandemics (including COVID-19), incidents of terrorism, or responses to these events; and • the other factors described in this “Part II, Item 1A.
Although the strategic transformation plan announced in March 2023 includes cost and cash optimization efforts, our operating expenses may increase substantially in the future as we continue to, among other things: • execute on our long-term growth strategy and strategic plans; 17 Table of Contents • invest in our relationships with third parties, including retail partners and distributors; • update our product and style mix; • invest in new materials innovation and technology; • focus on sustainable and environmentally friendly practices in our supply chain, which are often more expensive than traditional alternatives; • invest in advertising and marketing initiatives to engage existing and new customers, enhance awareness of our brand, and grow market share; • optimize our number of retail store locations; • invest in the overall health and well-being of our employees; • address increased competition; • recruit and retain talent; and • incur significant accounting, legal, and other expenses as a public company that we did not incur as a private company.
Although the strategic transformation plan announced in March 2023 includes cost and cash optimization efforts, our operating expenses may increase substantially in the future as we continue to, among other things: • execute on our long-term growth strategy and strategic plans; • invest in our relationships with third parties, including retail partners and distributors; • update our product and style mix; • invest in new materials innovation and technology; • focus on sustainable and environmentally friendly practices in our supply chain, which are often more expensive than traditional alternatives; • invest in advertising and marketing initiatives to engage existing and new customers, enhance awareness of our brand, and grow market share; • optimize our number of retail store locations; • invest in the overall health and well-being of our employees; • address increased competition; • recruit and retain talent; and • incur significant accounting, legal, and other expenses as a public company that we did not incur as a private company.
Moreover, natural disasters such as earthquakes, hurricanes, tsunamis, floods, monsoons or wildfires, public health crises, such as pandemics and epidemics (including, for example, the COVID-19 pandemic), political crises, such as terrorist attacks, war and other political and geopolitcal instability, or other catastrophic events, whether occurring in the United States or abroad, and their related consequences and effects, including energy shortages, could disrupt our operations, the operations of our vendors and other suppliers, or result in economic instability that could negatively impact customer spending, any or all of which would negatively impact our results of operations and financial condition.
Moreover, natural disasters such as earthquakes, hurricanes, tsunamis, floods, monsoons or wildfires, public health crises, such as pandemics and epidemics (including, for example, the COVID-19 pandemic), political crises, such as terrorist attacks, war and other political and geopolitical instability, or other catastrophic events, whether occurring in the United States or abroad, and their related consequences and effects, including energy shortages, could disrupt our operations, the operations of our vendors and other suppliers, or result in economic instability that could negatively impact customer spending, any or all of which would negatively impact our results of operations and financial condition.
Our ability to successfully open and operate new stores depends on many factors, including, among others, our ability to: • identify suitable store locations, the availability of which is outside of our control and may require expensive and long-term lease obligations; • gain brand recognition and acceptance, particularly in geographies or regions that are new to us; • negotiate acceptable lease terms; • hire, train, and retain store personnel and field management who possess the required customer service and other skills and who share our commitment to sustainability; • invest sufficient capital in store build-out and opening; • immerse new store personnel and field management into our corporate culture and shared values; • source sufficient inventory levels; and • successfully integrate new stores into our existing operations and information technology systems.
Our ability to successfully open and operate new stores depends on many factors, including, among others, our ability to: • identify suitable store locations, the availability of which is outside of our control and may require expensive and long-term lease obligations; • gain brand recognition and acceptance, particularly in geographies or regions that are new to us; 21 Table of Contents • negotiate acceptable lease terms; • hire, train, and retain store personnel and field management who possess the required customer service and other skills and who share our commitment to sustainability; • invest sufficient capital in store build-out and opening; • immerse new store personnel and field management into our corporate culture and shared values; • source sufficient inventory levels; and • successfully integrate new stores into our existing operations and information technology systems.
We will remain an emerging growth company until the earliest of: (1) December 31, 2026, the last day of the fiscal year following the fifth anniversary of our initial public offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (3) the date on which we have, during the previous rolling three-year period, 49 Table of Contents issued more than $1 billion in non-convertible debt securities; and (4) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates.
We will remain an emerging growth company until the earliest of: (1) December 31, 2026, the last day of the fiscal year following the fifth anniversary of our initial public offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates.
Acquisitions, investments and other strategic alliances involve numerous risks, including: • problems integrating the acquired business, facilities, technologies, or products, including issues maintaining uniform standards, procedures, controls, policies, and culture; • unanticipated costs associated with acquisitions, investments, or strategic alliances; • diversion of management’s attention from our existing business; • adverse effects on existing business relationships with suppliers, outsourced manufacturers, and other third parties; • risks associated with entering new markets in which we may have limited or no experience; • potential loss of key employees of acquired businesses; and • increased legal and accounting compliance costs.
Acquisitions, investments and other strategic alliances involve numerous risks, including: • problems integrating the acquired business, facilities, technologies, or products, including issues maintaining uniform standards, procedures, controls, policies, and culture; 46 Table of Contents • unanticipated costs associated with acquisitions, investments, or strategic alliances; • diversion of management’s attention from our existing business; • adverse effects on existing business relationships with suppliers, outsourced manufacturers, and other third parties; • risks associated with entering new markets in which we may have limited or no experience; • potential loss of key employees of acquired businesses; and • increased legal and accounting compliance costs.
Risks Related to Our Business, Brand, Products, and Industry We may be unable to successfully execute on our strategic transformation plan, simplification initiatives, or our long-term growth strategy, including efforts to maintain or grow our current revenue and profit levels, reduce our costs, or accurately forecast demand and supply for our products.
Risks Related to Our Business, Brand, Products, and Industry We may be unable to successfully execute on our strategic transformation plan or our long-term growth strategy, including efforts to maintain or grow our current revenue and profit levels, reduce our costs, or accurately forecast demand and supply for our products.
Our website, portions of which are run through Shopify, and information technology systems, some of which are managed by third parties, may be susceptible to a variety of interruptions or outages, including those caused by damage, disruptions, slowdowns, or shutdowns due to failures during the process of upgrading or replacing software, databases, or components, fire, flood, power outages, hardware failures, terrorist attacks, acts of war, break-ins, earthquakes, or catastrophic events.
Our website, portions of which are run through Shopify, and information technology systems, some of which are 30 Table of Contents managed by third parties, may be susceptible to a variety of interruptions or outages, including those caused by damage, disruptions, slowdowns, or shutdowns due to failures during the process of upgrading or replacing software, databases, or components, fire, flood, power outages, hardware failures, terrorist attacks, acts of war, break-ins, earthquakes, or catastrophic events.
Like other eCommerce companies, we are also vulnerable to hacking, malware, supply chain attacks, computer viruses, unauthorized access, and various other attacks by computer hackers (such as phishing or social engineering attacks, 33 Table of Contents ransomware attacks, credential stuffing attacks, denial-of-service attacks, exploitation of software vulnerabilities, and other real or perceived cyberattacks) as well as cybersecurity incidents caused by telecommunication failures, user errors, or intentional or accidental actions or inactions by users with authorized access to our systems.
Like other eCommerce companies, we are also vulnerable to hacking, malware, supply chain attacks, computer viruses, unauthorized access, and various other attacks by computer hackers (such as phishing or social engineering attacks, ransomware attacks, credential stuffing attacks, denial-of-service attacks, exploitation of software vulnerabilities, and other real or perceived cyberattacks) as well as cybersecurity incidents caused by telecommunication failures, user errors, or intentional or accidental actions or inactions by users with authorized access to our systems.
For example, in 2023, we determined that triggering events, primarily related to our current period and history of operating cash flow losses required an impairment review of our long-lived assets. This resulted in us recording a non-cash impairment charge of $27.4 million related to long-lived assets associated with certain retail stores. The footwear and apparel business is extremely capital-intensive.
For example, in 2023, we determined that triggering events, primarily related to our current period and history of operating cash flow losses required an impairment review of our long-lived assets. This resulted in us recording a non-cash impairment charge of $27.4 million related to long-lived assets associated with certain retail stores. Our business is extremely capital-intensive.
Under generally accepted accounting principles in the United States, we assess our long-lived assets, principally property and equipment, operating lease right-of-use assets, and other long-lived assets, including identifiable intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate the carrying amount of an 20 Table of Contents asset may not be recoverable.
Under generally accepted accounting principles in the United States, we assess our long-lived assets, principally property and equipment, operating lease right-of-use assets, and other long-lived assets, including identifiable intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Accordingly, Delaware law and our PBC status could result in our board of directors making decisions which are less financially lucrative for our stockholders in the short- and/or long-term if the public benefit and other stakeholder considerations are significant; this could harm our business, results of operations, and financial condition, which in turn could cause our stock price to decline.
Accordingly, Delaware law and our PBC status could result in our board of directors making decisions which are less financially lucrative for our stockholders in the short- and/ 40 Table of Contents or long-term if the public benefit and other stakeholder considerations are significant; this could harm our business, results of operations, and financial condition, which in turn could cause our stock price to decline.
In addition, customer complaints or negative publicity related to our website, mobile app, products, product delivery times, customer data handling, marketing efforts, security practices, customer support, especially on blogs and social media websites or customer responses to the actions of our vendors or distributors, could diminish customer loyalty and community engagement and harm our brand and business.
In addition, customer complaints or negative publicity related to our website, mobile app, products, product delivery times, customer data handling, marketing efforts, security practices, customer support, especially on blogs and social media 22 Table of Contents websites or customer responses to the actions of our vendors or distributors, could diminish customer loyalty and community engagement and harm our brand and business.
We may be unable to provide customers with the high-quality sustainable footwear and apparel they seek if our supply chain partners do not consistently produce high-quality products for us to sell. We believe that many of our new customers find us by word of mouth and other non-paid referrals from existing customers.
We may be unable to provide customers with the high-quality sustainable footwear and apparel they seek if our supply chain partners do not consistently produce high-quality products for us to sell. 27 Table of Contents We believe that many of our new customers find us by word of mouth and other non-paid referrals from existing customers.
Further, Virginia, Colorado, Utah, and Connecticut have all passed privacy laws that took effect in 2023, but aspects of these state privacy statutes remain unclear, resulting in further legal uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply.
Further, Virginia, Colorado, Utah, and Connecticut have all passed 33 Table of Contents privacy laws that took effect in 2023, but aspects of these state privacy statutes remain unclear, resulting in further legal uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply.
If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive beneficial network effects with our suppliers, our net revenue may decrease, and our business, financial condition, and results of operations may be materially adversely affected.
If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to 13 Table of Contents drive beneficial network effects with our suppliers, our net revenue may decrease, and our business, financial condition, and results of operations may be materially adversely affected.
If the perceived value of our equity awards declines further, or if the mix of equity and cash compensation that we offer is unattractive, it may adversely affect our ability to recruit and retain employees. We may not be successful in attracting, integrating, or retaining qualified personnel 25 Table of Contents to fulfill our current or future needs.
