Q2 2022 Original BARK Co Earnings Call
Speaker 1: and thank you for standing by. Welcome to Mark's second quarter fiscal year 2020 through earnings conference call. At this time, all participants are in a recent only mode. After this biggest presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. And please be advised that today's conference may be recorded. Thank you. I would now like to hand the conference over to your first speaker today, Mr. Michael Mugees.
Good day and thank you for standing by welcome to box second quarter fiscal year 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference maybe recorded thank you I would now like to hand, the conference over to your speaker today, Mr. Michael I'm a genius.
Speaker 1: Vice President Investor Relations. Good afternoon, everyone, and welcome to BARC's second quarter fiscal 2022 earnings call. Joining me today are Manish Joneja, CEO , and John Toth, CFO . 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.
Vice President of Investor Relations. Good afternoon, everyone and welcome to box second quarter fiscal 2022 earnings call. Joining me today are many eastern Asia, CEO and John <unk> CFO 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.
Speaker 2: Before we begin, I would like 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.
Before we begin I would like 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.
Speaker 2: Please refer to our SEC filings for more information on some of the factors that could affect our future results and outcomes.
Speaker 2: Also during today's call, we will discuss certain non-GAAP financial measures. Reconciliation to our non-GAAP financial measures are also contained in this afternoon's press release. With that, let me now turn the call over to Manish.
Also during today's call, we will discuss certain non-GAAP financial measures reconciliation to our non-GAAP financial measures are also contained in this afternoon's press release with that let me now turn the call over to Malaysia.
Speaker 2: Thanks, Mike, and good afternoon, everyone. Thank you for joining our fiscal second quarter earnings call. I'm pleased to report we delivered another strong quarter underscored by sizable growth in active subscriptions, a robust increase in subscription shipments, and record high average auto value. I'd like to begin today's call with some highlights from the most recent quarter, followed by an update on our progress across our key categories and some of our strategic priorities for the year.
Thanks, Mike and good afternoon, everyone. Thank you for joining our fiscal second quarter earnings call I'm pleased to report we delivered another strong quarter underscored by sizeable growth in active subscriptions, a robust increase in subscription shipments and record high average order value I'd.
I'd like to begin today's call with some highlights from the most recent quarter followed by an update on our progress across our key categories and some of our strategic priorities for the year.
Speaker 2: John will then walk you through our financial results from the quarter and provide guidance for the remainder of fiscal year.
John will then walk you through our financial results from the quarter and provide guidance for the remainder of fiscal year.
Speaker 2: Beginning with last quarter's results, we continue to benefit from sector and channel tailwinds, including growing drug ownership, increasing spend on pets, and an expanding share of pet sales occurring online. I'm pleased to report we delivered strong results across several key metrics last quarter.
Beginning with last quarter's result, we continue to benefit from sector and channels tailwind, including drawing draws ownership increasing spend on pet and an expanding share of pet sales occurring online I am pleased to report we delivered strong results across several key metrics last quarter.
Speaker 2: We added 271,000 active subscriptions, bringing our total to 2.1 million as of quarter end, a 39% increase compared to the same quarter last year. We delivered 3.6 million shipments in the quarter, a 34% increase year over year. Furthermore, we achieved a record average auto value of $29.73, a $1.55 increase compared to the same period last year, and a 52 cent increase compared to our fiscal first quarter.
We added 271000 active subscriptions, bringing our total to $2 1 million as of quarter end at 39% increase compared to the same quarter last year, we delivered $3 6 million shipments in the quarter, a 34% increase year over year. Furthermore, we achieved a record average order value of 49.
730 <unk>.
$1, 55% increase compared to the same period last year, and a 52% increase compared to our fiscal first quarter.
Speaker 2: This drove total revenue of $120.2 million, a 39% year over year, and resulted in a very healthy gross margin of 58%. These figures are impressive, especially considering how strongly the company performed during the COVID-19 period last year, which highlights the resiliency of our business model.
This drove total revenue of $120 2 million up 39% year over year and resulted in a very healthy gross margin of 58%.
These figures are impressive, especially considering how strongly the company performed during the COVID-19 period last year, which highlights the resiliency of our business model.
Speaker 2: I would also like to provide some perspective on a couple of topics very important to our business that have been top of mind and on the front pages for what seems like months.
I would also like to provide some perspective on a couple of topics very important to our business that have been top of mind and on the front pages for what seems like months, namely how we are navigating inventory levels, the global supply chain congestion and the rising cost of digital advertising as many of you have here the cost of media advertising has inquiry.
Speaker 2: Namely, how we are navigating inventory levels, the global supply chain congestion, and the rising cost of digital advertising.
Speaker 2: As many of you are aware, the cost of media advertising has increased significantly this year, and many companies are reporting material increases in customer acquisition costs as a result.
<unk> significantly this year and many companies are reporting material increases in customer acquisition costs as a result.
Speaker 2: At Bark, we have effectively managed these challenges to date through highly engaging content, a significant social media following, and a tactical approach to marketing, which leverages our unique customer relationships, strong word of mouth, and a growing dataset.
At Barb you have effectively manage these challenges to date through highly engaging content a significant social media following and a tactical approach to marketing, which leverages, our unique customer relationships strong word of mouth and our growing data asset.
Speaker 2: Last quarter, a customer acquisition cost was up just 7% compared to the previous quarter, which resulted in a very healthy LTV to CAC of 4.9 times.
Last quarter, our customer acquisition cost was up just 7% compared to the previous quarter, which resulted in a very healthy LTV to CAC of four nine times.
Speaker 2: In other words, for every dollar we spent in marketing, we generated roughly $5 of gross profit, a highly attractive return. Internally, we target an annual LTV to CAC of 4x. As LTV grows, we are well positioned to spend more in marketing to acquire those high value customers.
In other words for every dollar we spent in marketing be generated roughly $5 of gross profit a highly attractive returns.
Tony we target an annual LTV to CAC of Forex as LTV grows we are well positioned to spend more in marketing to acquire those high value customers and our view our efficacy it profitably acquiring new customers is a key differentiator for our business and something that sets us apart from not only other companies in the dock space, but.
Speaker 2: In our view, our efficiency at profitably acquiring new customers is a key differentiator for our business and something that sets us apart from not only other companies in the dog space but the broader DDC and retail segments as a whole.
Broader DTC and retail segments as a whole.
Speaker 2: From an inventory perspective, we believe that we are well positioned to meet the strong demand we expect this holiday season.
From an inventory perspective, we believe that we are well positioned to meet the strong demand. We expect this holiday season while.
