Smartbird, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Allbirds second quarter 2024 conference call. All participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question and answer session, at which time instructions will follow. Now I would like to turn the call over to Christine Greeney of the Blue Shirt Group.

Good afternoon, everyone, and thank you for joining us. With me on the call today are Joe Vernacchio, 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 full year and Q3 guidance targets, impact and duration of external headwinds, strategic transformation plan and related planned efforts, go-to-market strategy, 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, marketing strategy and investments, product and brand 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 filing, including our quarterly report on Form 10-Q for the quarter ended March 31, 2024, 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, everyone, and thanks for joining us today. We are pleased to report another quarter of strong execution and performance in line with our expectations. Our Q2 results reflect continuing progress, both operationally and financially, as we set the business on a path to return to top line growth in 2025. We are on a trajectory to reignite our product and brand. But before we talk about this next chapter, Let's take a look at what we've accomplished over the past 18 months. Since the announcement of our strategic transformation plan, we have reset the business, establishing the foundation for the next phase of Allbirds' journey. Importantly, we have demonstrated our ability to formulate a plan and then execute and deliver on that plan. I'd like to provide a quick recap of our actions since March of 2023. Starting with retail storage. We have closed 14 underperforming US locations to bias towards a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail fleet. Next is international. We have successfully transitioned to a distributor model in the five targeted regions where we were previously selling direct. We also opened four new regions where we have the opportunity to partner with leading distributors and leverage our strong brand affinity. We believe this distributor model positions us to achieve profitable and scalable growth internationally. Looking at cost of goods, our shift to a new factory, along with material optimizations, is enabling us to capture significant cog savings, driving longer-term gross margin expansion. We're also generating OpEx savings. We have rebuilt the wireframe of the company, and we're operating with greater overall efficiency. We believe this positions us to drive long-term profitability as we scale. And turning to our balance sheet, we cut our inventory by more than half and drove improvement in working capital in 2023 versus prior year. We entered 2024 in a very healthy position, and we're carefully managing inventory going forward. Against that backdrop, we are now prioritizing three main focus areas. Making great product, telling compelling stories, and providing customers with an engaging shopping experience. Creating great product is paramount to our long-term success. Getting the product engine ignited has been amongst my highest priorities since taking over the product range last November. After bringing in a new chief design officer in December, we built a roadmap to evolve our go-forward product and brand strategy. The first critical step was to edit the line to more closely reflect our evolving strategy. As a result, we have limited the number of recent product introductions to just a few launches. all of which have performed well thus far and demonstrates our customer is asking for newness from Allbirds. The Wool Runner 2, Tree Runner Go, and Canvas Piper have all met with positive consumer response. Up next is the launch of our Tree Glider in just a few weeks. We then set out to inject newness as quickly as possible using our existing tooling we swiftly introduced new colors and materials into the product line, which is allowing us to infuse freshness into our offering for the second half of 24 and the first half of 2025. You'll first see this reflected in the fall when we plan to introduce corduroy, as well as more rugged versions of our water resistant collection. Looking ahead to our fall 25 and spring 26 collections, We are creating these product lines from the ground up with an elevated design and product architecture that emphasizes Allbirds lifestyle brand positioning. We are in the intensive phase of designing and developing a robust line of products that will begin to launch in the second half of next year. We are very motivated by the progress we are seeing with each sample that arrives from our development center. We have more than 10 new product launches planned across these two seasons. The collections will not only enhance our product range, but also reinforce our dedication to quality, comfort, style, and sustainability. In preparation for our new product launches in mid-2025, we will be telling compelling marketing stories, utilizing a new brand narrative called All Birds by Nature. This narrative celebrates the duality of the word nature, connecting our design philosophy inspired by the natural world, while also encouraging people to embrace their innate and unique human nature. All Birds by Nature will enable us to inspire and engage the consumer with a wide range of topics, from product benefits to universal human experiences. For example, Breathable by Nature, will highlight our use of natural and recycled materials and knit constructions that offer exceptional breathability. Comfortable by nature will showcase the comfort of our shoes while also encouraging people to feel comfortable in their own skin. To amplify this narrative, we are prioritizing increased marketing investment starting in the second half of the year with a phased ramp-up planned to continue throughout 2025. More on this from Annie shortly. Our efforts will be centered around driving awareness through an upper funnel strategy that tells the Allbirds brand and product story in a fresh, engaging, and consistent manner. Specifically, our initiatives are designed to convey our brand message and product attributes through the lenses of rational, emotional, and cultural connections. By incorporating these elements, we are creating a richer, more engaging narrative that resonates with the values and aspirations of the Allbirds consumer. As we bring fresh, updated product to the market and amplify our marketing, providing customers with an engaging shopping experience is our other key priority. We are enhancing the in-store consumer journey, starting with an improved assortment presentation, wayfinding, and floor displays. In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop. You'll hear much more about this in the quarters to come. As we embark on the next phase of our journey, our track record of execution over the past 18 months gives us confidence in our ability to advance our three main focus areas, of making great product, telling compelling stories, and providing customers with an engaging shopping experience. We have bolstered our organization with key hires and internal promotions, creating a team that is coalesced around a clear path forward. We're continuing to operate with urgency and remain committed to building shareholder value over the long term. We appreciate your support. and look forward to keeping you updated on our progress. Now I'll turn the call over to Annie to discuss the financials.