If the perceived value of our equity awards declines further, or if the mix of equity and cash compensation that we offer is unattractive, it may adversely affect our ability to recruit and retain employees. We may not be successful in attracting, integrating, or retaining qualified personnel to fulfill our current or future needs.
Any of these issues with our contractors could have a greater negative impact on us, due to the importance of ESG and sustainability practices to our brand and business. 28 Table of Contents Failure of our suppliers or manufacturers to consistently provide high-quality materials and products could adversely affect our brand and reputation and cause our business and results of operations to suffer.
Any of these issues with our contractors could have a greater negative impact on us, due to the importance of ESG and sustainability practices to our brand and business. Failure of our suppliers or manufacturers to consistently provide high-quality materials and products could adversely affect our brand and reputation and cause our business and results of operations to suffer.
In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality, and features of our website, mobile app and underlying technology infrastructure, which is particularly challenging given the rapid rate at which new technologies, customer preferences and expectations, and industry standards and practices are evolving in the 32 Table of Contents eCommerce industry.
In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality, and features of our website, mobile app and underlying technology infrastructure, which is particularly challenging given the rapid rate at which new technologies, customer preferences and expectations, and industry standards and practices are evolving in the eCommerce industry.
GDPR, and other U.K. data protection laws or regulations may develop in the medium to longer term nor the effects of divergent laws and guidance regarding how data transfers to and from the United Kingdom will be regulated. 36 Table of Contents We are also subject to evolving E.U. privacy laws on cookies and e-marketing.
GDPR, and other U.K. data protection laws or regulations may develop in the medium to longer term nor the effects of divergent laws and guidance regarding how data transfers to and from the United Kingdom will be regulated. We are also subject to evolving E.U. privacy laws on cookies and e-marketing.
Many of our competitors are large apparel and/or footwear companies with strong worldwide brand recognition, while others are new market participants with low barriers to entry. Because of the fragmented nature of the industry, we also compete with other footwear and apparel sellers, including those specializing in athletic footwear and other casual footwear.
Many of 17 Table of Contents our competitors are large apparel and/or footwear companies with strong worldwide brand recognition, while others are new market participants with low barriers to entry. Because of the fragmented nature of the industry, we also compete with other footwear and apparel sellers, including those specializing in athletic footwear and other casual footwear.
Unfavorable economic conditions have led and, in the future, may lead consumers to delay or reduce purchases of our products. Consumer demand for our products may also decline as a result of store closures, an economic downturn, or economic 16 Table of Contents uncertainty in our key markets, particularly in North America, Europe, and Asia.
Unfavorable economic conditions have led and, in the future, may lead consumers to delay or reduce purchases of our products. Consumer demand for our products may also decline as a result of store closures, an economic downturn, or economic uncertainty in our key markets, particularly in North America, Europe, and Asia.
Our brand and reputation could also be negatively impacted by adverse publicity, whether or not valid, regarding allegations that we, or persons associated with us or formerly associated with us, have violated applicable laws or regulations, including but not limited to those related to product labeling and safety, marketing, employment, discrimination, harassment, whistle-blowing, privacy, corporate citizenship, improper business practices, or cybersecurity.
Our brand and reputation could also be negatively impacted by adverse publicity, whether or not valid, regarding allegations that we, or persons associated with us or formerly associated with us, have violated applicable laws or regulations, including but not limited to those related to product labeling and safety, 16 Table of Contents marketing, employment, discrimination, harassment, whistle-blowing, privacy, corporate citizenship, improper business practices, or cybersecurity.
In 39 Table of Contents addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate.
In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate.
These provisions could also limit the price that investors might be willing to pay in the future for shares of our Class A common stock, thereby depressing the market price of our Class A common stock. 45 Table of Contents As a PBC, we may be less attractive as a takeover target than a traditional company.
These provisions could also limit the price that investors might be willing to pay in the future for shares of our Class A common stock, thereby depressing the market price of our Class A common stock. As a PBC, we may be less attractive as a takeover target than a traditional company.
We may experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Our recruiting efforts may also be limited or delayed by laws and regulations, such as restrictive immigration laws, and restrictions on travel or availability of visas.
We may experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Our recruiting efforts 24 Table of Contents may also be limited or delayed by laws and regulations, such as restrictive immigration laws, and restrictions on travel or availability of visas.
To the extent that such changes have a negative impact on us, our suppliers, manufacturers, or our customers, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.
To the extent that such changes have a negative impact on us, our suppliers, manufacturers, or our customers, 38 Table of Contents including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.
We depend significantly on a very limited number of third-party contract manufacturers for the sourcing of the vast majority of our products. For example, during 2023, we transitioned all new footwear manufacturing to one footwear manufacturer in Vietnam.
We depend significantly on a very limited number of third-party contract manufacturers for the sourcing of the vast majority of our products. For example, during 2023, we transitioned all new footwear manufacturing to one footwear 19 Table of Contents manufacturer in Vietnam.
For example, we have in the past been the target of, and may in the future be the target of, fraudulent websites with similar domain names or content to us that attempt to divert our customer traffic and defraud our 31 Table of Contents customers.
For example, we have in the past been the target of, and may in the future be the target of, fraudulent websites with similar domain names or content to us that attempt to divert our customer traffic and defraud our customers.
As of December 31, 2023, we had more than 700 employees in our retail store operations. As a result, we are subject to costs and risks related to compliance with domestic and international labor and employment laws and regulations, which could cause our business, financial condition, results of operations, or cash flows to suffer.
As of December 31, 2024, we had more than 350 employees in our retail store operations. As a result, we are subject to costs and risks related to compliance with domestic and international labor and employment laws and regulations, which could cause our business, financial condition, results of operations, or cash flows to suffer.
The raw materials and commodities used by our suppliers and manufacturers include tree fiber, merino wool, sugarcane, castor bean oil, natural rubber, recycled plastic bottles, bio-based nylon, recycled polyester, bio-based TPU, and paper products.
The raw materials and commodities used by our suppliers and manufacturers such as, tree fiber, merino wool, sugarcane, castor bean oil, natural rubber, recycled plastic bottles, bio-based nylon, recycled polyester, bio-based TPU, and paper products.
As a public company that is subject to these new rules and regulations, it has been more expensive for us to obtain director and officer liability insurance compared to as a 48 Table of Contents private company, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
As a public company that is subject to these new rules and regulations, it has been more expensive for us to obtain director and officer liability insurance compared to as a private company, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
For example, our principal offices are located in Northern California, an area which has a history of earthquakes and wildfires, and are thus vulnerable to damage or disruption.
For example, our principal offices are located in Northern California, an area which has a history of earthquakes and wildfires, 49 Table of Contents and are thus vulnerable to damage or disruption.
In September 2023, we entered into asset purchase agreements for the sale of certain net assets used in connection with the operations of our businesses in South Korea and Canada, resulting in losses based on the difference between the net book value of assets and liabilities sold against the consideration received; we may experience similar losses in connection with future transitions to a distributor model.
In 2023 and 2024, we entered into asset purchase agreements for the sale of certain net assets used in connection with the operations of our businesses in South Korea, Canada, New Zealand and China, respectively, resulting in losses based on the difference between the net book value of assets and liabilities sold against the consideration received; we may experience similar losses in connection with future transitions to a distributor model.
Currently, we rely predominantly on a few third-party logistics providers to store our finished products in, and distribute our products to customers from, their distribution center locations in the United States, United Kingdom, the Netherlands, China, Japan, and New Zealand.
Currently, we rely predominantly on a few third-party logistics providers to store our finished products in, and distribute our products to customers from, their distribution center locations in the United States, United Kingdom, and the Netherlands.
These priorities are underpinned by 10 targets, which we intend to achieve by the end of 2025, or the 2025 Targets. In addition, we have announced a goal to reduce our per-unit carbon emissions to less than 1 kg of carbon dioxide equivalent emissions by 2030, or the 2030 Goal.
These priorities are underpinned by 10 targets, or the 2025 Targets, which we intend to achieve by the end of 2025. In addition, we have announced a goal to reduce our per-unit carbon emissions to less than 1 kg of carbon dioxide equivalent emissions by 2030, or the 2030 Goal. We anticipate continuing to make ESG disclosures.
For example, changes to the terms of our shipping arrangements or the imposition of surcharges or surge pricing may adversely impact our margins and profitability.
For example, changes to the terms of our 28 Table of Contents shipping arrangements or the imposition of surcharges or surge pricing may adversely impact our margins and profitability.
It is also not possible to predict with certainty this ongoing conflict’s additional adverse effects on existing macroeconomic conditions, consumer spending habits, currency exchange rates, and financial markets, all of which have impacted and could further impact our business, financial condition, and results of operations.
It is also not possible to predict with certainty this ongoing conflict’s additional adverse effects on existing macroeconomic conditions, consumer spending habits, currency exchange rates, and financial markets, all of which have impacted and could further impact our business, financial condition, and results of operations. Item 1B. Unresolved Staff Comments None.
Similarly, certain of our foreign operating expenses are denominated in the currencies of the countries and territories in which our third-party vendors are located.
Similarly, certain of our foreign operating expenses are denominated in the currencies of the 36 Table of Contents countries and territories in which our third-party vendors are located.
We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the 15 Table of Contents risks and uncertainties described herein.
We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein.
It is possible that these laws and regulations may be interpreted 34 Table of Contents and applied in a manner that is inconsistent from jurisdiction to jurisdiction or inconsistent with our current policies and practices.
It is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent from jurisdiction to jurisdiction or inconsistent with our current policies and practices.
These two cases are captioned Shnayder v. Allbirds, Inc., et al., Case No. 23-cv-01811-AMO (N.D. Cal.); Delgado v. Allbirds, Inc., et al., Case No. 23-cv-02372-AMO (N.D. Cal.). On July 25, 2023, the court entered an order consolidating the two cases, appointing lead plaintiffs, and approving lead plaintiffs’ selection of lead counsel. We intend to vigorously defend against these lawsuits.
These two cases are captioned Shnayder v. Allbirds, Inc., et al., Case No. 23-cv-01811-AMO (N.D. Cal.); Delgado v. Allbirds, Inc., et al., Case No. 23-cv-02372-AMO (N.D. Cal.). On July 25, 2023, the court entered an order consolidating the two cases, appointing lead plaintiffs, and approving lead plaintiffs’ selection of lead counsel.
Our growth strategy involves expansion of our retail partnerships, which presents risks and challenges to our business. In 2022, we began entering into broad-based agreements with third-party retailers, and we have limited operating experience executing this channel distribution strategy at scale.
