Q4 2021 Northern Star Acquisition Corp Earnings Call

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Thank you <unk>.

Morning, everyone and thank you for joining us on today's call to discuss barks fiscal fourth quarter and full year 2021 financial results.

Press release, covering the company's financial results was issued this morning, and a copy of that press release can be found on the company's investor portal investors that park that C. O R. B S E T at Kona site Umberger thicker S T I C or the company mean northern.

Star acquisition company.

Before we begin our prepared remarks, I would like to remind you that far east statements. We make during this call about mark the future results of operations and <unk>.

Financial position business strategy, and plans and objectives, including forward looking statements. These forward looking statements are based upon current expectations that involve risks changes in circumstances assumptions and uncertainties, which could cause <unk> actual result.

It's to differ materially from those contemplated in this forward looking statements. These risks are described in northern star. Its registration statement on form S. Four which is on file with the S. E C.

Well as in the press release, all the information we provide on this conference call is provided only as of today and we undertake no obligation to update any forward looking statements. We may make on this call on account of new information future events or otherwise.

One thing on todays call will be Manish, Georgia works.

Executive Officer, and John Pollok, Chief Financial Officer, with that I will turn the call over to finish please go head.

Good morning, everyone I'll begin today's discussion with an overview of box missions and some highlights from our fiscal year next I will discuss why we believe box is uniquely positioned for continued long term growth and share perspective on our outlook and growth strategies.

Then turn the call over to John to take you through our fiscal year 2021 financial performance in detail.

The funding is going to grow you have consistently grown our subscriber base and deliver bulk products to more than $6 5 million Bucks returns I mean, the only vertically integrated drilling only general Brian but shows dogs across four key categories of fleet food health and home and we do it at a high level of personalization and a high touch service.

Our fiscal 2021 results reflect the outstanding momentum in our business as we further deepen engagement with our existing customers expand about dark lowers nationwide and broaden our product offerings across great food health and home.

The growth we have achieved the detriment to our unique business model and the strong and disciplined execution. Our team delivered despite COVID-19 sort of challenges that we.

Continue to capitalize on the fast growing industry.

Illustrating our strong performance during the fiscal year, new subscriptions, which we defined as the number of subscriptions, but their first shipment occurring in a given period increased 91% versus last year to $1 2 million subscription shipments, which is the total number of shipments of subscriptions products in a given period increase.

52, 5% versus last year to $11 6 million.

Our net revenue increased 68, 8% to $378 6 million driven by the continued strength in our direct to consumer segment.

Exceeded our adjusted EBITDA expectation and reported an adjusted EBITDA loss of $7 9 million an improvement from negative $17 8 million in the prior year.

<unk> represents an adjusted EBITDA margin of negative two 1% compared to an adjusted EBITDA margin of negative seven 9% in fiscal 'twenty.

We are incredibly proud of our fiscal 'twenty one results but.

What's most exciting is a tremendous growth opportunity ahead.

Perspective out of the 63 million households, with dogs in the United States, we serve only $1 $8 million. This past year, reflecting the immediate opportunity we have significantly expanded our customer base just within the U S.

And then finally, the Doc product and service marks that continues to grow in the U S and nationwide.

Innovation of pets and dogs in particular have been fueling market go three years and was accelerated further this past year's families chose to adopt golf and companionship.

These dogs and they remain part of the family for more than a decade, we believe that the strong industry dynamics will fuel growth for years to come.

Uniquely position to capitalize on this momentum with our powerful business model.

All of this starts with our mission to make all dogs happy.

We believe that dogs and humans are better together and we aspire to be the world's favorite golf brand a strong track record of growth gives us great confidence that we are just scratching the surface.

Now I'd like to highlight some of our key strengths and why we are well positioned to capitalize on the strong industry dynamics and further our journey to be the world's favorite dog brand.

First the value and build deep customer relationships, which drive retention and lifetime value.

Lasting relationships with our customers strengthened by real human connections, where theyre happy team, which allows us to gain insights and enables us to deliver a postpaid experience leading to a strong retention high lifetime value.

We have an incredible asset in the form of a customer relationship hockey team. This dog obsessed team aspires to make our customers happy and the 95% average customer satisfaction or <unk> achieved in fiscal 2021 is evidence of the success. In addition, we use the power of analytics to personalize the experience and depth.

Products that align with our customers' needs.

