Ladies and gentlemen, thank you for standing by, and welcome to BARK's Third Quarter Fiscal Year 2025 Earnings Call. [Operator Instructions] I will now hand today's call over to Mike Mougias, VP of IR. Please go ahead, sir.

Good afternoon, everyone, and welcome to BARK's third quarter fiscal year 2025 earnings call. Joining me today are Matt Meeker, Co-Founder and Chief Executive Officer; and Zahir Ibrahim, Chief Financial Officer. Today's conference call is being webcast in 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 I pass it over to Matt, I want 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. We will also discuss certain non-GAAP financial measures on today's call. Reconciliation of our non-GAAP financial measures is contained in this afternoon's press release. And with that, let me now pass it over to Matt.

Thanks, Mike. We closed calendar 2024 on a strong note, surpassing the high end of our revenue expectations and delivering a $4.9 million year-over-year improvement in adjusted EBITDA, our 10th consecutive year-over-year improvement. Over the past year, we focused on building a leadership team capable of driving transformative results. Only two or three quarters in, the team's efforts are gaining traction, and we're seeing momentum across our key business segments. In our direct-to-consumer segment, we achieved our highest quarter for new subscriptions in three years, up 11% year-over-year at a lower acquisition cost. In our Commerce segment, revenue grew by an impressive 43% as we introduced new partners and expanded shelf space. Also, BARK Air delivered $2 million in revenue last quarter and is generating positive gross profit just seven months after its launch. These are encouraging trends, and we believe it's just the beginning. These achievements, coupled with ongoing improvements in G&A have resulted in positive adjusted EBITDA through the first three quarters of fiscal 2025. We are on track to deliver our first EBITDA positive year in BARK's history, a critical milestone and a huge turnaround from just a few years ago. With this strong foundation and the right team in place, BARK is positioned for a sustainable long-term profitable growth. With that backdrop, let's look ahead. In late October, we transitioned all paid media traffic to our new Shopify platform. This is a big deal. While transitions of this nature inherently carry some uncertainty, I'm pleased to report that the early results have been encouraging. New subscriptions grew 11% year-over-year, and we achieved this at a lower customer acquisition cost. Another encouraging data point is that 43% of the checkouts on the Shopify platform last quarter were via Shop Pay. Shop Pay and Apple Pay are features…

Thanks, Matt, and good afternoon, everyone. Our results last quarter demonstrate our consistent progress executing the road map we outlined at the start of fiscal '25. With oversight from our new leadership team, we're beginning to see early momentum on the top line while maintaining a sharp focus on profitability. We delivered our 10th consecutive quarter of year-over-year adjusted EBITDA improvement last quarter, and we're on track to achieve our first full year of adjusted EBITDA profitability at the end of March. Looking beyond fiscal '25, we expect to build on this foundation with stronger top line growth and sustained profitability improvements. With that, let's dive into our fiscal third quarter results in more detail. Total revenue for the quarter was $126.4 million, a 1% increase year-over-year. And while our long-term growth ambitions are far greater, this marked our second consecutive quarter of year-over-year revenue growth following eight quarters of year-over-year declines. These are important first steps, and much of the team's efforts are just beginning to be reflected in our top line results, particularly within our Commerce segment. Breaking it down by segment, D2C contributed $106.1 million in revenue, which includes $2 million of BARK Air. In total, the segment declined 4% compared to last year. As we have discussed in prior quarters, we have been migrating customer cohorts to our new Shopify-based platform throughout the year. And in October, we also moved all of our paid media over. As Matt mentioned, there is always a degree of uncertainty when moving to a new platform. However, the early results are encouraging. For instance, last quarter was our strongest new subscription quarter in three years. At the same time, we're also moving up the funnel, prioritizing customers who engage with BARK because of the value they see in our brand,…

Our first question comes from the line of Maria Ripps with Canaccord.

Great. Good afternoon and thanks for taking my questions. First, on your DTC segment, given all the progress with migrating to the Shopify platform, and marketing efficiencies that you've been seeing there, how should we think about sort of the trajectory of revenue returning to growth for that segment? And I think you mentioned sort of stabilization in 2026. I guess any color you can share on your DTC segment in the context of your outlook for mid to high single-digit growth next year?

Sure. Thanks, Maria. And you took the words out of my mouth there, when you said stabilization in fiscal year 2026, that's - you couldn't have said it - I couldn't have said it better myself. So you got that just right. And that means stabilizing. Therefore, when we're saying like the high single-digit growth on the overall enterprise. Then most of it is coming across the commerce channel, which we've stated in the past is a goal for us, to have that take more and more of the revenue share. We said at least a third, and we're on pace with that. We had a good quarter, 43% year-over-year growth in that channel year-over-year, and then BARK Air contributing as well. So that's where you get most of the growth when we talk about that mid to high single-digit number for next year.

Got it. That's helpful. And then can you maybe spend a few minutes and talk about sort of your strategic vision for BARK Air? I guess, did you see it developing into a meaningful contributor, to your financials over time? And would that impact your sort of capital requirements, or profitability of the overall business? And maybe talk about sort of your thoughts on synergies in terms of leveraging, your existing customer base and expanding your brand?