Our growth strategy involves expansion of our retail partnerships, which presents risks and challenges to our business. Beginning in 2022 we have entered into broad-based agreements with third-party retailers, and we have limited operating experience executing this channel distribution strategy.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, and our business and prospects could fail or be adversely affected. Item 1B. Unresolved Staff Comments None.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, and our business and prospects could fail or be adversely affected.
Our contracts with some suppliers and manufacturers may not adequately meet our production requirements, and we compete with other companies for raw materials and production.
Our contracts with some 26 Table of Contents suppliers and manufacturers may not adequately meet our production requirements, and we compete with other companies for raw materials and production.
As a result of our global suppliers, we are subject to risks associated with doing business abroad, including: • political unrest, terrorism, geopolitical events, war and other violent conflicts, labor disputes, and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured, including, for example, Vietnam, China, and Peru; • the imposition of new laws and regulations, including those relating to labor conditions, quality, and safety standards, imports, duties, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds, particularly new or increased tariffs imposed by the United States on imports from countries where our products are manufactured, including, for example, Vietnam, China, and Peru; • greater challenges and increased costs with enforcing and periodically auditing or reviewing our suppliers and manufacturers’ compliance with our supplier code of conduct, including their labor and sustainability practices, given that their facilities are located outside of the United States and, in many cases, far away from our offices and management; • reduced protection for intellectual property rights, including trademark protection, in some countries, particularly China; • disruptions in operations due to global, regional, or local public health crises (for example, the COVID-19 pandemic) or other emergencies or natural disasters; • disruptions or delays in shipments; and • changes in local economic conditions in countries where our manufacturers, suppliers, or customers are located. 29 Table of Contents These and other factors beyond our control, could interrupt our suppliers’ production, influence the ability of our suppliers to export our products cost-effectively or at all, and inhibit our suppliers’ ability to procure certain materials, any of which could harm our business, financial condition, and results of operations.
As a result of our global suppliers, we are subject to risks associated with doing business abroad, including: • political unrest, terrorism, geopolitical events, war and other violent conflicts, labor disputes, and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured, including, for example, Vietnam, China, and Peru; • the imposition of new laws and regulations, including those relating to labor conditions, quality, and safety standards, imports, duties, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds, particularly new or increased tariffs imposed by the United States on imports from countries where our products are manufactured, including, for example, Vietnam, China, and Peru; • greater challenges and increased costs with enforcing and periodically auditing or reviewing our suppliers and manufacturers’ compliance with our supplier code of conduct, including their labor and sustainability practices, given that their facilities are located outside of the United States and, in many cases, far away from our offices and management; • reduced protection for intellectual property rights, including trademark protection, in some countries, particularly China; • disruptions in operations due to global, regional, or local public health crises (for example, the COVID-19 pandemic) or other emergencies or natural disasters; • disruptions or delays in shipments; and • changes in local economic conditions in countries where our manufacturers, suppliers, or customers are located.
Our amended and restated certificate of incorporation provides that, unless we otherwise consent in writing, (A) (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of Allbirds to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws (as either may be amended or restated) or as to which the DGCL confers exclusive jurisdiction on the Court of Chancery of the State of Delaware, or (4) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters and the U.S. federal district courts will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or stockholders. 45 Table of Contents Our amended and restated certificate of incorporation provides that, unless we otherwise consent in writing, (A) (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of Allbirds to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws (as either may be amended or restated) or as to which the DGCL confers exclusive jurisdiction on the Court of Chancery of the State of Delaware, or (4) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
In addition, our marketing strategy is global in scale, reaching consumers in the more than 35 countries where we sell our products. We seek to engage with our customers and build awareness of our brands through sponsoring unique events and experiences.
In addition, our marketing strategy is global in scale, reaching consumers in each of the international markets where we sell our products. We seek to engage with our customers and build awareness of our brands through sponsoring unique events and experiences.
Even if the market in which we compete meets the size estimates and growth forecasts, our business could fail to grow for a variety of reasons outside of our control, including competition in our industry.
Even if the market in which we compete meets the size estimates and growth forecasts, our business could fail to grow for a variety of reasons outside of our control, including competition in our industry. If any of these risks materialize, it could harm our business and prospects.
The third-party owned and operated logistics and distribution centers we rely on could be interrupted by issues beyond our control, including information technology problems, disasters such as earthquakes or fires, or outbreaks of disease or government actions taken to mitigate their spread.
The third-party owned and operated logistics and distribution centers we rely on could be interrupted by issues beyond our control, including information technology problems, disasters such as earthquakes or fires, or outbreaks of disease or government actions taken to mitigate their spread. Any significant failure in our distribution facilities could result in an adverse effect on our business.
Trade restrictions, including tariffs, quotas, economic sanctions, embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations. 38 Table of Contents We are also dependent on international trade agreements and regulations.
Trade restrictions, including tariffs, quotas, economic sanctions, embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations.
The countries in which we produce and sell our products could impose or increase tariffs, duties, or other similar charges that could negatively affect our results of operations, financial position, or cash flows.
We are also dependent on international trade agreements and regulations. The countries in which we produce and sell our products could impose or increase tariffs, duties, or other similar charges that could negatively affect our results of operations, financial position, or cash flows.
In addition, from time to time, our products may be damaged in transit, which can also increase return rates. Returned goods may also be damaged in transit as part of the return process which can impede our ability to resell the returned goods.
Returned goods may also be damaged in transit as part of the return process which can impede our ability to resell the returned goods.
We cannot be sure that our practices comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business, and proceedings or actions against us by governmental entities, customers, suppliers, or others.
Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business, and proceedings or actions against us by governmental entities, customers, suppliers, or others.
If any of these risks materialize, it could harm our business and prospects. 47 Table of Contents We may seek to grow our business through acquisitions of, or investments in, new or complementary businesses, facilities, technologies, or products, or through strategic alliances; the failure to adequately manage these acquisitions, investments, or alliances, to integrate them with our existing business, or to realize anticipated returns, could adversely affect us.
We may seek to grow our business through acquisitions of, or investments in, new or complementary businesses, facilities, technologies, or products, or through strategic alliances; the failure to adequately manage these acquisitions, investments, or alliances, to integrate them with our existing business, or to realize anticipated returns, could adversely affect us.
All of the shares of common stock issuable upon the exercise of outstanding stock options, the 10,264,090 shares of Class A common stock reserved and available for future issuance under our 2021 Equity Incentive Plan, and the 5,236,950 shares of Class A common stock reserved and available for future issuance under our 2021 Employee Stock Purchase Plan are registered for public resale under the Securities Act.
All of the shares of common stock issuable upon the exercise of outstanding stock options, the 464,165 shares of Class A common stock reserved and available for future issuance under our 2021 Equity Incentive Plan, and the 316,554 shares of Class A common stock reserved and available for future issuance under our 2021 Employee Stock Purchase Plan are registered for public resale under the Securities Act.
It is possible that general business regulations and laws, or those specifically governing the internet or eCommerce, may be interpreted and applied in a 37 Table of Contents manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices.
It is possible that general business regulations and laws, or those specifically governing the internet or eCommerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices comply fully with all such laws and regulations.
We incurred full year net losses of $152.5 million and $101.4 million in 2023 and 2022, respectively, and had an accumulated deficit of $391.2 million as of December 31, 2023. We expect to continue to incur significant losses in the future.
We incurred full year net losses of $93.3 million and $152.5 million in 2024 and 2023, respectively, and had an accumulated deficit of $484.5 million as of December 31, 2024. We expect to continue to incur significant losses in the future.
As a result, historically, we have typically generated a higher proportion of net revenue, and incurred higher selling and marketing expenses, during the holiday season in the fourth quarter of the year compared to other quarters, and we expect these trends to continue.
As a result, historically, we have typically generated a higher proportion of net revenue, and incurred higher selling and marketing expenses, during the holiday season in the fourth quarter of the year compared to other quarters, and we expect these trends to continue. This seasonality may adversely affect our business and cause our results of operations to fluctuate.
We do not manufacture our products or the raw materials for them and rely instead on suppliers. Many of the materials used in our products are developed and manufactured by third parties and may be available, in the short-term, from only one or a very limited number of sources, some of whom may be impacted by external factors.
Many of the materials used in our products are developed and manufactured by third parties and may be available, in the short-term, from only one or a very limited number of sources, some of whom may be impacted by external factors.
If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our Class A common stock would be negatively affected.
We do not have any control over these analysts. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our Class A common stock would be negatively affected.
The DSL, which became effective on September 1, 2021, 35 Table of Contents imposes data privacy and cybersecurity obligations on entities carrying out processing of personal data and stipulates that entities processing of data outside China will be liable for damages to the interests of PRC citizens.
The DSL, which became effective on September 1, 2021, imposes data privacy and cybersecurity obligations on entities carrying out processing of personal data and stipulates that entities processing of data outside China will be liable for damages to the interests of PRC citizens. Also, on August 20, 2021, the PRC passed the Personal Information Protection Law, or the PIPL.
We are unable to predict the timing or effect of such sales on the market price of our Class A common stock. 44 Table of Contents In addition, as of December 31, 2023, we had stock options outstanding that, if fully exercised, would result in the issuance of 8,206,091 shares of Class B common stock and 5,043,892 shares of Class A common stock.
We are unable to predict the timing or effect of such sales on the market price of our Class A common stock. In addition, as of December 31, 2024, we had stock options outstanding that, if fully exercised, would result in the issuance of 316,542 shares of Class B common stock and 240,819 shares of Class A common stock.
In addition, we may be subject to heightened PRC regulatory scrutiny in the future. As there remains significant uncertainty in the interpretation and enforcement of the DSL and the PIPL, we cannot assure you that we will comply with such regulations in all respects.
As there remains significant uncertainty in the interpretation and enforcement of the DSL and the PIPL, we cannot assure you that we will comply with such regulations in all respects.
It is possible that further tariffs may be introduced, or increased. Such changes could adversely impact our business and could increase the costs of sourcing our products that are manufactured in countries other than the United States, or could require us to source more of our products from other countries.
Such changes could adversely 37 Table of Contents impact our business and could increase the costs of sourcing our products that are manufactured in countries other than the United States, or could require us to source more of our products from other countries.
Our success depends in large part upon widespread adoption of our products by our customers. In order to attract new customers and continue to expand our customer base, we must appeal to and attract customers who identify with our sustainable footwear and apparel products.
In order to attract new customers and continue to expand our customer base, we must appeal to and attract customers who identify with our sustainable footwear and apparel products.
If a conflict between such interests arises, there is no guarantee such a conflict would be resolved in favor of our stockholders. 41 Table of Contents While directors of traditional corporations are required to make decisions they believe to be in the best interests of their stockholders, directors of a PBC have a fiduciary duty to balance the stockholders’ pecuniary interests, the best interests of other stakeholders materially affected by the PBC’s conduct and the company’s specific public benefit.
