Q3 2024 BARK Inc Earnings Call
Operator: Ripps, Max Rakhlenko, Bark: Good afternoon and welcome to Bark's 3rd Quarter Fiscal Year 2020 Earnings Conference. All lines have been placed on mute to prevent any background noise.
Good afternoon, and welcome to box third quarter fiscal 'twenty earnings and friends.
This call being recorded.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If he would like to ask a question during that time. Please press star followed by the number one on your telephone keypad to withdraw your question Press Star one again.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again.
Mike Mujis: I will now turn the call over to Mike Mujis, Vice President, Investor Relations. You may begin your conference. Good afternoon, everyone, and welcome to Bark's third quarter fiscal year 2024 earnings call. Joining me today are Matt Meeker, co-founder and CEO, and Zaheer Ibrahim, chief financial officer. Today's conference call is being webcast in its entirety on our website, and a replay of the webcast will be made available shortly after the call.
I will now turn the call over to Mike <unk>, Vice President Investor Relations you May begin your conference.
Good afternoon, everyone and welcome embarks third quarter fiscal year 2024 earnings call. Joining me today are Matt meager co founder and CEO and Zaheer Ebrahim Chief Financial Officer.
Today's conference call is being webcast in its entirety on our website and a replay of the webcast will be made available shortly after the call. Additionally, our press release covering the company's financial results was issued this afternoon and can be found on our Investor Relations website.
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, our press release covering the company's financial results was issued this afternoon and can be found on our Investor Relations website.
Mike Mujis: Additionally, a press release covering the company's financial results was issued this afternoon and can be found on our Investor Relations website. Before I pass it over to Matt, I 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 filing for more information on some of the factors that could affect our future results and outcomes. Also, during today's call, we will discuss certain non-GAAP financial measures. Reconciliation to our non-GAAP financial measures is contained in this afternoon's press release. And with that, let me now pass it over to Matt.
Before I pass it over to Matt 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.
Also during today's call, we will discuss certain non-GAAP financial measures.
Conciliation to a non-GAAP financial measures is contained in this afternoon's press release.
And with that let me now pass it over to Matt.
Matt Meeker: Thanks, Mike, and good afternoon, everyone. We have momentum. These past two quarters are the best we've performed in several years, and that momentum is building. We delivered our strongest customer acquisition quarter in two years, surpassing the high end of our revenue guidance range. Through the first nine months of fiscal 24, we've improved our gross margin by over 350 basis points versus last year. We also generated $13 million of free cash flow last quarter and $17 million on a trailing 12-month basis, ending the quarter with a cash balance of $131 million. In addition to our strong financial performance, we secured commitments from two of the country's leading retailers to offer our new treat line in over 2,400 stores nationwide beginning this spring. In addition, on the back of our successful pilot program, we have an opportunity to significantly expand our partnership with the Girl Scouts of America.
Thanks, Mike and good afternoon, everyone.
We have momentum.
These past few quarters are the best we performed in several years and that momentum is building.
We delivered our strongest customer acquisition quarter in two years, surpassing the high end of our revenue guidance range.
Through the first nine months of fiscal 'twenty four we've improved our gross margin by over 350 basis points versus last year.
We've also generated $13 million of free cash flow last quarter and $17 million on a trailing 12 month basis, ending the quarter with a cash balance of $131 million.
In addition to our strong financial performance we.
We secured commitments from two of the country's leading retailers to offer our nutrient line and over 2400 doors nationwide beginning this spring.
In addition on the back of our successful pilot program, we have an opportunity to significantly expand our partnership with the girl Scouts of America.
Matt Meeker: This broad distribution will greatly increase revenue and customer awareness of our consumables offerings. Strong customer acquisition, gross margin expansion, cash flow generation, and revenue diversification are all coming together. We believe our financial profile is strong and expect to carry this momentum into fiscal 2025. This puts us in a great position.
This broad distribution would greatly increase revenue and customer awareness of our consumables offerings.
Strong customer acquisition gross margin expansion cash flow generation and revenue diversification are all coming together.
We believe our financial profile is strong and expect to carry this momentum into fiscal 2025.
This puts us in a great position.
Matt Meeker: Now let's talk about our fiscal third quarter. Starting at the top of the P&L, we delivered total revenue of over $125 million ahead of the high end of our guidance range for the quarter. Driving this outperformance was our strongest customer acquisition quarter in two years across our BarkBox and Superchew, our product. This is particularly encouraging given the challenging macro environment for discretionary products. As I discussed on our last call, there was room for us to execute better, and so we evolved our acquisition approach. First, we reorganized our creative and marketing functions, bringing our creative talent closer to the customer.
Now, let's talk about our fiscal third quarter.
Starting at the top of the P&L, we delivered total revenue of over $125 million ahead of the high end of our guidance range for the quarter.
Driving this outperformance was our strongest customer acquisition quarter in two years across our park box Super to our products.
This is particularly encouraging given the challenging macro environment for a discretionary products.
As I discussed on our last call there was room for us to execute better and so we evolved our acquisition approach.
First we reorganized our creative and marketing functions, bringing our creative talent closer to the customer.
Matt Meeker: This shift mitigated the dilution of some of our previous creative and yielded content with a stronger resonance among our customer base. Additionally, we've been leveraging AI to a much greater extent. Previously, we had individual designers creating each piece of content. Today, a designer can create a blueprint for content and leverage our AI tools to create thousands of different iterations within minutes.
This shift mitigated the dilution of some of our previous creative and yielded content with a stronger residents among our customer base.
Additionally, we have been leveraging AI to a much greater extent.
Previously, we had individual designers, creating each piece of content.
Today, our designers and create a blueprint for content and leverage our AI tools to create thousands of different iterations within minutes.
Matt Meeker: This approach enables more robust testing of ads across various platforms, helping us identify the most impactful content in an efficient way. And lastly, the holiday themes of our boxes this year really resonated with customers. All in all, we were very encouraged with how small changes to the organization had material benefits for customer acquisition. It's too early to call this a trend, but we're optimistic we'll continue to deliver improvement. Moving on.
This approach enables more robust testing of ads across various platforms, helping.
Helping us identify the most impactful content in an efficient way.