Speaker 2: While global freight congestion and increased shipping costs are likely to impact many retail companies' ability to meet demand during the holidays, our team identified this challenge early on and accelerated the shipping of our D2C product for the back half of the year. As a result, our warehouses in the U.S. are already stocked with the holiday inventory that we anticipate needing. It significantly de-risks the potential impact that future freight congestion could have on our D2C business this holiday season.
While global freight congestion and increased shipping costs are likely to impact many retail companies ability to meet demand during the holidays team identified the challenge early on and accelerated the shipping of our DTC product for the back half of the year as a result, our warehouses in the U S are already stopped with the holiday inventory.
Tori, we anticipate meeting, but significantly derisk the potential impact that future freight congestion could have on our DTC business. This holiday season.
Speaker 2: Nonetheless, we are experiencing rising costs on our shipping and fulfillment line as rates continue to increase and we are often paying for premium shipping to ensure our customers receive their shipments in a timely manner.
Nonetheless, we are experiencing rising costs on our shipping and fulfillment line as rates continue to increase and we are often paying for premium shipping to ensure our customers receive their shipments in a timely manner.
Speaker 2: We do not expect these headwinds to subside for the foreseeable future. However, we are encouraged by the continued growth in new subscriptions and AOV, as well as our healthy LTV to CAC metric, which in our view are most important indicators of the health of our business long term.
We do not expect these headwinds to subside for the foreseeable future. However, we are encouraged by the continued growth in new subscriptions and <unk> as well as our healthy LTV to CAC metric, which in our view are most important indicators of the health of our business long term.
Speaker 2: Looking ahead, we are optimistic about our ability to meet customer demand going into what is traditionally our strongest two months of the year. While it is still early days, we are encouraged by our start to the current quarter and early signs are indicating healthy consumer demand this holiday season.
Looking ahead, we are optimistic about our ability to meet customer demand going into what is traditionally our strongest two months of the year. While it is still early days. We are encouraged by our start to the current quarter and early signs are indicating healthy consumer demand. This holiday season I'd.
Speaker 2: I'd like to now spend some time discussing some of our key categories, beginning with our play business, which includes our Team Toys and Treats subscription, Bog Box and Superture. We continue to see robust growth in new subscriptions, subscription shipments and average auto value.
I'd like to now spend some time discussing some of our key categories, beginning with our <unk> business, which includes our team towards increased subscription bog box into mature.
We continue to see robust growth in new subscriptions subscription shipments and average order value.
Speaker 2: While the Play business is currently our largest category, we believe we still have a significant runway for growth in this category.
While the play business is currently our largest category. We believe we still have a significant runway for growth in this category.
Speaker 2: We ended the quarter with over 2 million active subscriptions and the total address per market, the roughly 70 million households in the US of the dog continues to grow. Our mission is to be in all of them. Beats were single dog toy, through multi-line subscriptions. The market opportunity, therefore, remains significant.
<unk> ended the quarter with over 2 million active subscriptions and the total addressable market. The roughly 70 million households in the U S of the dog continues to grow our mission is to be in all of them beat to a single dog toy through multi line subscriptions the market opportunity therefore remain significant.
Speaker 2: Furthermore, we continue to see a rising share of pet sales occur online. In 2015, e-commerce sales represented as 3% of total pet sales. By 2020, that number jumped to 25%, and that trend is expected to continue with 35% of sales expected to occur online by 2024, according to third-party sources.
Furthermore, we continue to see a rising share of pet sales occur online in 2015 E. Commerce sales represented 3% of total pet sales by 2020 that number jumped to 25% and that trend is expected to continue with 35% of sale expected to occur online by <unk>.
24, According to third party sources.
Speaker 2: The shift will serve as a long-term channel tailwind for our business, especially given we offer one of the best online experiences for dog owners, and we plan to continue to invest and win in this category.
This shift will serve as a long term channels tailwind for our business.
Given we offer one of the best online experiences for dog owners, and we plan to continue to invest and win in this category put simply we are still in the early innings of our play business and bulk as a whole the extent of these deal wins and our ability to execute on this runway is underscored by our recent revenue growth.
Speaker 2: Put simply, we are still in the early innings of our play business and bark as a whole.
Speaker 2: The extent of these tailwinds and our ability to execute on this runway is underscored by a recent revenue growth. In the first half of fiscal 2022, a top line is up nearly 50% compared to last year. And we believe we are only just beginning to materially benefit from a cross-selling and at-to-boss functionality.
In the fourth half of fiscal 2020 do a top line is up nearly 50% compared to last year and we believe we are only just beginning to materially benefit from cross selling and <unk> functionality.
Speaker 2: Add2Box is a significant driver of revenue that is bolstered by our innovative data analytics and machine learning tools that enable us to recommend highly tailored items that customers can quickly add to their existing subscriptions each month.
<unk> is a significant driver of revenue that is bolstered by our innovative data analytics and machine learning tools that enable us to recommence highly tailored items that customers can quickly add to their existing subscriptions each month.
Speaker 2: Last quarter, our active box featured drove roughly 6 million of DDC revenue, a 75% increase compared to the same period last year. Through the first half of fiscal 2022, ATB revenue was up over 117% compared to the first half of fiscal 2021. Moreover, we expect our new categories, like food and health, to serve as additional opportunities to cross-sell and attach new products to existing subsurface.
Last quarter, our <unk> feature drove roughly $6 million of DTC revenue at 75% increase compared to the same period last year.
Through the first half of fiscal 2022, ATB revenue was up over 117% compared to the first half of fiscal 2021.
Moreover, we expect our new categories like food and health to serve as additional opportunities to cross sell and attach new products to existing subscriptions.
Speaker 2: Again, we have made important investments in this area which you feel will continue to drive to our blind growth in strong margin.
We have made important investments in this area, which we feel will continue to drive top line growth and strong margins.
Speaker 2: Moving on, we continue to ramp up our Barg Eats operation, a growth initiative we are very excited about. For those new or two barg storage, Barg Eats is a highly personalized subscription based meal plan that we think has a capability to disrupt the premium pet food market by completely tailoring your dog's food by breed size, age and lifestyle.
Moving on we continue to ramp up our bulk each operation a growth initiative, we are very excited about.
For those newer to bog story <unk> is a highly personalized subscription based meal plan that we think has the capability to disrupt the premium pet food market the completely tailoring your dog's food by breed size each and lifestyle.
