10-Q: Allbirds Q3 2025: Losses Continue Amid Revenue Decline

Allbirds, Inc. reported a significant decline in net revenue and continued net losses for the third quarter and first nine months of 2025, raising substantial doubt about its ability to continue as a going concern.

Summary

• Net revenue decreased by 23.3% to $33.0 million for the three months ended September 30, 2025, compared to $43.0 million in the same period of 2024.
• Net revenue for the nine months ended September 30, 2025, declined by 21.7% to $104.8 million, from $133.9 million in the prior year period.
• The company incurred a net loss of $20.3 million for Q3 2025 and $57.7 million for the nine months ended September 30, 2025.
• Gross margin decreased to 43.2% for Q3 2025 from 44.4% in Q3 2024, and to 42.7% for 9M 2025 from 47.5% in 9M 2024.
• Adjusted EBITDA loss was $15.7 million for Q3 2025 and $46.9 million for 9M 2025, showing a slight improvement from the prior year periods.
• Cash and cash equivalents stood at $23.7 million as of September 30, 2025, a significant decrease from $66.7 million at December 31, 2024.
• Management has assessed that conditions raise substantial doubt about the company's ability to continue as a going concern for the next twelve months.
• The company closed 9 stores in the United States and 1 store in the United Kingdom during the first three quarters of 2025, reducing the total store count to 23.
• International operations are transitioning from a direct model to a distributor model, with the European direct-to-consumer business transitioning in July 2025.
• A new $50.0 million secured revolving credit agreement was entered into on June 30, 2025, with $12.3 million outstanding as of September 30, 2025.
• An at-the-market (ATM) offering program for up to $50 million of Class A common stock was established in June 2025, with no activity during Q3 2025.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, explicitly stating 'substantial doubt' about its ability to continue as a going concern. Revenue is declining significantly, gross margins are shrinking, and cash reserves are low. While net losses and adjusted EBITDA losses slightly improved due to cost reductions, the fundamental business challenges and competitive pressures are immense. The need for further capital raises, potentially diluting existing shareholders, combined with ongoing losses and legal proceedings, indicates a high-risk investment with a negative outlook.

Positives

• Net loss decreased to $20.3 million in Q3 2025 from $21.2 million in Q3 2024, and to $57.7 million in 9M 2025 from $67.6 million in 9M 2024, indicating some progress in loss reduction.
• Adjusted EBITDA loss improved to $15.7 million in Q3 2025 from $16.2 million in Q3 2024, and to $46.9 million in 9M 2025 from $50.9 million in 9M 2024, primarily due to reduced operating expenses.
• Restructuring expense decreased by 100% for both the three and nine months ended September 30, 2025, as the strategic transformation plan's restructuring activities were completed in 2024.
• The company secured a new $50.0 million revolving credit agreement, providing additional liquidity and capital resources.
• Selling, general, and administrative expense decreased by $9.3 million (30.0%) in Q3 2025 and $33.2 million (31.8%) in 9M 2025, driven by reductions in personnel, occupancy, stock-based compensation, and depreciation/amortization costs.

Negatives

• Net revenue declined significantly by 23.3% in Q3 2025 and 21.7% in 9M 2025 year-over-year, primarily due to decreases in the U.S. direct business (e-commerce and retail store closures) and international business transitions.
• Gross margin decreased to 43.2% in Q3 2025 (from 44.4%) and 42.7% in 9M 2025 (from 47.5%), reflecting a higher mix of digital and international distributor sales, increased duties, promotional activities, and higher inventory adjustments.
• Management has identified substantial doubt about the company's ability to continue as a going concern for the next twelve months.
• Cash and cash equivalents decreased substantially from $66.7 million at December 31, 2024, to $23.7 million at September 30, 2025.
• The company continues to incur net losses and negative cash flows from operating activities.
• Marketing expense increased by 18.9% in Q3 2025, driven by increased digital advertising for new product launches, despite overall revenue decline.
• Impairment expense of $0.7 million was recognized in Q3 2025 due to impairments of an internal-use software asset and an equity investment.
• Interest expense shifted from income to expense, primarily due to the new Credit Agreement borrowings.
• The company closed 9 stores in the U.S. and 1 in the U.K. during the first three quarters of 2025, indicating a shrinking direct retail footprint.