Sure. On BARK Air, I would say it's too soon to call it a material driver for us, or a material opportunity. Remember, we're eight, nine months into it right now. So it's been a great eight or nine months. The planes are filled. We are gross margin positive last quarter. We did $2 million of revenue last quarter. I think everything we've seen in these eight or nine months tells us that there's a really good opportunity for it. What we don't know yet is how far, does that demand stretch and the path to get there. So you'll see in the year ahead for sure is a lot of experimentation, opening up some new routes to test, different plane formats to test different price points. As you see next week, we have some flights between New York and Florida that bring the cost down to $1,000 per ticket from $6,000 or $8,000. So hopefully, that opens up a lot of demand. But on the whole, I think it's too early to say just how material it will be. The thing that we're committed to with respect to the capital expenditures, or requirements is we're very happy with the model that we run right now, which is an asset-light model. We partner with those who operate different aviation companies. They do the heavy lifting there. We lease the equipment and the infrastructure from them. We let them do what they do well. We take care of the dogs and the marketing. And that's working out really well. So I don't see a change in that in the foreseeable future. In short, Zahir would like me to say we're not buying a plane anytime soon.

Great. Thanks for the color Matt, and good luck for the rest of the quarter.

Thanks.

Your next question is from the line of Ryan Meyers with Lake Street Capital.

Hi guys, thanks for taking my question. First one from me, I just want to make sure I fully understand kind of the commentary on the fourth quarter guidance. So it sounds like there's just a lack of - a little bit of visibility just due to the stock resets. So is the right way to think about it is that you wouldn't know kind of where the numbers would come in, until the very end of the quarter as far as if those shelf resets will happen. And just where we're at right now in the quarter, it's just really too hard to tell where those orders will come in at?

Hey, Ryan, how you doing? This is Zahir. Yes, I think you've summed it up well. Shelf resets generally in retail happen in the March, April timeframe. And so, you'll always get some timing variability as you get confirms on resets, when product is going to ship depending on customer-to-customer. So some volume can flow out of Q4 into Q1. And so, you'll know that nearer to the time. And a lot of it is dependent on the customer supply chain as well in terms of them picking up the product around the quarter end. So that's probably the biggest driver of the variability.

Okay. Makes sense. And then the other question from me, just obviously, the Chewy business is a newer piece of business for you guys. But any commentary there on how that's kind of trend? I know, Matt, you gave some commentary about the kind of SKU expansion that you've been able to see. Maybe if you guys could give the maybe dollar amount contribution that you've seen, that would be helpful. But yes, any commentary there would be great?

Sure. I can take that one. So yes, as Matt said in his commentary, we started with Chewy in June with about 30 SKUs. We quickly expanded that to well over 150 SKUs as we speak. They've got most of our assortment on the consumable side as well. What we're seeing is continued momentum in that customer, so growth in the top line on a week-on-week basis. The conversations we have with Chewy are extremely positive about our performance and a ton of excitement, about the potential growth in the future. When you look at our toys performance, for example, we're already one of the biggest pet toy suppliers on their site. So just a lot of positive sentiment there. And I'll probably take it beyond Chewy, Ryan. We're performing really strongly with Amazon as well. As Matt mentioned, up 70% year-over-year, and similarly in a couple of other major retail customers as well.

Got it. That's great to hear. Thanks for taking my questions.

Thanks.

Your next question is from the line of Kaumil Gajrawala with Jefferies.

Hi guys. Good afternoon. I guess the first thing is you're growing again on DTC, or new subs. Can you maybe just talk about if there's a way to sort of parse out, is it the market kind of coming back your way after a few years of working itself out? Or if you're able to maybe parse out, how much of that is coming from sort of new media structure and Shopify and such?

Yes. This is Matt, by the way. It's - I would say it's 99% the latter. Maybe even the market being - continuing to be a little bit of a headwind. If we go back like a year, I talked a lot about that there were things that we could do as a company, to improve our performance. So it cuts through everything. It's the approach we take to creative, to testing the channels that we're choosing to invest in. And how we're allocating dollars to those channels, how we're expanding them, how we're going more mid and upper funnel with those dollars, because we think they are more efficient, and that will pay off over the long time horizon. And then specifically within this quarter, we made - we moved all of our ad spending for BarkBox and Super Chewer over to the Shopify platform. Because we were so encouraged, by the conversion results that we were seeing on the platform that, we thought we'd perform better on the holiday season over there, rather than on our legacy platforms. And that turned out to be true. So again, we saw that big uplift in new subscribers over last year at a more efficient cost of acquisition, and that was really with only two months of the quarter being on there. You saw some other strong indicators that there's just a lot of headroom in it for us. For example, we obviously, on our legacy platform, we can't offer Shop Pay as a way to check out, when we moved over, 43% of the customers who are checking out are using Shop Pay, that should help us in retention downstream as well. And now that we're a couple of months into it. but we're - finding that we can -…

No, it's probably, because you're excited. I guess, Zahir, if we could just talk about EBITDA. You guys have been nice enough this early to provide an initial sense of fiscal '26 top line. With everything that's changed so far, what would that mean for profits or EBITDA?