Speaker 2: Our offering evolves as the dog matures and their dietary needs change. In essence, we have a highly innovative product offering that affords customers the same high-touch relationship that they experience in our play category at a similar price point to higher-end cable purchased at a pet retailer.
Our offering evolves as a dog matures and their dietary needs change.
We have a highly innovative product offering that affords customers. The same high touch relationship that experience in our category at a similar price point to higher end cable fortunate that affect retailer.
We remain on target to launch this product nationwide in 2022, and we have executed several important initiatives to enable us to achieve that objective.
Speaker 2: We remain on target to launch this product nationwide in 2022, and we have executed several important initiatives to enable us to achieve that objective.
Speaker 2: Full. We have enhanced our user experience to better appeal to a wider range of cuts.
We have enhanced our user experience to better appeal to a wider range of customers customers now have the ability to quickly purchase a predetermined meal plan based on data we have collected from other dogs and a similar demographic.
Speaker 2: Customers now have the ability to quickly purchase a predetermined meal plan based on data we have collected from other dogs in a similar demographic.
Speaker 2: They shorten the funnel for customers that don't want to speak to a nutritionist upfront and prefer a quicker check-out experience. And for customers that do prefer a higher touch or more customized experience, our nutritionists and wellness advisors are on hand. We are also launching an affiliate and referral program for EATS, which will serve as an additional customer acquisition funnel.
This shortens the funnel for customers that don't want to speak to a nutritionist upfront and prefer quicker checkout experience and for customers that do prefer a higher touch our more customized experience, our nutritionists and Venice advisors are on hand.
We're also launching an affiliate and retro program for <unk>, which will serve as an additional customer acquisition funnel.
Speaker 2: Second, recently expanded our Ohio-based Barke Eats Fulfillment Center from 12,000 square feet, 200,000 square feet.
And recently expanded our Ohio based Barkeep fulfillment center from 12000 square feet to 100000 square feet.
Speaker 2: This expansion significantly augments our ability to shift to customers throughout the lower 48 in a timely and cost effective manner. We have also introduced certain operational efficiencies such as automated package.
This expansion significantly augments, our ability to ship to customers throughout the lower 48 in a timely and cost effective manner. We have also introduced certain operational efficiencies such as automated packaging.
Speaker 2: Third, we have bolstered the team supporting Eats. Mike Nawatni, who served as chief operating officer since 2019 and has been instrumental in expanding Barks' key businesses since joining the company in 2015, is now president of Eats and works alongside Carly Strife, one of Barks' co-founder. Together, they helped grow Barks to a 500 million revenue business, and I'm excited to have them leading the Eats opportunity.
We have bolstered the team supporting each Mike Novotny, who served as Chief operating officer since 2019 and has been instrumental in expanding box key businesses since joining the company. In 2015 is now president of eat and books alongside colleagues strife one off box cofounder together.
To help grow bar to a 500 million revenue business and I'm excited to have him leading the <unk> opportunity.
Speaker 2: The address market for each is massive. To put it in perspective, the dog toy market in the US is roughly $3 to $4 billion, while the dog food market is between $30 to $40 billion. The food category is also less discretionary, resulting in higher customer retention and lifetime value. Based on our data thus far, the average auto value for Barkees is also roughly two times higher than that of the play category.
The addressable market for each of the massive to put it in perspective, the doi market in the U S is roughly $3 billion to $4 billion, while the dog food market is between $30 to $40 billion in the food category is also less discretionary resulting in higher customer retention and lifetime value.
Based on our data thus far the average order value for <unk> is also roughly two times higher than that of the play category.
Speaker 2: Turning to Barg Bright, which is a dental hygiene offering and the first product we launched in our health protocol, I am pleased to report that we begin selling our bright product in Petsmart last quarter.
Turning to bulk bright, which is a dental hygiene offering and the first product we launched in our health vertical I am pleased to report that we began selling our bright product and petsmart last quarter.
Speaker 2: This product is an exciting opportunity for bark as you are able to select through multiple channels. We select on a D2C subscription basis as a one off app to box item as well as in retail stores.
This product is an exciting opportunity for bark as youre able to sell it through multiple channels, we sell it on a DTC subscription basis.
As a one off after bulks item as well as in retail stores.
Speaker 2: We believe Bright also serves an additional tool to grow average or a value and extend customer attention. Health is another exciting opportunity and we expect to broaden our health offering with the unique and innovative products over time.
We believe bright also serve as an additional tool to grow average order value and extend customer retention health is another exciting opportunity and we expect to broaden our offering with unique and innovative products overtime.
Speaker 2: The last yet meaningful strategic initiative that I would like to touch on is called One Bar.
The locked yet meaningful strategic initiative that I would like to touch on is called one borrower.
Speaker 2: One bark is an opportunity to create a unified customer experience across our various product categories.
One box is an opportunity to create a unified customer experience across our various product categories.
Speaker 2: enabling customers to easily attach different products to their current subscriptions and offering multi-line subscribers and even more premium experience.
Enabling customers to easily attach different products to their current subscriptions and offering multiline subscribers, an even more premium experience.
Speaker 2: Currently the customer experience across a various vertical feels standalone. Subscribing to bark eats is a different experience for example on a different website than bark bark.
Currently the customer experience across our various vertical field standalone subscribing to <unk> is a different experience for example on a different website embarked box.
Speaker 2: We are in the process of evolving this to create a unified experience that not only makes it easier to purchase across our various product categories, but also rewards customers that have multi-line subscriptions and remain barbed customers for extended periods of time.
We are in the process of evolving this to create a unified experience that not only makes it easier to purchase across our various product categories, but also reward customers that have multi line subscriptions and remained bulk customers for extended periods of time.
Speaker 2: One bark will deepen our relationship with our customers, positioning us as a company that understands the full demands of living with a dog. And easily and effectively, services all of your needs as a dog parent. This will be an ongoing and evolving initiative, but we expect to offer this unified experience live in the first half of calendar 2022. Megan Noe, who joined Barking,
One bark will deepen our relationship with our customers positioning us as a company that understands the full demand of living with their dog and easily and effectively <unk> all of your needs as about pairing this will be an ongoing and evolving initiative, but we expect to offer this unified experience life in the fullest half of calendar 2022.
Megan know who joined back in 2015 and.
Speaker 2: and has been overseeing our super-tour business. It's currently leading this effort and I'm highly confident in her ability to execute the ski strategic initiative.
And has been overseeing our super cooler business.
Currently leading this effort and I'm highly confident in her ability to execute this key strategic initiative.