Risks

• Incurred significant net losses since inception and anticipate continued losses for the foreseeable future.
• May require additional capital to support business growth, which might be unavailable or available only by diluting existing stockholders.
• Inability to successfully execute the long-term growth strategy, including efforts to maintain or grow current revenue levels, reduce costs, or accurately forecast demand and supply for products.
• Failure to attract new customers, retain existing customers, or maintain or increase sales to customers will harm business, financial condition, results of operations, and growth prospects.
• Operating results may fluctuate significantly, and past operating results may not be a good indication of future performance.
• Efforts to transition international go-to-market strategy from a direct model to a distributor model may not be successful and may negatively impact operating results and brand value.
• Economic uncertainty in key markets may affect consumer purchases of discretionary items, adversely affecting demand for products.
• International operations expose the company to various risks, such as foreign currency exchange rate fluctuations, tariffs or global trade wars, trade restrictions, shipping channel constraints, and changing tax laws.
• Inability to maintain and enhance the value and reputation of the brand and/or counter any negative publicity may prevent product sales.
• Operates in a highly competitive market where the size and resources of some competitors may allow them to compete more effectively, potentially leading to loss of market share and decreased net revenue and profitability.
• Focus on using sustainable, high-quality materials and environmentally friendly manufacturing processes and supply chain practices may increase cost of revenue and hinder revenue growth.
• Climate change and increased focus by governments, organizations, customers, and investors on sustainability issues may adversely affect reputation, business, and financial results.
• Inability to anticipate product trends and consumer preferences, or failure in technical and materials innovation to successfully develop and introduce new high-quality products, may prevent revenue and profit maintenance or increase.
• Marketing, advertising, and other initiatives to increase existing customer spend and acquire new customers may become more costly or fail to achieve desired impact, hindering profitable business growth.
• Business is subject to the risk of manufacturer concentration and suppliers' and manufacturers' ability to provide materials for, and to produce, products.
• Significant amount of long-lived assets are assessed for impairment, and the full value may never be realized, causing material impairment charges.
• As a company operating retail stores, it is subject to various risks, including commercial real estate and labor and employment risks; inability to successfully implement and expand third-party distribution and retail arrangements could harm results of operations.
• Business depends on maintaining a strong community of engaged customers, including through social media; negative publicity or failure to meet customer expectations could harm reputation and brand.
• Financial results may be adversely affected if substantial investments in businesses and operations, including retail stores, fail to produce expected returns.
• Subject to risks related to ESG activities and disclosures; reputation and brand could be harmed if public sustainability targets and goals are not met.
• Failure of contractors or licensees' contractors to comply with supplier code of conduct, contractual obligations, local laws, and other standards could harm business.
• Fluctuating cost of raw materials could increase cost of revenue and cause results of operations and financial condition to suffer.
• Failure to protect intellectual property rights, conflicts with others' trademark and proprietary rights, and inability to acquire, use, or maintain marks and domain names could harm brand, business, financial condition, and results of operations.
• Heavy reliance on information technology systems, and those of third-party vendors, business partners, and service providers; any significant failure, inadequacy, interruption, or cybersecurity incident could adversely affect business, financial condition, and operations.
• Unique risks as a Delaware public benefit corporation (PBC) and certified B Corporation (B Corp), including the board of directors' duty to balance various interests which may not maximize stockholder value.
• If all applicable Nasdaq requirements (including minimum closing bid price) are not satisfied, Class A common stock could be delisted, adversely affecting liquidity and market price.
• The dual class structure of common stock may adversely affect the trading market for Class A common stock and concentrates voting control with co-founders, directors, and principal stockholders.
• Sales, directly or indirectly, of a substantial amount of Class A common stock by existing security holders may cause the price to decline.
• No intention to pay dividends for the foreseeable future.
• Additional stock issuances could result in significant dilution to stockholders.
• Delaware law, PBC status, and provisions in the amended and restated certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest more difficult.
• May be subject to increased derivative litigation concerning the duty to balance stockholder and public benefit interests, which may have an adverse impact on financial condition and results of operations.
• Estimates of market opportunity and forecasts of market growth may prove inaccurate, and business may fail to grow at similar rates.
• May seek to grow through acquisitions or investments; failure to adequately manage or integrate these could adversely affect the company.
• Requirements of being a public company may increase costs, strain resources, divert management's attention, and affect ability to attract and retain executive management and qualified board members.
• Failure to maintain proper and effective internal control over financial reporting may adversely affect investor confidence and stock value.
• As an emerging growth company, reduced reporting and disclosure requirements may make Class A common stock less attractive to investors.
• If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about the business, the price and trading volume of Class A common stock could decline.
• May incur losses from fraud or theft.
• If estimates or judgments relating to critical accounting policies prove incorrect, results of operations could be adversely affected.
• Extreme weather conditions, natural disasters, public health crises, political crises and instability, and other catastrophic events could negatively impact results of operations and financial condition.

Future Outlook

The company expects to continue incurring net losses and negative cash flows from operating activities for the foreseeable future. To ensure sufficient liquidity, it plans to reduce costs, utilize its existing credit facility, and explore additional capital through its equity facility or strategic transactions. The strategy includes optimizing the store fleet, focusing on core product franchises, and continuing investments in product innovation and sustainable materials. The company remains committed to its ESG goals, including reducing per-unit carbon emissions to less than 1 kg by 2030.

