10q10k10q10k.net

What changed in Allbirds, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Allbirds, Inc.'s 2022 and 2023 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 2023 report.

+450 added−640 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-10)

Top changes in Allbirds, Inc.'s 2023 10-K

450 paragraphs added · 640 removed · 360 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

66 edited+10 added−181 removed35 unchanged
Biggest changeOur mobile app allows customers to virtually try on footwear, purchase exclusive product drops, and gain early access to our new product launches, creating further engagement between our brand and our customer. As of December 31, 2022, our physical retail channel consists of 58 company-operated stores spread across nine countries, with the majority in the United States.
Biggest changeThe 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.
Our Products Allbirds’ 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.
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.
For additional information, see the section titled “Risk Factors—Risks Related to Intellectual Property, Information Technology, and Data Security and Privacy” Government Regulations In the United States and the other jurisdictions in which we operate, we are subject to labor and employment laws, laws governing advertising, privacy and data security, product labeling and compliance, safety regulations, and other laws, including consumer protection regulations that apply to retailers and/or the promotion and sale of merchandise and the operation of our retail stores, manufacturing-related facilities and distribution centers.
For additional information, see the section titled “Risk Factors—Risks Related to Intellectual Property, Information Technology, and Data Security and Privacy.” Government Regulations In the United States and the other jurisdictions in which we operate, we are subject to labor and employment laws, laws governing advertising, privacy and data security, product labeling and compliance, safety regulations, and other laws, including consumer protection regulations that apply to retailers and/or the promotion and sale of merchandise and the operation of our retail stores, manufacturing-related facilities and distribution centers.
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 cost 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. 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 have carefully selected a tight 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.
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.
To continue to lead the industry, and 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.
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.
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 per year. Furthermore, 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, 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.
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 15698 million tonnes of CO2e, which is equivalent to taking 33 million cars off the road in the same timeframe.
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.
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.
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.
Digitally-Led Vertical Retail We reach our customers primarily through our digitally-led vertical retail distribution strategy, which combines our digital offerings with our stores so we can make a strong connection with our customers and meet them where they are, delivering value and convenience.
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.
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 11 Ta ble of Contents 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 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.
Our unique technical expertise in footwear and materials research and development is a basis for our apparel offerings, such as classic tees and sweats, plus basics including socks and underwear. Materials and Innovation We have examined every component that goes into our products to ensure we deliver design, comfort, and performance.
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.
Item 1. Business Overview Allbirds is a global lifestyle brand that innovates with naturally derived 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 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.
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 (including through a Head of Sustainability).
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.
As a 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 Ta ble of Contents We are focused on increasing brand awareness and consumer touchpoints through the following marketing initiatives: • Spreading our message through word-of-mouth, thought leadership and PR, partnerships, and community. • 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.
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 have seven employee resource groups, or ERGs, supporting various communities, including Women, LGBTQ+, AAPI, Black, Latinx, parents/caregivers, and international inclusion. These ERGs encourage employees to come together and support our business and each other through programming, education, and community engagement. We track and measure our diversity, equity, inclusion, and belonging progress and representation quarterly.
We have eight employee resource groups, or ERGs, supporting various communities, including women, LGBTQ+, AAPI, Jewish, Latinx, parents/caregivers, neurodiverse, and international inclusion. These ERGs encourage employees to come together and support our business and each other through programming, education, and community engagement. We track and measure our diversity, equity, inclusion, and belonging progress and representation quarterly.
Copies of our reports on Form 10-K, Forms 10-Q, Forms 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. 35 Ta ble 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 ir.allbirds.com as soon as reasonably practical after we file such material with, or furnish it to, the SEC. 13 Table of Contents
Our strategy is aligned to the United Nations’ 10 Ta ble of Contents Sustainable Development Goals, including affordable and clean energy, responsible consumption and production, climate action, and life on land, among others. We believe that near term goals and progress must be coupled with long term ambition.
Our strategy is aligned to the United Nations’ Sustainable Development Goals, including affordable and clean energy, responsible consumption and production, climate action, and life on land, among others. We believe that near term goals and progress must be coupled with long term ambition.
Marketing Strategy and Brand Our purpose-driven lifestyle brand inspires consumers to live life in better balance, a goal central to our marketing and which we believe creates deep affinity and loyalty with our growing base of customers, who associate our brand with sustainability and high-quality product experiences.
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.
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 730 Montgomery Street, San Francisco, California 94111. Our telephone number is (628) 225-4848. Our U.S. website address is allbirds.com.
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.
Our distribution network, comprised of nine primary distribution centers across eight countries (the United States, Canada, the United Kingdom, the Netherlands, China, Japan, South Korea, 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.
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.
As of December 31, 2022, people of color and women made up 48% and 50%, respectively, of our U.S. workforce. • Global Talent Development and Engagement We enable the flock to operate at their highest potential by building critical skills and leadership capabilities across all levels.
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.
The Securities and Exchange Commission, or SEC, maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information that we file with the SEC electronically.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information that we file or furnish with the SEC electronically.
The pace of change must accelerate in order for the industry to be compatible with planetary boundaries, and we believe Allbirds offers a blueprint for how to get there. Our approach to addressing the climate impact of our business is scientific and data driven—we first measure, then reduce, and finally offset the entirety of our emissions.
The pace of change must accelerate in order for the industry to be compatible with planetary boundaries, and we believe Allbirds offers a blueprint for how to get there. Our approach to addressing the climate impact of our business is scientific and data driven—we first measure , then reduce , and also support the removal of emissions from the atmosphere.
ESG Reporting In accordance with our PBC status, we report to stockholders, on at least a biennial basis, an assessment of our progress towards our stated public benefit of environmental conservation and general PBC objectives.
ESG Reporting In accordance with our PBC status, we report to stockholders on our investor relations website, on at least a biennial basis, an assessment of our progress towards our stated public benefit of environmental conservation and general PBC objectives, known as our “Flight Status” report.
We have a gender-diverse board of directors, with three out of our eight directors identifying as women. 13 Ta ble of Contents Management reports on ESG issues to our board of directors on a quarterly basis. The sustainability, nomination, and governance committee of our board of directors is responsible for overseeing ESG matters.
We have a gender-diverse board of directors, with two out of our seven directors identifying as women. Management reports on ESG issues to our board of directors on a quarterly basis. The sustainability, nomination, and governance committee of our board of directors is responsible for overseeing ESG matters.
Historically, the median score for companies evaluated by B Lab has been 50.9, compared to our latest recertification score of 89.4 in 2019/2020, which increased from our initial score of 81.9 in 2016 despite the growing size and complexity of our business during those years.
Historically, the median score for companies evaluated by B Lab has been 50.9, compared to our latest recertification score of 96.5 in 2023, which increased from our previous scores of 89.4 in 2020 and 81.9 in 2016, despite the growing size and complexity of our business during these years.
We think of each new style launch as a franchise where each new design can be leveraged across new materials innovations, colors, partnerships, and adjacent stylings to create freshness for the brand and our customers. Our core franchises include lifestyle and performance shoes, such as the Dasher and the Runner.
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.
Acceptance as a B Corp and continued certification is at the sole discretion of B Lab. To maintain our certification, we are required to update our assessment and provide documentation supporting our updated score with B Lab every three years.
Acceptance as a B Corp and continued certification is at the sole discretion of B Lab. To maintain our certification, we are required to update our assessment and provide documentation supporting our updated score with B Lab every three years. In June 2023, we completed our updated assessment for recertification and scored 96.5.
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.
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.
We offer many different products across our footwear and apparel categories, including lifestyle and performance products. Each product adheres to our product design principles, creating an evergreen, fad-resistant product that never goes out of style. Footwear represents the vast majority of our revenue and is the foundation of our brand.
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.
Using our product carbon footprint methodology, our internal estimates are that we reduced the weighted average carbon footprint of our top 10 products in 2022 by approximately 22%, as compared to 2021.
Using our product carbon footprint methodology, our internal estimates are that we reduced the weighted average carbon footprint of our top 10 products in 2023 by approximately 12%.
Our Supplier Code goes further, drawing upon ILO Core Labor Standards, in order to advance social and environmental responsibility. We also expect 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.
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.
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.
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.
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.
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 have registered domain names for websites that we use in our business, such as allbirds.com and similar variations. Further, we have developed internal practices around ongoing trademark and design patent registration pursuant to which we register brand names and product names, product designs, taglines, and logos to the extent we determine appropriate and cost-effective.
Further, we have developed internal practices around ongoing trademark and design patent registration pursuant to which we register brand names and product names, product designs, taglines, and logos to the extent we determine appropriate and cost-effective.
None of our employees are represented by a labor union with respect to his or her employment. 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.
Our initial January 2023 deadline to submit our assessment to maintain our status as a B Corp has been extended to March 2023. 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.
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.
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.
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.
The term “B Corp” does not refer to a particular form of legal entity, but instead refers to a company that has been certified as meeting the social and environmental performance, accountability, and transparency standards set by B Lab. 8 Ta ble of Contents In order to be designated as a B Corp, companies are required to undertake a comprehensive and objective assessment of their positive impact on society and the environment.
The term “B Corp” does not refer to a particular form of legal entity, but instead refers to a company that has been certified as meeting the social and environmental performance, accountability, and transparency standards set by B Lab.
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.
Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged.
Soles4Souls 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. • Pensole.
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.
Seasonality Our business is affected by general seasonal trends common to the retail footwear and apparel industry, with sales peaking during the end-of-year holiday period that typically falls within our fourth quarter. In 2022, 2021 and 2020, we generated 28%, 35% and 36%, of our full year net revenue in the fourth quarter, respectively.
