Allbirds, Inc.

Allbirds, Inc. is a global lifestyle brand that focuses on innovating with naturally derived materials to produce footwear and apparel products, emphasizing sustainability and a lighter environmental footprint [Item 1]. The company's core belief centers on consumers recognizing climate change as an existential threat, connecting purchase decisions with planetary impact, and desiring products that balance aesthetics, comfort, and environmental responsibility [Item 1]. Allbirds became a public benefit corporation (PBC) under Delaware law and achieved B Corporation (B Corp) certification in 2016, which codifies its commitment to considering the impact of its actions on all stakeholders, including the environment, employees, communities, consumers, and investors [Item 1].

The company operates in a highly competitive market, facing athletic and leisure footwear and apparel companies, both in physical retail and online [Item 1]. Many competitors are larger, possess strong worldwide brand recognition, and have substantially greater resources than Allbirds [Item 1]. The fragmented nature of the industry and the ease of entry for new companies due to offshore manufacturing and digital growth further intensify competition [Item 1]. Allbirds believes its competitive advantages stem from its unique combination of innovative materials and products, purpose-driven lifestyle brand positioning, deep customer connection, global distribution, and scalable infrastructure [Item 1].

Allbirds generates revenue primarily from the sale of footwear and apparel products through a digitally-led vertical retail distribution strategy, encompassing its eCommerce site and third-party marketplace platforms [Item 1]. The company also utilizes a third-party distribution strategy, appointing exclusive distributors in certain international markets and partnering with select U.S. retailers [Item 1]. Footwear constitutes the foundation of the brand and represents the majority of its revenue, while apparel offerings include classic tees, sweats, socks, and underwear [Item 1]. The company's products incorporate natural and recycled materials like ZQ certified merino wool, tree fibers, and sugarcane, offering benefits such as comfort, temperature regulation, and odor control [Item 1].

The company's product development is a fully integrated ecosystem, combining strategy, sustainability, design, sourcing, development, and production, with teams in the U.S. headquarters and alongside global manufacturing and supply chain innovation partners [Item 1]. This approach prioritizes longevity, versatility, and responsible innovation, creating products that endure through responsible craftsmanship and the Allbirds aesthetic [Item 1]. The marketing strategy is vertically integrated, maintaining a direct relationship with customers, and leveraging digital and performance marketing, social media, CTV, and other media to increase brand awareness and consumer touchpoints [Item 1].

For the fiscal year ended December 31, 2025, Allbirds reported net revenues of $152.5 million [Item 7]. The cost of revenue was $89.915 million [Item 7], resulting in a gross profit of $62.551 million [Item 7] and a gross margin of 41.0% [Item 7]. Operating expenses totaled $142.513 million [Item 7], comprising selling, general, and administrative (SG&A) expense of $92.488 million [Item 7], marketing expense of $45.238 million [Item 7], impairment expense of $4.225 million [Item 7], and restructuring expense of $562 thousand [Item 7]. The company reported a loss from operations of $(79.962) million [Item 7]. Net loss from sales of businesses was $0 [Item 7], interest expense was $(1.067) million [Item 7], and other income was $4.139 million [Item 7]. The loss before provision for income taxes was $(76.890) million [Item 7], with an income tax provision of $(393) thousand [Item 7], leading to a net loss of $(77.283) million [Item 7]. Diluted net loss per share attributable to common stockholders was $(9.47) [Item 8, Note 14]. As of December 31, 2025, cash and cash equivalents stood at $26.690 million [Item 8, Consolidated Balance Sheets], total debt was $17.371 million [Item 8, Consolidated Balance Sheets], and net debt was $(9.319) million. Net cash used in operating activities was $55.083 million [Item 8, Consolidated Statements of Cash Flows].

