Good day and thank you for standing by. Welcome to BARK’s Second Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised, that today’s conference maybe recorded. Thank you. I would now like to hand the conference over to your first speaker today, Mr. Mike Mougias, Vice President, Investor Relations. Sir, the floor is yours.

Good afternoon, everyone. And welcome to BARK’s second quarter fiscal 2022 earnings call. Joining me today are Manish Joneja, CEO, and John Toth, CFO. Today’s conference call is being webcast and its entirety on our website, and a replay of the webcast will be made available shortly after the call. Additionally, a press release covering the company’s financial results was issued this afternoon and can be found on our Investor Relations website. Before we begin, I would like to remind you of the following information regarding forward-looking statements. The statements made on today’s call are based on management’s current expectations and are subject to risks and uncertainties that could cause actual future results and outcomes to differ. Please refer to our SEC filings for more information on some of the factors that could affect our future results and outcomes. Also during today’s call, we will discuss certain non-GAAP financial measures. Reconciliation to our non-GAAP financial measures are also contained in this afternoon’s press release. With that, let me now turn the call over to Manish.

Thanks, Mike, and good afternoon, everyone. Thank you for joining our fiscal second quarter earnings call. I am please report we delivered another strong quarter underscored by sizeable growth in active subscriptions, a robust increase in subscription shipments and record high average order value. I’d like to begin today’s call with some highlights from the most recent quarter, followed by an update on a progress across our key categories and some of our strategic priorities for the year. John will then walk you through our financial results from the quarter and provide guidance for the remainder of fiscal year. Beginning with last quarter’s results, we continue to benefit from sector and channel tailwinds, including growing dog ownership, increasing spending on pets and an expanding share of pet sales occurring online. I’m pleased to report we delivered strong results across several key metrics last quarter. We added 271,000 active subscriptions, bringing our total to 2.1 million as of quarter end, a 39% increase compared to the same quarter last year. We delivered 3.6 million shipments in the quarter, a 34% increase year-over-year. Furthermore, we achieved a record average order value of $29.73, $1.55 increase compared to the same period last year and a $0.52 increase compared to our fiscal first quarter. This drove total revenue of $120.2 million, up 39% year-over-year and resulted in a very healthy gross margin of 58%. These figures are impressive, especially considering how strongly the company performed during the COVID-19 period last year, which highlights the resiliency of our business model. I would also like to provide some perspective on a couple of topics very important to our business that have been top of mind and on the front pages for what seems like months, namely how we are navigating inventory levels, the global supply chain…

Thanks, Manish, and good afternoon, everyone. We are very pleased to report our strong fiscal second quarter results, which are all the more impressive considering the surge in growth we experienced during the same period last year. Our recent results were underscored by continued growth in new subs, robust subscriptions and shipment figures, growing revenue per order and a very healthy LTV to CAC. In our view, our recent results demonstrate the strength of our brand, our strong customer retention and the powerful secular and channel tailwinds that we benefit from as one of the largest digitally native dog brands in the world today. Beginning at the top of the P&L, total revenue came in at $120.2 million, a 39% increase compared to the same period last year. On a segment basis, direct-to-consumer revenue was $106.8 million, up 42%. This growth was largely driven by a 34% increase in subscription shipments, as well as $1.55 increase in average order value. Our performance in this segment largely reflects the continued growth of our BarkBox and Super Chewer businesses. However, as we scale Bright and launch our Food business, BARK Eats, we expect these high TAM categories to provide meaningful tailwinds to our business. Revenue from our Commerce segment, which reflects our selling of BARK products in retail stores such as Target and Costco was $13.3 million, up 21% year-over-year. This was slightly lower than expected, as we experienced a shift in certain Commerce revenue between our fiscal second and our fiscal third quarters, due to delays in our retail partners’ ability to get shipping containers into the U.S. on time. Roughly 75% of that shifted revenue has already been realized in the first month of this fiscal quarter. So this appears to be a true shift as opposed to a loss…

Thank you very much. [Operator Instructions] Your first question is from the line of Steph Wissink from Jeffries. Your line is open.

Thank you, everyone, and John best wishes to you. It’s been a pleasure working with you. My question is for either of you actually is on the CAC costs and what your assumptions are go-forward, what’s embedded in the back half guidance for your LTV to CAC, any sort of change off of that 4.9 times that we saw in the first half? Thank you.