In connection with our customers.

And their dogs, resulting from our strong subscription based model greater attention and provides a high level of predictability for our direct to consumer business segment, which makes up 87% of our revenue.

Second we leverage these relationships and data to achieve personalization at scale.

The relationships, we build with our customers and the dogs allows us to better understand the needs and wants.

The personal lines, our subscribers experience, but collecting product and customer data.

We are able to utilize our machine learning technology and first party data set to compare dogs attributes against our available inventory as a result of data suggestions for dogs attributes such as size breed allergies and play style as well as adult parents needs be customized over 200000.

Monthly subscriptions.

We have significantly expanded our customization initiatives with our recently launched eat subscription.

Both symbolizes our food offerings for each and every dog.

I'll talk more about this exciting opportunity in more detail shortly.

Core digitally led data driven direct to consumer brand that delivers a high level of personalization at scale.

Our relationships and data support cross selling across our strong platform of new and existing products.

Trust REIT onto our customers relationships not only allows us to better understand both the dog and the human needs, but it improves our ability to cross sell products and expand into other categories such as food.

We also leveraged our data analytics capabilities to listen I suggested purchases through our <unk> program for subscriptions. The program allows existing customers to add products to the subscription shipment, including tourism fleet as well as back home and bulk bright products.

And cross selling opportunities drive higher average order value and are margin accretive and also enhance the overall customer experience.

Fourth.

We've already integrated proprietary band by vertically integrated I mean that all of our products are made exclusively for US everything we sell is designed by bulk develop the bark and branded box.

The higher margins by leveraging data and insights from a $1 8 million active subscriptions a world class team of product developers are able to create a collection of high quality unique products that addresses the needs of our customers in dogs.

The ability to have a strong brand affiliation and as a result have a higher profitability potential.

Fifth.

Our only channel distribution creates more setting opportunity even drives brand awareness.

Today, we offer our products to a wide variety of channels and partners, including our direct to consumer subscription lines box shop at site and online marketplaces, such as Amazon as well as major retail partners across extra Shelty mass club home.

And department store channels totaling 22 partner retail locations. Our goal is to make all dogs and their people happy.

Setting through multiple channels and across new markets allow us to reach broader audience.

Further grow our retail presence we have expanded our relationship with Costco to include select international locations and entered into a new partnership with Lowe's, which started shipping this month.

Overall, we are excited about our future we operate in a fantastic segment with significant growth opportunity.

But over half of all U S households, having dogs effects.

This combined with the Humanization of dogs continues to drive strong growth trends in the drug industry.

As we look to the next year and beyond we remain focused on our four growth strategies and service of the wants and needs of our customers and their dogs first expand into new product categories.

As part of our effort to maintain our customer relationships throughout the dog's life, we expanded into consumable product categories with the bulk brightening bulk offerings given the frequency of use the dog food category can be highly attractive subscription model on nutritionists designed food offering as high quality as well as both nice <unk>.

Proportion for each Doc.

All at a highly attractive Mustang and price points.

Encouraged by our product positioning and believe we will win big in the Gulf where categories for the following reasons.

First our customers Trust us.

Using minimal outreach to existing customers. We are highly encouraged by the early response to our pilots with eats.

The results are early tests, and with $1 8 million subscriptions, we see significant opportunity to cross sell leads.

Our proprietary data provides us with a unique ability to potently each products.

Through a mixture of Kimball suffers and supplements, we can cater to dogs of different ages sensitivities and breeds code personalization, followed by a dog obsessed happy team relationship drives loyalty youre able to personalize food offering for each Doc evolving the proportion meeting with each of the dogs lifespan.

Pages.

As adults ages and their needs change and from and prepared to evolve the food assortment to the evolving needs to do this without the luxury pricing points of other subscription models, making us even more attractive to our customers.

<unk> is ready to ship to approximately 20 markets with plans to expand the offering nationwide by the end of 2021.

We haven't built the sourcing capabilities as well as a distribution network. So we can deliver an exceptional experience for our customers.

Second continue to grow our toy and treats the chipping business a.

Our growth objectives are to maintain a high level of retention among customers as well as to attract new customers to Buck we have powerful levers to drive both initiatives as I spoke to earlier, we leverage data to align our offerings with the needs and wants of our customers.

Gained valuable insights into approximately 250000 customers per month to our passionate hockey team.