While directors of traditional corporations are required to make decisions they believe to be in the best interests of their stockholders, directors of a PBC have a fiduciary duty to balance the stockholders’ pecuniary interests, the best interests of other stakeholders materially affected by the PBC’s conduct and the company’s specific public benefit.
If we, our distributors, or our third-party service providers experience, or are believed to have experienced, security breaches that result in marketplace performance or availability problems or the loss or corruption of, or unauthorized access to or disclosure of, sensitive information, consumers may become unwilling to provide us the information necessary to make purchases on our website.
Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our employees, our third-party service providers, or their personnel. 32 Table of Contents If we, our distributors, or our third-party service providers experience, or are believed to have experienced, security breaches that result in marketplace performance or availability problems or the loss or corruption of, or unauthorized access to or disclosure of, sensitive information, consumers may become unwilling to provide us the information necessary to make purchases on our website.
Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent, if any, of international expansion efforts and other growth initiatives, the expansion of our marketing activities and overall economic conditions.
We intend to continue making investments to support our business growth and may require additional funds to support this growth. Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent, if any, of international expansion efforts and other growth initiatives, the expansion of our marketing activities and overall economic conditions.
Inventory shortages in our stores or third-party distribution centers could result in delayed shipments to customers, lost sales, a negative customer experience, lower brand loyalty, and damage to our reputation and customer relationships, any of which could have an adverse effect on our results of operations, financial condition, and cash flows.
Inventory shortages in our stores or third-party distribution centers could result in delayed shipments to customers, lost sales, a negative customer experience, lower brand loyalty, and damage to our reputation and customer relationships, any of which could have an adverse effect on our results of operations, financial condition, and cash flows. 20 Table of Contents As a company that operates retail stores, we are subject to various risks, including commercial real estate and labor and employment risks.
We are currently and may again in the future be subject to claims and litigation that could result in unexpected expenses and could ultimately be resolved against us. 40 Table of Contents From time to time, we may be involved in litigation and other proceedings, including matters related to product liability claims, stockholder class action and derivative claims, commercial disputes, and copyright infringement, challenging trademarks, and other intellectual property claims, as well as trade, regulatory, employment, and other claims related to our business or our sustainability and ESG practices, statements, and goals.
From time to time, we may be involved in litigation and other proceedings, including matters related to product liability claims, stockholder class action and derivative claims, commercial disputes, and copyright infringement, challenging trademarks, and other intellectual property claims, as well as trade, regulatory, employment, and other claims related to our business or our sustainability and ESG practices, statements, and goals.
Any of these proceedings could result in significant settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant legal fees.
We intend to vigorously defend against these lawsuits. 39 Table of Contents Any of these proceedings could result in significant settlement amounts, damages, fines, or other penalties, divert financial and management resources, and result in significant legal fees.
Our revenue is reported net of returns, discounts, and any taxes collected from customers and remitted to government authorities. We estimate an allowance for expected product returns based on historical return trends. Revenue is presented net of the sales return allowance, and the expected inventory right of recovery is presented as a reduction of cost of revenue.
Merchandise returns could harm our business. Our revenue is reported net of returns, discounts, and any taxes collected from customers and remitted to government authorities. We estimate an allowance for expected product returns based on historical return trends.
Failure to successfully execute the distributor arrangements, or a failure to protect the value of our brands, could have a material adverse effect on our results of operations.
Failure to successfully execute the distributor arrangements, or a failure to protect the value of our brands, could have a material adverse effect on our results of operations. If we are unable to execute these distributor arrangements effectively or protect our brand reputation, our operating results could suffer materially.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common stock and trading volume could decline.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common stock and trading volume could decline. 48 Table of Contents The trading market for our Class A common stock depends in part on the research and reports that securities or industry analysts publish about us or our business, our market and our competitors.
Counterfeit or “knock-off” products, as well as products that are “inspired-by-Allbirds,” may siphon off demand we have created for sustainable footwear and apparel, and may result in customer confusion, harm to our brand, a loss of our market share, and/or a decrease in our results of operations.
If the rate of product returns increases significantly or if product return economics become less efficient, our business, financial condition, and results of operations could be harmed. 25 Table of Contents Counterfeit or “knock-off” products, as well as products that are “inspired-by-Allbirds,” may siphon off demand we have created for sustainable footwear and apparel, and may result in customer confusion, harm to our brand, a loss of our market share, and/or a decrease in our results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur management team, including the Chief Technology and Culture Officer and General Counsel, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management and supervises both our internal and external cybersecurity resources.
Biggest changeOur management team, including the Chief Technology and Supply Chain Officer and Chief People and Legal Officer, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management and supervises both our internal and external cybersecurity resources.
Our Chief Technology and Culture Officer joined us in 2017 and has more than 20 years of technology-related roles and responsibilities. These presentations address a range of topics including, the threat landscape and cybersecurity events, vulnerability assessments, incident preparedness assessments, and cybersecurity awareness training.
Our Chief Technology and Supply Chain Officer joined us in 2017 and has more than 20 years of technology-related roles and responsibilities. These presentations address a range of topics including, the threat landscape and cybersecurity events, vulnerability assessments, incident preparedness assessments, and cybersecurity awareness training.
As reflected in its charter, the Audit Committee assists the Board in overseeing the Company’s privacy and information security policies. The Audit Committee engages on cybersecurity matters with our management team, including our Chief Technology and Culture Officer, and receives periodic reports from management on cybersecurity.
As reflected in its charter, the Audit Committee assists the Board in overseeing the Company’s privacy and information security policies. The Audit Committee engages on cybersecurity matters with our management team, including our Chief Technology and Supply Chain Officer, and receives periodic reports from management on cybersecurity.
In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. The Board receives regular updates on the activities of the Audit Committee, including with regard to cybersecurity oversight.
In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact 50 Table of Contents potential. The Board receives regular updates on the activities of the Audit Committee, including with regard to cybersecurity oversight.
Accordingly, we monitor and update our information technology networks and infrastructure to prevent, detect, address and mitigate risks associated with 51 Table of Contents unauthorized access, misuse, computer viruses and other events that could have a security impact.
Accordingly, we monitor and update our information technology networks and infrastructure to prevent, detect, address and mitigate risks associated with unauthorized access, misuse, computer viruses and other events that could have a security impact.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, we also leased property in the following countries around the world that serve as our 60 retail locations, totaling approximately 190,000 square feet, as set forth below. 52 Table of Contents Country # of Stores United States 45 China 6 United Kingdom 3 Japan 2 Germany 2 Netherlands 1 New Zealand 1 Total retail stores 60 While we believe that our current facilities are adequate to meet our foreseeable needs, we may lease additional facilities or vacate existing facilities as our operations require.
Biggest changeAs of December 31, 2024, we also leased property in the following countries around the world that serve as our 33 retail locations, totaling approximately 115,000 square feet, as set forth below.
In addition to our corporate headquarters, we have satellite corporate office locations in Portland, London, Shanghai, Tokyo, and Ho Chi Minh City where we lease or have co-working arrangements that total approximately 30,000 square feet of office space.
In addition to our corporate headquarters, we have satellite corporate office locations in Portland, London and Ho Chi Minh City where we lease or have co-working arrangements that total approximately 30,000 square feet of office space.
Item 2. Properties As of December 31, 2023, we operated 60 retail locations around the world. Our corporate headquarters is located in San Francisco, California, where we lease approximately 33,000 square feet of space under two leases that expire in December 2026.
Item 2. Properties As of December 31, 2024, we operated 33 retail locations around the world. Our corporate headquarters is located in San Francisco, where we lease approximately 33,000 square feet of space under two leases that expire in December 2026.
Removed
For example, we have vacated and currently sublease two corporate office spaces in San Francisco and San Diego.
Added
Country # of Stores United States 30 United Kingdom 3 Total retail stores 33 While we believe that our current facilities are adequate to meet our foreseeable needs, we may lease additional facilities or vacate existing facilities as our operations require. For example, we have vacated and currently sublease two corporate office spaces in San Francisco and San Diego, respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe intend to vigorously defend against this lawsuit. On October 3, 2023, we and certain of our executive officers and directors were named as defendants in a shareholder derivative suit, captioned Park v. Zwillinger, et al., Case No. 23-cv-01092-CFC, filed in the United States District Court for the District of Delaware.
Biggest changeFull briefing on the motion was completed on December 4, 2024 and a hearing on the motion is set for May 29, 2025. We intend to vigorously defend against this lawsuit. On October 3, 2023 and January 3, 2025, we and certain of our executive officers and directors were named as defendants in shareholder derivative suits, captioned Park v.
We intend to vigorously defend against these lawsuits. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, harm to our brand and reputation, and other factors.
We intend to vigorously defend against these lawsuits. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, harm to our brand and reputation, and other factors. Item 4.
On October 13, 2023, we and certain of our past and current executive officers and directors were named as defendants in a substantially similar shareholder derivative suit, captioned Junker v. Zwillinger, et al., Case No. 23-cv-01152-CFC, filed in the United States District Court for the District of Delaware.
On October 13, 2023, we 51 Table of Contents and certain of our past and current executive officers and directors were named as defendants in a substantially similar shareholder derivative suit, captioned Junker v. Zwillinger, et al., Case No. 23-cv-01152-CFC, filed in the United States District Court for the District of Delaware.
On July 25, 2023, the court entered an order consolidating the two cases, appointing lead plaintiffs, and approving lead plaintiffs’ selection of lead counsel. On September 15, 2023, lead plaintiffs filed a consolidated amended complaint against the same group of defendants and asserting the same claims. We filed a motion to dismiss the consolidated complaint on November 3, 2023.
On July 25, 2023, the court entered an order consolidating the two cases, appointing lead plaintiffs, and approving lead plaintiffs’ selection of lead counsel. On September 15, 2023, lead plaintiffs filed a consolidated amended complaint against the same group of defendants and asserting the same claims.
This lawsuit alleges violations of Section 14(a) of the Exchange Act, contribution under Section 21D of the Exchange Act, breach of fiduciary duties, and aiding and abetting based on allegations that are substantially similar to those asserted in the securities class action.
These derivative lawsuits allege violations of Section 14(a) of the Exchange Act, contribution under Section 21D of the Exchange Act, breach of fiduciary duties, and aiding and abetting based on allegations that are substantially similar to those asserted in the securities class action.
Added
On November 3, 2023, we filed a motion to dismiss the consolidated amended complaint and the court granted the motion on May 10, 2024, but provided plaintiffs with leave to amend their complaint. The plaintiffs filed an amended complaint in July 2024 and we filed a motion to dismiss the amended complaint on September 5, 2024.
Added
Zwillinger, et al., Case No. 23-cv-01092-CFC, filed in the United States District Court for the District of Delaware and Wolfson v. Zwillinger, et al., Case No. 2025-0007, filed in Court of Chancery of the State of Delaware, resp.
