BARK, Inc. Class A

Ladies and gentlemen, thank you for standing by and welcome to the BARC First Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this time, you will need to press star 1 on your telephone keypad. Also, please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Mr. Mike Mujiz, Vice President of Investor Relations. Thank you. Please go ahead.

Good afternoon, everyone, and welcome to BARC's first quarter fiscal 2022 earnings call. Joining me today are Manish Janeja, CEO, and John Toth, CFO. 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 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. lastly i would like to remind everyone that our fiscal year and march 31st we are currently in fiscal 2022 which will consist of the last three calendar quarters of 2021 and the first calendar quarter of 2022. with that let me now turn the call over to manish thanks mike and good afternoon everyone uh thank you for joining our first earnings call trading under the bob ticker i would also like to thank our employees customers and partners for your contributions and continued support

Given this is a first learning stall, I will take the opportunity to reiterate Bark's mission, highlight the durable secular tailwinds that we are benefiting from, and ultimately share why we believe Bark is uniquely positioned to capture market share and deliver long-term shareholder value. I will then turn the call over to John Toth, Bark's CFO, to walk you through our recent financial performance in more detail. First, let's begin with some key highlights from our strong first quarter. Fiscal 2022 is off to a great start. We saw robust growth in subscription shipments, driving total revenue to the top end of our guidance range. Our top line was accompanied once again by strong margins and healthy customer acquisition costs. In fact, our customer acquisition costs were lower last quarter than in the quarters going back to fiscal 2019, despite doubling our subscription base over that time period. Looking at the business in more detail, revenue in our core direct-to-consumer segment came in at $105 million, an impressive 55% increase year-over-year. We added 280,000 new subscriptions last quarter, bringing total active subscriptions to over 1.9 million. We delivered a record 3.6 million subscription shipments in the quarter, a 52% increase compared to the same period last year. Our out-of-box feature, which reflects our cross-selling capabilities, also drove significant growth, accounting for over $7 million in revenue in the quarter, a 174% increase compared to last year. Average order value was also up 87 cents to $29.21 versus last year. Turning to our commerce business, which includes sales of bought products through retailers such as Target, Costco, and Amazon, Total revenue in this segment was $12.2 million, a 59% increase year-over-year, driven by growth in revenue from both existing partners as well as new partners such as Lowe's. This performance is encouraging as the segment helps broaden awareness of BART products and presents an opportunity for us to convert these customers to monthly subscribers. We have had a lot of recent success in the segment, To date, 20 individual SKUs have topped $1 million in sales at a single retail partner, with seven falling between $2 million and $4 million. Our total revenue for the first quarter was $117.6 million, which came in at the top end of our guidance range for the quarter while maintaining our best-in-industry gross margin at 59% plus. We were also pleased with our customer acquisition costs. which came in at $48.36, down 6% from the previous quarter. This in an environment of raising media costs. Additionally, the customers we acquired were of higher value, thereby delivering a healthy three to four months' payback on a gross margin basis. On an year-over-year basis, our CAC was up from a particularly low $30.83 we had achieved last year. However, this comparison isn't as relevant in our view as the overlapping impact from COVID, which resulted in lower than normal customer acquisition costs. Nonetheless, we are extremely pleased with a strong start to the fiscal year and believe we are strongly positioned to capitalize on the immense market opportunity. Taking a step back, I would like to reiterate the broader Bark opportunity for those on the call that are newer to our story. Bark's mission is simple and has not changed since our fourth space check nine years ago. Make all dogs happy. Our customer service, our happy team, and wellness advisors help us build lifelong relationships with dogs and their parents, which drives high retention and lifetime value. This is a core and highly differentiating asset particularly as we expand into new product categories like food and health. As a positive experience, our customers have had with the BarkBox product that have a halo effect on our newer categories, which have larger addressable markets and are less discretionary. On the broader industry side, we continue to benefit from durable secular tailwinds. Globally, dog ownership continues to grow at a healthy clip. Today, an estimated 63 million households in the U.S. own a dog. of which we serve only 1.9 million. If nationally, that figure is much higher. Furthermore, the humanization of pets is an ongoing trend that we continue to benefit from. Dog parents are spending more time and more money on their pets, often viewing them as members of the family. This is particularly apparent amongst millennials and Gen Z. This presents a significant opportunity for Bark to grow its market share across our fun, food, health, and home verticals. So why is Park uniquely positioned to capitalize on these rising types? First, we have an incredible asset in our customer experience happy team, which delivers highly personalized experiences and ensures complete customer satisfaction. To that end, our customer satisfaction scores have been around 95% for the past four years. Second, we leverage our growing data set to personalize and optimize our products at scale. This data enables us to better understand our customers' needs, while machine learning capabilities allow us to predict and tailor our suite of products for your dog based on age, weight, breed, and more. Furthermore, this data better enables us to cross-sell products and recommend specific and individualized add-on products for our customers. It strives higher average order value and margin accretion. Third, We are the only vertically integrated dog brand. All of our product categories are designed, manufactured, and distributed by us. Bark is a brand. We are not a marketplace selling third-party products. We are happy to sell our products through marketplaces to reach all dog parents and further raise brand awareness in the same way that Nike sells its sneakers in Foot Locker. However, the value proposition