Breaking Down Allbirds, Inc. (BIRD) Financial Health: Key Insights for Investors

Understanding Allbirds, Inc. (BIRD) Revenue Streams

Understanding Allbirds, Inc.’s Revenue Streams

The primary source of revenue for the company is derived from sales of footwear and apparel products. Revenue is recognized when control passes to the customer. This occurs at the time products are shipped to digital and third-party customers, and at the point of sale for retail customers.

Breakdown of Primary Revenue Sources

As of September 30, 2024, the company reported the following revenue breakdown:

Year-over-Year Revenue Growth Rate

The company experienced a decline in revenue year-over-year:

• Q3 2024 net revenue was $42.996 million, a 25% decrease from $57.244 million in Q3 2023.
• Nine months ended September 30, 2024 net revenue was $133.905 million, a 26.3% decrease from $182.075 million in the same period in 2023.

Contribution of Different Business Segments to Overall Revenue

The direct business, which includes digital sales and physical stores, remains the largest contributor. The geographical breakdown shows that:

• The United States accounts for approximately 74.4% of total net revenue in Q3 2024.
• International sales contribute about 25.6% of total net revenue in the same quarter.

Analysis of Significant Changes in Revenue Streams

Key changes include:

• A notable decrease in both domestic and international sales compared to the previous year, attributed to lower unit sales and strategic store closures.
• The company has implemented a strategic transformation plan aimed at optimizing its retail footprint, which includes the planned closure of approximately 10-15 stores in the U.S. during 2024.

Overall, the revenue trends indicate a pressing need for the company to enhance its growth strategies and possibly pivot towards more effective marketing and product strategies to reverse the current downward trajectory in revenue.

A Deep Dive into Allbirds, Inc. (BIRD) Profitability

Profitability Metrics

In analyzing the profitability of the company, we will focus on key metrics such as gross profit, operating profit, and net profit margins, along with trends over time and comparisons with industry averages.

Gross Profit, Operating Profit, and Net Profit Margins

For the nine months ended September 30, 2024, the financial data is as follows:

Trends in Profitability Over Time

Comparing the nine months ended September 30, 2024, to the same period in 2023, the net revenue decreased by 26.4% from $182.1 million to $133.9 million. Gross profit also saw a decline of 17.3% from $76.9 million to $63.6 million. However, gross margin improved from 42.2% to 47.5%, indicating better cost management despite lower sales volumes.

Comparison of Profitability Ratios with Industry Averages

As of September 30, 2024, the company's gross margin of 47.5% is above the industry average of approximately 45% for footwear brands, reflecting effective cost management strategies. The net loss margin of (50.5%) remains a concern, as many competitors are achieving breakeven or profitability.

Analysis of Operational Efficiency

Operating expenses have decreased significantly by 21.4% from $172.2 million in 2023 to $135.4 million in 2024. Key components of this reduction include:

• Selling, general, and administrative expenses decreased by 21.3% from $132.5 million to $104.2 million.
• Marketing expenses reduced by 14.1% from $34.2 million to $29.4 million.
• Restructuring expenses fell by 67.6% from $5.5 million to $1.8 million.

The operating loss improved from $(95.4 million) to $(71.8 million), indicating a positive trend in operational efficiency.

As a result of these changes, the adjusted EBITDA loss also decreased from $(58.9 million) in 2023 to $(50.9 million) in 2024, reflecting a 13.0% improvement year-over-year.

Overall, while the company is still facing challenges in achieving profitability, the trends in gross margin and operational efficiency indicate a focused effort on improving its financial health.

Debt vs. Equity: How Allbirds, Inc. (BIRD) Finances Its Growth

Debt vs. Equity: How Allbirds, Inc. Finances Its Growth

As of September 30, 2024, Allbirds, Inc. reported total liabilities of $94.6 million and total stockholders’ equity of $127.3 million, reflecting a total balance sheet of $221.9 million.

Overview of the Company's Debt Levels

Allbirds, Inc. has a credit agreement that includes a revolving line of credit of up to $50 million, subject to a borrowing base formula as amended in March 2023. The interest on borrowings is determined by the Term Secured Overnight Financing Rate plus a specified spread.

As of September 30, 2024, the company had cash and cash equivalents totaling $78.6 million. Additionally, the company had current liabilities including accounts payable of $18.4 million and accrued expenses of $13.3 million.

Debt-to-Equity Ratio and Comparison to Industry Standards

The debt-to-equity ratio can be calculated as follows:

• Total Debt: $94.6 million
• Total Equity: $127.3 million
• Debt-to-Equity Ratio: 0.74

This ratio is below the industry average of approximately 1.0 for similar companies in the retail sector, indicating a more conservative approach to debt financing.