One important facts about each dog to deepen our customer connection and to inform product innovation led by World class talent, a customer obsessed creative team uses this data to inform product design and development decisions.

As a result, we delivered <unk> offering and treat every month that are driven by our customers, allowing us to deliver a body in a box of owners engulfed enjoy together.

Could enhance cross selling opportunities. In addition to product development utilize our data centric model to drive cross selling opportunities, which leads to higher <unk> and it's margin accretive we have been extremely encouraged by our success and effectively creating cross promotions of new or add on products and services to subscribers listing.

Fluids, our anchor box feature which is a monthly prompt for the subscribers to add another product of the shipment <unk>.

ABB products includes toys and treats box right and back home products that can be a one time purchase added to our bulk box or slip at.

Automatically renewing shipment bundled with the subscription we plan to continue building upon our machine learning and artificial intelligence capabilities to effectively cross sell these products to our existing subscribers.

Port.

And our retail distribution and marketplace presence drive brand partnerships and reach more dogs and that people.

True to our objective that we want to serve all dogs, we plan to further expand our presence in existing and new retail channels across online marketplaces and select branded partners.

This growth.

Stablish affirmative platform to drive brand awareness and introduce new products.

We haven't successfully building our presence with retail partners, which drives both incremental sales as well as brand awareness at Taro.

They're big distribute to all 800 stores.

Alex are featured on end caps throughout the year, creating a high level of visibility for our brand.

Our end cash collections are matched by growing always on inline assortment.

We will continue to establish new opportunities with new retailers as well as expand existing relationships.

We have been successful at mobilizing various brand partnerships to reach new audiences. These include license partnerships such as the Scoop movie as well as in store partnerships, such as Duncan all of which allow us to boost brand awareness and reach more dogs.

In conclusion, we remain extremely excited about our future opportunities within the industry.

Trends towards the Humanization of dogs are sustained we believe that our differentiated business model and the advancement of our strategies enable us to drive strong profitable growth well into the future now I will turn the call over to John to review, our full year financial performance in detail.

Thank you <unk> and good morning, everybody.

I'm truly pleased to bring you our earnings for the first time as an almost public company as a quick reminder.

Minder, the shareholder vote to approve our merger with Northern Star is scheduled for May 28, and transaction close for June 1st.

<unk> will then change from Spi C to park.

RK.

We began this journey toward becoming a public company over one year ago, well before our transaction with Northern Star began.

And the team could not be more ready or excited to launch park as a publicly traded company.

With the capital expected to be provided by northern Star and the experts support of our sponsors Jon Litt, Deci and Joanna Coles.

We are confident in our ability to generate strong results for years to come as we continue to penetrate the enormous addressable market ahead of us.

Turning to our numbers today, we filed our preliminary financial results for the fiscal fourth quarter and full fiscal year ending March 31 2021.

Courage you to download the full release from our Investor portal investors Dot Park.

Co CEO.

Or the SEC's Edgar site under the ticker Stis see where the company name Northern Star acquisition Company.

In that release, we provide more detailed information and I will be able to cover during this call.

We expect to include our audited financial statements for the year ended March 31, 2021, and future filings with the SEC, assuming a successful merger vote.

With regard to our financial results themselves Mark had a very robust Q4 to conclude a strong fiscal year.

Revenue for the quarter was $112 million, resulting in $379 million in revenue for the year.

This represents 69% year over year growth on an annual basis.

Our strong topline growth was driven by both our direct to consumer as well as our commerce segments.

And our direct to consumer segment, we profitably acquired new customers, while simultaneously retaining existing customers to further fuel our growth.

The $334 million in DTC revenue of 64% increase over fiscal 2020 was driven by a combination of increased subscription shipments as well as an increased average order value.

Subscription shipments for the year.

11 6 million.

53% year over year increase.

And average order value for the year was $28 74.

On almost $2 increase over last years <unk> of 2680.

In addition average monthly subscription shipment churn was a healthy five 9%.

And our Commerce segment we.

Increased revenue to $45 million.

Hundred 21% increase over the prior fiscal year.

This growth was driven in our retail channel as well as increased sales of our bark home products.

The increase in retail was due to the introduction of bark products into new retail chains, including Petsmart and.

And was further supported by increased sales with existing partners.

Further we expanded our park home product offerings, and further developed our penetration and online marketplaces.

This strong revenue growth flowed through our P&L with disciplined management of our gross margin.

