BARK Reports Third Quarter Fiscal Year 2024 Results

BARK, Inc. (NYSE:BARK) ("BARK" or the "Company"), a leading global omnichannel dog brand with a mission to make all dogs happy, today announced its financial results for the fiscal third quarter ended December 31, 2023.

Key Highlights

• Total revenue was $125.1 million, ahead of the high-end of the Company's guidance range and a 6.9% decrease compared to the same period last year.
• Consolidated gross margin was 61.8%, a 210 basis point increase compared to the same period last year and a 610 basis point improvement versus the third quarter of fiscal 2022.
• Net loss improved 52.5% to $(10.1) million, year-over-year.
• Adjusted EBITDA was $(6.4) million, the midpoint of the Company's guidance range and a $6.4 million improvement versus last year.
• Net cash provided by operating activities was $15.0 million and free cash flow was $13.3 million.

"Our results last quarter highlight the significant strides we've made as a public company. We delivered our strongest customer acquisition quarter in two years, surpassed the high-end of our revenue guidance range, and improved our gross margin by over 200 basis points year-over-year," said Matt Meeker, Co-Founder and Chief Executive Officer. "We also cut our Adjusted EBITDA loss in half versus last year, and generated $13 million of free cash flow in the quarter, and $17 million on a trailing twelve month basis. We believe these results, combined with our recent retail treat partnerships, position us strongly as we approach fiscal 2025."

Key Performance Indicators

Fiscal Third Quarter 2024 Highlights

• Revenue was $125.1 million, ahead of the Company's guidance range and driven by its strongest customer acquisition quarter in two years. Revenue declined 6.9% year-over-year primarily driven by fewer total orders in the most recent period, largely related to carrying fewer Barkbox and Super Chewer subscriptions into the quarter, compared to last year.
• Direct to Consumer ("DTC") revenue was $110.9 million, a 7.6% decrease year-over-year, primarily related to the items discussed above.
• Commerce revenue was $14.2 million, a 0.6% decrease year-over-year.
• Gross profit was $77.2 million, a 3.7% decrease compared to last year.
• Gross margin was 61.8%, as compared to 59.7% in the same period last year. The increase was driven by new contract pricing delivering a reduction in unit cost of goods in the most recent period.
• Advertising and marketing expenses were $25.1 million as compared to $21.7 million in the previous year. The Company invested more in marketing in the current period due to the efficiency at which it was able to acquire customers.
• General and administrative ("G&A") expenses were $66.1 million, as compared to $80.2 million in the prior year. This decrease was largely driven by a reduction in headcount and improved shipping terms.
• Net loss was $(10.1) million, as compared to a net loss of $(21.3) million in the previous year.
• Adjusted EBITDA was $(6.4) million, a $6.4 million improvement compared to last year and at the midpoint of the Company's guidance range. The continued improvement in unit economics also enabled the Company to invest more in marketing in the current period, particularly given the efficiency at which it was able to acquire new customers.
• Net cash provided by operating activities was $15.0 million. Free cash flow, defined as net cash provided by (used in) operating activities less capital expenditures, was $13.3 million, an improvement of $12.9 million compared to the same period last year.

"We've been very pleased with our ability to deliver consistent improvements in our profitability profile," said Zahir Ibrahim, Chief Financial Officer of BARK. "There is still work to do, however, we believe the business has reached an inflection point from a profitability standpoint. We expect to be Adjusted EBITDA positive in the fiscal fourth quarter and have solid visibility into bottom line improvements in fiscal 2025."

Balance Sheet Highlights

• The Company's cash and cash equivalents balance as of December 31, 2023 was $131.3 million, following the $45.0 million repurchase of its outstanding convertible notes.
• The Company's inventory balance as of December 31, 2023 was $98.5 million, a decrease of $10.9 million compared to the prior quarter and a $46.8 million decrease compared to last year.