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 train our global retail and customer support teams to deliver incredible customer experiences and drive sales, while maintaining our vision globally and localizing content through collaborative review processes.
We train our retail and customer support teams to deliver incredible customer experiences and drive sales, while maintaining our vision and localizing content through collaborative review processes. We have implemented critical organizational structures and managerial capabilities, including building an executive leadership team with deep expertise.
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.
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.
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 industry.
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.
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.
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. 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.
Our innovation approach is to leverage materials that are both more sustainable than synthetic alternatives and also have tangible benefits for our customers, such as comfort, temperature regulation, and odor control. Materials research and development is led by our Innovation team, with expertise in biomaterials commercialization and polymer science.
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.
We have developed distinctive “Hero” materials platforms that provide the foundation for our product innovation, which include superfine ZQ certified merino wool, tree fibers, sugarcane, and plant leather.
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.
The assessment evaluates how a company’s operations and business model impacts its workers, customers, suppliers, community, and the environment using a 200-point scale.
In order to be designated as a B Corp, companies are required to undertake a comprehensive and objective assessment of their positive impact on society and the environment. The assessment evaluates how a company’s operations and business model impacts its workers, customers, suppliers, community, and the environment using a 200-point scale.
Sustainalytics ESG Risk Rating We believe it is important to seek external evaluation of the work we are doing to validate progress and identify areas for improvement.
Information contained on, or that can be accessed through, our investor relations website is not incorporated by reference in this Annual Report on Form 10-K. Sustainalytics ESG Risk Rating We believe it is important to seek external evaluation of the work we are doing to validate progress and identify areas for improvement.
Although we continue to view retail stores as brand beacons, increasing brand awareness and site traffic, and enable us to offer cross-platform shopping, we plan to try to optimize our store fleet and focus on ensuring that our retail stores are efficiently driving customer acquisition..
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.
To do that, we are building the cost of carbon emissions into our business by implementing an internal carbon tax across all of our sourcing and business decisions today. Offsets are only a credible tool if you also have a robust plan to reduce emissions.
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.
As of December 31, 2022, we employed over 1,000 ’birds, approximately 75% of whom were located in the United States. Approximately 20% 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.
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 are taking steps, through regenerative agriculture, materials innovation, and clean energy, to reduce emissions within our direct footprint and within our supply chain. For those emissions that we are not able to abate today, we have invested in high quality carbon offset projects, and have purchased renewable electricity, to neutralize our remaining emissions.
Support for offset projects is a credible tool only if you also have a robust plan to reduce emissions. We are taking steps, through regenerative agriculture, materials innovation, and clean energy, to reduce emissions within our direct footprint and within our supply chain.
We have worked with external experts to align our ESG reporting with the Sustainability Accounting Standards Board (“SASB”) and Task Force on Climate-Related Financial Disclosure (“TCFD”) frameworks, which are included below in the sections titled “Sustainability Accounting Standards Board Disclosures” and “The Task Force on Climate-Related Financial Disclosures”.
We have worked with external experts to align our ESG reporting with the Sustainability Accounting Standards Board and Task Force on Climate-Related Financial Disclosure frameworks, which for 2023 will be included in our “Flight Status” report. In November 2022, we published an update of our progress against our previously disclosed SPO Framework on our investor relations website.
Our customers live an active and curious lifestyle, care about health and well-being, prioritize quality over price, frequently purchase products online, live in urban center settings, and appreciate socially conscious brands. 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 line.
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.
Several large companies have announced commitments to label products with carbon footprints, and we’re eager for more organizations to do the same. 9 Ta ble of Contents Reduce By using natural, renewable materials in place of petroleum-based synthetics and responsible manufacturing practices, Allbirds produces footwear today with approximately 45% less emissions than our estimated carbon footprint for a standard sneaker.
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.
Our target is aligned with all the requirements of The Science Based Targets initiative, or SBTi, including alignment with a 1.5°C reduction pathway, and was approved by SBTi in 2021. 34 Ta ble of Contents Intellectual Property We rely on a combination of trademarks, copyrights, trade secrets, design and utility patents, license agreements, confidentiality procedures, non-disclosure agreements, employee non-disclosure and invention assignment agreements, and other legal and contractual rights to establish and protect our proprietary rights.
Intellectual Property We rely on a combination of trademarks, copyrights, trade secrets, design and utility patents, license agreements, confidentiality procedures, non-disclosure agreements, employee non-disclosure and invention assignment agreements, and other legal and contractual rights to establish and protect our proprietary rights. We have registered domain names for websites that we use in our business, such as allbirds.com and similar variations.
Technology We leverage modern technology across physical and digital channels, and as a result, we are able 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.
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.
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. 7 Ta ble of Contents We require that all partners sign our Supplier Code of Conduct, or Supplier Code, which requires that suppliers operate in full compliance with the laws, rules and regulations of the countries in which they operate.
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 will temporarily close stores and restrict operations as necessary, based upon information from local health and government officials. • 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 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.
Allbirds has been a carbon-neutral business on an annual basis across Scope 1, 2, and 3 emissions since 2019. We know all carbon offsets are not created equal, so we work with trusted partners to source projects we believe in.
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.
Additionally, we collaborate with experts in the fields of biomechanics, polymer development, green chemistry, biotechnology, and sustainable venture investment to extend the innovation ecosystem. 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.
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.
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. Our goal is to inspire other brands to follow suit, so that one day customers can compare carbon footprints of products just like they compare nutrition labels on food.
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.
Our entire supply chain has been carbon neutral since 2019. 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. While this market is highly fragmented, many of our competitors are larger, with strong worldwide brand recognition, and have substantially greater resources than us.
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.
Removed
Our digital channel includes our website, which supports seven languages and showcases our product portfolio and our branded content, including information on our natural materials and sustainability. The seamless online experience from search to order to fulfillment creates the convenient shopping experience that our customers desire.
Added
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.
Removed
We have a sophisticated data infrastructure and toolset that allows our global teams to make informed decisions across key aspects of the business. This powers many areas of our business including marketing, customer relationship management, inventory planning and logistics, and back office functions.
Added
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.
Removed
As of December 31, 2022, our footwear products are primarily manufactured in Korea and Vietnam across four vendors, with the ability to scale up manufacturing in China as a potential alternative. During 2023, we plan to fully transition to a new footwear manufacturing partner in Vietnam.
Added
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.
Removed
This would create a productive “race to the top” where brands compete to have the lowest carbon footprint products.
Added
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.
Removed
In service of this future, we have published our LCA methodology, detailed methodology, and our labeling system for anyone to download and implement in their own business, and have specifically shared these resources with the 15 largest fashion brands to invite them along on our journey.
Added
Our wholesale strategy includes partnering with select retailers in the United States who purchase our products and sell them via their own eCommerce sites and retail stores, which increases our brand awareness and reaches customers where they are.
Removed
In 2021, we teamed up with adidas to create a pair of performance running shoes with a carbon footprint of 2.94kg of CO2e—about ¼ the carbon footprint of standard sneakers. We are able to produce lower-impact products because sustainability is a key design principle woven throughout the product development process, not an add-on at the end.
Added
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.
Removed
At the very beginning of the product creation process, we integrate key sustainability constraints like target carbon footprint and preferred materials composition in addition to standard practices like establishing target profit margins. Our Sustainability Team also ensures that sustainability is considered at every key milestone of creating a product.
Added
Further, as a PBC, employees are an important stakeholder in our business as are the communities that extend beyond our walls. As of December 31, 2023, we employed 927 ’birds, approximately 77% of whom were located in the United States.

… 177 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

191 edited+38 added−22 removed385 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 67 Ta ble of Contents 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.
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.
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 apparel sellers, including those specializing in athletic footwear and other casual footwear.
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.
Technical and materials innovation and quality control in the design and manufacturing process of our footwear and apparel is essential to the commercial success of our products. Research and development play a key role in technical innovation. We rely upon specialists in the fields of materials sciences, sustainability, and related fields.
Technical and materials innovation and quality control in the design and manufacturing process of our footwear and apparel is essential to the commercial success of our products. Research and development play a key role in technical and materials innovation. We rely upon specialists in the fields of materials sciences, sustainability, and related fields.
If any of these factors prevent us from meeting our sustainability goals or increase the carbon footprint of any our products, then it could have an adverse effect on our brand, reputation, results of operations, and financial condition.
If any of these factors prevent us from meeting our sustainability goals or increase the carbon footprint of any of our products, then it could have an adverse effect on our brand, reputation, results of operations, and financial condition.
For example, we may choose to revise our policies in ways that we believe will further promote environmental conservation and sustainability, even though such changes may be costly; we may take actions, such as building or contracting with suppliers and service providers who have state-of-the-art manufacturing and distribution facilities with technology and quality control mechanisms that exceed the applicable legal requirements and industry standards, even though these actions may be more costly than other alternatives; we may be influenced to pursue programs and opportunities to demonstrate our commitments to our planet, the environment and the communities in which we live and work; or in responding to a possible proposal to acquire the company, our board of directors may be influenced by the interests of our stakeholders, including our flock, our suppliers, vendors, and manufacturers, and our customers, any or all of whose interests may be different from the interests of our stockholders.
