Allbirds bets on AI as losses deepen and cash dwindles
The losses continued at Allbirds Inc., which on Wednesday reported preliminary first quarter results in a regulatory filing with the Securities and Exchange Commission (SEC).
The projected net loss for the three months ended March 31 was $19.6 million, with a possible range of a net loss at between $16.6 million to $22.6 million. At the high end of that range, the net loss would be more than the projected net revenue of $22.3 million at the midway range. Net revenue for the first quarter was given a range of between $21.3 million to $23.3 million.
A year ago, the sneaker brand posted a net loss of $21.9 million on revenue of $32.1 million.
The company's net loss at the midway range of $19.6 million was also more than what Allbirds had in cash on hand, which was stated as $14.4 million at the end of the first quarter. A year ago, the company reported $39.1 million of cash and cash equivalents at the end of the quarter and "no outstanding borrowings under its $50.0 million revolving credit facility."
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which is considered a better measure at how well a company is doing, was projected at a loss ranging from $14.1 million to $18.1 million. That compares with the year-ago adjusted EBITDA loss of $18.6 million.
And another negative measure was the decline in gross margin. The first quarter range was at between 23.3 percent to 32.3 percent, far lower than the 44.8 percent achieved in the same year-ago quarter.
Last month, the sneaker firm said it plans to sell the company's intellectual property (IP) assets to brand management firm American Exchange Group for $39 million. A series of missteps, including an expansion that was too fast and spending as if it was a true tech firm - the fash-tech firm was based in San Francisco among other tech elites - dropped Allbirds' lofty $4.1 billion valuation to just $39 million.
One of the brand's problems was that profitability was not its strong suit. In fact, the company said that it has "incurred significant losses since inception" in 2015, according to an annual report filed March 31 with the SEC.
Company founders Tim Brown, a former New Zealand professional soccer player, and Joey Zwillinger, a biotech engineer, grabbed the market's attention with its Wool Runner shoe, which was crafted from merino wool and recycled plastic shoelaces. It also featured a proprietary sugarcane-based SweetFoam midsole that gave the shoe a lightweight and bouncy feel.
Zwillinger was succeeded as CEO in March 2024 by the firm's chief operating officer Joe Vernachio, but he retained his board seat. Brown stepped down as co-CEO a year earlier, and shifted to the role of chief innovation officer. The belief is that they retained their Class A and Class B shares, the latter reserved for founders that gave them 10-times the voting power for each Class A share and firm control of the company.
A week ago, Allbirds Inc. said it would shift its focus to AI from sustainably-made shoes. While the IP will be owned by American Exchange once the sale is completed, with the new owner making shoes under the Allbird brand, Allbirds the public company is seeking shareholder approval to change course. It's a mechanism that allows Allbirds' founders to use the publicly-traded shares to raise money to fund its new venture as an AI compute infrastructure business under the renamed entity New Bird AI.
Presuming existing Allbirds shareholders agree, all stakeholders would essentially get a second bite at the proverbial apple to reap - or eke out - any additional benefits from share price increases should the new venture take off.
Shares of Allbirds closed at $2.39 on April 14, popped up to an intraday high of $24.31 before closing at $16.99 on April 15, when the company disclosed its AI plans. The shares have since given up much of those gains, closing Wednesday at $8.43 in trading on the NasdaqGS exchange.
