•Grew our digital revenue from $113.2 million in 2018 to $194.6 million in 2020, representing a CAGR of 31.1%;
•Grew our store footprint from three in 2018 to 22 in 2020;
•Grew our U.S. and international revenue by $52.5 million and $40.7 million, respectively, from 2018 to 2020, representing a CAGR of 20.8% and 112.4%, respectively;
•Increased gross margin by 454 basis points from 46.9% in 2018 to 51.4% in 2020;
•Generated net losses of $14.5 million and $25.9 million in 2019 and 2020, respectively; and
•Generated adjusted EBITDA of $(1.3) million and $(15.4) million in 2019 and 2020, respectively."
What is interest, if not an expense? What is tax, if not an expense? What is depreciation if not an expense? Alright, amortization, yeah, that one could get added back in – I buy that.
Whenever someone starts talking about EBITDA, check your wallet.
> What is interest, if not an expense? What is tax, if not an expense? What is depreciation if not an expense? Alright, amortization, yeah, that one could get added back in – I buy that.
2) There is a specific reason these get taken out, because they generally represent values that the company either has little control over (taxes) or represent episodic expenditures (capital purchases, or debt raises) that have meaningful life greater than 1 year. D/A are essentially synonymous. So, no, D/A are not expenses, because they are simply representations of capital expenditures shown as expenses (the distinction is important) throughout the useful life the asset (intangible or tangible).
Easy way to illustrate this is an airline who buys an airplane in year 1 and then uses that plane for 30 years. If EBITDA wasn't useful, then calculating their earnings over a period time won't tell you anything about trends of the business health.
The devil is in the details. EBITDA is not all that bad, it's just not a "one figure to rule them all", especially since most firms create an "Adjusted" version of it to fit some narrative (and they always do).
To your point. The cashflow statement is much more important IMHO.
Then, people just sort of adopted EBITDA as shorthand for “FCF from operations” and then companies like Allbirds took advantage of that to do whatever they want with it.
> then companies like Allbirds took advantage of that to do whatever they want with it.
Here's an insider secret - everyone manipulates Adj. EBITDA (not just "Allbirds like companies"). It's part of the game of business sellers, which is why buy-side auditing is so important to get right. This is more or less why public security analysts exist - to keep pressure on proper reporting from the company. If WeWork actually went public every analyst worth a salt would basically throw out their "Community Adjusted EBITDA" and the term would be rendered meaningless.
Interest could be irrationally expensive for a business, taxes could be higher than they should be if the entity is not setup correctly, Amortization represents assets which could be sold off.
These are all things that PE firms can fix/work on to one extent or another with financial engineering. They can't really grow cash flow.
And you're also right in that it's useful for comparing with similar companies. It's greatest value is in the variety of ratios that it slots into.
If 2 similar companies have very different EBITDA/Revenue ratios, e.g., that would indicate that the company with the lower EBITDA/rev ratio is probably less efficiently run.
You 100% can make investing decisions in isolation. I don't think this is what you meant you say, because this makes absolutely no sense at all. If someone comes to me and says "if you give me a dollar today, I'll give you $10 tomorrow" I really don't need to consider anything else. Sure, someone else might say "I'll give you $11 instead", but if the deal is there and I can analyze that the risk of default is minimal, then I can absolutely make that decision in isolation.
And even so, how would you construct a life such that you were naive to all investment opportunities until this single one arises? It doesn't make sense.
- EBITDA is used for both comparison and YoY trends
- YoY trends don't matter in isolation
All of my clients (PEGs) used EBITDA both as a tool to normalize YoY trends and to do like for like comparisons of comparable assets. Ultimately this is to evaluate whether they want to make an investment or not.
Since you cared to provide some contradictory clarification to my comment, I can only assume you were disagreeing that EBITDA can only be used for comparative measures, which is 100% not true as per practice. Hence my example was that in theory you could make an investment decision in isolation (as naive as that might be).
All I was saying is that you have to have context and something to compare the YoY to and you can't simply look at a YoY growth rate. It's literally meaningless to do so without comparables. It's like saying the velocity of something is 50, ok who cares unless you can tell me how it relates to some other thing. If a company grows 100% YoY I don't care without information relating it to other investment options. 100% could very well be really bad unless I know what is normal, below average, above average, etc.
So idk what's really going on here anymore. I think something has become confused that's causing this conversation to go in useless circles.
These metrics companies like to put out there, not surprisingly, tend to be something along the lines of “look at all the profit we’re making if you for a moment ignore all the reasons why our business model is not profitable.”