Speaker 2: The power of a brand is not only evidenced by our recent performance but also by the other world-class brands that lean into bark. To date, we have partnered with Universal Studios, Warner Brothers, the NBA, NCAA College Football, the WWE, Duncan Donuts and Subaru to name a few. And as we mentioned in the last call, we have partnerships with Netflix and many others to come.
The power of our brand is not only evidenced by our recent performance, but also by the other world class brands that lean into balk to date, we have partnered with Universal Studios Warner Brothers, the NBA NCAA College football the WWE, Dunkin' Donuts and Subaru to name a few and as he meant.
And in the last call, we have partnerships with Netflix and many others to come.
Speaker 2: During the current quarter, we continue to invest a new talent to help support the continued growth of bark ecosystem.
During the current quarter, we continue to invest in new talent to help support the continued growth of our ecosystem.
Speaker 2: Anil Nair, who I worked closely with at Amazon, is now our chief supply chain officer, and is leading all of our global supply chain operations effort. Supporting him in these efforts are two seasoned operational leaders, James O'Leary, and Tyler Braun.
Liar, who ive worked closely with that Amazon is now our chief supply chain officer and is leading all of our global supply chain operations effort supporting him and these efforts are two seasoned operational leaders James O'leary and Tyler Bronson. James also comes from Amazon, While dollar Bronson spent the previous 12 years of Dick's Sporting goods.
Speaker 2: James also comes from Amazon, while Dala Bronson spent the previous 12 years at Dixporting Goods. I'm also excited to note that Allie Downs recently joined the team as VP of data and machine learning. Allie is an accomplished machine learning scientist and will lead Barks machine learning and data capabilities with the ultimate goal of expanding our existing personalization and user experience efforts.
I'm also excited and note that Ali Downs. The recently joined the team as VP of data and machine learning. All he is an accomplished machine learning scientist and will lead box machine learning and data capabilities with the ultimate goal of expanding our existing personalization and user experience efforts.
Speaker 2: All in all, there are a lot of exciting things happening at Bark. We have a whole class team in place. Our play vertical continues to grow at a healthy clip. They're making a notable progress on our new categories like food and health. And they're improving the overall customer experience across the Bark ecosystem.
All in all there are a lot of exciting things happening at Bock <unk>.
We have a world class team in place or play a vertical continues to grow at a healthy clip, we're making notable progress on our new categories like food and health and improving the overall customer experience across the <unk> ecosystem collectively we believe these efforts will have a meaningful impact on customer retention and will help drive cross selling revenue.
Speaker 2: Collectively, we believe these efforts will have a meaningful impact on customer retention and will help drive cross-selling revenue across the categories. I'm also pleased with a team's ability to navigate the challenging macro environment of increasing shipping costs, faith congestion, and rising media rates.
Across our categories I'm also pleased with the team's ability to navigate the challenging macro environment of increasing shipping costs fade congestion and rising media rates. While we are not immune to these challenges are anticipated DTC product inventory for the holiday season is already state site gross margin.
Speaker 2: While we are not immune to these challenges, our anticipated DTC product inventory for the holiday season is already state-side. A gross margins remain strong, and we maintain the healthy customer acquisition cost. Undrescoring our marketing teams' continued effectiveness are strong customer engagement and a powerful brand.
<unk> remains strong and we maintained a healthy customer acquisition cost underscoring our marketing teams continued effectiveness, our strong customer engagement and a powerful brand.
Speaker 2: In conclusion, Bach remains one of the largest digitally native God brands in the world today. We are benefiting from both secular and channel tailwinds, which we believe enable us to grow at scale. Furthermore, a technology stack allows us to foster meaningful customer relationships that result in strong customer attention in some of the highest NPS cores in the broader consumer space.
In conclusion <unk> remains one of the largest digitally native brands in the world today.
Benefiting from both secular and channel tailwind, which we believe enable us to grow at scale. Furthermore, a technology stack allows us to foster meaningful customer relationships that result in strong customer retention and some of the highest NPS scores in the broader consumer space.
Speaker 2: And before I turn it over to John , I'd like to provide an update on our CFO search. Over the past couple of months, we have interviewed a number of high quality candidates and believe that we will bring this process to a close in near term. In the meantime, we have appointed Howard Hilton to serve as interim CFO and assist in managing the company's day-to-day finance responsibilities.
And before I turn it over to John I'd like to provide an update on our CFO search over the past couple of months, we have interviewed a number of high quality candidates and believe that we will bring this process to a close in near term.
In the meantime, we have appointed Howard yeaton to serve as interim CFO and assist in managing the company's day to day finance responsibilities.
Speaker 2: How it worked closely with us during our merger with Northern Star and is very familiar with Bach and the...
How it worked closely with us during our module with Northern Star and is very familiar with Mark and the team. He has over 25 years of senior financial and strategic business experience, including as CFO for other public companies and will be steady hand, as you conduct our ongoing search to that and this will be John's last.
Speaker 2: He has over 25 years of senior financial and strategic business experience, including at CFO for other public companies, and will be steady hand as he conduct our ongoing search. To that end, this will be John's last week as a full-time employee at BARC.
<unk> as a full time employer bock.
Speaker 2: John will remain and advise it to the company as we onboard a permanent replacement and I want to personally thank him for his valuable contributions to the company. He was crucial in building a strong financial and reporting infrastructure for BAR and helping us get to where we are today. With that, I will turn the call over to John .
John will remain an advisor to the company as the onboard a pulmonary replacement and I want to personally thank him for his valuable contributions to the company. He was crucial in building a strong financial and reporting infrastructure for bar and helping us get to where we are today.
With that I will turn the call over to John.
Thanks, <unk> and good afternoon, everyone.
Speaker 3: We are very pleased to report our strong fiscal second quarter results, which are all the more impressive considering the surge in growth we experienced during the same period last-
We are very pleased to report our strong fiscal second quarter results, which are all the more impressive considering the surge in growth we experienced during the same period last year.
Speaker 3: Our recent results were underscored by continued growth in new subs, robust subscription shipment figures, growing revenue per order, and a very healthy LTV to cap.
Our recent results were underscored by continued growth in new subs robust subscription shipment figures growing revenue per order and a very healthy LTV to CAC.
Speaker 3: In our view, our recent results demonstrate the strength of our brand, our strong customer retention, and the powerful secular and channel tailwinds that we benefit from as one of the largest, digitally native dog brands in the world today.
In our view our recent results demonstrate the strength of our brand our strong customer retention and the.
Powerful secular channel tailwind that we benefit from is one of the largest digitally native dog brands in the world today.