For example, we may choose to revise our policies in ways that we believe will further promote environmental conservation and sustainability, even though such changes may be costly; we may take actions, such as building or contracting with suppliers and service providers who have state-of-the-art manufacturing and distribution facilities with technology and quality control mechanisms that exceed the applicable legal requirements and industry standards, even though these actions may be more costly than other alternatives; we may be influenced to pursue programs and opportunities to demonstrate our commitments to our planet, the environment and the communities in which we live and work; or in responding to a possible proposal to acquire the company, our board of directors may be influenced by the interests of our stakeholders, including our flock, our suppliers, vendors, manufacturers, and distributors, and our customers, any or all of whose interests may be different from the interests of our stockholders.
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 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 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.
As a result, demand for such products failed to meet our expectations and, in the second quarter of 2022, we determined that we needed to adjust our overall apparel strategy and discontinue the product line. During 2022, we recognized a non-cash inventory write-down in our consolidated statements of operations and comprehensive loss, primarily related to these certain first-generation apparel products.
As a result, demand for such products failed to meet our expectations and, in the second quarter of 2022, we determined that we needed to adjust our overall apparel strategy and discontinue the product line. As such, we recognized a non-cash inventory write-down in our consolidated statements of operations and comprehensive loss, primarily related to these certain first-generation apparel products.
If we 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.
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.
Negative publicity regarding our suppliers or manufacturers could adversely affect our reputation and sales and could force us to identify and engage alternative suppliers or manufacturers. Additionally, while we devote considerable efforts and resources to protecting our intellectual property, if these efforts are not successful, the value of our brand may be harmed.
Negative publicity regarding our suppliers, manufacturers, or distributors could adversely affect our reputation and sales and could force us to identify and engage alternative suppliers, manufacturers, or distributors. Additionally, while we devote considerable efforts and resources to protecting our intellectual property, if these efforts are not successful, the value of our brand may be harmed.
Our commitment to product innovation, quality, and sustainability and our continuing investment in design (including materials) and marketing efforts may not have the desired impact on our brand image and reputation. We rely on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation.
Our commitment to product innovation, quality, and sustainability and our continuing investment in design (including materials) and marketing efforts may not have the desired impact on our brand image and reputation. We rely on social media, as one of our key marketing strategies, to have a positive impact on both our brand value and reputation.
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 partnerships 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. 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.
Climate change and increased focus by governments, organizations, customers, and investors on sustainability issues, including those related to climate change and socially responsible activities, may adversely affect our reputation, business, and financial results. Climate change is occurring around the world and may impact our business in numerous ways.
Climate change and increased focus by governments, organizations, customers, and investors on sustainability issues, including those related to climate change and socially responsible activities, may adversely affect our reputation, business, and financial results. Climate change occurring around the world may impact our business in numerous ways.
The partial or complete loss of these key manufacturers, or a significant adverse change in our relationship with any of these manufacturers, could result in lost sales, added costs, and distribution delays that could harm our business and customer relationships.
The partial or complete loss of these key manufacturers, or a significant adverse change in our relationship with any of these manufacturers, could result in lost sales, added costs, and distribution delays that could harm our business, reputation and customer relationships.
Failure to comply with PCI DSS or to meet other payment card standards may result in the imposition of financial penalties or the allocation by the card brands of the costs of fraudulent charges to us.
Failure to comply with PCI DSS or to meet other payment card or other industry standards may result in the imposition of financial penalties or the allocation by the card brands of the costs of fraudulent charges to us.
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.
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.
Successfully executing our long-term growth and profitability strategy and maintaining our revenue and profit levels or growing them in the future will depend on many factors, including our ability to: • increase brand awareness and drive efficient customer acquisition through brand marketing and leveraging third party stores; • continue growth within our existing customer base and increase closet share by focusing on our core franchise products; • optimize our store fleet and execute our vertical distribution strategy of slowing the pace of retail store openings and transitioning our international go-to-market strategy; • grow our product innovation platform while understanding the market opportunity for new product styles; • scale our infrastructure for profitable growth; • materialize our product and brand initiatives in a timely fashion; • accurately forecast demand for our product and implement a more focused product strategy; and • continue focusing on using sustainable materials.
Successfully executing our long-term growth and profitability strategy and maintaining our revenue and profit levels or growing them in the future will depend on many factors, including our ability to: • increase brand awareness and drive efficient customer acquisition through brand marketing and leveraging third party stores; • continue growth within our existing customer base and increase closet share by focusing on our core franchise products; • optimize our store fleet and execute our vertical distribution strategy of slowing the pace of retail store openings and transitioning our international go-to-market strategy from a direct model to a distributor model; • grow our product innovation platform while understanding the market opportunity for new product styles; • scale our infrastructure for profitable growth; • materialize our product and brand initiatives in a timely fashion; • accurately forecast demand for our product and implement a more focused product strategy; and • continue focusing on using sustainable materials.
The GDPR, and national implementing legislation in EEA member states and the United Kingdom, impose a strict data protection compliance regime including: providing detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); granting new rights for data subjects in regard to their personal data (including the right to be “forgotten” and the right to data portability), as well as enhancing current rights (e.g., data subject access requests); requirements to have data processing agreements in place to govern the processing of personal data on behalf of other organizations; introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; maintaining a record of data processing; and complying 57 Ta ble of Contents with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, trainings, and audits.
The GDPR, and national implementing legislation in EEA member states and the United Kingdom, impose a strict data protection compliance regime including: providing detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); granting new rights for data subjects in regard to their personal data (including the right to be “forgotten” and the right to data portability), as well as enhancing current rights (e.g., data subject access requests); requirements to have data processing agreements in place to govern the processing of personal data on behalf of other organizations; introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; maintaining a record of data processing; and complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, trainings, and audits.
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 manufacturing partners, 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; • 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.
Such change could lead to an increase in prices of raw materials, commodities, and/or packaging, as well as reduced availability of key manufacturing components. Increased frequency of extreme weather, such as storms, hurricanes, and floods, could cause increased disruption to the production and distribution of our products and have an adverse impact on consumer demand and spending.
Such changes could lead to an increase in prices of raw materials, commodities, and/or packaging, as well as reduced availability of key manufacturing components. Increased frequency of extreme weather, such as storms, hurricanes, and floods, could cause increased disruption to the production and distribution of our products and have an adverse impact on consumer demand and spending.
Although the strategic transformation plan announced in March 2023 include 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.
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.
As we open new retail stores, our ability to effectively obtain real estate to open new retail stores, both domestically and internationally, depends on the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics, demographics, and other factors. We also must be able to effectively renew our existing real estate leases.
When we open new retail stores, our ability to effectively obtain real estate to open new retail stores, both domestically and internationally, depends on the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics, demographics, and other factors. We also must be able to effectively renew our existing real estate leases.
Further, based on shares outstanding as of December 31, 2022, holders of a substantial number of shares of our Class B common stock had rights, subject to certain conditions, to require us to file registration statements for the public resale of such shares or to include such shares in registration statements that we may file for us or other stockholders.
Further, based on shares outstanding as of December 31, 2023, holders of a substantial number of shares of our Class B common stock had rights, subject to certain conditions, to require us to file registration statements for the public resale of such shares or to include such shares in registration statements that we may file for us or other stockholders.
An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies, or the carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business, financial condition, and results of operations. In addition, any proceeding could negatively impact our reputation among our customer and our brand image.
An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies, or the carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business, financial condition, and results of operations. In addition, any proceeding could negatively impact our reputation among our customers and our brand image.
Risks Related to Our Business, Brand, Products, and Industry We may be unable to successfully execute on our strategic transformation plans, 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, 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.
Our marketing strategy includes brand marketing campaigns across platforms, including email, digital, display, site, direct-mail, streaming audio, television, social media, and our Allgood Collective, as well as performance marketing efforts, including retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization, personalized emails, and mobile push notifications through our app.
Our marketing strategy includes brand marketing campaigns across platforms, including email, digital, display, site, direct-mail, streaming audio, television, and social media, as well as performance marketing efforts, including retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization, personalized emails, and mobile push notifications through our app.
We expect to continue to evaluate the number and geographic reach of our retail stores in the short- and mid-term and invest in a strategic manner, including in connection with our strategic transformation plan to slow the pace of store openings in the U.S. and transition our international go-to-market strategy.
We expect to continue to evaluate the number and geographic reach of our retail stores in the short- and mid-term and invest in a strategic manner, including in connection with our strategic transformation plan to slow the pace of store openings in the U.S. and transition our international go-to-market strategy to a distributor model.
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.
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.
In August 2022, we announced certain simplification initiatives designed to generate cost of revenue savings, streamline workflows, and lower operating costs as a result of external headwinds. These initiatives focus on reducing costs related to our supply chain and selling, general, and administrative expense.
In August 2022, as a result of external headwinds, we announced certain simplification initiatives designed to generate cost of revenue savings, streamline workflows, and lower operating costs. These initiatives focus on reducing costs related to our supply chain and selling, general, and administrative expenses.
If we are unable to introduce new products in a timely manner, or our new products are not accepted by our customers, our competitors may introduce similar products in a more timely fashion, which could hurt our goal to be viewed as a leader in comfortable and sustainable footwear and apparel.
If we are unable to introduce new products in a timely manner, or our new products are not accepted by consumers, our competitors may introduce similar products in a more timely fashion, which could hurt our goal to be viewed as a leader in comfortable and sustainable footwear and apparel.
Our business is affected by seasonality. Our business is affected by the general seasonal trends common to the retail footwear and apparel industry.
Our business is affected by seasonality. Our business is subject to the general seasonal trends common to the retail footwear and apparel industry.
For example, in 2022, our net revenue and results of operations were negatively impacted by approximately $8.0 million from unfavorable foreign exchange rates due to the strengthening U.S. dollar in certain international markets.
