BARK, Inc. Class A

placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one. I will now hand today's call over to Mike Moogis, VP of IR. Please go ahead, sir.

Good afternoon, everyone, and welcome to VARC'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 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, Barger 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 GMA 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 BART'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 was 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 that didn't exist on our legacy platforms. The new platform modernizes the customer experience, which we expect to continue to drive increased conversion over time. We plan to migrate our remaining active subscriber cohorts from our legacy sites to the Shopify platform this quarter. While we continue to refine and optimize our approach, the initial performance on the new platform reinforces our confidence in this transition. We are also evolving our marketing strategy by moving further up the funnel. This means shifting focus away from promotional and direct purchase advertising and investing more in brand-building efforts. As we look to the year ahead, we see significant opportunities to connect with prospective customers in new and engaging ways, which we believe will enhance our long-term B2C performance. Over the past 18 months, our progress has been challenged not only by industry headwinds, but also by the limitations of outdated customer solutions. With these changes, we're addressing those gaps and positioning ourselves for growth with a lot of room for upside. As highlighted earlier, the additions we made to our leadership team this fiscal year are driving immediate and meaningful results. Last quarter, our commerce segment delivered over $20 million in revenue, a 43% year-over-year increase. Year-to-date, our commerce segment is up over 25%. This is fantastic progress and we are confident this is accelerating. Growth in this segment is being fueled by adding new partners and increasing shelf space with existing partners. For example, we launched 30 SKUs with Chewy in June. Today we have over 150 SKUs and growth in that channel is accelerating. Similarly, we are expanding our presence on Amazon, where we've historically been underrepresented. Amazon has become a key focus, and we expect our revenue from this channel to grow over 70% this year, with further expansion ahead. Additionally, I'm pleased to share that Bark is now available on Amazon Europe, marking another important milestone. Overall, we anticipate expanding our offerings across both toys and consumables with partners including Target, Walmart, Costco, PJ Maxx, and many more. We expect this segment to grow approximately 30% this year over last year, with even faster growth expected in fiscal year 2026. Moving on, Spark Air has exceeded expectations. Our first flight took off in May, and just two quarters later, the business delivered $2 million in revenue with a positive gross margin as a result of our high utilization rates. When we initially introduced BarkAir, we acknowledged that the cost of air travel for dogs was prohibitive for many pet parents. However, we emphasized our long-term goal of making air travel accessible to all dogs, not just those with wealthy owners. Overall, we are thrilled with the speed and efficiency with which the team has grown this business. These early successes lay a strong foundation for the future of BarkAir. On that note, let's turn to profitability, an area we have delivered consistent improvements for the past two years. Last quarter, we delivered a 63% consolidated gross margin, an improvement of 90 basis points compared to last year. As I said before, profitability drives revenue. These margin gains empower us to invest more efficiently and effectively in driving top line growth and we are now at an inflection point in that journey. In addition to gross margin improvements, we've continued to drive down G&A costs, including savings in both shipping and fulfillment, as well as reductions related to headcount. These efforts enabled us to achieve our 10th consecutive quarter of year-over-year adjusted EBITDA improvements. Most importantly, we are on track to reach our first full year of adjusted EBITDA profitability in two months' time. This is a critical milestone and we intend to expand the bottom line further in the years ahead. Looking beyond fiscal year 2025, we anticipate our top line returning to growth in fiscal year 2026 with mid to high single digit gains. This growth will be built on a far more profitable foundation. Beyond that, we expect both revenue and EBITDA margin to improve steadily with each passing year. As I reflect on the past three years back as CEO, it's clear that BARC has made meaningful strides, delivering substantial improvements in profitability, building an impressive leadership team, executing key growth initiatives, and laying a strong foundation for the future. We believe in our progress and future so much that we've invested around $17 million to repurchase over 11 million shares to date. And we'll continue to repurchase shares for as long as we believe the company is significantly undervalued as we feel it is today, given this progress. The investments we've made to strengthen our platform, streamline operations, and elevate our brand are setting the stage for a return to revenue growth in FY26 and beyond. With a more sustainable cost base and exciting opportunities on the horizon, we are confident that BARC's best days are yet to come. And with that, I will turn the call over to Zaheer.