Thank you for standing by. My name is Karen, and I will be your conference operator today. At this time, I would like to welcome everyone to the BARK First Quarter Fiscal Year 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After today's presentation there will be an opportunity to ask question. [Operator Instructions] I will now turn the call over to Mike Mougias, VP of IR. Please go ahead.

Good morning, everyone, and welcome to BARK's First Quarter Fiscal Year 2026 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 available shortly after the call. Additionally, a press release covering the company's financial results was issued this morning 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 also contained in this morning's press release. And with that, let me now pass it over to Matt.

Thanks, Mike, and good morning, everyone. On our last earnings call, following our first full year of positive adjusted EBITDA, I laid out 2 key priorities for fiscal 2026, remain adjusted EBITDA positive despite macro uncertainty and accelerate diversification beyond subscription boxes. On both fronts, we're off to a strong start. We delivered $103 million of revenue, well above our guidance with over $16 million coming from non-D2C sources, which is nearly double from last year. And we delivered positive adjusted EBITDA for the quarter, improving by nearly $2 million from last year. In D2C, we delivered $89.2 million in revenue, $2.3 million of that came from BARK Air, a 300% improvement from last year and our first quarter breaking the $2 million mark. More importantly, we maintained a 99% 5-star rating, a clear signal that we're solving a real problem for dog parents around the world. This is still an early-stage business, but the demand is real. The experience is resonating and the team is performing well. The bulk of the D2C business was driven by our subscription business, which saw a strong new subscriber acquisition on lower marketing spend and better-than-expected retention. One of the most notable shifts this quarter was in product mix. Last year, about 2/3 of new customers chose BarkBox over Super Chewer. This quarter, that ratio flipped with Super Chewer accounting for roughly 2/3 of new subscribers. The higher price associated with that product was also a tailwind to both average order value and D2C gross margin, which came in at 67%, up 250 basis points year-over-year and our strongest D2C margin quarter ever. That's one way we can grow AOV and margin in D2C. But the far bigger opportunity is in cross-selling our customers. Now that we're fully on the Shopify platform with…

Thanks, Matt, and good morning, everyone. Fiscal 2026 is off to a solid start, driven by better-than-expected subscription growth, disciplined marketing spend and nearly 50% year-over-year growth in our Commerce segment. Most importantly, we delivered another quarter of positive adjusted EBITDA, a key milestone given ongoing macro uncertainty and tariff volatility. Let me walk through the quarter in more detail. Total revenue for the first quarter was $102.9 million, exceeding our guidance range of $99 million to $101 million and driven by a stronger performance across both our D2C and Commerce segments. Excluding Air, our D2C segment delivered $86.8 million in revenue, slightly ahead of expectations, largely due to higher-than-anticipated new subscriber additions and stronger order volume as a result. Additionally, the majority of these new subscribers opted for our more premium Super Chewer offering, which should benefit AOV for the remainder of the year. We achieved this growth while reducing D2C marketing spend by 38% year-over-year. As Matt mentioned, we've made a strategic pivot away from promotional and discount-driven acquisition and toward higher-value, longer retaining customers. This approach is improving customer quality and margin while enabling us to redirect investment towards our broader goal of revenue diversification, bringing more products to more customers across more channels. Speaking of revenue diversification, our Commerce segment delivered $13.7 million in the quarter, a 50% increase year-over-year. Growth in this segment was supported by expanded distribution with Amazon and newer partners like Chewy and increased shelf presence at retailers like Costco, Walmart and TJX. While quarterly performance can be influenced by retailer intake timing, we're encouraged by the momentum and expect continued growth as we scale these relationships and launch our BARK in the Belly consumables line. These products will launch on our website in the next month, followed by availability on Amazon…

The first question comes from Ryan Meyers from Lake Street Capital Markets.

First one for me. If we think about the EBITDA guidance for the second quarter, obviously, a loss of $2 million to a positive $2 million, a kind of wide range there. Just curious what kind of puts you at the low end of the range, what potentially puts you at the high end of that range?

Ryan, this is Zach here. Look, the midpoint of the guidance is in line with Q1. So we feel pretty good about the overall guidance range. A lot of it is to do with timing. So tariff flow-through timing, coupled with some timing on operating expenses, that could swing the overall profit performance and hence, the broader range.

Got it. And then if we think about the $5 million step down in G&A, maybe provide us with some color of what you guys were able to do here and then maybe how we should be thinking about that number going forward through the balance of the rest of the year?

Yes. On G&A, we've been making good progress over the past 18 to 24 months, basically evolving the structure of the business to the needs of the business and the scale of the business. We've been working pretty diligently on all areas of spend. So consultancy, professional services included. So those are some of the main drivers of what we've seen. Q1, there was a small amount of timing benefit that we'll see play through in Q2 and Q3. But overall, where we landed was a strong place. I would say for the balance of the year, slightly elevated to what you saw in Q1, but broadly in that range.

The next question comes from Maria Ripps from Canaccord.

Can you maybe give us a little bit more color on what drove stronger subscriber trends in Q1, especially on low advertising spend? And are you seeing sort of that momentum continuing here into fiscal Q2?

Maria, it's Matt here. I think what drove that is just ongoing experimentation with different, different ad formats, different concepts, different ways of trying to attract the customer. And there's been a real focus by us on getting a higher quality customer. One way that we talked about that, that played out was a pretty dramatic shift over to Super Chewer customers, which at a base level have an average order value that's about $5 per unit higher. That's one way. We're also looking for subscribers to prepay for their subscriptions upfront, and we've made good progress there to respond to some of the upsell or cross-sell offers that we've made and certainly made some progress there in terms of the initial purchase that they're making and their initial commitment. So we knew we were focused more on the side of higher-quality subscribers and spending less to acquire those. And when we pulled back, we expected more of a pullback in terms of the volume, and we just outperformed that. So pretty happy about that. The momentum in the learning continues. But as we're learning, sometimes it doesn't always go well, but so far, so good.

Great. That's very helpful. And then how should we think about sort of revenue contribution in the back half of the year from some of the revenue diversification sort of initiatives that you talked about?

We've, again, for the last 1.5 years, I believe, have set out to say that we want our commerce business to represent 1/3 or over 30% of our overall revenue within a couple of years. You saw another leap forward in that contribution this quarter. And so we're -- I'd say we're on path for that to happen. So that diversification from a channel perspective makes sense or continues and gets better and better by the quarter. The BARK Air contribution last year was over 1% of revenue in its first year. It was a partial year. We're building momentum. As Zahir mentioned, we're also following the customer and discovering new opportunities and services that are extensions of BARK Air. So not only extending the revenue, but extending to high-margin revenue there as well. Instead of 1% of the total revenue, I would think this year would be more in the 2% to 3% range. It's still small, but getting bigger and not unexpected for something in its second year. And then last but not least, I mentioned on the call that we're making this move into -- or launching a new line of consumables in a few weeks here. And it's been a long time coming, but we're really excited that we've got a full line, the BARK in the Belly line coming out, and it's coming out on our Shopify platform, which was also a long time coming, but it gives us the ability to credibly cross-sell that and the customer can put all of our products into one cart and check out as well as featuring that on our Amazon and Chewy platforms or with our partners there. So with that, you get some product diversification and you get some channel diversification. So it's a very long-winded way of saying what I said at the top, 2 priorities this year, remain EBITDA positive and continue forward on revenue diversification and feel very good about the start and our prospects for that.

That concludes our Q&A session. Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.