Speaker 3: Beginning at the top of the PNL, total revenue came in at $120.2 million. A 39% increase compared to the same period last-
Beginning at the top of the P&L total revenue came in at $122 million or 39% increase compared to the same period last year on.
Speaker 3: on a segment basis direct to consumer revenue was $106.8 million up 42%.
On a segment basis direct to consumer revenue was $106 8 million up 42%.
Speaker 3: This growth was largely driven by a 34% increase in subscription ship.
This growth was largely driven by a 34% increase in subscription shipments.
Speaker 3: as well as a $1.55 increase in average order valve.
As well as $1 55 increase in average order value.
Speaker 3: Our performance in this segment largely reflects the continued growth of our box box and super-tour business.
Our performance in this segment largely reflects the continued growth of our box and Super Chewer businesses. However, as we scale bright and launch our food business Park. Each we expect these high Tam categories to provide meaningful tailwind to our business.
Speaker 3: However, as we scale bright and launch our food business, bark eats. We expect these high-tam categories to provide meaningful tail winds to our business.
Speaker 3: Revenue from our Commerce segment, which reflects our selling of bark products in retail stores such as Target and Clause.
Revenue from our Commerce segment, which reflects our selling of bark products in retail stores, such as target and Costco was $13 3 million up 21% year over year.
Speaker 3: was $13.3 million, up 21% year over year.
Speaker 3: This was slightly lower than expected as we experienced a shift in certain commerce revenue between our fiscal second and our fiscal third.
This was slightly lower than expected as we experienced a shift in certain commerce revenue between our fiscal second in our fiscal third quarters due to delays in our retail partners' ability to get shipping containers into the U S on time.
Speaker 3: Due to delays in our retail partner's ability to get shipping containers into the US on top.
Speaker 3: Roughly 75% of that shifted revenue has already been realized in the first months of this fiscal year.
Roughly 75% of that shifted revenue has already been realized in the first months of this fiscal quarter.
Speaker 3: So this appears to be a true shift as opposed to a loss of
So this appears to be a true shift as opposed to a loss of revenue.
Speaker 3: Once again, our strong top line results were accompanied by healthy gross margins, underscoring the value of our vertically integrated directed consumer business.
Once again, our strong topline results were accompanied by healthy gross margins underscoring the value of our vertically integrated direct to consumer business model.
Speaker 3: Gross profit was $69.9 million, resulting in a gross margin of 58%.
Gross profit was $69 $9 million, resulting in a gross margin of 58%.
Speaker 3: On a segment basis, our DTC gross margin was 60%. While the commerce segment came in at...
On a segment basis, our DTC gross margin was 60% while.
While the Commerce segment came in at 42%.
Speaker 3: that we accept a lower growth margin in our commerce sector.
Note that we accept a lower gross margin in our commerce segment, because that segment requires significantly less marketing expense.
Speaker 3: because that segment requires significantly less marketing expense, thus resulting in a comp.
Thus, resulting in a comparable contribution margin.
Speaker 3: These gross margin results are particularly impressive, considering they are in line with previous...
These gross margin results are particularly impressive considering they are in line with previous quarters, notwithstanding the rising freight rates that we and the rest of the world are experiencing.
Speaker 3: notwithstanding the rising freight rates that we and the rest of the world are experiencing.
Speaker 3: As I mentioned on our fiscal Q1 call, the team has done an excellent job addressing these macro headwinds by optimizing the timing...
As I mentioned on our fiscal Q1 call. The team has done an excellent job addressing these macro headwinds by optimizing the timing of certain shipments investing an additional self fulfillment assets and improving the focus of our network of great partners.
Speaker 3: investing in additional self-fulfillment assets and improving the focus of our network of freight.
Speaker 3: Moving on, we added roughly 271,000 new subscriptions.
Moving on we added roughly 271000, new subscriptions in the quarter.
Speaker 3: Our customer acquisition cost came in at $51.71. Up only 7% comes...
Our customer acquisition cost came in at $51 71.
Up only 7% compared to the prior quarter.
Speaker 3: We've been impressed with our recent CAC figures, considering that meteor rates are also significantly above even pre-COVID-19.
We've been impressed with our recent CAC figures considering that media rates are also significantly above even pre COVID-19 levels.
Speaker 3: We continue to believe that our efficiency in acquiring new customer speaks to the power of our brains.
We continue to believe that our efficiency in acquiring new customer speaks to the power of our brand our high social media engagement with over 9 million followers and our marketing teams tactical approach to channel and promotion management.
Speaker 3: our high social media engagement with over 9 million followers. And our marketing teams tactical approach to channel and promotion management.
Speaker 3: Total advertising and marketing expense associated with these new subscriptions was $17.1 million in the court.
Total advertising and marketing expense associated with these new subscriptions was $17 $1 million in the quarter.
Speaker 3: Our marketing efficiency, coupled with our strong gross margins, resulted in a very healthy LTV to CAC of approximately five times.
Our marketing efficiency, coupled with our strong gross margins resulted in a very healthy LTV to CAC of approximately five times.
Speaker 3: On that note, our marketing team's budget is driven by the lifetime value of customers we are acquiring.
On that note our marketing teams budget is driven by the lifetime value of customers we are acquiring.
As <unk> mentioned, we target an LTV to CAC of Forex for a minimum return of $4 of gross profit for every $1 marketing dollars we deploy.
Speaker 3: As Meneas mentioned, we target an LTV to CAC of 4X, or a minimum return of $4 gross profit for every $1 marketing dollars we did.
Speaker 3: Nonetheless, we are highly disciplined in this approach. And if we see this ratio varying from our target, we will adjust our marketing and...
Nonetheless, we are highly disciplined in this approach and if we see this ratio varying from our target we will adjust our marketing investment.
Speaker 3: We believe that the relationships we foster with our customers and the data we are able to leverage as a result is a key differentiator for BART.
We believe that the relationships, we foster with our customers and the data we are able to leverage as a result is a key differentiator for Bart.
Speaker 3: The strength of these relationships is illustrated by our above average NTS scores, high customer attention, and growing lifetime value.
Strength of these relationships as illustrated by our above average NPS scores high customer retention and growing lifetime value.
Speaker 3: Last quarter, the average subscription shipment turn was 7.1%, roughly 30 basis points below the previous course.
Last quarter, the average subscription shipment churn was seven 1% roughly 30 basis points below the previous quarter.
Speaker 3: Nonetheless, this figure remained above our 6% historical level as a result of shipping delays as well as the surge in customers that we acquired during COVID last year.