For example, in 2022, our full year net revenue and results of operations were negatively impacted by approximately $8.0 million from unfavorable foreign exchange rates due to the strengthening U.S. dollar in certain international markets.
We require the contractors that directly manufacture our products as well as those that manufacture the materials used to manufacture our products to comply with our supplier code of conduct and other social, environmental, health, and safety standards for the benefit of workers. We also require these contractors to comply with applicable standards for product safety.
We require the contractors that directly manufacture our products as well as those that manufacture the materials used to manufacture our products to comply with our supplier code of conduct and other social, environmental, health, and safety standards. We also require these contractors to comply with applicable standards for product safety.
We also have subsidiaries and/or employees and other agents working in several foreign countries and territories, including, but not limited to, the United Kingdom, the People’s Republic of China, South Korea, and Hong Kong. We are subject to the U.S.
We also have subsidiaries and/or employees and other agents working in several foreign countries and territories, including, but not limited to, the United Kingdom, the People’s Republic of China, and Hong Kong. We are subject to the U.S.
Furthermore, as laws and regulations governing the use of these platforms evolve, any failure by us, our Allgood Collective Ambassadors, or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could subject us to regulatory investigations, class action lawsuits, liability, fines, or other penalties and adversely affect our business, financial condition, and results of operations.
Furthermore, as laws and regulations governing the use of these platforms evolve, any failure by us, or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could subject us to regulatory investigations, class action lawsuits, liability, fines, or other penalties and adversely affect our business, financial condition, and results of operations.
Furthermore, any such noncompliance by our contractors, product recalls, or negative publicity regarding production methods, alleged practices, or workplace or related conditions of any of our suppliers, manufacturers, or licensees could 50 Ta ble of Contents adversely affect our brand image, result in lost sales, require us to divert resources to address and remediate these issues, expose us to legal claims, and force us to locate alternative suppliers, manufacturers or licensees, any of which could have an adverse effect on our business, financial condition, and results of operations.
Furthermore, any such noncompliance by our contractors, product recalls, or negative publicity regarding production methods, alleged practices, or workplace or related conditions of any of our suppliers, manufacturers, or licensees could adversely affect our brand image, result in lost sales, require us to divert resources to address and remediate these issues, expose us to legal claims, and force us to locate alternative suppliers, manufacturers or licensees, any of which could have an adverse effect on our business, financial condition, and results of operations.
Further, Virginia, Colorado, Utah, and Connecticut have all passed privacy laws that took effect or will take 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 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.
The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.
The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions and maintaining our intercompany arrangements, or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.
The dual class structure of our common stock has the effect of concentrating voting control with our co-founders and co-Chief Executive Officers, Timothy Brown and Joseph Zwillinger, our directors, our principal stockholders, and their respective affiliates, which limits or precludes the ability of our other stockholders to influence corporate matters, including the election of directors and the approval of any change of control transaction.
The dual class structure of our common stock has the effect of concentrating voting control with our co-founders, Timothy Brown and Joseph Zwillinger, our directors, our principal stockholders, and their respective affiliates, which limits or precludes the ability of our other stockholders to influence corporate matters, including the election of directors and the approval of any change of control transaction.
The introduction of new products, changes in customer confidence or shopping habits or other competitive and general economic conditions could cause actual returns to exceed our estimates. If actual return costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur.
The introduction of new products, changes in customer confidence or shopping habits or other competitive and general economic conditions could cause actual returns to exceed our estimates. If actual return costs differ from previous 26 Table of Contents estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur.
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.
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.
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.
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.
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.
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.
Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent of international expansion efforts and other growth initiatives, the expansion of our marketing activities and overall economic conditions.
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.
If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to changes in our market or the geographies where we operate and where we sell our products, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to (i) changes in our market or the geographies where we operate and where we sell our products or (ii) changes to our business models, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
Maintaining, promoting, and positioning our brand will depend largely on the success of our design and marketing efforts, including advertising and consumer campaigns, as well as our product innovation, product quality, and sustainability initiatives.
Maintaining, promoting, and positioning our brand will depend largely on the success of our design and marketing efforts, including advertising, social media, and consumer campaigns, as well as our product innovation, product quality, and sustainability initiatives.
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.
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.
To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may need to engage in equity or debt financings to secure additional funds. In recent months, there has been volatility in and disruptions to the global economy, including the equity and debt financial markets.
To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may need to engage in equity or debt financings to secure additional funds. Recently, there has been volatility in and disruptions to the global economy, including the equity and debt financial markets.
In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the Securities and Exchange Commission, or SEC, following the date we are no longer an “emerging growth company.” Our compliance with Section 404 has required and will continue to require that we incur substantial expenses and expend significant management efforts.
In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company.” Our compliance with Section 404 has required and will continue to require that we incur substantial expenses and expend significant management efforts.
Our brand and reputation could be adversely affected by any number of factors or events, including if our public image is tarnished by negative publicity due to our actions or those of persons associated with us or formerly associated with us (including employees, Allgood Collective Ambassadors, celebrities, or others who speak publicly or post on social media about our brand or our products, whether authorized or not), if we fail to deliver innovative and high quality products, if we face or mishandle a product recall, or if we are subject to claims of “greenwashing” (e.g., if the carbon footprint of one or more of our products is alleged to be greater than what we claim, or if we fail or are alleged to have failed to achieve our sustainability goals).
Our brand and reputation could be adversely affected by any number of factors or events, including if our public image is tarnished by negative publicity due to our actions or those of persons associated with us or formerly associated with us (including employees, celebrities, social media influencers, brand affiliates and partners or others who speak publicly or post on social media about our brand or our products, whether authorized or not), if we fail to deliver innovative and high quality products, if we face or mishandle a product recall, or if we are subject to claims of “greenwashing” (e.g., if the carbon footprint of one or more of our products is alleged to be greater than what we claim, or if we fail or are alleged to have failed to achieve our sustainability goals).
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.
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.
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.
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.
In an effort to protect sensitive information, we rely on a variety of security measures, but advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography, or other developments may result in our 55 Ta ble of Contents or our third party service providers’ (a) failure or inability to detect cyberattacks or (b) failure or inability to adequately protect sensitive information.
In an effort to protect sensitive information, we rely on a variety of security measures, but advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography, or other developments may result in our or our third-party service providers’ (a) failure or inability to detect cyberattacks, or (b) failure or inability to adequately protect sensitive information.
Beginning in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to 65 Ta ble of Contents include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria.
Beginning in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria.
Similarly, we may be committed to perform our obligations under the applicable leases even if current locations of our stores become unattractive as demographic patterns change.
We may also be committed to perform our obligations under the applicable leases even if current locations of our stores become unattractive as demographic patterns change.
Notwithstanding their contractual obligations to comply with our policies and applicable standards, from time to time, contractors may not comply with such standards or applicable local law or our licensees may fail to enforce such standards or applicable local law on their contractors.
Notwithstanding their contractual obligations to comply with our policies and applicable laws and standards, from time to time, contractors may not comply with such standards or applicable local law or may fail to enforce such standards or applicable local law on their contractors.
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, Canada, United Kingdom, the Netherlands, China, Japan, South Korea, 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, the Netherlands, China, Japan, and New Zealand.
We have significant exposure to changes in domestic and foreign laws governing our relationships with our workforce, including wage and hour laws and regulations, fair labor standards, minimum wage requirements, overtime pay, unemployment tax rates, workers’ compensation rates, pension contributions, citizenship requirements, and payroll taxes, which could have a direct impact on our operating costs.
We have significant exposure to changes in domestic and international laws governing our relationships with our workforce, including wage and hour laws and regulations, fair labor standards, minimum wage requirements, overtime pay, unemployment tax rates, union protections, workers’ compensation rates, pension contributions, citizenship requirements, and payroll taxes, which could have a direct impact on our operating costs.
Negative commentary regarding us, our products, or Allgood Collective Ambassadors and other third parties who are affiliated with us, whether accurate or not, may be posted on social media platforms at any time and may adversely affect our reputation, brand, and business.
Negative commentary regarding us, our products, and other third parties who are affiliated with us, whether accurate or not, may be posted on social media platforms at any time and may adversely affect our reputation, brand, and business.
In particular, these types of events could impact our global supply chain, including the ability of vendors to provide raw materials where and when needed, the ability of third parties to manufacture and ship merchandise, and our ability to ship products to customers from or to the impacted region(s). 72 Ta ble of Contents In February 2022, armed conflict escalated between Russia and Ukraine.
In particular, these types of events could impact our global supply chain, including the ability of vendors to provide raw materials where and when needed, the ability of third parties to manufacture and ship merchandise, and our ability to ship products to customers from or to the impacted region(s). In February 2022, armed conflict escalated between Russia and Ukraine.
Our growth will largely depend on our ability to successfully open and operate new stores, which depends on many factors, including, among others, our ability to: 43 Ta ble of Contents • 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; • 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.
In addition, our marketing strategy is global in scale, reaching consumers in the over 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 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.
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.
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.
Under Delaware law, directors are shielded from liability for breach of these fiduciary obligations if they make informed and disinterested decisions that serve a rational purpose. Thus, our directors are not merely permitted, but obligated, to consider 63 Ta ble of Contents our specific public benefit and the interests of other stakeholders.
Under Delaware law, directors are shielded from liability for breach of these fiduciary obligations if they make informed and disinterested decisions that serve a rational purpose. Thus, our directors are not merely permitted, but obligated, to consider our specific public benefit and the interests of other stakeholders.