Recent Debt Issuances, Credit Ratings, or Refinancing Activity

In February 2019, the company entered into a credit agreement that was later amended in March and April 2023. This agreement is an asset-based loan with a revolving line of credit of up to $50 million and an optional accordion feature. As of the latest reports, there have been no new debt issuances, and the company maintains a stable credit rating, reflecting its financial health and ability to service debt.

How the Company Balances Between Debt Financing and Equity Funding

Allbirds primarily funds its operations through cash flows from product sales and net proceeds from equity securities. The company’s cash flow from operations is crucial for meeting its short-term obligations and funding its growth initiatives. As of September 30, 2024, the company had $78.6 million in cash and cash equivalents.

The following table summarizes the debt and equity structure of Allbirds, Inc. as of September 30, 2024:

By maintaining a balanced approach to debt and equity financing, Allbirds aims to support its strategic growth initiatives while managing its financial risk effectively.

Assessing Allbirds, Inc. (BIRD) Liquidity

Assessing Allbirds, Inc.'s Liquidity

Current Ratio: As of September 30, 2024, the current ratio was approximately 1.92, calculated from current assets of $101.2 million and current liabilities of $52.7 million.

Quick Ratio: The quick ratio stood at 1.35, indicating a solid liquidity position when accounting for liquid assets. This is derived from liquid assets of $78.6 million against current liabilities of $52.7 million.

Analysis of Working Capital Trends

Working capital as of September 30, 2024, was $48.5 million, reflecting a positive trend compared to $29.0 million at the end of 2023. The increase is attributed to improved net cash inflows from operations despite overall losses.

Cash Flow Statements Overview

Operating Cash Flow: For the nine months ended September 30, 2024, net cash used in operating activities was $(53.0 million), compared to $(25.5 million) in the same period of 2023.

Investing Cash Flow: Net cash provided by investing activities for the same period was $1.5 million, primarily due to proceeds from the sale of businesses.

Financing Cash Flow: Net cash provided by financing activities was $0.2 million, reflecting a slight decrease from $0.4 million in 2023.

Potential Liquidity Concerns or Strengths

The company maintains a cash balance of $78.6 million as of September 30, 2024, which is considered sufficient to cover operational expenses for the next 12 months. However, the ongoing net losses, which totaled $(67.6 million) for the nine months ended September 30, 2024, could pose a risk to liquidity if not addressed by revenue growth or cost management measures.

With a credit agreement providing access to an additional $50 million in revolving credit, the company has a buffer against short-term liquidity challenges. The structured repayment terms and interest rates are manageable, yet the reliance on external financing could be a concern if operational cash flows do not improve.

Overall, while liquidity appears to be stable, continued monitoring of cash flows and operational efficiency will be crucial to sustaining this position.

Is Allbirds, Inc. (BIRD) Overvalued or Undervalued?

Valuation Analysis

The valuation of a company can be assessed through various financial ratios, stock price trends, and consensus opinions from analysts. This section evaluates these aspects for the company in focus.

Price-to-Earnings (P/E) Ratio

The price-to-earnings (P/E) ratio is a critical metric for assessing valuation. As of September 30, 2024, the company reported a net loss of $67.6 million for the nine-month period, translating to a net loss per share of $8.64 . Given the current stock price of approximately $22.50, the P/E ratio cannot be calculated due to negative earnings.

Price-to-Book (P/B) Ratio

The price-to-book (P/B) ratio provides insight into how the market values the company's equity relative to its book value. The total stockholders’ equity as of September 30, 2024, is $127.3 million, with total liabilities of $94.6 million . With 5.39 million shares outstanding , the book value per share is approximately $23.60. Therefore, the P/B ratio stands at approximately 0.95 when compared to the stock price of $22.50.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The enterprise value-to-EBITDA (EV/EBITDA) ratio is another significant metric for valuation. The enterprise value (EV) is calculated as market capitalization plus debt minus cash. Assuming a debt level of $50 million and cash of $78.6 million , the EV can be approximated as follows:

EV = (Stock Price × Shares Outstanding) + Debt - Cash

EV = ($22.50 × 5.39 million) + $50 million - $78.6 million ≈ $117.1 million

For the nine months ended September 30, 2024, the adjusted EBITDA loss was $50.9 million . Thus, the EV/EBITDA ratio is:

EV/EBITDA = $117.1 million / ($50.9 million) ≈ -2.30

Stock Price Trends

Over the past 12 months, the stock price has exhibited volatility. Starting the period at approximately $30.00, it has seen a decline to around $22.50, representing a decrease of approximately 25%. The stock reached a low of $20.00 in recent months .

Dividend Yield and Payout Ratios

The company does not currently pay dividends, resulting in a dividend yield of 0% . Consequently, the payout ratio is also not applicable as there are no earnings distributed to shareholders.