Nonetheless, this figure remained above our 6% historical level as a result of shipping delays as well as the surge in customers that we acquired during Covid last year.
We see these as relatively short term influences and longer term as categories like food and health become more meaningful contributors to the business.
Speaker 3: and longer term as categories like food and health become more meaningful contributors to the business.
Speaker 3: We expect our average shipment churn to improve relative to historic levels. Given the stickier-
We expect our average shipment churn to improve relative to historic levels.
The stickier in nature of these categories.
Speaker 3: Also, remember that Shipman Churn does not equal customers.
Also remember that shipment churn does not equal customer churn for.
Speaker 3: For example, if a customer chooses to get a bark box every other month, they would count as ship and churn every other month. We think
For example, if a customer chooses to get a bark box every other month, they would count as shipment churn every other month.
We think shipment churn is the most meaningful way to look at churn as we can tie the metric directly to revenue and therefore the P&L.
Speaker 3: to look at churn as we can tie the metric directly to revenue and therefore the P&L. If we look at
If we look at active subscription churn.
Speaker 3: which is defined as if a customer received a product in the previous 364 day period. Our churn rate is in the
Which is defined as.
If a customer received a product in the previous 364 day period.
Our churn rate is in the two 5% range.
Speaker 3: Moving on, total GNA in the quarter was $68.2 million versus $39.3 million in the fiscal second quarter of last year.
Moving on total G&A in the quarter was $68 2 million versus $39 3 million in the fiscal second quarter of last year.
Speaker 3: The year-over-year increase is a function of several factors. First, roughly $16 million of this $29 million in-
The year over year increase is a function of several factors first roughly $16 million of this $29 million increase is due to the year over year increase in volume shift as well as higher shipping rates.
Speaker 3: is due to the year over your increase in volume shift as well as higher shipping rates.
Speaker 3: Another approximately $8.4 million is due to an increase in compensation, including $3.7 million.
Another approximately $8 $4 million is due to an increase in compensation.
<unk> $3 7 million of stock based compensation as we continue to invest in people and technology to launch and scale, our new business lines.
Speaker 3: As we continue to invest in people and technology to launch and scale our new business.
Speaker 3: And the remaining roughly $5 million is a combination of the Murage fees, additional insurance, professional legal costs associated with being a newly public company, and other general...
And the remaining roughly $5 million is a combination of demurrage fees additional insurance professional and legal costs associated with being a newly public company and other general and administrative expenses.
Speaker 3: Interest expense, which is associated with our outstanding convertible note, was $1.3 million in the quarter.
Interest expense, which is associated with our outstanding convertible note.
It was $1 $3 million in the quarter.
Other income came in at $23 2 million, which reflects the $23 $4 million change in the fair value of our outstanding warrants during the period.
Speaker 3: which reflects the $23.4 million change in the fair value of our outstanding warrant.
Speaker 3: As a result, gap net income for the quarter was positive 6.5.
As a result, GAAP net income for the quarter was positive $6 5 million.
Speaker 3: compared to a loss of 1.4 million in the same period last month.
<unk> to a loss of $1 4 million in the same period last year.
Speaker 3: On an adjusted basis, net loss, which excludes stock-based compensation, the impact of outstanding warrants and other one-time items was a
On an adjusted basis net loss, which excludes stock based compensation the impact of outstanding warrants and other one time items was $11 million compared to.
Speaker 3: compared to adjusted net income of 1.4 million in the
Adjusted net income of $1 4 million in the second quarter last year.
Speaker 3: And lastly, adjusted EBITDA was negative $8.8 million.
And lastly, adjusted EBITDA was negative $8 $8 million in the quarter.
Speaker 3: As I mentioned on a previous call, fiscal 2022 and 2023 are investment years.
As I mentioned on our previous call fiscal 2022, and 2023 are investment years for park, we are investing in people products technology and other operational assets that we expect will enable <unk> to grow at scale.
Speaker 3: investing in people, products, technology, and other operational assets that we expect will enable BARC to grow its scale.
Speaker 3: As I've mentioned before, our play categories are already profitable and help subsidize these investments.
As I've mentioned before our play categories already profitable and help subsidize these investments.
Speaker 3: Given our strong margins and our opportunity to take market share in the food and health verticals, we are confident in our ability to profitably scale our business in the medium to long.
Given our strong margins and our opportunity to take market share in the food and health verticals. We are confident in our ability to profitably scale our business in the medium to long term.
Speaker 3: Turning to the balance sheet, we ended the quarter with $273 million of cash. As Manish mentioned, we made certain working capital investments in the fiscal second quarter, including securing additional inventory ahead of the holiday season.
Speaker 3: We ended the fiscal second quarter with a total inventory of $130 million, up 68% year-over-year.
Speaker 3: This investment is intended to significantly reduce the effects of potential holiday season freight congestion and to enable us to meet the growing demand of our DTC subscription base.
Speaker 3: We continue to monitor the macro environment of ongoing freight congestion, rising shipping and fulfillment.
Speaker 3: and higher public company costs and the impact that those factors could have on our top and bottom.
Speaker 3: While we remain optimistic, we see roughly 2% risk to the $516 million revenue guidance for the full year given back in December . Again, due to the volatility of the max.
Utility of the macro environment.
Speaker 3: For the third quarter of fiscal 2022, we expect total revenue to be between 137 and 139.
Or the third quarter of fiscal 20, twenty-two we expect total revenue to be between 137 and $139 million.
On an adjusted EBITDA basis, we currently expect a loss between 38 and $40 million for the full fiscal year 2022.
Speaker 3: On an adjusted EBITDA basis, we currently expect a loss between $38 and $40 million for the full fiscal year.
Speaker 3: The delta versus our previous guidance of negative 30.5 million
The delta versus our previous guidance of negative $30.5 million is largely the result of increased shipping and fulfillment costs.
Speaker 3: is largely the result of increased shipping and fulfillment costs, which include higher shipping rates, the mortgage fees.
Which include higher shipping rates, the marriage port fees, and our decision to upgrade certain customer shipments to offset potential delays associated with broader shipping congestion.
Speaker 3: offset potential delays associated with broader shipping congestion.
Speaker 3: We expect these factors to represent roughly net $5 to $7 million of incremental expense to our company.
We expect these factors to represent roughly net $5 million to $7 million of incremental expense to our contribution profit.
Secondly, we are seeing increased expenses associated with being a newly public company.
Speaker 3: Secondly, we are seeing increased expenses associated with being a newly public.