If the number of people who are willing to purchase our products does not continue to increase, if we fail to deliver a high quality shopping experience, if our retail partnerships are not successful, if we make products that our customers do not buy in sufficient quantities, or if our current or potential future customers are not convinced that our products are superior to alternatives, then our ability to retain existing customers, acquire new customers, and grow our business may be harmed.
If the number of people who are willing to purchase our products does not continue to increase, if we fail to deliver a high quality shopping experience, if our third-party arrangements are not successful, if we make products that our customers do not buy in sufficient quantities, or if our current or potential future customers are not convinced that our products are superior to alternatives, then our ability to retain existing customers, acquire new customers, and grow our business may be harmed.
Additionally, as our business expands, we may not be able to identify suppliers and manufacturers with business practices that reflect our commitment to sustainability, which may harm our ability to expand our supply chain to meet the expected growth of our business.
Additionally, as our business evolves, we may not be able to identify suppliers, manufacturers, and distributors with business practices that reflect our commitment to sustainability, which may harm our ability to expand our supply chain to meet the expected growth of our business.
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; • 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; 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. 46 Ta ble of Contents We are subject to risks related to our commitment to certain ESG criteria, which we call the Sustainability Principles and Objectives Framework, or the SPO Framework.
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.
Any of these or other difficulties in effectively managing our growth and the increased complexity of our business could result in the erosion of our brand image which could have a material adverse effect on our financial condition.
Any of these or other difficulties in effectively managing our 23 Table of Contents growth and the increased complexity of our business could result in the erosion of our brand image which could have a material adverse effect on our financial condition.
If we cannot maintain our culture and values as we grow, our business could be harmed. 47 Ta ble of Contents We believe that a critical component of our success has been our corporate culture and values. We have invested substantial time and resources in building our culture, which is rooted in innovation, teamwork, and achieving profit with purpose.
If we cannot maintain our culture and values as we grow, our business could be harmed. We believe that a critical component of our success has been our corporate culture and values. We have invested substantial time and resources in building our culture, which is rooted in innovation, teamwork, and achieving profit with purpose.
Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors. 66 Ta ble of Contents Additional stock issuances could result in significant dilution to our stockholders. We may issue additional equity securities to raise capital, make acquisitions, or for a variety of other purposes.
Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors. Additional stock issuances could result in significant dilution to our stockholders. We may issue additional equity securities to raise capital, to make acquisitions, or for a variety of other purposes.
It is uncertain if and to what extent various states will conform to current federal tax law. In addition, our ability to utilize our federal net operating carryforwards may be limited under Section 382 of the Internal Revenue Code of 1986, as amended, 62 Ta ble of Contents or the Code.
It is uncertain if and to what extent various states will conform to current federal tax law. In addition, our ability to utilize our federal net operating carryforwards may be limited under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code.
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.
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.
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 37 Ta ble of Contents assets with definite lives, for impairment whenever events or changes in circumstances indicate the carrying amount of an 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 20 Table of Contents asset may not be recoverable.
Many of our competitors have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition, and greater financial, research and development, store development, marketing, distribution, and other resources than we do. 39 Ta ble of Contents We rely on technical and materials innovation to offer high-quality products.
Many of our competitors have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers and distributors, greater brand recognition, and greater financial, research and development, store development, marketing, distribution, and other resources than we do. We rely on technical and materials innovation to offer high-quality products.
If we are unable to identify suitable acquisitions or strategic relationships, or if we are unable to 69 Ta ble of Contents integrate any acquired businesses, facilities, technologies, and products effectively, or if we fail to realize anticipated returns or capture expected benefits, our business, financial condition, and results of operations could be adversely affected.
If we are unable to identify suitable acquisitions or strategic relationships, or if we are unable to integrate any acquired businesses, facilities, technologies, and products effectively, or if we fail to realize anticipated returns or capture expected benefits, our business, financial condition, and results of operations could be adversely affected.
If our ESG practices do not meet investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones we choose to focus on), or if our ESG practices do not live up to our own values or ESG- and sustainability-related goals, then our brand, reputation, and employee retention may be negatively impacted.
If our ESG practices do not meet investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones we choose to focus on), or if our ESG practices, including our periodic reporting, change or otherwise do not live up to our own values or ESG- and sustainability-related goals, then our brand, reputation, and employee retention may be negatively impacted.
If there is a substantial increase in the volume of traffic on our website or the number of orders placed by customers, we will be required to further expand, 54 Ta ble of Contents scale, and upgrade our technology, transaction processing systems, and network infrastructure.
If there is a substantial increase in the volume of traffic on our website or the number of orders placed by customers, we will be required to further expand, scale, and upgrade our technology, transaction processing systems, and network infrastructure.
Laws and regulations in the United States and around the world restrict how information about individuals is collected, processed, stored, used, and disclosed, as well as set standards for its security, implement notice requirements regarding privacy practices, and provide individuals with certain rights regarding the use, disclosure, 56 Ta ble of Contents and sale of their protected personal information.
Laws and regulations in the United States and around the world restrict how information about individuals is collected, processed, stored, used, transferred, and disclosed, as well as set standards for its security, implement notice requirements regarding privacy practices, and provide individuals with certain rights regarding the use, disclosure, and sale of their protected personal information.
As a result of this concentration in our supply chain, our business and operations would be negatively affected if any of our key manufacturers were to experience significant disruption affecting the price, quality, availability, or timely delivery of products.
As a result of this concentration in our supply chain, our business and operations would be negatively affected if our footwear manufacturer in Vietnam or any of our other key manufacturers were to experience a significant disruption affecting the price, quality, availability, or timely delivery of products.
In addition, from time to time, we seek to downsize, consolidate, reposition, or close some of our retail stores, which may require modification of various contracts, including an existing lease. We generally cannot cancel these leases at our option.
In addition, from time to time, we have sought to and may again seek to downsize, consolidate, reposition, or close some of our retail stores, which may require modification of various contracts, including an existing lease. We generally cannot cancel these leases at our option.
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 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 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.

… 171 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−1 removed1 unchanged
Biggest changeAs of December 31, 2022, we also leased property in the following countries around the world that serve as our 58 retail locations, totaling approximately 180,000 square feet, as set forth below. 73 Ta ble of Contents Country # of Stores United States 42 China 5 United Kingdom 3 Japan 2 Canada 2 Netherlands 1 Germany 1 South Korea 1 New Zealand 1 Total retail stores 58 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, 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.
Item 2. Properties As of December 31, 2022, we operated 58 retail locations around the world. Our corporate headquarters is located in San Francisco, California, where we lease approximately 39,000 square feet of space under two leases that expire in December 2026.
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.
In addition to our corporate headquarters, we have satellite corporate office locations in Portland, London, Shanghai, Tokyo, Vietnam, and Seoul where we lease or have co-working arrangements that total approximately 16,000 square feet of office space.
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.
Removed
We vacated our corporate office lease in San Diego in July 2022 and subleased the space to another tenant in November 2022.
Added
For example, we have vacated and currently sublease two corporate office spaces in San Francisco and San Diego.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+7 added−2 removed0 unchanged
Biggest changeItem 3. Legal Proceedings From time to time, we may be subject to legal proceedings, claims, and government investigations in the ordinary course of business.
Biggest changeItem 3. Legal Proceedings From time to time, we may be subject to legal proceedings, claims, and government investigations in the ordinary course of business. On April 13, 2023, and on May 16, 2023, we and certain of our executive officers and directors were named as defendants in two substantially similar securities class action lawsuits, captioned Shnayder v.
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.
Removed
We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition, or cash flows.
Added
Allbirds, Inc., et al., Case No. 23-cv-01811-AMO and Delgado v. Allbirds, Inc., et al., Case No. 23-cv-02372-AMO, filed in the United States District Court for the Northern District of California.
Removed
We have received, and may in the future continue to receive, claims arising from: our products, such as consumer claims and personal injury claims; our workforce, our technology, and business processes, such as worker classification and patent claims; our sustainability and ESG practices, statements, and goals; and our intellectual property, such as trademarks and copyright infringement claims.
Added
These lawsuits allege that we violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder, and Sections 11 and 15 of the Securities Act by making materially false and/or misleading statements about our business, operations and prospects. The plaintiffs seek damages in an unspecified amount.
Added
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.
Added
We 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.
Added
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.
Added
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.
Added
This lawsuit alleges breach of fiduciary duties, unjust enrichment, violations of Section 10(b) of the Exchange Act, contribution under Section 11(f) of the Securities Act and Section 21D of the Exchange Act, and waste of corporate assets based on allegations that are substantially similar to those asserted in the securities class action and are currently stayed.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−4 removed3 unchanged
Biggest changeAny future determination to pay dividends on our capital stock will be at the discretion of our board of directors. Securities Authorized for Issuance under Equity Compensation Plans See the section titled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information regarding securities authorized for issuance.
Biggest changeAny future determination to pay dividends on our capital stock will be at the discretion of our board of directors. Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved]
Prior to that date, there was no public trading market for our Class A common stock. Holders of Record As of February 28, 2023, we had 26 holders of record of our Class A common stock and 29 holders of record of our Class B common stock.
Prior 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.
Removed
Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act.
Removed
The following graph compares (i) the cumulative total stockholder return on our Class A common stock from November 3, 2021 (the date our Class A common stock commenced trading on the Nasdaq Stock Market) through December 31, 2022 with (ii) the cumulative total return of the Standard & Poor's (S&P) 500 Index and the Nasdaq Composite Index over the same period, assuming the investment of $100 in our Class A common stock and in both of the other indices on November 3, 2021 and the reinvestment of dividends.
