BARK, Inc. Class A

Good afternoon. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to BARC's first quarter fiscal 2025 earnings call. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. At this time, I'd like to turn the conference over to Mike Mujiz, Vice President of Inventor Investor Relations. You may begin.

Good afternoon, everyone, and welcome to BARC's first quarter fiscal year 2025 earnings call. Joining me today are Matt Meeker, Co-Founder and Chief Executive Officer, and Zaheer 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 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, and good afternoon, everyone. Fiscal year 2025 is off to a strong start, building on the momentum we established last year. Our first quarter results are a testament to this momentum and progress, and we remain confident in our ability to accelerate our top line and deliver our first full year of positive adjusted EBITDA and free cash flow. Last quarter, we delivered $116.2 million of revenue, surpassing the high end of our guidance range. This was powered by quick wins from two of the strong leaders we hired earlier this year. Specifically on the marketing side, we saw year-over-year growth in new BarkBox subscribers for the third consecutive quarter. Furthermore, we saw over 5% year-over-year growth in our commerce business, with strong contributions from marketplaces like Amazon. We're confident this is just the beginning for both BarkBox and Amazon. The strong revenue performance was more impressive given we delivered a record high consolidated gross margin of 63%, a 250 basis point improvement compared to Q1 last year. This is our seventh consecutive quarter of year-over-year gross margin improvement, and I'm so proud of the team for executing this well. Finally, supported by further G&A and shipping and fulfillment improvements, adjusted EBITDA was negative $1.8 million for the quarter ahead of the top end of our guidance range and $5.6 million or 76% year over year improvement. Overall, this is a great start to the year. SPARC's talent is strong and provides the foundation for the top line growth we expect to begin in the current quarter. This progress coupled with our strong balance sheet enabled us to buy back roughly 3 million shares at a price of $1.43 per share last quarter. We plan to continue to seek opportunities to buy back our stock given our belief that the market has yet to reflect the value of the company. Last quarter, I discussed the strong leadership team we assembled to accelerate growth. Just one quarter later, we're more enthusiastic about this team than ever, and they started delivering right away. As I said, we achieved year-over-year growth in new customer acquisition for the third consecutive quarter, but there's so much more potential. Our new CMO, Michael Parnes, is already evolving our approach to customer acquisition and brand awareness, shifting marketing dollars from bottom of the funnel, heavily promotional ads, to a more sophisticated full funnel approach. Simply put, that means we'll spend less time talking about our promotions and more time talking about our overall brand proposition including fantastic products. It's already working, and Michael and his team are just getting started. On the commerce side of the business, our new CRO, Michael Black, has also hit the ground running. I mentioned some near-term acceleration marketplaces like Amazon that contributed to our strong quarter. Look for that to continue under his leadership. To that end, I'm excited to share that we have recently launched a selection of our best-selling toys at Chewy. The initial customer feedback exceeded expectations, and we're excited to expand our offerings to Chewy customers to include many more Bark products from toys to consumables in the coming months. Overall, the new leadership team is off to a strong start. We're excited to see what they and their teams do the rest of the year. One other growth lever that took off this quarter, quite literally, is Bark Air. Spark Air is the epitome of how we sell emotional experiences with your dog, and customers love it. The consumer response following our launch was incredible. We're less than four months in, and demand for the service continues to grow. To date, we have flown 24 flights between New York, Los Angeles, and London, and booked over $2.5 million in ticket sales. Spark Air is exciting for a variety of reasons. it has driven incredible awareness for Bark. Millions of people worldwide have learned of the company, our products, and our underlying mission to make all dogs happy. Second, we are solving a real pain point for dog parents who, before Bark Air, had limited options for traveling long distances with their dogs. We recognize the price point is not accessible to many today. However, with sustained demand, we can lower costs and make the service more accessible to more dog parents. And third, we've quickly realized that this service can become a real business. Most of our flights are sold out, and we've received tens of thousands of requests for new flights and destinations. This is the best start we could have hoped for, and there are more opportunities ahead. Overall, I'm thrilled with how far BARQ has come in the past two and a half years. In that time, We've delivered seven consecutive quarters of year-over-year gross margin improvements. We've built a strong balance sheet with $118 million of cash and has after buying back over 7 million shares to date and $45 million of our outstanding convertible note. Our inventory balance of $80 million has also halved from its peak, freeing up working capital and allowing us to be more nimble. We've also delivered eight consecutive quarters of year-over-year adjusted EBITDA improvements And we're on track for our first positive adjusted EBITDA and cash flow year in our history. This is a considerable feat considering we were burning nearly $200 million of cash just two years ago. We're accelerating our growth in all channels and further diversifying our products from consumables to air travel. And as strong as our leadership team is today, it will only grow stronger as they build momentum and familiarity with each other. In my view, our business is the strongest it has ever been, and I'm excited for the future. There's so much more to discuss from this quarter, so for that, I will now turn the call over to Zaheer.