Partial Repurchase of 2025 Convertible Notes

As announced last quarter, the Company repurchased $45.0 million of the par value of its 2025 Convertible Notes (the "Notes") at a 6% discount in November. The repurchase amount, which was all cash, represented approximately 54% of the outstanding par value of the Notes. Following the transaction, the Company had $40.6 million of outstanding borrowings under the note purchase agreement as of quarter-end.

Fiscal Fourth Quarter and Full Year 2024 Financial Outlook

Based on current market conditions as of February 7, 2024, BARK is providing updated guidance for revenue and Adjusted EBITDA, which is a Non-GAAP financial measure, as follows.

For the fiscal full year 2024, the Company expects:

• Total revenue growth of (8)% to (9)% year-over-year, revised from its prior guidance of (8)% to (11)%. The Company is increasing the low-end of its revenue range due to its stronger-than-expected third quarter results.
• Adjusted EBITDA of $(9.8) million to $(11.8) million, compared to the its prior guidance of $(6.0) million to $(12.0) million. The change in the high-end of its range reflects the Company investing more in marketing in the period, given its ability to acquire new customers efficiently.

For the fiscal fourth quarter 2024, the Company expects:

• Total revenue of $118.4 to $123.8 million.
• Adjusted EBITDA of $1.0 million to $3.0 million.

We do not provide guidance for Net Loss due to the uncertainty and potential variability of certain items, including stock-based compensation expenses and related tax effects, which are the reconciling items between Net Loss and Adjusted EBITDA. Because such items cannot be calculated or predicted without unreasonable efforts, we are unable to provide a reconciliation of Adjusted EBITDA to Net Loss. However, such items could have a significant impact on Net Loss.

The guidance provided above constitutes forward looking statements and actual results may differ materially. Please refer to the "Forward Looking Statements" section below for information on the factors that could cause our actual results to differ materially from these forward looking statements and "Non-GAAP Financial Measures" for additional important information regarding Adjusted EBITDA.

Conference Call Information

A conference call to discuss the Company's fiscal third quarter 2024 results will be held today, February 7, 2024, at 4:30 p.m. ET. During the conference call, the Company may make comments concerning business and financial developments, trends and other business or financial matters. The Company's comments, as well as other matters discussed during the conference call, may contain or constitute information that has not been previously disclosed.

The conference call can be accessed by dialing 1-888-330-2120 for U.S. participants and 1-646-960-0290 for international participants. The conference call passcode is 5515653. A live audio webcast of the call will be available at https://investors.bark.co/ and will be archived for 1 year.

About BARK

BARK is the world's most dog-centric company, devoted to making dogs happy with the best products, services and content. BARK's dog-obsessed team applies its unique, data-driven understanding of what makes each dog special to design playstyle-specific toys, wildly satisfying treats, great food for your dog's breed, effective and easy to use dental care, and dog-first experiences that foster the health and happiness of dogs everywhere. Founded in 2011, BARK loyally serves dogs nationwide with themed toys and treats subscriptions, BarkBox and BARK Super Chewer; custom product collections through its retail partner network, including Target and Amazon; its high-quality, nutritious meals made for your breed with BARK Food; and products that meet dogs' dental needs with BARK Bright®. At BARK, we want to make dogs as happy as they make us because dogs and humans are better together. Sniff around at bark.co for more information.

Forward Looking Statements

This press release contains forward-looking statements relating to, among other things, the future performance of BARK that are based on the Company's current expectations, forecasts and assumptions and involve risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "intend," "potential," "continue," "ongoing" or the negative of these terms or other comparable terminology. These statements include, but are not limited to, statements about future operating results, including our strategies, plans, commitments, objectives and goals. Actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Other factors that could cause or contribute to such differences include, but are not limited to, risks relating to the uncertainty of the projected financial information with respect to BARK; the risk that spending on pets may not increase at projected rates; that BARK subscriptions may not increase their spending with BARK; BARK's ability to continue to convert social media followers and contacts into customers; BARK's ability to successfully expand its product lines and channel distribution; competition; the uncertain effects of the COVID-19 pandemic or other global or macroeconomic events or challenges.

