Smartbird, Inc.

Good afternoon, and thank you for standing by. At this time, I would like to welcome everyone to Allbirds' first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Christine Green, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us. With me on the call today are Joe Vernaccio, CEO, and Annie Mitchell, CFO. Before we start, I'd like to remind you that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about our financial outlook, including cash flow and adjusted EBITDA expectations, 2024 guidance targets, impact and duration of external headwinds, strategic transformation plan, and related planned efforts, go-to-market strategy, planned transitions to a distributor model in certain international markets, anticipated distributor model arrangements, expected profitability, cost savings targets, gross margin estimates, product plan timelines and expectations, third-party partnership strategy, marketing strategy, and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise any statements to reflect changes that occur after this call. Please refer to our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2023, for a more detailed description of the risk factors that may affect our results. Also, during this call, we will discuss non-GAAP financial measures that adjust our GAAP results to eliminate the impact of certain items. These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures to the extent reasonably available in today's earnings release. Now I'll turn the call over to Joe to begin the formal remarks.

Hello. I'm pleased to be here today, hosting my first earnings call as CEO. I've been in the seat for nearly 60 days, and it's been gratifying to see that our teams are coalesced around our transformation plan, leaning into the tasks at hand and operating with purpose. Today's headline is that we know what needs to be done and we're executing with urgency. We're pleased to share that first quarter results were in line with expectations, highlighted by our ability to achieve significant improvement in gross margin and narrow our adjusted EBITDA loss despite a 28% sales decline. We're delivering strong execution against the key pillars under our strategic transformation plan, which are reigniting product and brand, optimizing our U.S. distribution and store profitability, transitioning to a distributor model in international markets, and improving cost and capital efficiency. We made substantial progress in this first year of our transformation with our initiatives across stores, distributor transitions, and cost reductions well underway in generating benefits. We have set up 2024 as a year to regain top-line momentum through improved product and storytelling and position the brand for growth in 2025. Among our strategic imperatives is the return to full-price selling. After a year of promotional activity, we recognize this shift will create near-term impact to sales, but we know it's the right decision for long-term health of the brand. In Q1, we had just one promotion, a planned event in March. Going forward, you can expect to see a similar cadence of limited promotions connected to consumer-driven moments throughout the year. As we start to deliver a more robust offering of fresh, updated products later this year, we believe the consumer will respond. We are laser-focused on creating a cohesive icon strategy that celebrates and innovates upon the core franchises that Allbirds is known for and our customers love. It has been encouraging to see some green shoots when we have brought newness. Most recently, we introduced the latest edition of our runner franchise, the Tree Runner Go. This shoe draws inspiration from one of our best-selling silhouettes with new innovations and upgrades. It's still early, but consumer feedback has been extremely positive. with our customers responding well to the style, color, and comfort. And our limited color drop to date leaves opportunity to bring additional newness in the coming months. Initial conversion rates have been robust in both men's and women's. And for the two-week period subsequent to launch, it's the highest performing product we have seen in almost two years. Following the success of our Wool Runner 2 launch last November, this tells us that our franchise offense strategy is resonating, and we have more to come for fall and holiday. Importantly, we are moving as quickly as possible to advance the product pipeline in 2025. The work being done now will be in market mid-year, and we are thrilled with how our design direction is taking shape. We will be designing through consumer-led insights and stories and anchoring on core colors to meet the needs of our consumers throughout their day their week, and across season, all through a very focused brand plan. With a healthy inventory position and rejuvenated product design, we're beginning to sharpen our brand position and marketing message. In the short term, we plan to keep our spend efficient. As we begin to flow in updated product offerings during the second half of the year, we expect to make incremental investments in upper funnel marketing, broaden brand awareness, and reach new customers. In parallel with our efforts to reignite our product and brand, we are taking actions to create a healthy, balanced US marketplace, which includes optimizing our store profitability and distribution. We are on track with the store optimization initiative that we outlined last quarter. We closed three US stores in Q1 and plan to close 10 to 15 underperforming US locations this year. As we focus on maximizing the productivity of our remaining stores, we're encouraged that our drive conversion, including new visual merchandising strategies and enhanced selling culture, are beginning to gain traction. Wholesale is another critical channel where we can reach both new and existing customers. In the near term, we will continue to be conservative to ensure that we don't over-assort before we have a portfolio of resonant products. You've heard us say this previously, but it bears repeating. We are fortunate to have exceptional partners in the wholesale channel, including Dick's Sporting Goods, Nordstrom, and REI. We intentionally pulled back the brand's presence in these doors in 2023, as we wanted to ensure that we could show up in this channel with a clean book of inventory and compelling product. We're now positioned to become better partners to them. We're moving forward with a long-term game plan to strengthen these relationships and deliver a compelling product offering that will excite their customers. The decision to add Amazon as an additional digital marketplace last year is bearing fruit and outpacing our expectations. This is a profitable extension of our reach and allows Allbirds to meet our customers where they are. Turning now to international, we have made substantial progress in a short period of time with our transition to a distributive model. Canada and South Korea transitioned in Q3 of last year, while Japan and Australia and New Zealand are on track to transition in the next few months. Additionally, we are pursuing opportunities to localize key regional marketplaces throughout continental Europe. We're also entering new regions and recently announced distribution agreements in the Gulf countries and Southeast Asia. By the end of 2024, we expect to have a much stronger expression of the Allbirds brand across key international geographies. Most importantly, we will be utilizing the knowledge, local marketplace expertise, and wholesale capabilities of our distributors to drive scalable growth over the coming years. As Andy talked about last quarter, we view 2024 as a stair step as we transition these markets at different times throughout the year. and make the trade-off necessary to generate high-quality revenue that allows for stronger flow through to the bottom line. Underlying all of our strategic actions we're taking is cost discipline. We are rebuilding the wireframe of the company, making significant progress across the cost structure, inventory, and cash to lay the groundwork to achieve profitability. This year, we'll begin to realize COGS savings resulting from our factory shifts and materials innovation while also capturing operating expense savings from our workforce reductions, international transitions, and store closures. More on this shortly from Annie. Our key areas of focus within our transformation pillars where our teams are executing this year are as follows. Returning our brand to full price selling, creating a cohesive icon product strategy, refreshing our brand position and message, building a balanced U.S. marketplace across digital retail storefronts and wholesale, executing our international transitions, and continuing to right-size our cost structure. As I said earlier, we have our plan and we're executing with urgency. We greatly appreciate the dedication of our teams and the support of our shareholders during this transformational time at Allbirds. We look forward to keeping you updated on our progress and driving value for all our stakeholders in the quarters and years to come. Now I'll turn the call over to Annie to discuss the financials.