Removed
The graph uses the closing market price on November 3, 2021 of $28.89 per share as the initial value of our Class A common stock.
Removed
As discussed above, we have never declared or paid a cash dividend on our Class A common stock and do not anticipate declaring or paying a cash dividend in the foreseeable future. 75 Ta ble of Contents Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

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

96 edited+34 added−70 removed42 unchanged
Biggest changeResults of Operations The following table sets forth our consolidated statements of operations data for each of the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands) Consolidated Statements of Operations Data: Net revenue $ 297,766 $ 277,472 $ 219,296 Cost of revenue 168,138 130,810 106,555 Gross profit 129,628 146,662 112,741 Operating expense: Selling, general, and administrative expense (1)(2) 166,736 122,200 86,694 Marketing expense 59,109 57,338 55,271 Impairment expense 3,286 — — Restructuring expense 782 — — Total operating expense 229,913 179,538 141,965 Loss from operations (100,285) (32,876) (29,224) Interest income (expense) 19 (178) (297) Other income (expense) 139 (11,506) (452) Loss before provision for income taxes (100,127) (44,560) (29,973) Income tax (provision) benefit (1,227) (810) 4,113 Net loss $ (101,354) $ (45,370) $ (25,860) Other comprehensive loss: Foreign currency translation (loss) gain (4,277) (1,290) 2,245 Total comprehensive loss $ (105,631) $ (46,660) $ (23,615) ________________ (1) Includes stock-based compensation expense of $19.0 million, $9.7 million, and $6.6 million for the years ended December 31, 2022, 2021, and 2020, respectively.
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.
Financing Activities Net cash provided by financing activities in 2022 was $3.6 million, primarily due to net proceeds from the exercise of stock options, the issuance of common stock under the employee stock purchase plan, and the receipt of a repayment for a non-recourse promissory note, offset by payments of deferred offering costs and taxes withheld on employee stock awards.
Net cash provided by financing activities in 2022 was $3.6 million, primarily due to net proceeds from the exercise of stock options, the issuance of common stock under the employee stock purchase plan, and the receipt of a repayment for a non-recourse promissory note, offset by payments of deferred offering costs and taxes withheld on employee stock awards.
We expect these actions, together with our strategic transformation plan on cost and cash optimization, as announced in March 2023, to reduce 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, 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.
Most importantly, we are firmly committed to reducing our carbon footprint and our environmental impact. This commitment may require current and future investments, which may result in higher expenses. Macroeconomic Trends Consumers are increasingly becoming more conscious of the products they purchase and are seeking brands that are responsible and purpose-driven.
Most importantly, we are firmly committed to reducing our carbon footprint and our environmental impact. This commitment may require current and future investments, which may result in higher expenses. Current Macroeconomic Conditions and Trends Consumers are increasingly becoming more conscious of the products they purchase and are seeking brands that are responsible and purpose-driven.
We believe our investments in direct and meaningful relationships with all of our partners, from raw materials suppliers to Tier 1 manufacturers and logistics providers, helps put us on a path of achieving profitable growth in the future. We will continue to make similar investments in developing partnerships across the full supply chain.
We believe our investments in direct and meaningful relationships with all of our partners, from raw materials suppliers to Tier 1 manufacturers and logistics providers, helps put us on a path of achieving profitable growth in the future. We will continue to make similar investments in developing relationships across the full supply chain.
Our supply chain initiatives included reduction of 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.
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.
Further, we must continue to emphasize our commitment to people, the planet, and our investors in order to further increase our reach and highlight the integrity of our brand. We believe our brand strength will enable us to continue to grow brand awareness, allowing us to deepen relationships with consumers and expand our access to global markets.
Further, we must continue to emphasize our commitment to people, the planet, and our stockholders in order to further increase our reach and highlight the integrity of our brand. We believe our brand strength will enable us to continue to grow brand awareness, allowing us to deepen relationships with consumers and expand our access to global markets.
Net cash used in operating activities mainly consists of our net loss adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization of property and equipment, inventory write-offs and write-downs, and changes in operating assets and liabilities during each year.
Net cash used in operating activities mainly consists of our net loss adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization of property and equipment, impairment expense, inventory write-offs and write-downs, and changes in operating assets and liabilities during each year.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of our existing cash and cash equivalent balances, cash flow from operations, amounts available for borrowing under the Credit Agreement and issuances of equity securities or debt offerings.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of our existing cash and cash equivalent balances, amounts available for borrowing under the Credit Agreement and issuances of equity securities or debt offerings.
Assumptions used in these forecasts are consistent with internal planning, and include revenue growth rates, gross margins, and operating expense in relation to the current economic environment and our future expectations, competitive factors in its various markets, inflation, revenue trends and other relevant economic factors that may impact the asset group under evaluation.
Assumptions used in these projected cash flows are consistent with internal planning, and include revenue growth rates, gross margins, and operating expense in relation to the current economic environment and our future expectations, competitive factors in its various markets, inflation, revenue trends and other relevant economic factors that may impact the asset group under evaluation.
We would cease to be an emerging growth company if we have more than $1.235 billion in annual gross revenue, we have more than $700.0 million in market value of our Class A stock held by non-affiliates or we issue more than $1.0 billion of non-convertible debt securities over a three-year period. 94 Ta ble of Contents
We would cease to be an emerging growth company if we have more than $1.235 billion in annual gross revenue, we have more than $700.0 million in market value of our Class A stock held by non-affiliates or we issue more than $1.0 billion of non-convertible debt securities over a three-year period.
Execution of Our Vertical Retail Distribution Strategy and Optimization of Our Store Fleet Our long-term growth strategy relies on our ability to grow across our digital and retail channels, while still maintaining our goal of medium to long-term profitability. We believe an omni-channel buying experience is important to meeting the needs of our growing customer base while also growing revenue.
Execution of Our Vertical Retail Distribution and Omni-Channel Strategy and Optimization of Our Store Fleet Our long-term growth strategy relies on our ability to grow across our digital and retail channels, while still maintaining our goal of long-term profitability. We believe an omni-channel buying experience is important to meeting the needs of our customer base.
Impairment of Long-Lived Assets We evaluate the recoverability of property and equipment, operating lease right-of-use assets, and other long-lived assets, including identifiable intangible assets with definite lives, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Impairment of Long-Lived Assets We evaluate the recoverability of property and equipment, operating lease right-of-use assets, and identifiable intangible assets with definite lives (“long-lived assets”) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Consumers’ increasing care in the products and brands they trust have contributed to significant demand for our products. Our status as a PBC and a B Corp highlight our commitment to sustainability and our purpose while providing an objective reference point for consumers.
Consumers’ increasing care in the products and brands they trust has contributed to continued demand for our products. Our status as a PBC and a B Corp highlight our commitment to sustainability and our purpose while providing an objective reference point for consumers.
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; 87 Ta ble of Contents • 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 not 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 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, 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.
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 long-trusted commitment to offering the most comfortable, high performance, 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 gross margin may fluctuate from period to period based on a number of factors, including business outcomes, the mix of products we sell, the geographies and channels through which we sell our products, price increases or decreases, the innovation initiatives we undertake in each product category, cost drivers, such as commodity prices, transportation rates, manufacturing costs, and inventory write-downs or write-offs, among other factors.
Our gross margin may fluctuate from period to period based on a number of factors, including business outcomes, the mix of products we sell in different geographies and channels, price increases, promotional activities, the innovation initiatives we undertake in each product category, cost drivers (including commodity prices, transportation rates, manufacturing costs), and inventory write-downs or write-offs, among other factors.
Other Income (Expense) Other income (expense) consists of gains or losses on foreign currency, gains or losses on sales of property and equipment, changes in the fair value of our equity investments, and changes in the fair value of our preferred stock warrant liability.
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.
During 2022, we reduced our global corporate workforce by 8% and subleased one 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 that will continue into 2023, including reducing our hiring and cutting discretionary spending.
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.
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, as store traffic has not fully recovered to pre-pandemic levels.
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.
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, 2020 March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 United States 12 12 15 19 23 27 32 38 42 International 8 10 10 12 12 12 12 14 13 16 Total 22 22 27 31 35 39 46 51 58 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, 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 material cash requirements for future capital expenditures, expected to be between $10 million and $15 million in 2023, 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 which are not accurately estimable, 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 market conditions.
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.
Recent Developments March 2023 Strategic Transformation In March 2023, we announced the implementation a strategic transformation plan to reignite growth in the coming years, as well as improve capital efficiency, and drive profitability.
Recent Developments March 2023 Strategic Transformation In March 2023, we announced the implementation of a strategic transformation plan designed to reignite growth in the coming years, as well as improve capital efficiency, and drive profitability. The plan focuses on four key areas.
The changes were primarily driven by the same factors as noted in the adjusted EBITDA discussion above. Liquidity and Capital Resources As of December 31, 2022, we had cash and cash equivalents of $167.1 million. Our operations have been funded primarily through cash flows from the sale of our products and net proceeds from private sales of equity securities.
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.
Any material changes in the sum of our undiscounted cash flow estimates resulting from different assumptions used as of December 31, 2022 for those asset groups included in our evaluation could result in a material change in the long-lived asset impairment charge for fiscal year 2022.
Any material changes in the sum of our undiscounted cash flow estimates resulting from different assumptions or changes in data used in the third-party valuations as of December 31, 2023 for those asset groups included in our 67 Table of Contents evaluation could result in a material change in the long-lived asset impairment charge for fiscal year 2023.