And lastly, the holiday themes of our boxes this year really resonated with customers.
All in all we were very encouraged with how small changes to the organization had material benefits to customer acquisition.
It's too early to call. This a trend, but we're optimistic we'll continue to deliver improvements.
Moving on.
Matt Meeker: We achieved another quarter of healthy gross margin expansion. On a consolidated basis, our gross margin improved by 210 basis points versus last year and by 30 basis points versus Q2.
We achieved another quarter of healthy gross margin expansion.
On a consolidated basis, our gross margin improved by 210 basis points versus last year, and 30 basis points versus Q2.
Matt Meeker: This is a 600 basis point improvement over the past two years, which annualized is nearly $30 million falling to the bottom line. We expect further improvement in the current quarter and throughout fiscal 2025. In terms of adjusted EBITDA, we reported a loss of $6.4 million last quarter, slightly ahead of the midpoint of our guidance range.
This is a 600 basis point improvement in the past two years, which annualized is nearly $30 million falling to the bottom line.
We expect further improvement in the current quarter and throughout fiscal 2025.
In terms of adjusted EBITDA, We reported a loss of $6 $4 million last quarter slightly ahead of the midpoint of our guidance range.
Matt Meeker: It's worth noting we invested more in marketing this holiday period, given the efficiency at which we were able to acquire new customers. Ripps, Max Rakhlenko, Bark. Notwithstanding the greater investment in marketing, we improved our adjusted EBITDA loss by 50% year-over-year, and we're confident we'll continue to improve our profitability profile. And finally, we generated over $13 million of free cash flow in the quarter, ending the period with $131 million of cash on the balance sheet.
It's worth noting we invested more in marketing this holiday period, given the efficiency at which we were able to acquire new customers.
Total marketing expense was about $3 million higher than the same holiday quarter last year.
Notwithstanding the greater investment in marketing, we improved our adjusted EBITDA loss by 50% year over year and were confident we will continue to improve our profitability profile.
And finally, we generated over $13 million of free cash flow in the quarter ending the period with $131 million of cash on the balance sheet.
Matt Meeker: Remember, our current cash figure reflects the $45 million we used to pay down over half of our outstanding convertible notes. Given the significant profitability improvements we've already delivered and our anticipated ongoing future cash generation, we believe we are in an advantageous position from a balance sheet perspective. This affords us a number of opportunities to help drive long-term shareholder value, including investing in marketing to drive top-line growth and or buying back stock. All in all, we are ending the year in a strong position and look forward to what's in store for the coming fiscal year. On that note, let me touch on our strategic priorities for the remainder of the year in fiscal 2025.
Remember our current cash figure reflects the $45 million were used to pay down over half of our outstanding convertible note.
Given the significant profitability improvements we have already delivered <unk>.
And our anticipated ongoing future cash generation.
We believe we are in an advantageous position from a balance sheet perspective.
To support this number of opportunities to help drive long term shareholder value, including investing in marketing to drive topline growth and or buying back stock.
All in all we are ending the year in a strong position and look forward to what's in store in the coming fiscal year on that note. Let me touch on our strategic priorities for the remainder of the year fiscal 2025.
Matt Meeker: As we've discussed throughout the year, our top priority is profitability. We've come a long way, and our next milestone is to deliver a full year of profitability. Zaheer will discuss this in more detail in a moment, but let me briefly touch on some of the factors that will drive this.
As we've discussed throughout the year, our top priority is profitability.
Come a long way and our next milestone is to deliver a full year of profitability.
Did you hear will discuss this in more detail in a moment.
Let me briefly touch on some of the factors that will drive this.
Matt Meeker: First, we believe we will return to top-line growth in fiscal 2025. However, given the broader market uncertainty, we'll take a cautious approach to guidance. However, we are aiming for growth for the full year. Second, we continue to expect healthy improvements in gross margin for a number of quarters to come. Much of the growth we achieved this fiscal year was driven by reducing the number of toy vendors we used, which in turn reduced our cost of goods.
First we believe we will return to top line growth in fiscal 2025.
Given the broader market uncertainty, we will take a cautious approach to guidance. However, we are aiming for growth for the full year.
Second we continue to expect healthy improvements in gross margin for a number of quarters to come much of the growth. We achieved this fiscal year was driven by reducing the number of toy vendors we used.
Which in turn reduced our cost of goods.
Matt Meeker: I am pleased to report we recently consolidated our consumables vendors, and we will begin to see the benefits of that flow through in the current quarter and to a greater extent in fiscal 2025. And remember, consumables represent about one-third of our business, so the impact is meaningful. We also expect improvements in other GNAs and shipping infill filaments.
I am pleased to report, we recently consolidated our consumables vendors and we only begin to see the benefits of that flow through in the current quarter and to a greater extent in fiscal 2025, and remember consumables represented about one third of our business. So the impact is meaningful.
We also expect improvements and other G&A and shipping and fulfillment.
Matt Meeker: For example, as we migrate our Bark Box products to our unified platform, there will be efficiencies created from not having to manage multiple sites. We will also see the full year benefit from the cost reduction exercises that we carried out in the first half of 2023. And lastly, we have new shipping contracts that will benefit the P&L beginning this quarter. Collectively, we expect these dynamics to improve our profitability profile over the coming quarters. Our second priority is consumables, which is something we've discussed a lot over the past year. There are two overarching avenues for growth in this category: retail and direct-to-consumer.
For example, as we migrate our bark box products to our unified platform, there will be efficiencies created from not having to manage multiple sites.
We will also see the full year benefit from the cost reduction exercises that we carried out in the first half of 2023.
And lastly, we have new shipping contracts that will benefit the P&L beginning this quarter.
Collectively we expect these dynamics to improve our profitability profile over the coming quarters. Our second priority is consumables, which is something we've discussed a lot over the past year.
There are two overarching avenues for growth in this category retail and direct to consumer.
Matt Meeker: Let's start with retail, where we have made solid progress recently. As I mentioned earlier, we received our second major retail commitment last month. To date, we have commitments from two leading national retailers to sell our treats in over 2400 stores beginning this spring. Together, these agreements consist of over a half dozen different SKUs, and a combination of them will be available both in-store and on our partners' online sites.
Let's start with retail where we have made solid progress recently.