Added
Mine Safety Disclosures Not applicable. 52 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrior to that date, there was no public trading market for our Class A common stock. Holders of Record As of February 29, 2024, we had 18 holders of record of our Class A common stock and 27 holders of record of our Class B common stock.
Biggest changePrior to that date, there was no public trading market for our Class A common stock. Holders of Record As of February 28, 2025, we had 17 holders of record of our Class A common stock and 26 holders of record of our Class B common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBecause we have a recent history of pre-tax book losses and are expected to be in a pre-tax book loss position in the near term, a valuation allowance was maintained against the deferred tax assets in the United States, Canada, Vietnam, and Hong Kong as of December 31, 2023. 59 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented in dollars and as a percentage of net revenue: Year Ended December 31, 2023 2022 (in thousands) Consolidated Statements of Operations Data: Net revenue $ 254,065 $ 297,766 Cost of revenue 149,833 168,138 Gross profit 104,232 129,628 Operating expense: Selling, general, and administrative expense (1)(2) 174,044 166,736 Marketing expense 49,042 59,109 Impairment expense 27,392 3,286 Restructuring expense 6,757 782 Total operating expense 257,235 229,913 Loss from operations (153,003) (100,285) Loss from sales of businesses (2,761) — Interest income 4,076 19 Other (expense) income (436) 139 Loss before provision for income taxes (152,124) (100,127) Income tax provision (334) (1,227) Net loss $ (152,458) $ (101,354) Other comprehensive loss: Foreign currency translation gain (loss) 276 (4,277) Total comprehensive loss $ (152,182) $ (105,631) ________________ (1) Includes stock-based compensation expense of $19.3 million and $19.0 million for the years ended December 31, 2023 and 2022, respectively.
Biggest changeResults of Operations The following tables set forth our results of operations for the periods presented in dollars and as a percentage of net revenue: Year Ended December 31, 2024 2023 (in thousands) Consolidated Statements of Operations Data: Net revenue $ 189,757 $ 254,065 Cost of revenue 108,693 149,833 Gross profit 81,064 104,232 Operating expense: Selling, general, and administrative expense (1)(2) 133,379 174,044 Marketing expense 41,638 49,042 Impairment expense 1,800 27,392 Restructuring expense 1,800 6,757 Total operating expense 178,617 257,235 Loss from operations (97,553) (153,003) Net loss from sales of businesses (432) (2,761) Interest income 3,489 4,076 Other income (expense) 3,049 (436) Loss before provision for income taxes (91,447) (152,124) Income tax provision (1,871) (334) Net loss $ (93,318) $ (152,458) Other comprehensive loss: Foreign currency translation (loss) gain (2,345) 276 Total comprehensive loss $ (95,663) $ (152,182) ________________ (1) Includes stock-based compensation expense of $11.5 million and $19.3 million for the years ended December 31, 2024 and 2023, respectively.
However, we continue to monitor and respond to evolving developments regarding recent macroeconomic events including elevated inflation, rising interest rates, liquidity concerns at, and failures of, banks and other financial institutions, supply chain disruptions, fluctuations in currency exchange rates, and geopolitical conflicts, which have led to further economic uncertainty in the global economy.
However, we continue to monitor and respond to evolving developments regarding recent macroeconomic events including elevated inflation, tariffs, rising interest rates, liquidity concerns at, and failures of, banks and other financial institutions, supply chain disruptions, fluctuations in currency exchange rates, and geopolitical conflicts, which have led to further economic uncertainty in the global economy.
To determine if the value of inventory requires a write-down, we estimate the net realizable value of inventory by considering current and anticipated demand, customer preferences and buying trends, the age of the merchandise, and product quality. Inventory write-downs are recognized in cost of revenue in the condensed consolidated statements of operations and comprehensive loss.
To determine if the value of inventory requires a write-down, we estimate the net realizable value of inventory by considering current and anticipated demand, customer preferences and buying trends, the age of the merchandise, and product quality. Inventory write-downs are recognized in cost of revenue in the consolidated statements of operations and comprehensive loss.
The Credit Agreement has a maturity date of April 17, 2026. As of December 31, 2023 and 2022, we had no outstanding balances under the Credit Agreement. See Note 6, Long-Term Debt , of our consolidated financial statements included in Part II, Item 8, for more information regarding the Credit Agreement.
The Credit Agreement has a maturity date of April 17, 2026. As of December 31, 2024 and 2023, we had no outstanding balances under the Credit Agreement. See Note 6, Long-Term Debt , of our consolidated financial statements included in Part II, Item 8, for more information regarding the Credit Agreement.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations relates to our operations and financial condition reported in the consolidated financial statements for the fiscal years ended December 31, 2023 and December 31, 2022 and should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations relates to our operations and financial condition reported in the consolidated financial statements for the fiscal years ended December 31, 2024 and December 31, 2023 and should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
Some of these limitations are: • adjusted EBITDA and adjusted EBITDA margin do not reflect stock-based compensation expense, including common stock warrant expense, and therefore do not include all of our compensation costs; • adjusted EBITDA and adjusted EBITDA margin do not reflect depreciation and amortization expense and, although these are a non-cash expense, the assets being depreciated may have to be replaced in the future, increasing our cash requirements; • adjusted EBITDA and adjusted EBITDA margin do not reflect impairment expense for long-lived assets and, although these are a non-cash expense, the assets being impaired may never recover their fair value, increasing our cash requirements; • adjusted EBITDA and adjusted EBITDA margin do not reflect severance, reorganization, exit, disposal and other costs associated with restructuring plans, which reduce cash available to us; 63 Table of Contents • adjusted EBITDA and adjusted EBITDA margin do not reflect gains or losses from sales of businesses that may reduce cash available to us if the actual cash received is lower than the cash paid; • adjusted EBITDA and adjusted EBITDA margin do not reflect other income or expense that may reduce cash available to us if the actual cash received is lower than the cash paid; • adjusted EBITDA and adjusted EBITDA margin do not reflect interest income or expense, or the cash required to service interest on our debt, which reduces cash available to us; and • adjusted EBITDA and adjusted EBITDA margin do not reflect income tax expense, or tax payments that may reduce cash available to us.
Some of these limitations are: • adjusted EBITDA and adjusted EBITDA margin do not reflect stock-based compensation expense, and therefore do not include all of our compensation costs; • adjusted EBITDA and adjusted EBITDA margin do not reflect depreciation and amortization expense and, although these are a non-cash expense, the assets being depreciated may have to be replaced in the future, increasing our cash requirements; • adjusted EBITDA and adjusted EBITDA margin do not reflect impairment expense for long-lived assets and, although these are a non-cash expense, the assets being impaired may never recover their fair value, increasing our cash requirements; • adjusted EBITDA and adjusted EBITDA margin do not reflect severance, reorganization, exit, disposal and other costs associated with restructuring plans, which reduce cash available to us; • adjusted EBITDA and adjusted EBITDA margin do not reflect gains or losses from sales of businesses that may reduce cash available to us if the actual cash received is lower than the cash paid; • adjusted EBITDA and adjusted EBITDA margin do not reflect other income or expense that may reduce cash available to us if the actual cash received is lower than the cash paid; 61 Table of Contents • adjusted EBITDA and adjusted EBITDA margin do not reflect interest income or expense, or the cash required to service interest on our debt, which reduces cash available to us; and • adjusted EBITDA and adjusted EBITDA margin do not reflect income tax expense, or tax payments that may reduce cash available to us.
Key Factors Affecting Our Performance Our financial and operating conditions have been, and will continue to be affected by a number of factors, including: Ability to Grow Brand Awareness and Drive Efficient Customer Acquisition The ability to communicate our mission of making better things in a better way is integral to our success in engaging new customers and introducing them to our products and brand.
Key Factors Affecting Our Performance Our financial and operating conditions have been, and will continue to be affected by a number of factors, including: 54 Table of Contents Ability to Grow Brand Awareness and Drive Efficient Customer Acquisition The ability to communicate our mission of making better things in a better way is integral to our success in engaging new customers and introducing them to our products and brand.
Overview Allbirds is a global lifestyle brand that innovates with sustainable materials to make better footwear and apparel products in a better way, while treading lighter on our planet. We generate our revenue via sales of footwear and apparel products, primarily through our direct business, a digitally-led vertical retail distribution strategy.
Overview Allbirds is a purpose-driven lifestyle brand that innovates with sustainable materials to make better footwear and apparel products in a better way, while treading lighter on our planet. We generate our revenue via sales of footwear and apparel products, primarily through our direct business, a digitally-led vertical retail distribution strategy.
Shipping costs to receive products from our suppliers are included in the cost of inventory and recognized as cost of revenue upon the sale of products to our customers. We generally expect our cost of revenue to decrease or increase in absolute dollars in line with net revenue fluctuations.
Shipping costs to receive products from our suppliers are included in the cost of inventory and recognized as cost of revenue upon the sale of 56 Table of Contents products to our customers. We generally expect our cost of revenue to decrease or increase in absolute dollars in line with net revenue fluctuations.
Components of Results of Operations Net Revenue We generate net revenue primarily from sales of our footwear and apparel products. We sell products directly through our own digital channels (including our websites and mobile app), our leased retail stores, and third-party retailers and distributors.
Components of Results of Operations Net Revenue We generate net revenue primarily from sales of our footwear and apparel products. We sell products directly through our own digital channels (including our websites, our discontinued mobile app, and marketplace platforms), our leased retail stores, and third-party retailers and distributors.
We expect these actions, together with our strategic transformation plan on cost and cash optimization, as announced in March 2023, to reduce certain costs included in SG&A expense, however, the changing prices of goods and services caused by inflation and other macroeconomic factors may cause fluctuations in SG&A expense, notwithstanding our cost control actions.
We expect these actions, together with our strategic transformation plan on cost and cash optimization to reduce certain costs included in SG&A expense, however, the changing prices of goods and services caused by inflation and other macroeconomic factors may cause fluctuations in SG&A expense, notwithstanding our cost control actions.
Adjusted EBITDA is defined as net loss before stock-based compensation expense, including common stock warrant expense, depreciation and amortization expense, impairment expense, restructuring expense (consisting of professional fees, severance payments, and other related charges from our August 2022 and March 2023 initiatives), non-cash gains or losses on the sales of businesses relating to our March 2023 initiatives, other income or expense (consisting of non-cash changes in the fair value of our equity investments, non-cash gains or losses on foreign currency, and non-cash gains or losses on sales of property and equipment), interest income or expense, and income tax provision or benefit.
Adjusted EBITDA is defined as net loss before stock-based compensation expense, depreciation and amortization expense, impairment expense, restructuring expense (consisting of professional fees, severance payments, and other related charges from our August 2022 and March 2023 initiatives), non-cash gains or losses on the sales of businesses relating to our March 2023 initiatives, other income or expense (consisting of non-cash changes in the fair value of our equity investments, non-cash gains or losses on foreign currency, non-cash gains or losses on sales of property and equipment, and non-cash gains or losses on modifications or terminations of leases), interest income or expense, and income tax provision or benefit.