is different across these businesses. For example, we regularly partner with other iconic brands like Warner Brothers and the NBA. Our margins are two to three times higher than that of a traditional tech marketplace, and our social media presence, which exceeds 9 million followers across our various channels, is significantly larger. To put that last figure in context, our box-to-box Instagram handle alone has more followers than iconic lifestyle brands such as Peloton, Oatly, and Beyond Meat, which is extremely powerful as it serves as a force multiplier for us to launch and market new products and categories. Lastly, we are Omi Channel. We sell products direct to consumer, but we also leverage partnerships with top retailers like Petco and PetSmart, in addition to the ones I mentioned before. You can buy Bug Box toys waiting in line in Dunkin' Donuts, walking through the Costco food court, or strolling through the pet aisle in Target. So how do we intend to capitalize on these opportunities and deliver long-term shareholder value? To that end, we remain focused on the following key growth strategies. One, expansion to new product categories. Two, scaling and optimizing existing products. Three, enhancing cross-selling and add-on opportunities. Four, increasing our presence in retailers and other marketplaces. I will touch on each of these, but first, I'd like to spend some additional time on our expansion into new categories. We are more than just a dog toy company. We are the only company offering dogs and their parents a suite of products spanning the four core pet categories, fun, food, health, and home. We are replicating the success we have had in the fun category by applying our learnings and data into our newer categories, extend the lifetime value of our customers, and drive increases in average order value. While we are still in early days, we have progressed in these categories and we are confident that the halo effect from our BarkBox success will enable us to replicate our success across new initiatives such as BarkBright and Eats. BarkEats is a highly personalized meal plan created for your specific dog and delivered in portion daily meals. Our wellness advisors work with dog parents to understand their dog and create a meal plan consisting of high quality kibbles, toppers, and other supplements. Our nutritionists maintain ongoing relationships with our customers, navigating the dog's wellness over time and recommending different meal plans and supplements as the dog matures. Currently, Personalization in the kibble market is limited and generally consists of a label on the bag indicating puppy, adult, or senior. This presents bar to the significant opportunity to capture market share of the $40 billion plus kibble business in the United States alone by creating a highly personalized and premium product at a more mass market price point. We are confident in our ability to scale this business as we leverage our data and customers from our existing play category. Given the magnitude of the opportunity, investing in our Eats product and infrastructure is a key priority, which will enable us to reach more markets in line with the plan for full national rollout by end of fiscal year. We have also made a number of recent enhancements in our Eats products as well. First, we redesigned the packaging to be more consistent with the brand identity. We also launched an active box feature for existing BarkBox and SuperChewer customers, which will allow us to cross-sell into our 1.9 million active subscriptions. This will enable our current subscribers to add eats from their existing dashboard in a couple of easy clicks. The same is true for our proprietary bright dental product, as well as home products like bed. While still early days, we are extremely pleased with the early reception of eats. We cannot provide specific numbers at this time, However, July was by far our strongest month to date, and it is looking like August will be even stronger. Encouraging early data from ETH is notwithstanding the fact that we have spent minimal marketing dollars. Most of our customer acquisition has been through word of mouth. One of our founders, Carly Strife, is leading ETH for us and is dedicated to its long-term success. All in all, we are excited about these new categories and look forward to updating you on our progress over the coming months. Moving on, Our second priority is to continue scaling and optimizing our toy and treat subscription business. Our passionate, happy team engages over 250,000 customers per month. We learn about you and your dog, which helps deepen our connection with the customer and provides us with valuable insights and data. A creative team then leverages this data to inform product design and development decisions as part of the flywheel. Our third priority is to enhance cross-selling opportunities. We utilize our data-centric model to recommend add-ons. Historically, this was focused on just toys and treats. However, we are scaling this opportunity by including eats, bright, and home products as additional add-on features. This is a meaningful opportunity for us as we look to grow average order value and extend the lifetime value of a customer. As I mentioned, we increased our add-to-box revenue by 174% last quarter. We anticipate additional growth as we execute on these priorities and continue to improve our machine learning capabilities, enabling us to cross-sell our products more effectively. And fourth, we are focused on increasing brand partnerships and retail distribution. We have had the privilege of partnering with some truly iconic brands, including the NBA, Warner Brothers, Universal Studios, Dunkin' Donuts, and more. These partnerships raise awareness of our brand and drive incremental sales. Recently, we signed a unique collaboration with Netflix, which will roll out next year. These types of opportunities remain a key priority, and we will continue to secure new and exciting licensing deals. We are also looking to expand our presence in retail. These channels raise the visibility of a product and create additional channels for us to convert one-time sales to monthly subscriptions. In summary, S522 is off to a great start, and the market opportunity for Bark is immense. Our mission is to make all dogs happy and be obsessed over supporting a unique relationship and bond between each dog and the parent, be it at home, while many of us work from home, or back in office. A strong brand enables us to profitably scale this business beyond that of a traditional marketplace or retailer. I'm proud of our team's customer obsession and dogged determination towards disciplined execution to deliver results. We will continue to execute, and we look forward to updating you on our progress as we scale the BART ecosystem. With that, I will turn the call over to John.