As I mentioned earlier, we received our second major retail commitment last month to date, we have commitments from two leading national retailers to sell our treats and over 2400 doors beginning this spring.
Together these agreements consist of over a half dozen different skus and a combination of them will be available both in store and on our partners' online sites.
In addition to the revenue opportunity we expect these agreements to raise awareness of our full of consumables offering given the millions of customers that will see our new product offerings on a daily basis.
Matt Meeker: In addition to the revenue opportunity, we expect these agreements to raise awareness of our full consumables offering given the millions of customers that will see our new product offerings on a daily basis. We have also started selling our new treats on Bark.co and began including samples of them in our Bark Box. The initial feedback has been great, and we expect this to help build awareness ahead of their official retail launch in a few months. At the end of the day, we want our full product portfolio available wherever the customer is, and these agreements are a great first step in our broader retail expansion. In addition to these recent partnerships, we have more retail opportunities in the pipeline. For example, Costco began selling our advent calendar in stores this holiday, and the feedback was great. In fact, we've had outreach from other retail partners who want to offer the product next holiday season. As I mentioned earlier, we also expect to build on our relationship with the Girl Scouts over the coming years.
We also started selling our new treats embark dachau and began including samples of that when our barked boxes.
The initial feedback has been great and we expect this to help build awareness ahead of their official retail launch in a few months.
At the end of the day, we want our full product portfolio available wherever the customer is and these agreements are a great first step in our broader retail expansion.
In addition to these recent partnerships, we have more retail opportunities in the pipeline.
For example, with Costco began selling our advent calendar in store this holiday and the feedback was great. In fact, we've had outreach from other retail partners, who want to offer the product next holiday season.
As I mentioned earlier, we also expect to build on our relationship with the girl Scouts over the coming years.
We launched our pilot program with them last fall, where we ended up selling out ahead of schedule and they ultimately doubled their order with us. This.
This year, we expect to grow our pilot relationship with them with the goal of becoming part of their annual Cookie program.
Given the early success of the partnership.
We're optimistic about this opportunity.
This partnership has the opportunity to be significantly larger than any individual retail partnership where we land.
Matt Meeker: We launched our pilot program with them last fall, where we ended up selling out ahead of schedule, and they ultimately doubled their order with us. This year, we expect to grow our pilot relationship with them with the goal of becoming part of their annual cookie program. Given the early success of the partnership, we are optimistic about this opportunity. This partnership has the opportunity to be significantly larger than any individual retail partnership we land. We'll know more on specific timing later this year, so stay tuned.
We'll know more on specific timing later this year so stay tuned.
And finally, we plan to pitch additional products to our retail partners this year, including toppers and dental products.
Overall, we're thrilled with our progress to date and look forward to updating you more over the year.
Turning to the direct to consumer side of the business Park that coda has been delivering consistent improvements in traffic conversion and total orders.
Fiscal year to date, we've generated over $15 million of DTC.
Removals revenue outside of what's included in our subscription box products.
Matt Meeker: And finally, we plan to pitch additional products to our retail partners this year, including toppers and dental products. Overall, we're thrilled with our progress to date and look forward to updating you more over the year. Turning to the direct consumer side of the business, Bark.co has been delivering consistent improvements in traffic, conversion, and total order. Fiscal year to date, we've generated over $15 million in DTC revenue. This is up over 30% compared to last year, and we expect continued improvements on this side of the business. When we fully migrate to a single unified site, we expect notable upticks in traffic, which we expect to drive improvements in our cross-selling capability. For example, BarkBox.com has millions of unique monthly visitors.
This is up over 30% compared to last year and we expect continued improvements on this side of the business.
When we fully migrate to a single unified site.
We expect notable upticks in traffic, which we expect to drive improvements in our cross selling capabilities.
For example, Bart box Satcom sees millions of unique monthly visitors today, those prospective customers all ICR bark box offering and.
In the future they will see our full suite of products, which could be significant from a conversion and cross sell perspective.
Part of driving long term growth of our business will be through more diverse marketing today.
Today, 99% of our marketing budget is allocated to direct response ads.
This has been highly successful for impulse purchases like Embarq box, however that will be less effective for more considered purchases like food.
We need to build more awareness for park.
And our products in new ways.
And with bark Dot co alive and well, it's a perfect time to begin to show the world that we are a lot more than a subscription box company, but rather a company that strives to improve the lives of dogs and their people with best in class products and services.
Matt Meeker: Today, those prospective customers only see our Bark Box offering. In the future, they'll see our full suite of products, which could be significant from a conversion and cross-sell perspective. Part of driving long-term growth for our business will be through more diverse marketing. Today, 99% of our marketing budget is allocated to direct response ads.
Over the coming quarters, we plan to invest more of our marketing budget towards driving brand awareness with creative campaigns that showcase <unk> mission of making all dogs happy.
It's too soon to give specifics.
You'll start to see US launch some of these campaigns throughout 2024, so stay tuned.
Matt Meeker: This has been highly successful for impulse purchases like a Bark Box. However, it will be less effective for more considered purchases like food. We need to build more awareness for Bark and our products in a new way. And with Bark.co alive and well, it's a perfect time to begin to show the world that we are a lot more than a subscription box company but rather a company that strives to improve the lives of dogs and their people with best-in-class products and services. Over the coming quarters, we plan to invest more of our marketing budget toward driving brand awareness with creative campaigns that showcase Bark's mission of making all dogs happy. Too soon to give specifics, but you'll start to see us launch some of these campaigns throughout 2024, so stay tuned.
In closing, we're executing the roadmap that we laid out when I returned to the CEO role in those two years, we improved our gross margin by 600 basis points and another 300 basis points on shipping and fulfillment.
We reduced our adjusted EBITDA loss by roughly $50 million.
And expect to continue to improve our profitability profile going forward.
And we generated positive free cash flow of $13 million last quarter and $17 million over the trailing 12 months.
In our view this progress is not yet reflected in our share price. However, we continue to believe we will make significant improvements the financial health of the business in light of these dynamics, we have the ability to continue to opportunistically repurchase shares with that I will turn the call over to say here.
Thanks, Matt and good afternoon, everyone I will begin today's call with an overview of our third quarter results followed by our outlook for the remainder of fiscal 2024.