Speaker 3: These include higher than expected DNO insurance as a result of rising demand from insurers. Additional audit fees are so...
These include higher than expected DNO insurance as a result of rising demand from insurers.
Additional audit fees associated with the timing of our merger with Northern Star.
[noise] and costs associated with preparing to comply as a large accelerated filer with the requirements section four O four b of the Sarbanes Oxley Act.
Speaker 3: The cost associated with preparing to comply as a large accelerated filer with the requirements of Section 404B.
Speaker 3: Collectively, these fees represent roughly 3 million of increments.
Collectively these fees represent roughly 3 million of incremental expenses.
Speaker 3: In summary, the change in guidance is largely the result of macro headwinds in shipping and fulfillment costs.
In summary, the change in guidance is largely the result of macro headwinds and shipping and fulfillment Cos.
And secondarily certain increased expenses associated with being a newly public company expenses, we expect not to reoccur next year.
Speaker 3: certain increased expenses associated with being a newly public company. Expenses we expect.
Speaker 3: to conclude it is an exciting time to be at bar.
To conclude it is an exciting time to be at bark.
Speaker 3: We continue to grow our top line in the 35 to 40% per year range. Notwithstanding the challenging year-over-year comparisons, we face coming into the fiscal year. Heating on the core of the COVID-19 pandemic for the end of life," says. Heating on the core of the COVID-19 pandemic for the end of life.
We continue to grow our top line in the 35% to 40% per year range, notwithstanding the challenging year over year comparisons, we face coming into the fiscal year.
Our gross margin is strong.
Speaker 3: We are developing larger TAM opportunities like food and health to afford the company with an attractive runway to significantly grow our business over the course of the year.
We are developing larger tam opportunities like food and health to afford the company with an attractive runway to significantly grow our business over time.
Speaker 3: We believe our unique position as one of the largest digitally native dog brands affords us highly attractive economics and unparalleled customer relationships.
We believe our unique position as one of the largest digitally native dog brands affords us highly attractive economics, an unparalleled customer relationships and.
Speaker 3: In our view, these factors, coupled with our healthy balance sheet, strongly positioned bark to capitalize on the exciting opportunity.
In our view these factors coupled with our healthy balance sheet strongly positioned bark to capitalize on the exciting opportunities ahead.
Speaker 3: And for my part, I'm very excited for Howard to be joining the team. He is excellent and a terrific addition.
And for my part I'm very excited for Howard to be joining the team he is excellent and a terrific condition.
Speaker 3: With that, I will turn the call over to the operator for Q&A.
With that I will turn the call over to the operator for Q&A.
Speaker 1: Thank you very much. Ladies and gentlemen, as a reminder, if you would like to ask a question, you may press star, then the number one on your telephone keypad. Once again, you may press star one to ask a question. Please stand by while we compile the Q&A.
Thank you very much ladies and gentlemen, as a reminder, if you would like to ask a question you May press night, a number one on your telephone keypad.
Langton Anthony pressed I want to ask the question.
Right well the compiler look any lasting.
Yeah. The first question is in the lineup stuff and we thank them Jaffe. Your line is open.
Speaker 1: Your first question is from the line of staff missing from Jeffries. Your line is open.
Speaker 4: Thank you everyone and John Bestwishes to you. I'm going to pleasure working with you.
Thank you everyone in John Best wishes to you and.
Pleasure working with you.
Speaker 4: My question is for either of you, actually, is on the CAC costs and what your assumptions are, go forward. What's embedded in the back half guidance for your LTV to CAC? Any sort of change off of that 4.9 times that we saw in the first half? Thank you. Thanks so much, Steph.
My question is for.
Either of you actually is on the cat car and what your thumbs embargo forward embedded in the back half guidance for your L. T V to CAC, you've heard of teens off of that 4.9 times that we saw in the first half. Thank you.
Thanks, [laughter], thanks, so much stuff.
Back at Ya.
We continued to target you know somewhere between four and five times L. T V to CAC as the ratio. So you can see kept go up as L. T V goes up with a O V and the addition of new products, we continue to try and stay real nimble you're gonna see seasonal adjustment Q3 is gonna be.
Speaker 3: somewhere between four and five times, LTV to CAC has the ratio. So.
Speaker 3: CCAT go up as LPV goes up with AOV and the addition of new products.
Speaker 3: We continue to try and stay real nimble. You're gonna see seasonal adjustment Q3 is gonna be higher because...
Higher because as with every year everybody's in the market layered onto that is the more secular increase everybody seeing in meteor rates go up we've been able to fend off of that more secular increase knock wood, because megan and will it really great at managing our business. So if.
Speaker 3: as with every year, everybody's in the market. Layered onto that is the more secular increase. Everybody's seeing in media rates go up. We've been able to fend off that more secular increase, not going because Megan and Will are really great at managing our business. So.
Speaker 3: If you're sort of suggesting we see a seasonal kind of 10% increase in CAC, that sounds about right for me. I don't expect to see it much more than that. And then returning to a non-seasonal level in Q4.
If you're sort of suggesting we see a seasonal kind of 10% increase in in CAC that sounds about right for me I don't expect to see it much more than that and then.
Returning to a nonseasonal level in queue for.
Does that speak to your question.
Speaker 4: It does. That's very helpful. I mean, each figure has to a quick question on the out of box. You talked a bit more about it on this call versus prior call. And I wanted to just give you a chance to share with us some of the data or statistics behind.
And that that's very helpful. And then he's thinking about real quick question on the out of box you'd have a bit more about it on this congress's prior call them and I wanted to just give you a chance to share with us some of the the data are statistics behind.
Speaker 4: That piece of business is quite small still, but it seems like it's quite powerful as well. He just shared with us a little bit of how you look at that business as a complement to the core business and how.
That piece of business, it's quite small, but it seems like it's quite powerful as well could you just share with us a little bit of how you look at that business as a complement to the core business and how.
How does that business here in terms of profitability when you start driving incremental value through your existing customer relationships.
Speaker 4: How did that business fare in terms of profitability when you start driving incremental value through your existing customer relationship?
Speaker 2: Yes, sir. Yep, sure. So at box, the way it works right now is think about it as, essentially, upselling and crossselling. What we do is we have machine learning engines that work on the data that we have collected for you and your dog. So that's surface-iscurity, selection of toys. And now we have added bright, as well as eats to that, at least to high gross margins. For example, if you think about shipping a box box or a super-tour box, you're able to add two or three toys or three eats or choose to it, those 7 sized boxes and skirts can shine beyond the center of price.
