BARKparticipants
Mike Mougias - Vice President of Investor Relations
Matt Meeker - Co-Founder and Chief Executive Officer
Zahir Ibrahim - Chief Financial Officer
Business Highlights
1. Progress towards profitability:
BARK Inc. reported significant progress towards profitability in its Q3 fiscal 2023 earnings call. The company's CEO, Matt Meeker, discussed the acceleration of its path to profitability, making meaningful progress in its food and consumables business, and transforming its customer base by acquiring more premium customers. The company grew its average order value by $2 year-over-year, improved its gross margin by 4 points to 60%, reduced its inventory, and announced a cost reduction exercise that is expected to achieve approximately $12 million of annual cost savings starting this quarter.
2. Strong momentum in food and dental categories:
The company's food and dental categories are showing strong momentum and are less discretionary, which is healthy for the company. The company is confident about taking toy customers and making them food customers, which will help in revenue growth. The company is also integrating the one BARK brand, which is progressing rapidly, and new products are being introduced.
Financial Status:
1. Revenue growth impacted by headwinds in commerce and direct-to-consumer:
BARK Inc. reported a healthy Q3 revenue growth, but Q4 is trending softer than expected due to the deterioration in discretionary spend. The company's revenue growth was impacted by headwinds in commerce, where retail partners have their inventory built up, and direct-to-consumer, where net adds came in lighter than expected.
2. Improving profitability profile:
The company's adjusted EBITDA was negative $12.8 million, $200,000 ahead of its guidance for the quarter and a 30% improvement, compared to the negative $18.3 million it generated last year. The company's gross margin continues to rise, and it is improving its operating expense profile. The company is beginning to generate positive free cash flow, which is a major milestone. The company anticipates positive free cash flow tailwinds in two areas, balance sheet driven and P&L driven, which should boost its profitability and free cash flow generation.
Overall, BARK Inc. had a very strong quarter, and while the near-term macro environment remains volatile, it has a tremendous runway ahead. Investors' main interests in the company are revenue growth and profit trend, and the company's focus on improving its profitability profile and aligning its cost structure with the current macro environment should be positive news for investors.
Question and Answer
BARK Inc., a dog-centric company, reported a healthy Q3 revenue growth, but Q4 is trending softer than expected due to the deterioration in discretionary spend. The company's revenue growth was impacted by headwinds in commerce, where retail partners have their inventory built up, and direct-to-consumer, where net adds came in lighter than expected. However, the company's food and dental categories are showing strong momentum and are less discretionary, which is healthy for the company. The company is confident about taking toy customers and making them food customers, which will help in revenue growth. The company is also focusing on improving its gross margin, shipping and fulfillment, and cost reduction to improve profitability. The company is guiding to a loss of $3 million in the current quarter, but the building blocks are there to achieve adjusted EBITDA profitability. The company is also integrating the one BARK brand, which is progressing rapidly, and new products are being introduced. The company is confident about its LTV to CAC and will push harder on marketing spend to grow faster.
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