Matt Meeker: In closing, we're executing the road map that we laid out when I returned to the CEO role. In those two years, we improved our gross margin by 600 basis points and another 300 basis points on shipping and fulfillment. We reduced our adjusted EBIT dollar loss by roughly $50 million, and we expect to continue to improve our profitability profile going forward. And we generated positive free cash flow of $13 million last quarter and $17 million over the trailing 12 months. In our view, this progress is not yet reflected in our share price, but we continue to believe we will make significant improvements to the financial health of the business. In light of these dynamics, we have the ability to continue to opportunistically repurchase shares. With that, I will turn the call over to Zaheer.
Overall, it was a strong quarter across the board starting with the P&L, we generated $125 million of revenue, which came in ahead of our guidance range driven by the better than expected new subscribers that Matt discussed.
Direct to consumer segment came in at $111 million, which was down seven 6% compared to last year. The year over year decline is largely a factor of entering the quarter with fewer auctions, who procure customers compared to the same period last year.
Total orders in the period were down five 8% compared to last year largely related to the same dynamic in the quarter itself. We saw healthy growth in new customer acquisition, which will benefit the top line in the periods ahead.
Also worth highlighting while new customer acquisition was challenging in the first half of fiscal 2024, we've been very pleased with our customer retention this year, which is near all time highs.
Zaheer Ibrahim: Thanks, Matt, and good afternoon, everyone. I'll begin today's call with an overview of our third quarter results, followed by our outlook for the remainder of fiscal 2024. Overall, it was a strong quarter across the board. Starting with the P&L, we generated $125 million of revenue, which came in ahead of our guidance range, driven by the better-than-expected number of new subscribers that Matt discussed. Our direct-to-consumer segment came in at 111 million, which was down 7.6% compared to last year. The year-over-year decline is largely a factor of entering the quarter with fewer BarkBox and SuperChewer customers compared to the same period last year. Total orders in the period were down 5.8% compared to last year, largely related to the same dynamic.
From a category basis, we generated $71 million from toys, and accessories and $40 million from consumables.
Turning to the <unk> segment, we delivered $14 million of revenue, which is roughly in line with last year, our retail partners continue to see headwinds across various discretionary categories, which is all the more reason why we are excited to be entering their doors with less discretionary consumables products. This spring.
And as Mac or discretionary challenges eventually ease we expect the retail toy sales to return to growth.
Moving down the P&L on a consolidated gross margin improved 210 basis points to 61, 8%.
<unk>, we anticipate further margin improvements in Q4 and into fiscal 2025 total DTC gross margin improved 200 basis points year over year to 63, 8%.
Zaheer Ibrahim: In the quarter itself, we saw healthy growth in new customer acquisition, which will benefit the top line in the periods ahead. It's also worth highlighting that while new customer acquisition was challenging in the first half of fiscal 2024, we've been very pleased with our customer retention this year, which is near all-time highs. On a category basis, we generated $71 million from toys and accessories and $40 million from consumables.
As a reminder, DTC margins tend to be a bit lower in the holiday quarter as there was more promotional activity and we continue to expect them to improve from here.
<unk> gross margin improved 340 basis points to 45, 5%.
The benefits from renegotiating contracts with toy vendors has had a bigger impact to our commerce segment, given virtually all of our current retail sales of our choice.
Zaheer Ibrahim: Turning to the commerce segment, we delivered $14 million in revenue, which is roughly in line with last year. Our retail partners continue to see headwinds across various discretionary categories, which is all the more reason why we are excited to be entering their doors with less discretionary consumables products this spring. And as macro-discretionary challenges eventually ease, we expect retail toy sales to return to growth.
Moving on other G&A expenses were $30 6 million down $8 3 million compared to last year as a percentage of revenue other G&A improved by 450 basis points the year over year improvement largely driven by the cost reduction exercises we carried on earlier in calendar 2023.
Shipping and fulfillment expense came in at $35 5 million down $5 8 million. This improvement was partially driven by lower order volume as well as efficiencies we have derived from more favorable shipping contracts and improved productivity across our supply chain network.
Zaheer Ibrahim: Moving down the P&L, our consolidated gross margin improved 210 basis points to 61.8%. As Matt mentioned, we anticipate further margin improvements in Q4 and into fiscal 2025. Total D2C gross margin improved 200 basis points year-over-year to 63.8%. As a reminder, DTC margins tend to be a bit lower in the holiday quarter as there is more promotional activity, and we continue to expect them to improve from here. Commerce Gross Margin improved 340 basis points to 45.5% The benefits from renegotiating our contracts with toy vendors have had a bigger impact on our commerce segment, given virtually all of our current retail sales are toys. Moving on, other G&A expenses were $30.6 million, down $8.3 million compared to last year.
In addition to the progress made in FY 'twenty four we believe there are additional opportunities to deliver improvements in both of these line items in the future.
Total sales and marketing expense was $25 million in the quarter up $3 million compared to last year as.
As we've discussed the progress we have made in improving the financial health of the business affords us the opportunity to invest more in areas like marketing, particularly given the efficiency at which we've been able to acquire new customers recently.
We will continue to balance growth and profitability as it relates to this line item, but we're not seeing attractive returns on our investment we will pare back marketing spend and allow more revenue to fall to the bottom line.
And finally, our adjusted EBITDA loss was $6 4 million landing at the midpoint of our guidance range and reflecting a 50% improvement versus last year, despite the higher marketing investment last quarter.
Zaheer Ibrahim: As a percent of revenue, other G&A improved by 450 basis points. The year-over-year improvement is largely driven by the cost reduction exercises we carried out earlier in calendar 2023. Shipping and fulfillment expense came in at $35.5 million, down $5.8 million.
From a cash flow standpoint, we generated $13 million of cash in the quarter. There are some timing benefits related to inventory and accounts payable.
Zaheer Ibrahim: This improvement was partially driven by lower order volume, as well as efficiencies we have derived from more favorable shipping contracts and improved productivity across our supply chain network. In addition to the progress made in FY24, we believe there are additional opportunities to deliver improvements in both of these line items in the future. Total sales and marketing expense was $25 million in the quarter, up $3 million compared to last year.