Our full year gross profit increased 67% year over year to $226 million, while our gross margin for the year was 59, 7% versus last year of 64%.

The 70 basis points difference between the years was primarily due to a mix shift in revenue as lower gross margin Commerce segment sales, where a greater portion of consolidated revenue.

Note that although the commerce segment has a lower gross margin we continue to manage it to a contribution margin comparable to the rest of our business lines.

In addition, we saw at the tail end of fiscal 2021 increased freight rates due to the congestion and the global shipping network.

We are responding to these challenges by investing in more owned and managed warehousing fulfillment assets to help manage this secular cost headwind.

In addition to maintaining our high gross margin.

We continue to be very disciplined in our marketing and advertising spend to acquire new customers.

We acquired $1 2 million new subscriptions in fiscal 2021 versus 627000 in fiscal 2020, a whopping 91% year over year increase.

However, our advertising and marketing expenses increased only 45%.

Half the rate of new subscription growth to.

To $67 million versus prior year.

We were able to achieve this efficiency as a result of a decrease in our customer acquisition cost or CAC.

$55 44 in 2020 to $47 55 and 2021.

The result was a very healthy six three times LTV to CAC ratio for the full year.

This reduction in CAC versus prior year was due largely to decreased pricing for social media advertising in the first half of the year as a result of the COVID-19 pandemic.

We have already seen tech increase however, we continue to maintain our disciplined return based approach to our marketing spend.

In this most recent quarter ending March 31, our CAC was $51 47.

Our LTV to CAC was six six times.

By managing the efficiency of our marketing spend we are able to balance strong growth with building the foundation for long term healthy margins and giving us the operating cash flow to invest in building, our new business lines.

To that end general and administrative expenses increased 55% year over year to $180 million.

The increase was driven primarily by two factors first.

A higher operational expenses, including warehouse fulfillment shipping and payment processing fees, resulting from the increased sales volume during the period.

Secondly, we continue to grow our head count and related expenses in support of bark eats arc right and the cross selling initiatives <unk> described earlier.

We also absorbed some transaction costs during Q4 as well as sales and use tax expense from historical sales, which are not normal course operating items.

Ultimately G&A as a percent of revenue declined 430 basis points year over year.

We're very pleased with this result, as the leveraging of our G&A expenses in our more mature businesses was offset by the G&A investments, we are making in our new business lines and the creation of the platform and you just described.

To complete the review of our P&L interest expense for the year increased to $11 million compared to $5 million last year.

This increase was due to cash and noncash interest related to our convertible notes as well as two fees for paying down existing debt ahead of maturity.

Ultimately, our net loss as a percent of revenue improved year over year.

For the full year 2021, our net loss was $31 million on $379 million of revenue or negative eight 3%.

Versus a net loss as a percent of revenue last year of negative 14%.

In addition to these GAAP measures.

Adjusted EBITDA is an important measure of profitability, we use internally to manage our business for.

For the fiscal year 2021, our adjusted EBITDA was negative $7 9 million or negative 2% of revenue.

Versus last year of negative $17 8 million or 8% of revenue.

Taking our performance to date into consideration, we are providing revenue guidance for the first fiscal quarter of the year ending June 30.

While we expect our strong new subscription growth to continue we also expect to see an increase in subscription shipment churn as we passed the anniversary of the commencement of the COVID-19 outbreak in the U S.

Net result is we expect to continue strong revenue growth with revenue in the first quarter to be in the range of $116 million to $118 million.

This represents an approximately 56% year over year increase at the midpoint of the range.

In addition, we are reaffirming our outlook for fiscal year 2022 in particular, we anticipate full year fiscal 'twenty two revenue to be $516 million.

And adjusted EBITDA of negative $31 million or negative 6% of revenue.

We invest in our new product lines to provide long term aggressive but disciplined growth.

As I conclude today's call I want to acknowledge that reporting on the numbers is not the same as generating money.

I want to sincerely, thank our incredible team for their commitment and hard work over the past year and a half as we've navigated this unprecedented period, both for the world and for Park.

The dedication of our employees is what drives our business and we are incredibly proud of the team's performance leading up to our public trading debut.

These results in this difficult environment further demonstrate the strength and flexibility of our unique business model.

Thank you for your time and for joining today's call and we look forward to continuing to update you on our further progress.

Operator.

Ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Okay.

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