Net profit = the profit from the overall business, taking into account all sources of income and all expenses.
Sales and marketing are usually not treated as part of COGS, because they are not a necessary expense (in this context, COGS would include things like materials and production costs).
That had become less common because software has famously high gross margins that aren’t necessarily linearly tied to revenue, but allbirds are shoes.
No comment on usual or not. Definitely not “good”.
Eg growing from 3 stores to 22 in two years probably requires a lot of big upfront expenditures.
It's important to look at cashflow statements, P&L, and balance sheet in concert rather than isolation -- especially for larger fast-growing companies.
They're spending a lot on operating stores and advertising, where the input-output math is less clear/predictable. You could also believe that those stores stores will scale up in efficiency as people know that they're there and leave their house post-COVID.
In the case of startups like this, the loss is often due to the large costs of things like expanding number of stores, expanding manufacturing capacity (it's not always as simple as sending orders to China to make), expanding their logistics system to handle shipping more and more shoes, etc.
It's a VC money, and the VCs will let this go on as long as an exit is in sight because they can then extract their money + a hefty premium.
Then at that point the money faucet is re-plumbed to the public's money via institutional investors and from there they're free to do the slow decline to penny stock at their own pace
My wife just worked on an S1 and had a similar comment but she investigated other S1s and saw that was just how it was done.
Companies often play such games. Esp to make their IPO look attractive. I went over Squarespace S-1 today who IPOed in May and saw they claim around 70% revenue growth in commerce from 2019 to 2020. Then somewhere in the document you find that they acquired a company in March 2021 but they include their revenue in their 2020 numbers. So the 70% growth is not really organic growth and they don't mention anything about the growth of the acquired company (Tock).
Showing two data points could mask growth in year one and losses in year two.
ps. Yes, I know this is HN, but it’s such an absurdly difficult space that if I can help a single trans woman reading this comment, then it was worth the risk of being attacked for caring. Fashion is often high tech these days too. With custom-to-order clothing and fast fashion normality, there’s no excuses for retailers who don’t extend their size range anymore. It’s just that lots of techy hackers aren’t aware of the market bias. I’ve been studying fashion for a couple decades and there are insanely great innovations that I don’t post to HN because we’re not mature enough yet. Hooray for Allbirds’ offering an opportunity to talk about one of my tech interests safely :)
Still. I'll go check now, though, and I feel kind of dumb for not thinking to look sooner. Thank you for the pointer.
It's a shoe shape called "Flats" that only exists in Women's, it comes in colors that are totally unlike their Men's shoe shapes and colors in the closest (it's not very close) equivalent offered:
This is pervasive and industry-wide, but I'm still surprised that Allbirds fell prey to it. I would have expected better of them, based on their marketing and general love from buyers. Oh well.
My everyday shoe now is from Casca . They’re a Vancouver-based company with a specific focus on quality: I’ve worn them almost every day since fall 2018 (when they launched) and the shoes still look as good as new. And they’re machine washable.
They’re also incredibly comfortable. When you buy a pair of shoes, you have the option to take a few pictures of your feet and the shoes will be delivered with custom 3D-printed insoles. It’s amazing the difference in comfort when a shoe is moulded to your feet.
They great for when it’s too cold for jandals but you are too lazy to put socks on.
non-skid soles on a fashionable lightweight sneaker are impossible to find :(
I wear my wool runners most days in the winter.
I worry, though, than an IPO signals a growth curve that will impose quality problems.
I went from Allbirds to Baabuk. Similar comfort (I can wear them sockless without chafing) but they seem to last twice as many miles before wearing out & they look a lot better IMO.
I’ve now become the person who tells other people about my shoes lol - they had better not change the design!
In particular the McGuffey Plain Toe: https://www.johnstonmurphy.com/mcguffey-plain-toe/8318.html
YMMV, of course!
But... their footwear wears out quite quick (the soles esp.), so overall, I do not know that if you were to study its carbon footprint over two years, if they would actually come ahead compared to conventional footwear.
A few cheaper options exist in my closet, but mostly they're more expensive.
I've been wearing the same line of tennis shoes for a handful of years. Outside of work boots for projects, I wear the tennis shoes for almost every other event and task, breaking out dressy black shoes a handful of times per year.
They run around $65 unless I find a deal. That shoe is adequate for my needs and budget, fits well, and the variations from year to year are minimal. I'm hesitant to deviate away from something I know works well.
I've never found a pair of Nike tennis shoes that are comfortable. Nike shoes would probably be more expensive than my go-to pair, but I'm sure for some people my tennis shoes would be really uncomfortable.