Actively these benefited the quarter to the tune of around $10 million, regardless, we were very pleased to have delivered another quarter of positive free cash flow and we expect more of them in the future fiscal year to date, we have generated approximately $400000 of positive free cash flow. However, we do expect fiscal Q4.
For to be negative as a result of the reversal of the timing benefits that flowed into the third quarter.
Zaheer Ibrahim: As we've discussed, the progress we have made in improving the financial health of the business affords us the opportunity to invest more in areas like marketing, particularly given the efficiency at which we've been able to acquire new customers recently. We will continue to balance growth and profitability as it relates to this line item. If we're not seeing attractive returns on our investment, we will pare back marketing spend and allow more revenue to fall to the bottom line. And finally, our adjusted EBITDA loss was $6.4 million, landing at the midpoint of our guidance range and reflecting a 50% improvement versus last year, despite the higher marketing investment last quarter. From a cash flow standpoint, we generated $13 million in cash in the quarter.
Turning to the balance sheet, we ended the period with $131 million of cash outs.
Outstanding convertible debt of roughly $40 million.
<unk> noted this number reflects a repurchase in November of $45 million of the outstanding note at a 6% discount.
We also further reduced our inventory last quarter on a sequential basis, our inventory balance came down by $11 million to $98 million.
And over the past 18 months, we have reduced our inventory balance by over $60 million.
This frees up working capital and reduces expenses associated with the inventory carrying costs.
Overall, I'm happy with the significant balance sheet improvements we have delivered in a relatively short period of time. This puts us in an advantageous position to deploy capital efficiently and further improve the financial health of the business.
Zaheer Ibrahim: There are some timing benefits related to inventory and accounts payable. Collectively, these benefited the quarter to the tune of around $10 million. Regardless, we were very pleased to have delivered another quarter of positive free cash flow, and we expect more of them in the future. Fiscal year to date, we've generated approximately $400,000 of positive free cash flow. However, we do expect fiscal Q4 to be negative as a result of the reversal of the timing benefits that flowed into the third quarter. Turning to the balance sheet, we ended the period with $131 million of cash and outstanding convertible debt of roughly $40 million.
Let me now turn to the guidance for the fiscal fourth quarter and full year 2024, starting with the full year. We are reiterating the high end of our revenue guidance range of minus 8% year over year and are raising the low end to minus 9% versus the previous minus 11% the improvement in the low end.
The range reflects the strong holiday quarter on the benefits that will carry into future quarters.
All year revenue guidance implies total fourth quarter revenue of between $123 8 million on.
$118 4 million.
Turning to adjusted EBIT.
For the fiscal fourth quarter, we currently expect to deliver positive adjusted EBITDA of $3 million.
Zaheer Ibrahim: As Matt noted, this number reflects our repurchase in November of $45 million of the outstanding note at a 6% discount. We also further reduced our inventory last quarter. On a sequential basis, our inventory balance came down by $11 million to $98 million.
Two 1 million this implies full year adjusted EBITDA of <unk>.
Minus $9 8 million to minus $11 8 million versus our previous guidance of minus 6 million to minus $12 million. The change in the high end of our adjusted EBITDA range is almost entirely the result of our decision to invest more in marketing given the efficiency at which we were able to acquire new customers.
Zaheer Ibrahim: And over the past 18 months, we have reduced our inventory balance by over $60 million. This frees up working capital and reduces expenses associated with inventory carrying costs. Overall, I am happy with the significant balance sheet improvements we have delivered in a relatively short period of time. This puts us in an advantageous position to deploy capital efficiently and further improve the financial health of the business. Let me now turn to the guidance for the fiscal fourth quarter and four years in 2024. Starting with the four years, we are reiterating the high end of our revenue guidance range of minus 8% year-over-year and raising the low end to minus 9% versus the previous minus 11%. The improvement in the low end of the range reflects the strong holiday quarter and the benefits that will carry into future quarters.
And from which we will benefit in the periods ahead.
In conclusion, we've been very pleased with our ability to deliver consistent improvements in our profitability profile.
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 profitable in the current quarter and have good visibility to bottom line improvements next year. This dynamic coupled with our healthy balance sheet and recent consumables momentum affords us.
A lot of opportunity to grow the business and deliver strong value to our shareholders.
With that I will turn the call over to the operator for Q&A.
Thank you as a reminder, if you would like to ask a question. Please press star one.
Your first question comes from Maria <unk> with Canaccord Genuity.
Go ahead.
Okay.
Thanks, Good afternoon.
Wanted to ask about your strong customer acquisition trends in Q3, and thanks for all the color there I guess, how sustainable do you think this trend can be going forward are there any other areas that could drive further improvements.
Zaheer Ibrahim: Our four-year revenue guidance implies total fourth-quarter revenue of between $123.8 million and $118.4 million. Turning to Adjusted EBITDA, for the fiscal fourth quarter, we currently expect to deliver positive Adjusted EBITDA of $3 million to $1 million. This implies full-year Adjusted EBITDA of minus $9.8 million to minus $11.8 million versus our previous guidance of minus $6 million to minus $12 million.
How does this inform your marketing strategy and budgeting as you look into calendar 2024.
Hi, Maria Thanks for that.
Where I would say, we're cautiously optimistic about it it's one good quarter of customer acquisition.
Zaheer Ibrahim: The change in the high end of our Adjusted EBITDA range is almost entirely the result of our decision to invest more in marketing given the efficiency at which we were able to acquire new customers and from which we will benefit in the periods ahead. In conclusion, we've been very pleased with our ability to deliver consistent improvements in our profitability profile. However, there's still work to do.
Activity.
And we're attributing that mainly too.
Some of the reorganization of our team and that.
And putting some of our creative resources closer to the customer.
We're really encouraged by that performance, but again, it's one quarter. So, let's let's see a couple before we call it a trend.
Zaheer Ibrahim: However, we believe the business has reached an inflection point from a profitability standpoint. We expect to be adjusted EBITDA profitable in the current quarter and have good visibility to bottom line improvements next year. This dynamic, coupled with our healthy balance sheet and recent consumables momentum, affords us a lot of opportunity to grow the business and deliver strong value to our shareholders. With that, I will turn the call over to the operator for Q&A. Thank you. As a reminder, if you would like to ask a question, please press star one. Your first question comes from Maria Ripps with Canaccord Genuity. Please go ahead. Thanks. Good afternoon.
