Allbirds S-1 IPO

Because it's not their money.

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

VC backed company try to grow revenue at all cost, they don't care about profit.

Building a business to such scale that it can be a public company is an extremely expensive endeavour, continuing that growth till a time such that the business can sustain "market weather" while in the public is even more so. As crazy as it may seem, the bar for a public market business to be considered a "stable" or "safe" investment is very very very high and takes years in the public to build the platform that holds your market share. In near all instances, you have to continue to spend a lot into that sustainability.

Haven't read the S-1, but their gross margins appear pretty solid, so they're probably spending aggressively in SG&A and capex-heavy depreciated assets that will hit COGS over time.

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.

From their S-1, 2020 revenue was $219m. From that, $106m was cost of revenue, $87m went out to SG&A, and $55m for marketing. Presumably if they wanted to hit pure profitability, they could take their foot off the gas on the admin expenses and marketing, but since they're still seeing good growth and seem to be having an easy enough time getting capital, they may as well keep spending on additional growth.

I haven’t looked at the filing in detail yet, but I would guess expanding their physical store footprint is burning money and the source of loss. They are in the expansion/growth phase so I would not expect profitability until either runway runs out or growth slows.

Out of fairness, their gross margin is 51%, so they're covering their COGS comfortably.

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.

Losing money isn't always due to a company charging less for a product than the direct cost to make it.

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.

For eCommerce ad-driven sales, I would think that ad expenses should be a part of COGS. It's easy to attribute sales to each ad dollar spent, and the impact of reduced ad spending will likely impact revenue, not just growth.

Why can't the comparison context be from one year to the next year?

Isn't EBITDA the number of greater interest to institutional investors such as Private Equity funds?

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.

The point of these things is that there are strict rules on what counts and what doesn’t do it’s a measurement that has some common degree of understanding. It’s far from perfect, but absent these things companies have a habit of making up BS metrics to make the company look healthy (remember “Community Adjusted EBITDA”) when the standard metrics would call the company’s financial health into question.

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.”

1) It's adjusted EBITDA which makes it even more meaningless.

> 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.

EBITDA is a useful measure for understanding how much cash a business generates if you were to strip it down. E.g. EV/ebitda is the most widely multiple for buyouts and most accurately takes into account operating leverage. It’s less useful for a business like this, but saying “ebitda is a scam” is illiterate.

EBITDA is a good measure of the upper bound of the earning potential of the current business.

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.

Is that unusual?

Are they paying people $14 to then in turn purchase an $11 shoe? Why can't I just keep the $14?

You would be correct. On page 18, 2019 revenue was 193M and 2020 was 219M, growth of only 13%.

No. All S1s do it this way for some reason.

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.

It's because the gold standard for IPO 8 quartners with sustained growth.

Good observation. That's not th standard as people here claim.

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).

That’s why I like ASICS. I can just keep buying the same model shoe.

This was my experience too. It was like ice skating.

after wearing a few different pairs of allbirds for years without issue, i just sprained my foot a week ago after slipping on a slick sidewalk after a drizzle in a reasonably new pair

non-skid soles on a fashionable lightweight sneaker are impossible to find :(

Both my wool ones and my eucalyptus ones wash quite well (cold water, take out insoles, don't dry), so yes, can confirm.

How does the Allbirds Men’s line differ from the Allbirds Women’s line? All of their shoes look pretty much the same to me, could your trans friends just order a 42+ shoe from the Men’s line?

Same here. Only use them to get to the store, out for food.

They great for when it’s too cold for jandals but you are too lazy to put socks on.

I have a pair from 2018 that I frequently wear that still looks fine. I think some people have feet that just don't work with Allbirds.

Unfortunately Amazon doesn't have these shoes. I need to create yet another user account.

I second this, they are extremely durable I had mine for over 4 years.

That's disappointing to hear. I personally try to buy things that will last for years. I'd rather spend a lot of money on, say, a pair of Red Wings and wear them for a decade, maybe with an occasional resoling, than a pair of boots that will be a mess in a year or two. Also, NYC (where I am) will really tear a pair of shoes up from all the city walking, so that's a bit of an extra incentive to go for quality.

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 footwear is fast fashion. People throw out shoes well ahead of them being worn out. I appreciate all the natural materials for this purpose, because at least they biodegrade better, which may have something to do with being worn out faster.

Affordable is relative. These are at least twice what I've ever paid for casual-looking shoes.

Oh I agree, but I would put large bets against any company with a fresh take on a popular product that suddenly has an IPO. The growth curve to satisfy shareholders will destroy the brand's name and quality as what they do...doesn't really scale well. Eventually you are outsourcing shoe production to new sources, getting lower quality wool for cheaper, reducing costs in customer service. For a year or so things look great on paper, then slowly sales start to slip, the company cuts costs further, slowing the slip and then the cycle repeats until the brand is known for their Shoe Department collection for 29.99.

The company could be profitable tomorrow if they wanted to.

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.

And the assumption that "tech" ends at the browser, cloud, or digital device is rooted in ignorance about how consumer goods are created from the "raw inputs"