All that said, I am considering trying a pair of Allbirds. I'm 4 hours from their nearest store, and have never bought a pair of shoes online, so I may swing by next time I'm in Minneapolis.
They come in whole sizes only; the rest of my shoes are 9.5 to 10.5 depending on application. My Allbirds fit perfectly; both pairs are 10s.
It's good that their inputs aren't horrible for the planet, but if they break down in a couple years it might not make that much of a difference.
Most sportswear shoes, "sneakers" in vernacular, don't accommodate resoling. But evenso, the plastic mesh or wool upper (depends on model) tends to wear out in obvious spots (same as where socks might wear out, like toes).
The best part about them was the convenience and comfort, but as far as style they're maybe one rung up the ladder from Crocs, so you're not really winning points there. They go well with shorts and look particularly awkward in jeans.
They're premium priced and definitely casual in style and function, with a sustainability-focused marketing sheen.
I've had a few pairs and the quality is above-average but definitely not a "buy it for life."
I guess it hasn't affected their valuation much though.
If the amount of shoes/repurchases I and many others I know have made over the years from them is any indication, they’re going to keep growing fast - they seem to have a knack for bringing customers back; the filing says more than 43% of customers return to purchase something else, which is impressive.
They haven’t proven that. Yes, they’ve sold a lot of shoes, but they’ve never made a profit and don’t project doing so.
Every money-losing company that raises money has a story of how it will become profitable. It is possible that they do, but they haven’t yet.
It's not like this is some grand, new, unproven business concept, or one that is only competitive due to VC capital. They sell shoes, and they sell them at a decent profit. There are lots of large apparel companies out there making stacks of money, many of whom started off selling shoes.
This is not Uber/AirBnb, it's Adidas/Puma/Nike.
I think long-term, stores might be their best bet. There is still a good amount of people who are skeptical on purchasing shoes online even with easy return options. Good job to these founders!
My white pair has survived about 10 runs through the wash, and damn if there isn't a better looking shoe to wear sockless.
Good for them.
Bought them, really comfortable, great refund policy (could test out 2-3 pairs to find my right size), would definitely recommend.
Seriously though, I have no idea how valid Allbirds sustainability credentials are. They are, however, like slippers I can wear outside. Mine are two years old and have almost no signs of age. Price point is about normal for my shoes. I'm a fan.
Like, what about that DTC toothbrush company? Or those guys who sell disposable razors? Or the online viagra salesmen whose ads are all over the MTA? Somehow, investors have become convinced these are tech companies ("democratizing access to consumer goods?") that should be valued at whacky p/e ratios, instead of yet another online commodity retailer.
◦New materials. Our successful track record of commercializing and bringing to market new innovations has made us a desirable partner for many outside R&D companies and vendors, allowing us to be first to market with novel materials while accelerating development timelines and reducing costs. A recent example is our collaboration with Natural Fiber Welding, Inc. to commercialize a 100% natural, plant-based leather-alternative. As we continue to build our library of materials, we plan to create new, differentiated products, as well as leverage new materials across our existing product platforms by refreshing our classic silhouettes.
We estimate that a standard pair of sneakers results in a carbon footprint of 14.1 kg of CO2e. Today, through our use of renewable, natural materials and responsible manufacturing, the average pair of Allbirds shoes has a carbon footprint that is 30% less than our estimated carbon footprint for a standard pair of sneakers, and we offset the entirety of the rest to provide our customers with carbon-neutral products. Furthermore, we believe in the power of selective industry collaboration to accelerate progress, as evident by our partnership with adidas to unveil the world’s lowest carbon footprint running shoe at 2.94kg of CO2e in May 2021. This partnership, as well as our decision to open up the carbon-negative, green EVA used to make SweetFoam, and our carbon footprint methodology demonstrates our ability to scale our impact to the broader industry and beyond, while extending our brand’s leadership as a sustainability innovator.
For example, in 2018, with the help of our partner, Braskem S.A., the petrochemical company and a leading biopolymers producer, we pioneered a carbon-negative green EVA made with Brazilian sugarcane, as an alternative to traditional EVA made from petroleum. We used this new carbon-negative green EVA to create SweetFoam, which is now in all of our shoe soles.
Because from where I'm sitting, it looks like they're making sneakers only very slightly differently than Nike has been for many decades, using a different foam resin supplier that claims to make it out of sugarcane feedstock rather than petroleum, and some nice claims of using recycled bottles for laces to make it so that their customers can feel a little better about buying fairly disposable shoes made from polymer foam.