And how that factors in obviously today.
Those activities are almost entirely direct response oriented.
And that will continue to be a big part of our marketing playbook our mix as we go forward.
It works really well for a product like dark boxes more impulse purchase in nature.
So we'll use it there or what where we've been.
I don't even want to say weak but.
Under utilized in the past is awareness marketing inside expect to see that ramp up and become some percentage of our overall spend and share and so youll see some of the dollars shift over there.
Operator: I wanted to ask about your strong customer acquisition trends in Q3, and thanks for all the color there. I guess, how sustainable do you think the trends can be going forward? Are there any other areas that could drive sort of further improvements? And how does this inform your sort of marketing strategy and budgeting as you look into calendar 2020? Hi Maria.
<unk>.
Especially to promote bark Doc how as a platform and the consumable products that arent as impulsive in nature.
Got it Thats very helpful and then.
Matt you touched on this a little bit, but you've had a pretty strong retail presence for some time, but.
Matt Meeker: Thanks for that. We're, I would say, cautiously optimistic about it. It's one good quarter of customer acquisition and activity, and we're attributing that mainly to some of the reorganization of our team and that, and putting some of our creative resources closer to the customer. We're really encouraged by that performance, but again, it's just one quarter, so let's see a couple more before we call it a trend. Ripps, and how that factors in obviously today. Box.
But now that you're sort of starting to introduce consumables.
Well channel can you maybe talk talk about what kind of impact to box brand recognition do you expect to see as a result.
Well us.
If if the toy business is any indication then a very positive one.
Well, we certainly had I would say, okay brand awareness for the first five or six years of bark box being a product and then our toy started to appear in target stores and.
Matt Meeker: Those activities are almost entirely direct response oriented, and that will continue to be a big part of our marketing playbook or mix as we go forward. It works really well for a product like Bark Box that is more of an impulse purchase in nature. So we'll use it there. Where we've been, I don't even want to say weak, but underutilized in the past, is awareness marketing. And so I'd expect to see that ramp up and become some percentage of our overall spend and share. And so you'll see some of the dollars shift over there, especially to promote Bark.co as a platform and consumable products that aren't as impulsive in nature. That's very helpful.
And then on to other retail partners.
And we saw a significant lift in our brand awareness and that spilled over into.
I have an acceleration of our subscription our direct to consumer businesses.
<unk>.
And so as we introduce consumables and you put them in 'twenty 500 doors of major national retailers like that.
Like target for example has 30 million people every week walking the aisle right past what is often our end cap so that kind of traffic puts your brand front and center and then.
It's up to us to capitalize on that and village a recognition from there so hopefully a very positive effect.
Matt Meeker: And then, Matt, you touched on this a little bit, but you've had a pretty strong retail presence for some time, but now that you're sort of starting to introduce consumables in the retail channel, can you maybe talk about what kind of impact on Bark's brand recognition you expect to see as a result? Well, if the toy business is any indication, then a very positive one. We certainly had, I'd say, OK brand awareness for the first five or six years of BarkBox being a product, and then our toys started to appear in Target stores, and then on to other retail partners.
Got it thank you for the call and congrats on the quarter.
Thank you.
Your next question comes from Ryan Meyers with Lake Street Capital markets. Please go ahead.
Hey, guys. Thanks for taking my questions.
First one for me, obviously set to launch in the retail.
This spring with D treats and I was just wondering if you could provide any commentary around the potential revenue impact that you guys expect to see.
And then maybe if you expect to see any of that in FY 'twenty four.
So that will come from FY 'twenty five.
Hey, Ryan How's it going.
In terms of.
Matt Meeker: And we saw a significant lift in our brand awareness, and that spilled over into an acceleration in our subscription or direct-to-consumer businesses. Ripps, Max Rakhlenko, Bark, And so as we introduce consumables and you put them in 2,500 doors of major national retailers like that. A Target, for example, has 30 million people every week walking the aisle right past what is often our end cap.
Fiscal 'twenty for the impacts.
Not material, obviously will be.
Loading and some initial orders to both of the national retailers and then.
They will clear through and hit shelf for the early part of fiscal 'twenty five.
Obviously, a lot more traction during the course of fiscal 'twenty five.
Coupled with some of the momentum we're also seeing on the girl Scouts, which Matt mentioned.
When we look at our commerce business. The additional revenue from the two retailers plus girl Scout will add about.
Matt Meeker: So that kind of traffic puts your brand front and center, and then it's up to us to capitalize on that and build recognition from there. So, hopefully, a very positive effect. Got it. Thank you for the call and congratulations on the quarter. Thank you. Your next question comes from Ryan Myers with Lake Street Capital Markets. Please go ahead.
Double digit percentage wise to our overall commerce revenue for fiscal 'twenty five.
Okay. That's helpful.
And then if we think about the gross margins in FY 'twenty fives. It sounded like you guys expect to see.
Margin improvement there, but I just want to make sure I understand that especially as retail begins to make a larger contribution.
Yes on a like for like basis.
Operator: Hey guys, thanks for taking my questions. First one for me, obviously it's set to launch in retail this spring with the treats. You know, just wondering if you could provide any commentary on the potential revenue impact that you guys expect to see. And then, you know, maybe if you expect to see any of that in FY24 or if most of that will come from FY25. Hey Ryan, how's it going? In terms of Fiscal 24, the impacts are not material.
As you've seen during fiscal 'twenty four sequentially. Our margin has improved and we expect that to continue through till the end of the year.
Most of that's been driven by the consolidation of the toy suppliers.
We've got some improvement as well as we've managed down our inventory levels, you're doing better from our aging and obsolescence cost management as well so both of those have helped.
In terms of drive the 300 plus margin improvement for this year.
Zaheer Ibrahim: Obviously, we'll be loading in some initial orders to both of the national retailers, and then they'll clear through and hit the shelves for the early part of fiscal 25. Obviously, we'll get a lot more traction during the course of fiscal 25. That coupled with, you know, some of the momentum we're also seeing on the Girl Scouts, which Matt mentioned. When we look at our commerce business, the additional revenue from the two retailers plus Girl Scouts will add about double digit percentage points to our overall commerce revenue for fiscal 25. Okay, I got it. That's helpful.