Comparing 2025 to 2024, net revenue decreased by $37.3 million, or 19.7% [Item 7]. This decline was primarily due to a $23.1 million decrease in the U.S. direct business, driven by retail store closures and e-commerce declines, and an $11.9 million decline in international business due to the transition to third-party distributors [Item 7]. Gross margin decreased from 42.7% in 2024 to 41.0% in 2025 [Item 7], primarily due to a higher mix of digital and international distributor sales, increased duties, and lower average selling prices in the U.S. business [Item 7]. SG&A expense decreased by $40.9 million, or 30.7% [Item 7], largely due to reductions in personnel and related expenses ($18.3 million), rent and utilities ($10.0 million), depreciation and amortization ($4.4 million), and stock-based compensation ($3.7 million) [Item 7]. Marketing expense increased by $3.6 million, or 8.6% [Item 7], driven by investments in upper funnel marketing initiatives [Item 7]. Impairment expense increased by $2.4 million [Item 7], primarily from a $3.5 million non-cash impairment of long-lived assets related to retail stores, partially offset by a $1.8 million impairment of an equity investment in the prior year [Item 7]. Restructuring expense decreased by $1.2 million [Item 7], reflecting fewer costs incurred in 2025 as part of strategic initiatives, with 2025 expenses related to severance and employee benefits from fourth-quarter strategic actions [Item 7]. Interest (expense) income shifted by $4.6 million from income to expense [Item 7], due to a $3.5 million decrease in interest income on money market funds and an increase in interest expense from the Credit Agreement [Item 7]. Other income increased by $1.1 million [Item 7], mainly from greater gains on lease terminations and modifications ($0.4 million) and foreign currency fluctuations ($0.3 million) [Item 7].

During 2025, Allbirds maintained focus on product, marketing, and customer experience, which included designing new product styles, investing in upper funnel brand marketing under the "Allbirds by Nature" banner, and optimizing its retail store fleet, leading to the closure of 10 stores [Item 7]. The company also entered into a new $50.0 million asset-based revolving credit agreement and an "at-the-market" (ATM) program to sell up to $50 million of Class A common stock [Item 7]. Subsequent to year-end, in the first quarter of 2026, Allbirds closed its remaining full-price stores in the United States and entered into a definitive agreement to sell substantially all of its assets to an affiliate of American Exchange Group for $39 million in cash [Item 7, Note 16].

Allbirds' outlook is significantly shaped by its recent strategic decision to sell substantially all of its assets to an affiliate of American Exchange Group for an aggregate purchase price of $39 million in cash [Item 16]. This Asset Sale is expected to close in the second quarter of 2026 [Item 16]. Following the closing of this transaction, the company intends to dissolve and distribute proceeds to its stockholders under a plan of dissolution [Item 16]. This indicates a fundamental shift away from ongoing operations as a standalone entity.

The company explicitly states that it does not expect to continue its operations following the completion of the Asset Sale [Item 2]. If the Asset Sale is not completed for any reason, Allbirds does not anticipate being able to meet its future liquidity needs without accessing additional capital or engaging in strategic transactions, which are not within its control and are subject to various risks and uncertainties [Item 2]. This underscores the critical importance of the Asset Sale to the company's immediate future.

Prior to the Asset Sale, Allbirds' strategy involved focusing resources on its e-commerce platform, wholesale partnerships, and international distributorships, following the closure of its full-price U.S. retail stores in the first quarter of 2026 [Item 1]. The company aimed to grow brand awareness and drive efficient customer acquisition through brand marketing and leveraging third-party stores [Item 1A]. It also sought to increase "closet share" within its existing customer base by developing core franchises and introducing new products that resonate with customers, while maintaining its commitment to comfortable and sustainable products [Item 1A].

Operationally, the company had been focused on improving operational and capital efficiencies and optimizing its infrastructure to achieve profitable growth [Item 7]. This included investments in direct relationships with raw materials suppliers, Tier 1 manufacturers, and logistics providers [Item 7]. Allbirds' commitment to reducing its carbon footprint and environmental impact was expected to require current and future investments, potentially leading to higher expenses [Item 7]. However, the impending Asset Sale and dissolution will supersede these prior operational strategies.