We generally market directly to consumers via our localized multilingual digital platform and our physical footprint of 60 stores as of December 31, 2023. In addition to our direct business, we selectively partner with third-parties, including retailers and distributors, to sell our products through their channels, which helps us reach more consumers and increase brand awareness.
We generally market directly to consumers via our localized digital platform and our physical footprint of 33 stores as of December 31, 2024. In addition to our direct business, we selectively partner with third parties, including distributors and retailers, to sell our products through their channels, which helps us reach more consumers and increase brand awareness.
Risk Factors, for further details. Seasonality Our business is affected by general seasonal trends common to the retail footwear and apparel industry, with sales typically lower in the first quarter of the year and typically higher during the end-of-year holiday period that falls within our fourth quarter.
Seasonality Our business is affected by general seasonal trends common to the retail footwear and apparel industry, with sales typically lower in the first quarter of the year and typically higher during the end-of-year holiday period that falls within our fourth quarter.
While we continue to do this, we must constantly evaluate and improve our strategy to anticipate current and future consumer preferences and demands. At the same time, it is critical that we maintain our commitment to offering comfortable and sustainable products.
While we continue to do this, we must constantly evaluate and improve our strategy to anticipate current and future consumer preferences and demands. At the same time, it is critical that we maintain our commitment to offering comfortable and sustainable products. Our product strategy is focused on our core franchise products.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. We believe that the following accounting estimates involve a high degree of judgment and complexity.
Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. We believe that the following accounting estimates involve a high degree of judgment and complexity.
Our material cash requirements for future capital expenditures, which include investments in our existing retail stores, product development, and systems implementations, are expected to be between $8 million and $12 million in 2024, may vary materially from those currently planned and will depend on many factors, including our revenue growth rate, the impact of our strategic transformation plan, our ability to scale across categories, geographies, and channels, our human capital costs, our ability to execute on new marketing initiatives, the timing and extent of spending to support investments in growth and technology initiatives, the market adoption of new products, ESG initiatives to reduce and offset our carbon emissions, and overall macroeconomic conditions.
Our material cash requirements for future expenditures, including capital expenditures relating to systems implementations and our existing retail stores, may vary materially from those currently planned and will depend on many factors, including our revenue growth rate, the impact of our strategic transformation plan, our ability to scale across categories, geographies, and channels, our human capital costs, our ability to execute on new marketing initiatives, the timing and extent of spending to support investments in growth and technology initiatives, the market adoption of new products, initiatives to reduce our carbon emissions, and overall macroeconomic conditions.
We determine revenue recognition in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 606, Revenue from Contracts with Customers . Revenue is recognized when transfer of control to the customer has occurred, which is either upon shipment or upon receipt, depending on the terms of sale.
We determine revenue recognition in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 606, Revenue from Contracts with Customers . Revenue is recognized when transfer of control to the customer has occurred, based on the terms of sale.
Other (Expense) Income Other (expense) income consists of gains or losses on foreign currency, gains or losses on sales of property and equipment, and changes in the fair value of our equity investments.
Other Income (Expense) 57 Table of Contents Other income (expense) consists of gains or losses on lease terminations and modifications, gains or losses on foreign currency, gains or losses on sales of property and equipment, and changes in the fair value of our equity investments.
We have invested time and resources to train our manufacturers to use our natural materials, which we believe makes it difficult to replicate our novel manufacturing processes at our product quality. 54 Table of Contents Financial Highlights For the years ended December 31, 2023 and 2022: • We generated net revenues of $254.1 million and $297.8 million, respectively. • Our gross margin was 41.0% and 43.5%, respectively. • We generated net losses of $152.5 million and $101.4 million, respectively. • We generated adjusted EBITDA losses of $78.5 million and $60.4 million, respectively.
We have invested time and resources to train our manufacturers to use our natural materials, which we believe makes it difficult to replicate our novel manufacturing processes at our product quality. 53 Table of Contents Financial Highlights For the years ended December 31, 2024 and 2023: • We generated net revenues of $189.8 million and $254.1 million, respectively. • Our gross margin was 42.7% and 41.0%, respectively. • We generated net losses of $93.3 million and $152.5 million, respectively. • We generated adjusted EBITDA losses of $70.0 million and $78.5 million, respectively.
Although we continue to view retail stores as key to reaching new customers and increasing penetration of omni-channel customers, we plan to try to optimize our store fleet and focus on ensuring that our retail stores are efficiently driving customer acquisition.
Although we continue to view retail stores as key to reaching new customers and increasing penetration of omni-channel customers, we plan to try to optimize our store fleet and focus on ensuring that our retail stores are efficiently driving customer acquisition. In 2024, we closed 15 stores in the United States and 3 stores in Europe.
Marketing expense Marketing expense decreased $10.1 million, or 17.0%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease was primarily driven by decreased digital advertising spend for performance marketing.
Marketing expense Marketing expense decreased by $7.4 million, or 15.1%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The decrease was primarily driven by decreased digital advertising spend for performance marketing.
As of December 31, 2023, we had undiscounted operating lease commitments of $116.2 million, with $19.9 million payable within 12 months. See Note 13, Leases , of our consolidated financial statements included in Part II, Item 8, for more information regarding our operating lease commitments.
As of December 31, 2024, we had undiscounted operating lease commitments of $63.3 63 Table of Contents million, with $13.1 million payable within 12 months. See Note 13, Leases , of our consolidated financial statements included in Part II, Item 8, for more information regarding our operating lease commitments.
The decrease was primarily due to a fluctuations in foreign currency.
The increase was primarily due to fluctuations in foreign currency.
(2) Includes depreciation and amortization expense of $21.1 million and $15.8 million for the years ended December 31, 2023 and 2022, respectively. 60 Table of Contents Year Ended December 31, 2023 2022 Consolidated Statements of Operations Data, as a Percentage of Net Revenue: Net revenue 100.0 % 100.0 % Cost of revenue 59.0 % 56.5 % Gross profit 41.0 % 43.5 % Operating expense: Selling, general, and administrative expense 68.5 % 56.0 % Marketing expense 19.3 % 19.9 % Impairment expense 10.8 % 1.1 % Restructuring expense 2.7 % 0.3 % Total operating expense 101.2 % 77.2 % Loss from operations (60.2) % (33.7) % Loss from sales of businesses (1.1) % — % Interest income 1.6 % 0.0 % Other (expense) income (0.2) % 0.0 % Loss before provision for income taxes (59.9) % (33.6) % Income tax (provision) benefit (0.1) % (0.4) % Net loss (60.0) % (34.0) % Other comprehensive loss: Foreign currency translation gain (loss) 0.1 % (1.4) % Total comprehensive loss (59.9) % (35.5) % Comparison of the Years Ended December 31, 2023 and 2022 Net Revenue Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Net revenue $ 254,065 $ 297,766 $ (43,701) (14.7) % Net revenue decreased by $43.7 million, or 14.7%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
(2) Includes depreciation and amortization expense of $12.4 million and $21.1 million for the years ended December 31, 2024 and 2023, respectively. 58 Table of Contents Year Ended December 31, 2024 2023 Consolidated Statements of Operations Data, as a Percentage of Net Revenue: Net revenue 100.0 % 100.0 % Cost of revenue 57.3 % 59.0 % Gross profit 42.7 % 41.0 % Operating expense: Selling, general, and administrative expense 70.3 % 68.5 % Marketing expense 21.9 % 19.3 % Impairment expense 0.9 % 10.8 % Restructuring expense 0.9 % 2.7 % Total operating expense 94.1 % 101.2 % Loss from operations (51.4) % (60.2) % Net loss from sales of businesses (0.2) % (1.1) % Interest income 1.8 % 1.6 % Other income (expense) 1.6 % (0.2) % Loss before provision for income taxes (48.2) % (59.9) % Income tax provision (1.0) % (0.1) % Net loss (49.2) % (60.0) % Other comprehensive loss: Foreign currency translation (loss) gain (1.2) % 0.1 % Total comprehensive loss (50.4) % (59.9) % Comparison of the Years Ended December 31, 2024 and 2023 Net Revenue Year Ended December 31, 2024 2023 $ Change % Change (dollars in thousands) Net revenue $ 189,757 $ 254,065 $ (64,308) (25.3) % Net revenue decreased by $64.3 million, or 25.3%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Loss from Sales of Businesses Loss from sales of businesses consists of losses associated with the sale of certain net assets used in connection with the operations of our businesses in South Korea and Canada, in September 2023, based on the difference between the net book value of assets and liabilities sold against the consideration received.
Net Loss from Sales of Businesses Net loss from sales of businesses consists of gains or losses associated with the sale of certain net assets used in connection with the operation of our businesses in certain geographical markets, based on the difference between the net book value of assets and liabilities sold against the consideration received.
Cash Flows Year Ended December 31, 2023 2022 (in thousands) Net cash used in operating activities $ (30,222) $ (90,583) Net cash used in investing activities (7,712) (32,292) Net cash provided by financing activities 640 3,581 Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 200 (1,515) Net decrease in cash, cash equivalents, and restricted cash $ (37,094) $ (120,809) Operating Activities Our largest sources of operating cash are cash payments received from customers for sales of our products.
Cash Flows Year Ended December 31, 2024 2023 (in thousands) Net cash used in operating activities $ (63,860) $ (30,222) Net cash provided by (used in) in investing activities 2,118 (7,712) Net cash provided by financing activities 287 640 Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash (1,635) 200 Net decrease in cash, cash equivalents, and restricted cash $ (63,090) $ (37,094) Operating Activities Our largest sources of operating cash are cash payments received from customers for sales of our products.
Inventory Purchase Obligations 65 Table of Contents Inventory purchase obligations relate to a supplier agreement that requires us, through our manufacturers, to purchase a minimum quantity of materials per year. As of December 31, 2023, we had inventory purchase obligations of $15.4 million, with $3.2 million payable within 12 months.
Inventory Purchase Obligations Inventory purchase obligations relate to a supplier agreement that requires us, through our manufacturers, to purchase a minimum quantity of materials per year. As of December 31, 2024, we had inventory purchase obligations of $9.5 million, with $0.9 million payable within 12 months.
We value our inventory using the weighted-average cost method and include product costs from our suppliers, freight, import duties and other landing costs. We periodically review inventory and make provisions as necessary to appropriately value end of life, slow-moving, damaged, and excess inventory.
Inventory Inventory consists of finished goods, stated at the lower of cost or net realizable value. We value our inventory using the weighted-average cost method and include product costs from our suppliers, freight, import duties and other landing costs. We periodically review inventory and record write-downs as necessary to appropriately value end of life, slow-moving, damaged, and excess inventory.
Impairment expense Impairment expense increased by $24.1 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022, as a result of the non-cash impairment of property and equipment and operating lease right-of-use assets associated with certain of our retail stores.