Q4, we'll start seeing the benefit of consumer vendor consolidation as well and then Youll see.
Coming through for the bulk of fiscal 2025, and now be the major driver the level of that lift won't be as much as what we saw this year.
Still the healthy improvement.
We don't expect significant shift in fiscal 'twenty five in terms of the channel mix. So it will stay pretty similar now.
That will probably be a bigger factor beyond fiscal 'twenty five.
Got it thank you for taking my questions. Thanks Ryan.
Okay.
Your next question comes from Yigal <unk> with Citigroup. Please go ahead.
Zaheer Ibrahim: And then if we think about gross margins in FY25, it sounded like you guys expect to see margin improvement there, but I just want to make sure I understand that, especially as, you know, retail begins to make a larger contribution. Yeah, on a like-for-like basis, you know, as you've seen during Fiscal 24, sequentially, our margin has improved, and we expect that to continue through till the end of the year. Most of that has been driven by the consolidation of toy suppliers.
Hey, good afternoon guys.
I wanted to dig in.
The <unk> side, a little bit more on the comments and in particular about.
The consumables.
For the products.
Sales general coming outside of the subscription box that being up 30% year over year.
Can you expand on that opportunity a little bit more.
How much of a mix do you think that could be over time.
What to expect from that in the <unk>.
Zaheer Ibrahim: We've got some improvement as well as we've managed down our inventory levels. You're doing better with our aging and obsolescence cost management as well, so both of those have helped in terms of driving the 300-plus margin improvement for this year. In Q4, we'll start seeing the benefit of consumer vendor consolidation as well, and then you'll see that coming through for, you know, the bulk of Fiscal 2025, and that'll be the major driver. The level of that lift won't be as much as what we saw this year, but it'll still be a healthy improvement.
Coming quarters.
And then I guess thats, all thats tied into the unified platforms, just give us an update on timing around that when we got the full transition in the timeline.
Yeah on the consumables question like like we said $15 million.
And that 30% growth.
And that's obviously continuing to grow quarter over quarter as we get more of that emphasis on bark Dachau.
And it's really as more traffic moves over there. He there as we take the legacy park box customers in that direction.
Zaheer Ibrahim: We don't expect a significant shift in Fiscal 2025 in terms of the channel mix, so it'll stay pretty similar. That'll probably be a bigger factor beyond Fiscal 2025. Got it. Thank you for taking my questions. Thanks, Ryan. Your next question comes from Igal Arunian with Citigroup. Please go ahead.
And we take the AD spend in that direction, it's going to accelerate.
The cross sell and upsell opportunities.
The timing of that we're looking for that to happen in fiscal year 'twenty five ideally before the holidays, but its a big move so we'll go when we're ready but in fiscal year 'twenty five.
Operator: Hey, good afternoon, guys. I want to dig into the DGZ side a little bit more in the comments, maybe in particular about the consumables or the products, sales in general, coming outside of the subscription box, that being up 30% year over year. Can you expand on that opportunity a little bit more? How much of a mix do you think that could be over time?
Hi.
Where that takes us in terms of the consumables if I, if I look out like over four or five years Youre looking for something like.
35% to 40% of the business moving into the consumables around instead of twice.
Counter that twice that's across DTC E Commerce, yes. Thank you.
Matt Meeker: What to expect from that in the coming quarters? And then I guess that's all that's tied into the unified platform. Just give us an update on timing around that when we get the full transition and the timeline. Yeah, on the consumables question, like we said, $15 million and that 30% growth. And that's obviously continuing to grow quarter over quarter as we get more of that emphasis on Bark.co. And it's really, as more traffic moves over there, either as we take the legacy BarkBox customers in that direction, and we take the ad spend in that direction, it's going to accelerate the cross-sell and up-sell opportunities. The timing of that, we're looking for that to happen in fiscal year 25, ideally before the holidays, but it's a big move, so we'll go when we're ready, but in fiscal year 25. Where that takes us in terms of consumables, if I look out over four or five years, you're looking for something like 35 to 40 percent of the business moving into the consumables realm instead of the toys or counter to toys And that's across D2C and Comos?
Alright, great and then just.
Big picture one.
Not at ICR, you made a comment about.
The current.
Patients.
Scott.
50% of your market cap.
Net cash.
I still don't see.
The opportunity maybe that's the company would want to see for that.
Expand on that thought a little bit.
How do you think about that how much time do you.
You give it once.
But what else can you talk about there that might be helpful for investors. Thank you.
I think the situation remains the same that we.
We.
Given.
All of these dynamics the strength of the balance sheet, we talked about.
Having over $130 million of cash the free cash flow over the past 12 months.
The inventory position that gross margin expansion.
Just everything we feel really good about that business overall.
And.
When you Oh, I'd say like went up when I or we.
Look at that objectively and look at the value of the company.
We would say to investors we think it's.
Matt Meeker: Yes. Ripps, Max Rakhlenko, Bark. What else can you talk about there that might be helpful for investors? I think the situation remains the same, that we... Given all these dynamics, the strength of the balance sheet, we talked about having over a hundred and thirty million dollars of cash, the free cash flow over the past twelve months, the inventory position, the gross margin expansion, but just everything we feel really good about the business overall, and when you, I'd say like when I or we look at that objectively and look at the value of the company. We would say to investors, we think it's a great opportunity, and so we also have to look at ourselves as potential investors again given the cash balance and what our D. Cash needs or generation that we expect in the future will be. So we have to take that same lens and view it as an opportunity, and Ripps, Max Rakhlenko, Bark, That's exactly how we'll behave. Bye. Your next question comes from Kalmel Godrewala with Jeffreys. Please go ahead. Hey guys. Good evening. This is Keith DeVos from Tacoma.
It's a great opportunity and so we also have to look at ourselves as potential investors again, given the cash balance and what are key.
Cash needs or generation that we expect in the future Ob. So we have to take that same lens and view it as an opportunity.
That's exactly how it will behave.
Thanks Liz.