Risk-free interest rate —The risk-free interest rate for the expected term of the options was based on the U.S. Treasury yield curve in effect at the time of the grant. The assumptions for expected volatility and expected term are the two assumptions that most significantly affect the grant date fair value of stock options and ESPP Rights.
Treasury yield curve in effect at the time of the grant. The assumptions for expected volatility and expected term are the two assumptions that most significantly affect the grant date fair value of stock options and ESPP Rights.
Risk Factors, for further details. Components of Results of Operations Net Revenue We generate net revenue primarily from sales of our products. We sell products directly through our own digital channels (including our websites and mobile app), our leased retail stores, and third-party wholesalers.
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.
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, 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 changes in fair value of our preferred stock warrant liability), interest income or expense, and income tax provision or benefit.
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.
We expect these initiatives to result in estimated annualized selling, 77 Ta ble of Contents general, and administrative expense savings of approximately $13 million to $15 million. We substantially completed these simplification initiatives in the fourth quarter of 2022.
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.
Inventory write-downs are recognized in cost of revenue in the condensed consolidated statements of operations and comprehensive loss. Our reserve estimates require us to make assumptions based on the current rate of sales, age of inventory, salability and profitability of inventory, all of which may be affected by changes in our product mix and consumer preferences.
Our reserve estimates require us to make assumptions based on the current rate of sales, age of inventory, salability and profitability of inventory, all of which may be affected by changes in our product mix and consumer preferences.
Our store-based distribution initiatives in the United States include optimizing our existing store fleet and selectively expanding our third party wholesale channel. Store optimization will include slowing the pace of new store openings and investing in corporate and retail store talent and store marketing.
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.
Income Tax Provision Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Income tax provision $ (1,227) $ (810) $ (417) 51.5 % Income tax provision increased by $0.4 million, or 51.5%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, 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, 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.
Item 7. 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 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, 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.
Seasonality Our business is affected by general seasonal trends common to the retail footwear and apparel industry, with a larger percentage of our sales occurring during the end-of-year holiday period that typically falls within our fourth quarter.
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.
August 2022 Simplification Initiatives 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 focus on reducing costs related to our supply chain and selling, general, and administrative expense.
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.
As we begin to execute on our strategic transformation plan announced in March 2023, we expect to see a decrease in future capital expenditures due to fewer store openings in the U.S. as well as in international markets if we transition our international go-to-market strategy to partnerships with distributors in certain markets.
As we continue to execute on our strategic transformation plan announced in March 2023, we expect to see a decrease in future capital expenditures due to fewer store openings in the U.S. and in international markets.
In connection with our strategic transformation plan announced in March 2023, we intend to reconnect with our core customers by focusing our product strategy on our core franchise products. Our continued growth 78 Ta ble of Contents within our existing customer base will depend in part on our ability to focus our product strategy to appeal to our existing customers.
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.
(2) Includes depreciation and amortization expense of $15.8 million, $9.8 million, and $7.1 million for the years ended December 31, 2022, 2021, and 2020, respectively. 82 Ta ble of Contents The following table sets forth our consolidated results of operations as a percentage of net revenue, for the periods presented: Year Ended December 31, 2022 2021 2020 Consolidated Statements of Operations Data, as a Percentage of Net Revenue: Net revenue 100.0 % 100.0 % 100.0 % Cost of revenue 56.5 % 47.1 % 48.6 % Gross profit 43.5 % 52.9 % 51.4 % Operating expense: Selling, general, and administrative expense 56.0 % 44.0 % 39.5 % Marketing expense 19.9 % 20.7 % 25.2 % Impairment expense 1.1 % — % — % Restructuring expense 0.3 % — % — % Total operating expense 77.2 % 64.7 % 64.7 % Loss from operations (33.7) % (11.8) % (13.3) % Interest income (expense) 0.0 % (0.1) % (0.1) % Other income (expense) 0.0 % (4.1) % (0.2) % Loss before provision for income taxes (33.6) % (16.1) % (13.7) % Income tax (provision) benefit (0.4) % (0.3) % 1.9 % Net loss (34.0) % (16.4) % (11.8) % Other comprehensive loss: Foreign currency translation (loss) gain (1.4) % (0.5) % 1.0 % Total comprehensive loss (35.5) % (16.8) % (10.8) % Comparison of the Years Ended December 31, 2022 and 2021 Net Revenue Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Net revenue $ 297,766 $ 277,472 $ 20,294 7.3 % Net revenue increased by $20.3 million, or 7.3%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
(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.
Our projections are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, consumer demand and competitive environments differ from our expectations.
Our projections are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, consumer demand and competitive environments differ from our expectations. Inventory Inventory consists of finished goods, stated at the lower of cost or net realizable value.
Related to this, we recognized 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.
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.
We record deferred tax assets and liabilities based on differences between the book and tax bases of assets and liabilities. The deferred tax assets and liabilities are calculated by applying enacted tax 81 Ta ble of Contents rates and laws to taxable years in which such differences are expected to reverse.
The deferred tax assets and liabilities are calculated by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse.
For stock options granted to employees, we estimate the expected term by using the simplified method. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options. For stock options granted to non-employees, the expected term equals the contractual term of the option.
The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options. For stock options granted to non-employees, the expected term equals the contractual term of the option. Risk-free interest rate —The risk-free interest rate for the expected term of the options is based on the U.S.
These adjustments are estimates which could vary significantly, 91 Ta ble of Contents either favorably or unfavorably, from actual requirements if future economic conditions, customer demand or other factors differ from expectations.
These adjustments are estimates which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer demand or other factors differ from expectations. Revenue Recognition Our primary source of revenue is from sales of shoes and apparel products.
Expected term —The expected term of options represents the period of time that options are expected to be outstanding. Our historical stock option exercise experience does not provide a reasonable basis upon which to estimate an expected term due to a lack of sufficient data.
Our historical stock option exercise experience does not provide a reasonable basis upon which to estimate an expected term due to a lack of sufficient data. For stock options granted to employees, we estimate the expected term by using the simplified method.
Cost of Revenue Cost of revenue consists primarily of the cost of purchased inventory, inbound and outbound shipping costs, import duties, distribution center and related equipment costs, and inventory write-downs or write-offs. Shipping costs to receive products from our suppliers are included in the cost of inventory and recognized as cost of revenue upon sale of products to our customers.
Cost of Revenue Cost of revenue consists primarily of the cost of purchased inventory, inbound and outbound shipping costs, import duties, distribution center and related equipment costs, and inventory write-downs or write-offs.
Cash Flows Year Ended December 31, 2022 2021 2020 (in thousands) Net cash used in operating activities $ (90,583) $ (50,850) $ (34,578) Net cash used in investing activities (32,292) (25,636) (16,281) Net cash provided by financing activities 3,581 238,152 102,189 Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash (1,515) (341) 909 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (120,809) $ 161,325 $ 52,239 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, 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.
Expected volatility —As we did not have a trading history for our common stock prior to November 2021, the expected volatility was estimated by taking the average historic price volatility for industry peers, consisting of several public companies in our industry which are either similar in size, stage of life cycle, or financial leverage, over a period equivalent to the expected term of the awards.
Expected volatility —The expected volatility is estimated by taking the average historic price volatility for industry peers, consisting of several public companies in our industry which are either similar in size, stage of life cycle, or financial leverage, over a period equivalent to the expected term of the awards. 68 Table of Contents Expected term —The expected term of options represents the period of time that options are expected to be outstanding.
Future expense amounts for any particular period could be affected by changes in our assumptions or market conditions. 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.
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.
As of December 31, 2022, we had inventory purchase obligations of $17.7 million, with $2.3 million payable within 12 months. See Note 15, Commitments and Contingencies, of our consolidated financial statements included in Part II, Item 8, for more information regarding our inventory purchase obligations.
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, 2022, the majority of our sales are through our digital channels and leased retail stores. Net revenue consists of sales of our products and shipping revenue, net of allowances for returns, discounts, and any taxes collected from customers.
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.
Overview Allbirds is a global lifestyle brand that innovates with naturally derived materials to make better footwear and apparel products in a better way, while treading lighter on our planet.
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.
Long-lived assets are reviewed for recoverability at the lowest level in which there are identifiable cash flows (asset group). The asset group is typically at the country-level for store assets and the corporate-level for corporate assets. The carrying amount of a country asset group includes stores’ operating lease right-of-use assets and property and equipment, primarily leasehold improvements.
The carrying amount of a store asset group includes stores’ operating lease right-of-use assets and property and equipment, which consists primarily of leasehold improvements. We evaluate corporate assets or other long-lived assets that are not store-specific at the consolidated level.
During 2021, net cash used in operating activities was $50.9 million, which consisted of a net loss of $45.4 million, partially offset by non-cash charges of $31.8 million and a net change of $37.3 million in our operating assets and liabilities.
During 2023, net cash used in operating activities was $30.2 million , which consisted of a net loss of $152.5 million and a net decrease of $43.8 million in our operating assets and liabilities, partially offset by non-cash charges of $78.4 million added back to net loss .
These optimization efforts may include a combination of efforts, including evaluating the number of new store openings and slowing the pace of new retail store openings, investing in store marketing, expanding our third-party partnerships, and exploring partnering with distributors in certain international markets.
These optimization efforts include a combination of efforts, including evaluating new store openings, slowing the pace of new retail store openings, closing existing stores, investing in store marketing, expanding our third-party partnerships, and exploring the use of third-party distributors in certain international markets, such as the distribution agreements entered into in September 2023 with distributors in Canada and South Korea, and the additional distribution agreements we expect to enter into in other international markets.