Impairment expense Impairment expense decreased by $25.6 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023, as a result of prior year non-cash impairment of property and equipment and operating lease right-of-use assets associated with certain of our retail stores of $27.4 million, partially offset by the impairment an equity investment of $1.8 million.
As of December 31, 2023, the majority of our sales are through our digital channels and leased retail stores. Revenue is recognized when we satisfy our performance obligation by transferring control of the promised goods to the customer, net of allowances for returns, discounts, and any taxes collected from customers.
As of December 31, 2024, the majority of our sales are through our direct channels. Revenue is recognized when we satisfy our performance obligation by transferring control of the promised goods to the customer, net of allowances for returns, discounts, and any taxes collected from customers. This occurs either upon shipment or upon receipt, depending on the terms of sale.
The following table presents a reconciliation of adjusted EBITDA to its most comparable GAAP measure, net loss: Year Ended December 31, 2023 2022 (in thousands) (unaudited) Net loss $ (152,458) $ (101,354) Add (deduct): Stock-based compensation expense, including common stock warrant expense 19,346 20,026 Depreciation and amortization expense 21,058 15,754 Impairment expense 27,392 3,286 Restructuring expense 6,757 782 Loss from sales of businesses 2,761 — Other income (4,076) (19) Interest expense (income) 436 (139) Income tax provision 334 1,227 Adjusted EBITDA $ (78,450) $ (60,437) Adjusted EBITDA decreased by $18.0 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The following table presents a reconciliation of adjusted EBITDA to its most comparable GAAP measure, net loss: Year Ended December 31, 2024 2023 (in thousands) (unaudited) Net loss $ (93,318) $ (152,458) Add (deduct): Stock-based compensation expense 11,472 19,346 Depreciation and amortization expense 12,439 21,058 Impairment expense 1,800 27,392 Restructuring expense 1,800 6,757 Net loss from sales of businesses 432 2,761 Other (expense) income (3,049) 436 Interest income (3,489) (4,076) Income tax provision 1,871 334 Adjusted EBITDA $ (70,042) $ (78,450) Adjusted EBITDA improved by $8.4 million in the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Income Tax Provision Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Income tax provision $ (334) $ (1,227) $ 893 (72.8) % Income tax provision decreased by $0.9 million, or 72.8%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a mix of taxable income in foreign jurisdictions that resulted in differences in the effective tax rates.
Income Tax Provision Year Ended December 31, 2024 2023 $ Change % Change (dollars in thousands) Income tax provision $ (1,871) $ (334) $ (1,537) 460.2 % Income tax provision increased by $1.5 million, or 460.2%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the mix of taxable income in foreign jurisdictions that resulted in differences in the effective tax rates and a change in the valuation allowance.
Investing Activities Net cash used in investing activities primarily relates to capital expenditures to support our growth and investment in property and equipment for expansion of our business, partially offset by proceeds from sale of businesses.
The change in operating assets and liabilities was primarily due to a decrease of $47.5 million in inventory due to lower inventory on hand. Investing Activities Net cash used in investing activities primarily relates to capital expenditures to support our growth and investment in property and equipment for expansion of our business, partially offset by proceeds from sale of businesses.
The following table presents net loss and adjusted EBITDA as percentages of net revenue: Year Ended December 31, 2023 2022 (in thousands) (unaudited) Net revenue $ 254,065 $ 297,766 Net loss $ (152,458) $ (101,354) Net loss margin (60.0) % (34.0) % Adjusted EBITDA $ (78,450) $ (60,437) Adjusted EBITDA margin (30.9) % (20.3) % 64 Table of Contents Adjusted EBITDA margin declined from (20.3)% to (30.9)% in the year ended December 31, 2023 compared to the year ended December 31, 2022.
The following table presents net loss and adjusted EBITDA as percentages of net revenue: Year Ended December 31, 2024 2023 (in thousands) (unaudited) Net revenue $ 189,757 $ 254,065 Net loss $ (93,318) $ (152,458) Net loss margin (49.2) % (60.0) % Adjusted EBITDA $ (70,042) $ (78,450) Adjusted EBITDA margin (36.9) % (30.9) % Adjusted EBITDA margin declined from (30.9)% to (36.9)% in the year ended December 31, 2024 compared to the year ended December 31, 2023.
We believe our existing cash and cash equivalent balances, cash flow from operations, and amounts available for borrowing under the Credit Agreement will be sufficient to meet our cash requirements over the next 12 months.
Our operations have been funded primarily through net proceeds from sales of equity securities and cash flows from the sale of our products. 62 Table of Contents We believe our existing cash and cash equivalent balances, cash flow from operations, and amounts available for borrowing under the Credit Agreement will be sufficient to meet our cash requirements over the next 12 months.
Interest Income Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Interest income $ 4,076 $ 19 $ 4,057 21352.6 % Interest income increased by $4.1 million, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Interest Income Year Ended December 31, 2024 2023 $ Change % Change (dollars in thousands) Interest income $ 3,489 4,076 $ (587) (14.4) % Interest income decreased by $0.6 million, for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Restructuring expense Restructuring expense increased by $6.0 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022, and consisted primarily of higher professional service fees, severance, and other employee-related benefits incurred as part of our March 2023 strategic transformation plan.
Restructuring expense Restructuring expense decreased by $5.0 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023, and consisted primarily fewer costs incurred as part of our March 2023 strategic transformation plan.
During 2022, net cash used in operating activities was $90.6 million , which consisted of a net loss of $101.4 million and a net increase of $40.6 million in our operating assets and liabilities, partially offset by non-cash charges of $51.4 million added back to net loss .
During 2024, net cash used in operating activities was $63.9 million, which consisted of a net loss of $93.3 million and a net decrease of $0.3 million in our operating assets and liabilities, partially offset by non-cash charges of $29.7 million added back to net loss.
Our product and brand initiatives include increasing focus on our core franchises, through a concentration on comfort and quality and better commercialization of our innovative materials, as well as a highly focused brand strategy that reconnects with core consumers. We expect these initiatives to begin to impact the business in 2024.
Our product and brand initiatives include increasing focus on our core franchises, through a concentration on comfort and quality and better commercialization of our innovative materials, as well as a highly focused brand strategy that reconnects with core consumers. Our store-based distribution initiatives in the United States include optimizing our existing store fleet and selectively expanding our third-party distribution channels.
Marketing Expense Marketing expense consists of advertising costs incurred to acquire new customers, retain existing customers, and build our brand awareness.
Marketing Expense Marketing expense consists of advertising costs incurred to acquire new customers, retain existing customers, and build our brand awareness. We expect marketing expense to increase in 2025 as we are prioritizing our marketing spend to align with our product strategy.
In the third quarter of 2023, we transitioned the operations of three international stores to distributors. 57 Table of Contents to have adverse consequences on consumer spending, including the buying patterns of our customers and prospective customers. See the section titled “Risk Factors—Risks Related to Our Business, Brand, Products, and Industry” in Part I, Item 1A.
These macroeconomic conditions have had and are likely to continue to have adverse consequences on consumer spending, including the buying patterns of our customers and prospective customers. See the section titled “Risk Factors—Risks Related to Our Business, Brand, Products, and Industry” in Part I, Item 1A. Risk Factors, for further details.
The decrease in gross profit was primarily driven by the decrease in net revenue at a higher rate than cost of revenue, as reflected in the percent changes above and for each for the factors described above. 61 Table of Contents Gross margin declined from 43.5% to 41.0% for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a lower average selling price in our direct business as a result of increased promotional activity.
The decrease in gross profit was primarily driven by the decrease in net revenue and associated cost of revenue. 59 Table of Contents Gross margin improved to 42.7% from 41.0% for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to lower freight and duty costs, fewer inventory adjustments and a higher average selling price in our direct business.
Our store-based distribution initiatives in the United States include optimizing our existing store fleet and selectively expanding our third party distribution channels. Store optimization will include slowing the pace of new store openings, closing certain stores that do not meet our profitability targets, and investing in corporate and retail store talent and store marketing.
Store optimization will include slowing the pace of new store openings, closing certain stores that do not meet our profitability targets, and investing in corporate and retail store talent and store marketing. As of December 31, 2023, we had completed all planned new store openings and we continue to evaluate ways to optimize our existing store fleet.
Critical Accounting Estimates Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.
Recent Accounting Pronouncements For information on recent accounting pronouncements, see Note 2, Significant Accounting Policies , in the notes to our consolidated financial statements included in Part II, Item 8.
Previously recognized compensation expense is not reversed if PSUs for which the requisite service has been rendered have vested and the market condition has not been met. Recent Accounting Pronouncements For information on recent accounting pronouncements, see Note 2, Significant Accounting Policies , in the notes to our consolidated financial statements included in Part II, Item 8.
Cost of Revenue, Gross Profit, and Gross Margin Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Cost of revenue $ 149,833 $ 168,138 $ (18,305) (10.9) % Gross profit 104,232 129,628 $ (25,396) (19.6) % Gross margin 41.0 % 43.5 % (5.8) % Cost of revenue decreased by $18.3 million, or 10.9%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Cost of Revenue, Gross Profit, and Gross Margin Year Ended December 31, 2024 2023 $ Change % Change (dollars in thousands) Cost of revenue $ 108,693 $ 149,833 $ (41,140) (27.5) % Gross profit 81,064 104,232 $ (23,168) (22.2) % Gross margin 42.7 % 41.0 % 4.1 % Cost of revenue decreased by $41.1 million, or 27.5%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
We anticipate that these initiatives will potentially accelerate cost of revenue, selling, general, and administrative expense, and cash optimization savings over the next three years. Related to these initiatives, we recognized restructuring expenses of $6.8 million in the year ended December 31, 2023, which is recorded within restructuring expense on the consolidated statement of operations and comprehensive loss.
Related to these initiatives, we recognized restructuring expenses of $1.8 million and $6.8 million in the years ended December 31, 2024 and 2023, which is recorded within restructuring expense in the consolidated statement of operations and comprehensive loss. These expenses primarily consist of third-party professional fees and other related charges.
The decrease was primarily driven by decreases in freight costs, inventory write-downs, and product costs. Gross profit decreased by $25.4 million, or 19.6%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The decrease was primarily driven by lower unit sales in our direct business and lower freight and duty costs per unit. Gross profit decreased by $23.2 million, or 22.2%, in the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Our store count by primary geographical market is presented in the table below, as of the dates presented: Store Count by Primary Geographical Market December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 United States 23 27 32 38 42 42 44 45 45 International 1 12 12 14 13 16 17 18 15 15 Total 35 39 46 51 58 59 62 60 60 Growing Our Product Innovation Platform Innovation has been core to the Allbirds brand since our inception in 2015.