More information about factors that could affect BARK's operating results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's quarterly report on Form 10-Q, copies of which may be obtained by visiting the Company's Investor Relations website at https://investors.bark.co/ or the SEC's website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to the Company on the date hereof. The Company assumes no obligation to update such statements.

Definitions of Key Performance Indicators

Total Orders

We define Total Orders as the total number of DTC orders shipped in a given period. These include all orders across all of our product categories, regardless of whether they are purchased on a subscription, auto-ship, or one-off basis.

Average Order Value

Average Order Value ("AOV") is Direct to Consumer revenue for the period divided by Total Orders for the same period. In prior periods, the Company calculated AOV by dividing DTC revenue by total subscription shipments.

Non-GAAP Financial Measures

We report our financial results in accordance with U.S. GAAP. However, management believes that Adjusted Net Loss, Adjusted Net Loss Margin, Adjusted Net Loss Per Common Share, Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow, all non-GAAP financial measures (together the "Non-GAAP Measures"), provide investors with additional useful information in evaluating our performance.

We calculate Adjusted Net Loss as net loss, adjusted to exclude: (1) stock-based compensation expense, (2) change in fair value of warrants and derivatives, (3) sales and use tax income, (4) non-cash impairment of previously capitalized software and prepaid software licenses, (5) restructuring charges related to reduction in force payment (6) duplicate headquarters rent expense, (7) gain on extinguishment of debt, and (8) other items (as defined below).

We calculate Adjusted Net Loss Margin by dividing Adjusted Net Loss for the period by Revenue for the period.

We calculate Adjusted Net Loss Per Common Share by dividing Adjusted Net Loss for the period by weighted average common shares used to compute net loss per share attributable to common stockholders for the period.

We calculate Adjusted EBITDA as net loss, adjusted to exclude: (1) interest income, (2) interest expense (3) depreciation and amortization, (4) stock-based compensation expense, (5) change in fair value of warrants and derivatives, (6) sales and use tax income, (7) non-cash impairment of previously capitalized software, (8) restructuring charges related to reduction in force payment, (9) duplicate headquarters rent expense, (10) gain on extinguishment of debt, and (11) other items (as defined below).

We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA for the period by revenue for the period.

We calculate Free Cash Flow as net cash provided by (used in) operating activities less capital expenditures.

The Non-GAAP Measures are financial measures that are not required by, or presented in accordance with U.S. GAAP. We believe that the Non-GAAP Measures, when taken together with our financial results presented in accordance with U.S. GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of the Non-GAAP Measures are helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.

The Non-GAAP Measures are presented for supplemental informational purposes only, have limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. Some of the limitations of the Non-GAAP Measures include that (1) the measures do not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect these capital expenditures, (3) Adjusted EBITDA and Adjusted EBITDA Margin do not consider the impact of stock-based compensation expense, which is an ongoing expense for our company, (4) Adjusted EBITDA and Adjusted EBITDA Margin do not reflect other non-operating expenses, including interest expense. In addition, our use of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies because they may not calculate the Non-GAAP Measures in the same manner, limiting their usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider the Non-GAAP Measures alongside other financial measures, including our net income (loss) and other results stated in accordance with U.S. GAAP, and (5) Free cash flow does not represent the total residual cash flow available for discretionary purposes and does not reflect our future contractual commitments.

The following table presents a reconciliation of Adjusted Net Loss to Net loss, the most directly comparable financial measure stated in accordance with U.S. GAAP, and the calculation of net loss margin, Adjusted Net Loss Margin and Adjusted Net Loss Per Common Share for the periods presented:

Adjusted Net Loss

The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with U.S. GAAP, and the calculation of net loss margin and Adjusted EBITDA margin for the periods presented:

Adjusted EBITDA

The following table presents a reconciliation of Free Cash Flow to Net cash used in operating activities, the most directly comparable financial measure prepared in accordance with U.S. GAAP, for each of the periods indicated:

Free Cash Flow

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