Thanks. Thanks so much, Steph. Back at you. We continue to target somewhere between 4 times and 5 times LTV to CAC as the ratio, so you can see CAC go up as LTV goes up with AOV in addition to new products. We continue to try and stay real nimble. You’re going to see seasonal adjustment. Q3 is going to be higher, because as with every year everybody’s in the market. Layered onto that is the more secular increase, everybody’s seeing the media rates go up. We’ve been able to fend off that more secular increase not going, because Meghan and Will are really great at managing our business. So if you’re sort of suggesting we see a seasonal kind of 10% increase in CAC. That sounds about right for me. I don’t expect to see it much more than that and then returning to a non-seasonal level in Q4. Does that speak to your question?

It does. That’s very helpful. I mean, if I could ask a quick question on the out-of-box, you talked a bit more about it on this call versus prior calls. And I wanted to just give you a chance to share with us some of the data or statistics behind that piece of business. It is quite small still, but it seems like it’s quite powerful as well. Could you just share with us a little bit of how you look at that business as a complement to the core business and how does that business fare in terms of profitability when you start driving incremental value through your existing customer relationships?

Hey, Steph. Yeah. Sure. So add-to-box the way it works right now, think about it as especially upselling and cross-selling. What we do is we have machine learning engines that work on the data that we have collected for you and your dog. So that surfaces curated selection of toys and now we have added Bright, as well as Eats to that that leads to higher gross margins. For example, if you think about shipping a BarkBox or Super Chewer box, you’re able to add two or three toys or treats or chews to it. That’s significantly higher margin since it shipped in the same box. So that’s the way we think about add-to-box. And if you’ve seen our AOV that continue to increase quarter-over-quarter, we’re a $55 over the last year same quarter. So we are pretty bullish on in optimizing and improving further.

Thank you.

[Operator Instructions] Your next question is from the line of Maria Ripps of Canaccord. Your line is open.

Great. Thank you for taking my questions. Can we maybe just talk about your thoughts around passing some of these elevated expenses here in the near-term to your subscribers versus absorbing them to drive higher volumes? And do you see a lot of price sensitivity among your customer base?

Hi, Maria. This is Manish. I’ll start and John can add. So, there are variety of ways to offset rising costs and I believe that raising bass prices is the simplest of choices, which we continue to test. We look at the overall ecosystem starting from CAC to cross-selling and retention. This ties back to add-to-box conversation we just had. Now we found focusing on average order value is a really good lever. So if we continue to improve our ability to recommend ATB product that resonate well with you and cross-sell via smarter machine learning engines, which Olly Downs, the gentleman I mentioned, who has joined as team is focused on, it drives higher AOV and in fact driving stronger revenue and margin. As you seen, our AOV continues to grow and that’s the way we are optimizing our AOV and ATB which leads to higher margins and offsetting those rising costs.

Got it. Thank you, Manish.

Yeah. I’m not sure I have much…

Yeah.

… to add to that. We really pervert -- prefer to add value to the box and make that a net price increase and a net margin expansion, so that custom -- consumers get value-add and not just a price increase pass-through. We’re always looking at the optimum relationship between price and LTV and we’re -- we feel pretty good about where we are right now. We’ve feel like we’re managing some of the input cost increases and so don’t anticipate just a flat list price increase at this time, but we’re constantly evaluating that.

Got it. That’s very helpful. And John, you shared with us that your Play subscription vertical was adjusted EBITDA positive last year. So if you are rolling out is how long do you think it may take for that segment to achieve profitability? And is it fair to assume that sort of your path to profitability for this segment could be accelerated, given that there is a lot of sort of cross-sell opportunity here? So I would be great to hear your thoughts on that?

Yeah. We really like the structure of the product, if you will, the personalization, the product offering enable a higher gross margin than what other food companies are used to and that affords us the opportunity to be profitable at operating income level faster. The question becomes growth and how much marketing do you pour into it to grow it. And for your point, because we have the opportunity to cross-sell to our existing 2 million customers, we have 9 million social followers, our marketing and we expect our marketing in this line to be more efficient and so allow us to get profitable faster. It’s such a big TAM. We’re moving to scale fast. So we want this to be hundreds of millions of dollars business as quick as we can. So even with a more efficient marketing, I expect us to have a healthy absolute dollar marketing budget against the business. On a unit economic basis, it should be profitable much faster than our core Play business.

Got it. Thanks a lot and John, best of luck.

Thanks, Maria.

Thank you. Speakers, I am no longer seeing any other questions on the queue.

Great. Thank you.

Thank you so much. This concludes today’s conference call. Thank you all for joining. You may now disconnect.