Analyst Consensus on Stock Valuation

Analysts have varied opinions on the company's stock valuation. The consensus rating is a "Hold," reflecting caution among analysts regarding the company’s financial performance and outlook .

Key Risks Facing Allbirds, Inc. (BIRD)

Key Risks Facing Allbirds, Inc.

Allbirds, Inc. faces several internal and external risks impacting its financial health, including industry competition, regulatory changes, and market conditions.

Industry Competition

The market for footwear and apparel is highly competitive. The company competes with athletic and leisure footwear companies, as well as apparel companies. Competitors include large, established companies with substantial market shares and diversified product lines. The presence of both new entrants with low barriers to entry and established players with significant resources can lead to pricing pressures, reduced profit margins, and potential market share loss. In particular, the company has seen a decline in net revenue from $57.2 million in Q3 2023 to $43.0 million in Q3 2024, reflecting competitive pressures.

Regulatory Changes

The company is subject to various regulations that could impact its operations and profitability. Changes in environmental regulations, labor laws, and trade policies could impose additional costs or operational constraints. As a public benefit corporation, Allbirds must balance its profit-making activities with its commitment to social and environmental goals, which may limit its operational flexibility.

Market Conditions

Market conditions, including consumer spending trends, economic downturns, and inflation, can significantly affect sales. The company reported a net loss of $21.2 million for Q3 2024, down from $31.6 million in Q3 2023, indicating ongoing challenges in achieving profitability. Additionally, the gross margin was 44.4% for Q3 2024 compared to 43.5% in Q3 2023, which shows some improvement but highlights the ongoing pressure from rising costs.

Operational Risks

Operational risks include supply chain disruptions, production delays, and quality control issues. The company sources materials from various suppliers, and any disruption in this supply chain could lead to increased costs or delays in product availability. As of September 30, 2024, inventory levels were $57.5 million, slightly down from $57.8 million in December 2023. This indicates a need for careful inventory management amid fluctuating demand.

Financial Risks

Financial risks involve liquidity constraints and the potential inability to meet financial obligations. As of September 30, 2024, the company had cash and cash equivalents of $78.6 million. The company’s reliance on external financing, including a credit agreement with a revolving line of credit of up to $50 million, adds to its financial risk profile.

Strategic Risks

The strategic risks include the execution of the company's transformation plan, which aims to improve profitability and operational efficiency. The plan focuses on optimizing store locations and enhancing product offerings. The company has closed a total of 14 stores in the nine months ended September 30, 2024, which reflects its strategy to reduce overhead costs.

Mitigation Strategies

To mitigate these risks, Allbirds has implemented several strategies, including:

• Focusing on core product franchises to enhance brand recognition and customer loyalty.
• Optimizing the store fleet by slowing new openings and closing underperforming locations.
• Investing in sustainable materials and practices to differentiate its products in the marketplace.

Future Growth Prospects for Allbirds, Inc. (BIRD)

Future Growth Prospects for Allbirds, Inc.

Analysis of Key Growth Drivers

Key growth drivers for the company include:

• Product Innovations: The company is focusing on enhancing its product line with sustainable materials and innovative designs.
• Market Expansions: Plans to expand into new geographic markets, particularly in international regions, are underway.
• Strategic Partnerships: Collaborations with third-party retailers and distributors to broaden distribution channels.

Future Revenue Growth Projections and Earnings Estimates

For the three and nine months ended September 30, 2024, the company generated net revenue of $42.996 million and $133.905 million, respectively. This compares to $57.244 million and $182.075 million for the same periods in 2023, indicating a decline in revenue.

The projected gross margin for the same periods in 2024 was 44.4% and 47.5% respectively, compared to 43.5% and 42.2% in 2023, showing an improvement in gross profitability despite declining revenues.

Strategic Initiatives or Partnerships

The company has announced a strategic transformation plan focusing on:

• Improving capital efficiency and driving profitability.
• Optimizing the existing store fleet while selectively expanding third-party distribution channels.
• Increasing focus on core franchises and better commercialization of innovative materials.

Competitive Advantages

The company's competitive advantages include:

• Strong Brand Identity: A commitment to sustainability and ethical production resonates with a growing segment of environmentally conscious consumers.
• Innovative Materials: The use of naturally derived materials gives the company a unique selling proposition in the footwear and apparel market.
• Established Retail Presence: With 34 stores as of September 30, 2024, the company maintains a physical footprint that enhances customer engagement.

As of September 30, 2024, the company reported cash and cash equivalents of $78.6 million, indicating a need for strategic financial management moving forward.

Updated on 16 Nov 2024

Resources:

1. Allbirds, Inc. (BIRD) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Allbirds, Inc. (BIRD)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Allbirds, Inc. (BIRD)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.