Our store count by primary geographical market is presented in the table below, as of the dates presented: Store Count by Primary Geographical Market December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 United States 1 42 42 44 45 45 42 32 31 30 International 2 16 17 18 15 15 15 11 3 3 Total 58 59 62 60 60 57 43 34 33 1 In the first quarter of 2024, we closed the operations of three stores in the US.
In connection with our strategic transformation plan announced in March 2023, we are refocusing our product strategy on our core franchise products. Our 56 Table of Contents growth within our existing customer base will depend in part on our success focusing our product strategy to appeal to our existing customers.
Our growth within our existing customer base will depend in part on our success focusing our product strategy to appeal to our existing customers.
The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock.
For stock options, we generally estimate the fair value using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (1) the fair value of common stock, (2) the expected stock price volatility, 65 Table of Contents (3) the expected term of the award, (4) the risk-free interest rate and (5) expected dividends.
In the third quarter of 2023, we signed distribution agreements with independent third-party distributors in South Korea and Canada, and completed the transition of these businesses. Subsequently, we signed distribution agreements with independent third-party distributors in Australasia and Japan, with transitions expected in mid-year 2024.
In 2024, we signed distribution agreements with independent third-party distributors in Australasia, Japan, and China and completed the transition of these businesses. In addition, we signed various distribution agreements in new geographies, where no existing business was transitioned.
The increase was driven by an increase in interest income on our money market funds. 62 Table of Contents Other (Expense) Income Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Other (expense) income $ (436) $ 139 $ (575) (413.7) % Other (expense) income decreased by $0.6 million, for the year ended December 31, 2023 resulting in expense in 2023 as compared to income in the year ended December 31, 2022.
Other (Expense) Income Year Ended December 31, 2024 2023 $ Change % Change (dollars in thousands) Other (expense) income $ 3,049 $ (436) $ 3,485 (799.3) % 60 Table of Contents Other (expense) income increased by $3.5 million, for the year ended December 31, 2024 resulting in income in 2024 as compared to expense in the year ended December 31, 2023.
Net cash used in investing activities in 2023 and 2022 was $7.7 million and $32.3 million , respectively, and consisted primarily of cash outflows for the purchases of property and equipment to support the opening of retail stores across the U.S. and internationally. 66 Table of Contents Financing Activities Net cash provided by financing activities in 2023 was $0.6 million, primarily due to net proceeds from the exercise of stock options and the issuance of common stock under the employee stock purchase plan, offset by taxes withheld on employee stock awards.
Financing Activities Net cash provided by financing activities in 2024 and 2023 was $0.3 million and $0.6 million, respectively, primarily due to net proceeds from the exercise of stock options and the issuance of common stock under the employee stock purchase plan, offset by taxes withheld on employee stock awards. 64 Table of Contents Critical Accounting Estimates Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP.
Operating Expenses Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Operating expense: Selling, general, and administrative expense $ 174,044 $ 166,736 $ 7,308 4.4 % Marketing expense 49,042 59,109 (10,067) (17.0) % Impairment expense 27,392 3,286 24,106 733.6 % Restructuring expense 6,757 782 5,975 764.1 % Total operating expense $ 257,235 $ 229,913 $ 27,322 11.9 % Selling, general, and administrative expense Selling, general, and administrative expense increased $7.3 million, or 4.4%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Operating Expenses Year Ended December 31, 2024 2023 $ Change % Change (dollars in thousands) Operating expense: Selling, general, and administrative expense $ 133,379 $ 174,044 $ (40,665) (23.4) % Marketing expense 41,638 49,042 (7,404) (15.1) % Impairment expense 1,800 27,392 (25,592) (93.4) % Restructuring expense 1,800 6,757 (4,957) (73.4) % Total operating expense $ 178,617 $ 257,235 $ (78,618) (30.6) % Selling, general, and administrative expense Selling, general, and administrative expense decreased by $40.7 million, or 23.4%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
As of December 31, 2023, we had completed all planned new store openings and we continue to evaluate ways to optimize our existing store fleet, which includes the planned closure of 10-15 stores in 2024. Our international go-to-market strategy initiative encompasses evaluating ways to reduce complexity and grow internationally in a cost- and capital-efficient manner.
In 2024, we closed 15 stores in the United States. Our international go-to-market strategy initiative encompasses evaluating ways to reduce complexity and grow internationally in a cost- and capital-efficient manner. In the third quarter of 2023, we signed distribution agreements with independent third-party distributors in South Korea and Canada, and completed the transition of these businesses.
The decrease in adjusted EBITDA was primarily due to the $25.4 million decrease in gross profit, driven by a lower average selling price, partially offset by decreases to marketing expense. We define adjusted EBITDA margin as adjusted EBITDA divided by net revenue.
The improvement in adjusted EBITDA was primarily due to lower operating expenses, partially offset by lower gross profit.
During 2022 and 2023, we reduced our global corporate workforce by 8% and 9%, respectively, and subleased two of our corporate offices in the United States as part of an effort to streamline workflows and lower operating cost, as well as executing on certain other cost control actions, including reducing our hiring and cutting discretionary spending.
As part of the strategic transformation announced in March 2023, we have executed on cost control actions, including a reduction in workforce in May 2023, the sublease of office spaces, and certain other cost control actions, including reducing our hiring and cutting discretionary spending.
The increase was primarily driven by: a $5.3 million increase in depreciation and amortization due to more stores operating throughout the year, a $3.6 million increase in third-party professional fees and consulting services, and $3.4 million increase in rent and utilities due to more stores in operation, and $1.9 million in personnel and related expenses.
The decrease was primarily driven by a $11.4 million decrease in personnel and related expenses, an $8.6 million decrease in depreciation and amortization, a $7.9 million decrease in stock-based compensation, and a $6.2 million decrease in rent and utilities, as well as reductions in other types of operating expenses.
The change was primarily driven by the same factors as noted in the adjusted EBITDA discussion above. Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of $130.0 million. Our operations have been funded primarily through net proceeds from sales of equity securities and cash flows from the sale of our products.
The change was primarily driven by the decline in revenue year over year. Liquidity and Capital Resources As of December 31, 2024, we had cash and cash equivalents of $66.7 million.
The change in operating assets and liabilities was primarily due to an increase of $24.7 million in inventory due to higher inventory on hand and higher inbound freight costs, as well as a decrease of $18.5 million in accounts payable due to timing of payments.
The change in operating assets and liabilities was primarily due to a decrease of $11.3 million for operating lease right of use assets and short-term and long-term lease liabilities as a result of retail store closures, partially offset by a decrease of $6.9 million in inventory as a result of lower on-hand inventory, a decrease of $2.0 million in accounts receivable due to timing of payments received, a decrease of $1.6 million in prepaid expenses and other current assets due to a decrease in tax and other receivables, and an increase of $1.0 million in accounts payable due to timing of payments made.
Restructuring Expense Restructuring expense consists of professional service fees, severance and other employee-related benefits, and other miscellaneous costs associated with exit and disposal activities. We expect restructuring expense to decrease in 2024 as compared to 2023, as a result of the execution of our March 2023 strategic transformation plan.
Impairment Expense Impairment expense consists of non-cash impairment charges relating to equity investments and long-lived assets, which include property and equipment and operating lease right-of-use assets. Restructuring Expense Restructuring expense consists of professional service fees, severance and other employee-related benefits, and other miscellaneous costs associated with exit and disposal activities.
Removed
These expenses primarily consist of third-party professional fees and other related charges. August 2022 Simplification Initiatives 55 Table of Contents In August 2022, we announced the implementation of simplification initiatives designed to generate cost of revenue savings, streamline workflows, and lower operating costs. These initiatives focused on reducing costs related to our supply chain and selling, general, and administrative expense.
Added
We anticipate that these initiatives will potentially accelerate cost of revenue, selling, general, and administrative expense, savings and improve cash optimization over the next few years.
Removed
We substantially completed these simplification initiatives in the fourth quarter of 2022, which resulted in annualized selling, general, and administrative expense savings of approximately $13 million to $15 million.
Added
In 2023 and 2024, we transitioned the operations of international stores to distributor partners in South Korea, Canada, Australasia, Japan, and China. As of December 31, 2024, we do not operate any stores in those geographies. Our remaining stores are located in the United States and the United Kingdom.
Removed
Our supply chain initiatives included reducing logistics costs in the United States by transitioning to automated distribution centers and a dedicated returns processor, optimizing inventory to accelerate logistics cost savings, which included inventory write-downs and write-offs over certain products, and accelerating the scaling of our manufacturing base to reduce product carbon footprint and product costs over time.
Added
In the second quarter of 2024, we closed the operations of ten stores in the US. In the third quarter of 2024, we closed the operations of one store in the US.
Removed
We recognized costs of $19.1 million primarily related to the write-down and liquidation of certain first generation apparel products in the year ended December 31, 2022, which are recorded within cost of revenue on the consolidated statement of operations and comprehensive loss.
Added
In the fourth quarter of 2024, we closed the operations of one store in the US. 2 In the third quarter of 2023, we transitioned the operations of three international stores to distributors.
Removed
We also recognized revenue of $2.0 million primarily related to the liquidation of certain first generation apparel products in the year ended December 31, 2022, which is recorded within net revenue on the consolidated statement of operations and comprehensive loss.
Added
In the second quarter of 2024, we transitioned the operations of two stores in Japan and one store in New Zealand to unrelated third-party distributors and closed one store in Europe.
Removed
Subsequent write-downs of inventory are recognized as part of our regular reviews of end of life, slow-moving, damaged, and excess inventory as described in more detail in Note 2. Significant Accounting Policies, in Item 8. “Financial Statements and Supplementary Data”.
Added
In the third quarter of 2024, we transitioned the operations of six stores in China to an unrelated third-party distributor and closed two stores in Europe. 55 Table of Contents Growing Our Product Innovation Platform Innovation has been core to the Allbirds brand since our inception in 2015.
Removed
Our selling, general, and administrative expense initiatives included slowing the pace of corporate new hires and backfills for departing employees, reducing our global corporate workforce, and reducing corporate office space to reflect a new hybrid working environment.
Added
We expect overall sales in 2025 to be in line with 2024, primarily driven by demand for new products in the fourth quarter of the year, offset by the impacts of our international distributor transitions, retail store closures, and sales trends in our direct business in the first three quarters of the year.
Removed
Related to this, we recognized restructuring expenses of $0.8 million in the year ended December 31, 2022, which is recorded within restructuring expense on the consolidated statement of operations and comprehensive loss. These expenses are primarily related to severance and other employee termination-related costs resulting from the reductions of our global corporate workforce in 2022 and 2023.
Added
Because we have a recent history of pre-tax book losses and are expected to be in a pre-tax book loss position in the near term, a valuation allowance was maintained against the deferred tax assets in the United States, China, Hong Kong, Canada, Germany and New Zealand as of December 31, 2024.
Removed
In 2022 and 2023, we began subleasing two of our corporate office leases in the United States to other tenants.

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