Management Comments

• Management's assessment is that conditions raise substantial doubt about the company's ability to continue as a going concern for a period of twelve months from the date these unaudited consolidated financial statements are issued.
• To have sufficient liquidity, the company plans to reduce costs and utilize its existing credit facility, which is in its control.
• The company also plans to access additional capital (including through the use of its existing equity facility) or engage in strategic transactions, which are not within its control and are subject to various risks and uncertainties.
• Allbirds is still relatively unknown to consumers worldwide, underscoring a large opportunity to scale our customer base and drive future growth.
• We believe our brand strength will enable us to continue to grow brand awareness, allowing us to deepen relationships with consumers and expand our access to global markets.
• Our goal is to acquire new customers in a cost-effective way.
• We believe an omni-channel buying experience is important to meeting the needs of our customer base.
• We plan to try to optimize our store fleet and focus on ensuring that our retail stores are efficiently driving customer acquisition, while also selectively partnering with third-party retailers.
• Innovation has been core to the Allbirds brand since our inception in 2015.
• We believe our investments in direct and meaningful relationships with all of our partners, from raw materials suppliers to Tier 1 manufacturers and logistics providers, helps put us on a path of achieving profitable growth in the future.
• Most importantly, we are firmly committed to reducing our carbon footprint and our environmental impact.

Industry Context

The company operates in a highly competitive retail footwear and apparel industry, which is influenced by general seasonal trends, with sales typically lower in the first quarter and higher during the fourth-quarter holiday period. Consumers are increasingly seeking responsible and purpose-driven brands, a trend Allbirds aims to capitalize on with its Public Benefit Corporation and B Corp status. However, the industry faces significant macroeconomic headwinds, including elevated inflation, rising interest rates, supply chain disruptions, currency fluctuations, and geopolitical conflicts, which are adversely affecting consumer discretionary spending.

Corporate Governance

Legal Proceedings

• Two consolidated securities class action lawsuits (Shnayder v. Allbirds, Inc., et al. and Delgado v. Allbirds, Inc., et al.) allege violations of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5, and Sections 11 and 15 of the Securities Act, for materially false and/or misleading statements. A third amended complaint was filed on July 14, 2025, and a motion to dismiss was filed on August 27, 2025, with full briefing expected by November 12, 2025. The company intends to vigorously defend against this lawsuit.
• Two shareholder derivative suits (Park v. Zwillinger, et al. and Junker v. Zwillinger, et al.) allege violations of Section 14(a) of the Exchange Act, breach of fiduciary duties, unjust enrichment, and waste of corporate assets, based on similar allegations as the securities class action. These cases are currently stayed pending the outcome of the securities class action lawsuits. The company intends to vigorously defend against these lawsuits.

Related Party Transactions

• A promissory note from an employee, received on November 19, 2018, in consideration for the early exercise of 11,000 shares of common stock options, remained outstanding as of September 30, 2025. The note was amended in June 2023 to no longer accrue interest after March 31, 2023, and to extend the maturity date to October 1, 2025.

Stakeholder Impact

• Shareholders face potential significant dilution from future capital raises, continued market price volatility, and the risk of delisting from Nasdaq due to ongoing financial challenges. The dual-class stock structure limits the influence of minority shareholders.
• Employees may experience further workforce reductions or changes in compensation structure as the company focuses on cost reduction and operational efficiency. The effectiveness of equity awards as incentives may be impacted by the declining stock price.
• Customers may experience changes in product availability and retail presence due to store closures and the transition to a distributor model in international markets. The company's focus on core products and innovation aims to maintain customer loyalty.
• Suppliers and manufacturers face risks related to manufacturer concentration, the company's commitment to sustainable materials, and stringent ESG requirements, which could impact their business relationships and costs.
• Creditors, particularly those under the new revolving credit agreement, face increased risk due to the company's 'going concern' warning and the need for additional capital to support operations.

Next Steps

• Reduce costs across operations.
• Utilize the existing $50.0 million revolving credit facility.
• Access additional capital, potentially through the existing equity facility or other strategic transactions.
• Continue to deliver on the strategic business plan.
• Work with advisors to explore supplemental debt and equity financing opportunities.
• Optimize the retail store fleet and focus on efficient customer acquisition.
• Selectively partner with third-party retailers to expand reach.
• Innovate with new products and focus on core product franchises to drive customer engagement.
• Improve operational and capital efficiencies and optimize supply chain infrastructure.
• Continue to make ESG disclosures and work towards the 2025 Targets and 2030 Goal of reducing per-unit carbon emissions.
• Vigorously defend against ongoing securities class action and shareholder derivative lawsuits.
• Complete full briefing for the motion to dismiss the third amended complaint in the securities class action by November 12, 2025.

Key Dates

Recommendation

The company is in a precarious financial position, explicitly stating 'substantial doubt' about its ability to continue as a going concern. This is a critical red flag for investors. Revenue is declining sharply, gross margins are eroding, and the cash position has significantly deteriorated. While management is implementing cost-cutting measures and seeking additional capital, the fundamental business model appears challenged in a highly competitive market. The need for further capital raises, likely involving significant shareholder dilution, coupled with ongoing net losses and legal liabilities, presents an extremely high-risk investment profile with a negative outlook. A seasoned investor would likely divest to avoid further capital erosion.

Keywords

Footwear, Apparel, Sustainable Materials, SEC Filing, 10-Q, Financial Results, Net Loss, Revenue Decline, Going Concern, Retail Strategy, Distributor Model, Allbirds, BIRD, Nasdaq, ESG, Supply Chain, Capital Raise, Stock Split, Operating Expenses, Public Benefit Corporation, B Corp