Regarding capital allocation, Allbirds entered into a secured $50.0 million revolving credit agreement with Second Avenue Capital Partners LLC on June 30, 2025 [Item 7]. As of December 31, 2025, $17.3 million was outstanding under this Credit Agreement [Item 7]. The company also established an "at-the-market" (ATM) program in June 2025, allowing it to sell up to $50 million of Class A common stock [Item 7]. During 2025, Allbirds sold 386,289 shares of Class A common stock under the ATM program for net proceeds of $1.7 million [Item 7, Note 7]. Following the Asset Sale, the company anticipates winding up its assets, liabilities, and affairs under a plan of dissolution, with proceeds distributed to common stockholders [Item 7].

The company's material cash requirements prior to the Asset Sale were primarily for working capital, which would depend on cash on hand, cash flows from operations, and borrowings under the Credit Agreement [Item 7]. As of December 31, 2025, inventory purchase obligations were $1.8 million, with $0.9 million payable within 12 months [Item 7]. Undiscounted operating lease commitments were $24.6 million, with $7.2 million payable within 12 months [Item 7]. These obligations will be addressed in the context of the Asset Sale and subsequent dissolution.

Allbirds faces substantial risks, particularly concerning its financial viability, as there is "substantial doubt about our ability to continue as a going concern" [Item 1A]. The company has incurred significant net losses, including $(77.3) million [Item 1A] in 2025, and negative cash flows from operating activities, totaling $55.1 million [Item 1A] in 2025. Future operations are uncertain, and the company will require additional capital to support business growth, which may not be available or could dilute existing stockholders [Item 1A]. The reliance on third-party distributors for international sales introduces risks related to their performance, brand representation, and adherence to sustainability standards, which are outside of Allbirds' direct control [Item 1A]. Economic uncertainty, including inflation and rising interest rates, may affect consumer purchases of discretionary items, impacting demand for Allbirds' products [Item 1A]. The company operates in a highly competitive market with larger, more resourced competitors, which could lead to pricing pressures, reduced profit margins, and loss of market share [Item 1A]. Changes in U.S. and global trade policy, such as tariffs or trade restrictions, particularly on imports from Vietnam and China where products are sourced, could increase costs, disrupt the supply chain, or prevent profitable sales [Item 1A]. Allbirds' commitment to sustainable, high-quality materials and environmentally friendly processes may increase cost of revenue and hinder revenue growth, as these practices are often more expensive than traditional alternatives [Item 1A]. The company's brand and reputation are vulnerable to negative publicity, failure to meet sustainability targets, or allegations of "greenwashing" [Item 1A]. Furthermore, the dual-class common stock structure concentrates voting control with co-founders and principal stockholders, limiting the influence of other stockholders [Item 1A].

Management's message to shareholders reflects a company undergoing a significant strategic pivot, acknowledging past financial challenges while outlining a path towards a definitive resolution. The overall tone indicates a recognition of the need for decisive action given the recurring net losses of $(77.3) million [Item 7] in 2025 and negative cash flows from operating activities of $55.1 million [Item 7] in the same year, which have raised "substantial doubt about the Company's ability to continue as a going concern" [Item 7]. The primary strategic priority emphasized is the Asset Sale, where the company entered into a definitive agreement in the first quarter of 2026 to sell substantially all of its assets to an affiliate of American Exchange Group for an aggregate purchase price of $39 million in cash [Item 7, Note 16]. This transaction is expected to close in the second quarter of 2026 [Item 16]. Following this Asset Sale, the company explicitly states it "does not expect to continue its operations" [Item 2] and intends to dissolve, distributing proceeds to stockholders [Item 7]. A secondary strategic priority, prior to the Asset Sale, was the optimization of working capital and enhancement of financial flexibility, evidenced by the new $50.0 million [Item 7] asset-based revolving credit agreement and the "at-the-market" (ATM) program to sell up to $50 million [Item 7] of Class A common stock, under which $1.7 million [Item 7, Note 7] in net proceeds were raised in 2025. Management also highlighted a focus on product, marketing, and customer experience in 2025, including the design of new product styles, investments in upper funnel brand marketing, and the optimization of the retail store fleet, which involved closing 10 stores in 2025 [Item 7] and all remaining full-price U.S. stores in early 2026 [Item 7, Note 16].