Inclusive of these cost control actions, we still expect total SG&A expense to increase over time. 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 restructuring expense to increase in 2023 as a result of our March 2023 strategic transformation plan. Interest Income (Expense) Interest income (expense) primarily consists of interest income generated from our cash and cash equivalents, offset by interest expense associated with our credit agreement with JPMorgan Chase Bank, N.A.
Interest Income Interest income primarily consists of interest income generated from our cash and cash equivalents, offset by interest expense associated with our credit agreement with JPMorgan Chase Bank, N.A, which we refer to as our Credit Agreement. We expect interest income and expense to fluctuate based on our future bank balances, credit line utilization, and the interest rate environment.
Ability to Scale Infrastructure for Profitable Growth To grow our business, we intend to continue to improve our operational and capital efficiency and thoughtfully optimize our infrastructure. Our ability to scale relies upon our supply chain infrastructure.
In addition, these initiatives may require ongoing investments that could delay our ability to achieve medium to long-term profitability. Ability to Scale Infrastructure for Profitable Growth To grow our business, we intend to continue to improve our operational and capital efficiencies and thoughtfully optimize our infrastructure. Our ability to scale relies upon our supply chain infrastructure.
We expect our cost of revenue to decrease or increase in absolute dollars in line with net revenue fluctuations. Gross Profit and Gross Margin Gross profit represents net revenue less the cost of revenue. Gross margin is gross profit expressed as a percentage of net revenue.
Gross Profit and Gross Margin Gross profit represents net revenue less the cost of revenue. Gross margin is gross profit expressed as a percentage of net revenue.
Interest Income (Expense) Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Interest income (expense) $ 19 $ (178) $ 197 NM 9 Interest income increased by $0.2 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
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.
As customers may return products, we record a reserve for estimated product returns in each reporting period as a reduction of net revenue, which is based on historical return trends. We record the expected customer refund liability as a reduction to revenue, and the expected inventory right of recovery as a reduction of cost of revenue.
The transaction price is determined based upon the invoiced sales price, less anticipated sales returns from and discounts to customers. As customers may return products, we record a reserve for estimated product returns in each reporting period as a reduction of net revenue.
We periodically review inventory and make provisions as necessary to appropriately value end of life, slow-moving, damaged, and excess inventory. 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.
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.
In the prior year ended December 31, 2020, we elected to carry back 2018 and 2019 net operating losses to prior tax years. Non-GAAP Financial Measures This Annual Report on Form 10-K and accompanying financial tables include references to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures.
Non-GAAP Financial Measures This Annual Report on Form 10-K and accompanying financial tables include references to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures.
We ceased use of one of our corporate office leases in the United States in the third quarter of 2022 and began subleasing the space to another tenant in the fourth quarter of 2022.
In 2022 and 2023, we began subleasing two of our corporate office leases in the United States to other tenants.
The following table presents net loss and adjusted EBITDA as percentages of net revenue: Year Ended December 31, 2022 2021 2020 (in thousands) (unaudited) Net revenue $ 297,766 $ 277,472 $ 219,296 Net loss $ (101,354) $ (45,370) $ (25,860) Net loss margin (34.0) % (11.8) % (7.5) % Adjusted EBITDA $ (60,437) $ (11,655) $ (15,430) Adjusted EBITDA margin (20.3) % (4.2) % (7.0) % Adjusted EBITDA margin declined from (4.2)% to (20.3)% in the year ended December 31, 2022 compared to the year ended December 31, 2021 and improved from (7.0)% to (4.2)% in the year ended December 31, 2020 compared to the year ended December 31, 2019.
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.
Net cash used in investing activities in 2022, 2021, and 2020 was $32.3 million , $25.6 million , and $16.3 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.
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.
As part of our strategic transformation plan announced in March 2023, we intend to leverage these third-party partnerships further to increase brand awareness and reach new customers. Continued Growth Within Existing Customer Base and Increasing Closet Share In addition to seeking to acquire new customers, we continuously seek ways to engage with our large and growing base of existing customers.
We also partner with select third-party retailers and distributors to sell our products in our effort to reach more consumers and build brand awareness. Growth Within Existing Customer Base and Increasing Closet Share In addition to seeking to acquire new customers, we continuously seek ways to engage with our base of existing customers.
We expect that the combination of our strategy and growth initiatives in 2023 will result in a stronger gross margin profile.
We expect that these factors will result in a stronger gross margin profile in 2024 and beyond.
Cost of Revenue, Gross Profit, and Gross Margin Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Cost of revenue $ 168,138 $ 130,810 $ 37,328 28.5 % Gross profit 129,628 146,662 $ (17,034) (11.6) % Gross margin 43.5 % 52.9 % (17.6) % 83 Ta ble of Contents Cost of revenue increased by $37.3 million, or 28.5%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
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.
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. The transaction price is determined based upon the invoiced sales price, less anticipated sales returns from and discounts to customers.
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.
The inability to raise capital if needed would adversely affect our ability to achieve our business objectives. Our material cash requirements include the following contractual and other obligations: Debt In February 2019, we entered into the Credit Agreement.
Our material cash requirements include the following contractual and other obligations: Debt In February 2019, we entered into the Credit Agreement, as subsequently amended in March 2023 pursuant to the First Amendment to Credit Agreement and in April 2023 pursuant to the Second Amendment to Credit Agreement.
Operating Leases We lease various office and retail spaces for our operations with lease terms ranging from 1 year to 12 years, certain of which contain renewal provisions. As of December 31, 2022, we had undiscounted operating lease commitments of $125.7 million, with $14.1 million payable within 12 months.
See Note 12, Commitments and Contingencies , of our consolidated financial statements included in Part II, Item 8, for more information regarding our inventory purchase obligations. Operating Leases We lease various office and retail spaces for our operations with lease terms ranging from 1 year to 12 years, certain of which contain renewal provisions.
After our IPO, the fair value of our common stock is determined by the closing price, on the grant date, of our common stock, which is traded on Nasdaq. 92 Ta ble of Contents Expected dividend yield —We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.
Expected dividend yield —We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. As a result, an expected dividend yield of zero percent is used.
The following table presents a reconciliation of adjusted EBITDA to its most comparable GAAP measure, net loss: Year Ended December 31, 2022 2021 2020 (in thousands) (unaudited) Net loss $ (101,354) $ (45,370) $ (25,860) Add (deduct): Stock-based compensation expense, including common stock warrant expense 20,026 11,408 6,684 Depreciation and amortization expense 15,754 9,813 7,110 Impairment expense 3,286 — — Restructuring expense 782 — — Other (income) expense (19) 178 297 Interest (income) expense (139) 11,506 452 Income tax provision (benefit) 1,227 810 (4,113) Adjusted EBITDA (1) $ (60,437) $ (11,655) $ (15,430) (1) We are no longer excluding the revenue and cost of revenue impact associated with the inventory optimization related to the previously announced discontinuation of our first generation apparel business, the Simplification Initiatives, from Adjusted EBITDA.
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.
Restructuring expense Restructuring expense increased by $0.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, and consisted primarily of severance and related costs of $0.7 million as a result of the 8% reduction of our global corporate workforce in 2022.
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.
The Credit Agreement is an asset-based loan with a revolving line of credit of up to $40.0 million and an optional accordion of up to $35.0 million. The Credit Agreement has a maturity date of February 20, 2024. As of December 31, 2022 and 2021, we had no outstanding balances under the Credit 89 Ta ble of Contents Agreement.
The Credit Agreement, as amended, is an asset-based loan with a revolving line of credit of up to $50.0 million and an optional accordion of up to $50.0 million.
The change in operating assets and liabilities was primarily due to an increase of $48.5 million in inventory due to a combination of higher in-transit inventory, resulting from extended lead times and higher inbound freight costs.
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.
The plan focuses on four key areas: Our product and brand initiatives include increasing focus on core franchise management, through a concentration on comfort and quality and better commercialization of our innovative materials, as well as increased investments into brand marketing.
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.
Operating Expenses Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Operating expense: Selling, general, and administrative expense $ 166,736 $ 122,200 $ 44,536 36.4 % Marketing expense 59,109 57,338 1,771 3.1 % Impairment expense 3,286 — 3,286 N/A Restructuring expense 782 — 782 N/A Total operating expense $ 225,845 $ 179,538 $ 46,307 25.8 % Selling, general, and administrative expense Selling, general, and administrative expense increased $44.5 million, or 36.4%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
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.
Selling, general, and administrative expense also includes fixed and variable lease costs for corporate offices and retail stores, depreciation and amortization expense, software costs, third-party professional fees, public company operating costs, and costs related to other office functions.
Operating Expense Selling, General, and Administrative expense Selling, general, and administrative expense (“SG&A expense”) consists of personnel and related costs including salaries, benefits, bonuses, and stock-based compensation for our corporate and retail employees, third-party professional fees, information technology, payment processing fees, fixed and variable lease costs for corporate offices and retail stores, depreciation and amortization, software costs, legal fees, and other administrative costs associated with operating the business.
We account for forfeitures as they occur instead of estimating the number of awards expected to be forfeited.
We account for forfeitures as they occur instead of estimating the number of awards expected to be forfeited. These assumptions and estimates are as follows: Fair value of common stock —The fair value of our common stock is determined by the closing price, on the grant date, of our common stock, which is traded on Nasdaq.

… 120 more changes not shown on this page.

Other BIRD 10-K year-over-year comparisons