Hi Kaumil, for fiscal '26, we expect a good year-over-year improvement in EBITDA. And of course, I'll provide more specifics when we get to our call in early June. I think directionally, as you think about our profit profile over the longer term, we expect steady improvements in our EBITDA margin, as we begin to scale the business and drive leverage across a number of areas of the business. So good step-up for '26 versus '25 and then continued improvement driven by leverage and scale.

Got it. Okay, great. Thanks guys.

Thanks.

Our next question is from the line of Ygal Arounian with Citigroup.

Hi, good afternoon guys. A few follow-ups on the segments, just dive a little bit deeper. I guess for direct-to-consumer and the marketing strategy moving further up funnel, did that start this quarter, meaning that increase in 11% of new customers, is that already reflective of this move to higher funnel? And as you do that, that kind of advertising generally has more of a longer payback period. Do you expect that to have an impact? Or does the Shopify platform offset that what that shift would be?

We started it in the summer. And as we weighed into it, we're going pretty cautiously, or carefully so we can learn what's working or what's not, not based on a subscriber number or cost of acquisition, but other signals that say the awareness is taking. And so, the efforts have scaled up through the year. And maybe as you're suggesting that they are longer lead and you're getting - maybe we got some of that benefit in the last quarter. But what we're trying to do is continue to learn, continue to expand our spend in those directions, while not overinvesting and blowing out our CAC for a quarter or two. So internally, we call it our glide path into, what would be the optimal state for us. So far, so good. We're learning a lot. And then what we're seeing with Shopify, is giving us some leeway to move that a little faster, and make mistakes a little bit faster.

Okay. Is there more efficiency in CAC from the Shopify transition? Or do you think it's mostly captured now? I know you still have to move some customers over, but largely in the numbers, or there's more?

I'm sorry. I thought I understood the question until right at the end there. I'm sorry.

Just like - so the transition to Shopify is driving that incremental efficiency on the CAC. Is there more on the Shopify transition? Or it's kind of you realized already, okay?

Yes. There is, and it's definitely driving that efficiency largely through conversion. And then what we're doing is taking those efficiency gains and largely pushing them back into exploring new channels that are upper and mid-funnel, more awareness building that don't pay off immediately. So if we just ran the same playbook that was all bottom of funnel, and moved over to Shopify, we'd have even greater efficiency gains. What we're doing is reinvesting that to learn faster into the permanent model.

Okay. Great. That's very helpful. And then on the commerce side, I know it's early, but can you talk about what you think the ultimate opportunity is internationally there? How big it can get? And then in the commentary of next year growing faster in commerce than this year, I know you laid out the - you laid out the specific drivers, including international, but can you kind of break out what each component drives, or how much the largest contributors are? Thanks.

Sure. Look, I think it's a combination of several factors. Matt called it out in his, in his part of the - call earlier on, bringing on a new leadership team and their expertise, their relationships with our customers, their vision has really been an accelerator for us overall. So talent infusion has been a major driver for us as you look at the results for this year. Part of what's driving the growth is we're focusing a lot more on going where the customer shops. So new customers like Chewy, expanding with others that we've really been underserving in the past, such as Amazon and T.J. Maxx, they're driving major opportunities and major white space opportunity for us. So plenty of runway for growth there. As it relates to Amazon, that's both domestically and in Europe. So we've just literally in the last month or so launched in Europe, and there's a huge runway there as far as the international market is concerned. Other things that I look at from a commerce perspective, is growing in the partnerships area. We've been investing in that space for some time. This year, we had a real strong initial launch with Crocs, which was a sellout in Q2 from the products that we're offering. And then probably larger than that by some way is our relationship that we're building with Girl Scouts. So we launched a pilot program with them a year ago, with one SKU that ran in the fall, worked really well. This year, we ran a similar program with a number of SKUs, growing revenue this year. And that's a program that we're going to continue to work on as far as an online program is with Girl Scouts. But bigger than that, we will be launching with a national program with them in fiscal '27. So we're really working out scale, size, the number of SKUs, assortment and things like that. But for fiscal '27, we would launch a national cookie program, which would be a significant revenue opportunity, both for us and for Girl Scouts. Internationally, you asked, we've already launched some product into Fressnapf, which is one of the bigger bricks-and-mortar retailers in Europe. We've got distribution in the U.K., one of the biggest pet specialty suppliers, which is Pets at Home. A lot of the bigger retailers in the U.K. will have seasonal programs with us in the coming months, and that will lead to a bigger relationship with those guys, along with what I said about Amazon Europe. So across domestically and internationally, there's a ton of white space here. That's both in toys and consumables.

Very helpful. Thank you, guys.

Thanks.

Thank you. This does conclude today's call. Thank you for joining. You may now disconnect your lines.