Yeah sure. So outbox related works right now to think about it is especially upsetting across settings. What we do is we have machine learning engines that book on the data that we have collected for you and your dog. So that's surfaces curated selection of toys and now we are adding bright as well as needs to that.
At least two higher gross margins. So for example, if you think about having a bark box or suite, but your box and are able to add two or three toys of cleaves or choose to it that significantly higher margin since the shipped in the same box. So that's the way we think about add to box and if you've seen our a O V continue to increase clutter with quatre or are we a buck 50.
Speaker 2: significantly higher margins since they're shipped in the same box. So that's the way we think about Add to Box. And if you've seen our AOV, that's continued to increase quarter over quarter. We are about 55 over the last year's same quarter. So we're pretty bullish on optimizing and improving further.
Five over the last year same Carter, so it's pretty bullish on optimizing and broken further.
Thank you.
Once again, if you would like to ask a question Gimme press nine one on your telephone keypad. Your next question is from the line of my ear. It that's kind of quaint you're 19 Hilton.
Speaker 1: Once again, if you would like to ask a question, you may press star 1 on your telephone keypad. Your next question is from the line of Maria Rips of Canaccord. Your line is open.
Oh, great. Thank you for taking my questions can you maybe just talk about your thoughts around passing some of them based elevated expensive shaming H M. T. A subscribers wishes absorbing them to drive higher volumes and do you see a lot of price sensitivity them on your customer base.
Speaker 5: Great. Thank you for taking my questions. Can you maybe just talk about your thoughts around passing some of these elevated expenses here in the near term to your subscribers, versus absorbing them to drive higher volumes? And do you see a lot of price sensitivity among your customer base?
Area is the niche I'll start on junk at so the variety of ways to offset driving goth and I believe that raising based prices is the simplest of choices, which be continuing to test and we look at the overall ecosystem starting from CAC to cross selling and retention. It's ties back to you know the add to box on those.
Speaker 2: Hey, Marius, this is Manish. I'll start and John can add. So there are a variety of ways to offset rising costs, and I believe that raising base prices is the simplest of choices, which we continue to test. Now, we look at the overall ecosystem, starting from CAC to cross-selling and retention, which ties back to the Add to Box conversation we just had. Now, we found...
<unk> and we just had now we've found focusing on average auto value.
Speaker 2: Focusing on average or a value is a really good lever. So if you continue to improve our ability to recommend ATV products that resonate well with you and cross-cell via smart or machine learning engines, which Ollie Downs, the gentleman I mentioned who joined the steam is focused on. It drives higher AOV in effect, driving stronger revenue and margin.
Really good lever. So he can continue to improve our ability to recommend ADB product that resonate well with you and across several of the modern machine learning engines, which.
Would you <unk> the gentleman I mentioned, who join this team is focused on and drive higher L V and affect driving stronger revenue and margin.
Speaker 2: As you see in our AOE continues to grow and that's the way we are optimizing our AOE and ATB which leads to higher margins and offsetting those rising costs.
Seen our AOE continues to grow and that's the way we are optimizing our <unk>.
<unk>, which leads to high margins and all setting those rising costs.
Got it. Thank you I'm not sure I have much to add to that we we really prefer prefer to to add value to the box and make that a net price increase and then net margin expansion, so that consumers get value add and not just a price increase past.
Speaker 6: I'm not sure I have much to add to that. We really prefer to add value to the box and make that a net price increase and a net margin expansion so that consumers get value added, not just a price increase pass-through. We're always looking at the optimum relationship between price and LTV. We feel pretty good about where we are right now.
We're always looking at.
The optimum relationship between price and L. T V and where we feel pretty good about where we are right now we feel like we're managing some of the input cost increases and so don't anticipate just a flat list price increase at this time, but we're constantly evaluating that.
Speaker 3: feel like we're managing some of the input cost increases. And so, no one anticipates just a flat list price increase at this time, but we're constantly evaluating.
Got it that that's very helpful and John you you shared with US that you play subscription vertical was adjusted ended up positive last year that it's.
Speaker 5: That's very helpful. And John , you shared with us that your play subscription vertical was adjusted with a positive last year. Sort of as you are rolling out, how long do you think it may take for that segment to achieve profitability? And is it fair to assume that sort of your path to profitability for this segment could be accelerated given that there is a lot of sort of cross-sell opportunity here? So it would be great to hear your thoughts on that.
As you are really not it's how long do you think it may take for that segment to achieve profitability and is it fair to assume that sort of your path to profitability for this segment could be accelerated given that there is a lot of setup crosstown attunity here that would be great to hear your thoughts on that.
[noise], Yeah, we we really like the the the structure of the product. If you will the personalization the product offering enable higher gross margin than what other food companies are used to and that that affords us the opportunity.
Speaker 6: Yeah, we really like the structure of the product if you will, the personalization.
Speaker 3: product offering enable a higher gross margin than what other food companies are used to and that affords us the opportunity.
Speaker 3: to be profitable at an operating income level faster. The question becomes growth and how much marketing do you pour into it to grow it and per your point because we have the opportunity to cross sell to our existing 2 million customers and we have 9 million social followers are marketing and we expect our marketing in this line to be more efficient.
To be profitable at operating income level faster.
The question becomes growth and how much marketing do you pour into it to grow it in for your point, because we have the opportunity to cross sell to our existing 2 million customers. We have 9 million social followers are marketing and we expect our marketing in this line to be more efficient and so allow us to get profitable faster, it's such a big Tam.
Speaker 3: allow us to get profitable faster. It's such a big tab. We're moving to scale fast. So we want this to be a...
We're moving to scale fast. So we want this to be you know you know hundreds of millions of dollars business as quick as we can so even with the more efficient marketing I expect us to have a healthy absolute dollar marketing budget against the business, but on a unit economic basis it should be <unk>.
Speaker 3: hundreds of millions of dollars business as quick as we can. So even with the more efficient marketing, I expect that to have a healthy absolute dollar marketing budget against the business, but on a unit economic basis, it should be profitable much faster than our core play business.
Affable much faster than our core play business.
Got it thanks, a lot and John I felt like.
Thanks Maria.
Speaker 1: Thank you, speakers. I am no longer seeing any other questions on the queue.
Thank you speakers I am no longer seeing any other questions on the Q.
Great. Thank you.
Speaker 1: Thank you so much. This concludes today's conference call. Thank you all for joining. You may now disconnect.
Thank you. So much. This concludes today's conference call. Thank you all for joining you may now disconnect.
[music].