Your next question comes from Pamela <unk> with Jefferies. Please go ahead.
Hey, guys. Good evening this is Keith <unk>.
I'd like to jump back to the customer acquisition on the quarter and if you could provide any context early on.
Any differences you're seeing in the cohorts from our purchasing habits standpoint.
The types of products are in the box any initial chairman assumptions I think.
In the past you've shared that some of the cohorts during COVID-19 et cetera were unprofitable, so I'm trying to gauge or get a sense of the difference.
Between the two if you could.
Just so I make sure I answer that question and thank you for it is are you talking about the recent cohorts where we are.
Operator: I'd love to jump back to customer acquisition for the quarter. And if you could provide any context really on any differences you're seeing in the cohorts from a purchasing habits standpoint, the types of products in the box, any initial term assumptions. I think in the past, you shared that some of the cohorts during Covid, etc., were unprofitable. So I'm trying to get a sense of the difference between the two, if you could.
Associated with those customers, we acquired here and in this quarter this past quarter.
That's right okay.
Okay.
Well.
In some ways a little too early to tell because we have anywhere from one month of renewal too.
To two or three so a little bit early in the life span.
But from a retention point of view from a average order point of view and all the dynamics that go around that.
Matt Meeker: Just so I make sure I answer that question and thank you for it, are you talking about the recent cohorts where we associate with those customers we acquired here in this quarter, this past quarter? That's right. Okay. Well, in some ways, a little too early to tell because we have anywhere from one month of renewal to two or three, so a little bit early in the lifespan.
Pretty on par pretty steady with what we've seen over the last call. It at least four quarters, maybe eight quarters and those have been strong.
And so when you when we started Bubbling all that up together and you look at the trend line of our.
Of our lifetime value, we're seeing a real acceleration there too.
Matt Meeker: But from a retention point of view, from an average order point of view, and all the dynamics that go around that, pretty on par, pretty steady with what we've seen over the last, call it at least four quarters, maybe eight quarters, and those have been strong. And so when we sort of bubble all that up together, and you look at the trend line of our lifetime value, we're seeing a real acceleration there to our highest point. Current This quarter was our highest point of lifetime value. And of course, that's propelled by Ripps, Max Rakhlenko, Bark, and feeling great about that. Obviously, we'll continue to monitor it, but off and running, that cohort looks... Historically, pretty consistent.
Our our highest point.
Correct.
This quarter was our highest point of lifetime value and of course, that's propelled by.
Really solid or strong retention combined with the gross margin expansion, you're seeing that's leading to on a gross profit basis at that.
Very high lifetime value so.
Feeling great about that.
Obviously, we will continue to monitor it but often running that cohort looks historically pretty consistent.
Okay.
Got it thank you.
And then on the retail rollout I know you guys are there with toys.
Going into treats.
Trying to get a sense of where you need to.
Matt Meeker: Got it, thank you. And then on the retail rollout, I know you guys are there with toys; now you're going into treats. Trying to get a sense of where you need to incrementally invest to kind of capture that different customer, you know, understanding that maybe they're already devoted to certain treat brands, etc. So how do you kind of capture that customer as you roll out into retail, and where do you need to invest to do so? Hi Keith, this is Zaheer.
Incrementally invest to kind of capture that at different customer understanding that may be there already.
Devoted to certain fruit brands et cetera, So how do you kind of capture that customer as you rollout.
To retail and where do you need to invest to do so.
Hi, Keith this is on here.
We were launching with the two retailers that we have.
Already shed and.
We hit the shelves of the start of fiscal 2025.
Zaheer Ibrahim: We're launching with the two retailers that we've already shared, and we hit the shelves at the start of fiscal 2025. We've got strong distribution, so six to seven SKUs in each of the retailers, national distribution, that's going to give us a lot of visibility in both of those retail chains and good shelf placement. We'll maximize opportunities to do things like end aisle placements, seasonal opportunities, and things like that. So you'll amplify the inline performance by doing other things as well.
We've got strong distributions, so six to seven skus in each of the retailers.
National distribution.
That's going to give us a lot of visibility in both of those retail chains.
Good shelf placement.
We'll maximize opportunities to do things like and aisle placements seized.
Seasonal opportunities and things like that so you will amplify the in line performance with doing other things as well.
Zaheer Ibrahim: We'll have a comprehensive shopper marketing and in-store marketing program to go with it. And then, beyond that, we'll be having conversations with other retailers in parallel, and based on their research, we'll be looking to expand distribution to other retailers towards the back end of fiscal 2025. Hey, maybe just to add a point or two to that as well, Zaheer.
Very comprehensive shopper marketing and in store marketing program to go with it.
And then beyond that we'll be having conversations with other retails empire retailers in parallel and based on their research will be looking to expand distribution to other retailers towards the back end of fiscal 2025.
Maybe just to add a point or two to that as well as the here.
Matt Meeker: We also bring to this a couple of unique advantages, and one of those we've already got in motion here, which is, We are sending out millions of bark boxes every month to people and their dogs, and Starting in November, we started to preview this new line of treats in every BarkBox with one-ounce sample packages. That continues today. It will continue through next month and through the launch.
One of the.
We also bring to this a couple of unique advantages.
And one of those we've already got in motion here.
Which is we are sending out millions of bark boxes every month to people in their dogs.
And starting in November we started to preview this new line of treats and every bark boxing with one hour sample packages that continues today that will continue through next month and through the launch.
Matt Meeker: And so we're also creating a habit in millions of homes, which is, again, a really unique advantage that should give us a leg up and have people looking for the replenishment on the shelf at their favorite retailers. In addition, we get to be cost competitive right out of the gate. If we were a start-up company doing our first deal in a big retailer with treats, we probably wouldn't have significant volume, and we'd have higher costs and maybe be pressured on price, but being one of the largest treat companies in the U.S. by revenue today, it allows us to come out of the gate really strong with great buying power and price it really appropriately. Have good margins from right there. And so we're not fighting an unwinning battle as a new brand. We're a recognized brand with a lot of trials already in the market at a really competitive price.
So we're also creating habit in millions of homes, which is again at a really unique advantage.
That should give us a leg up and have people looking for a replenishment on shelf at their favorite retailers.
In addition, we.
We got to be cost competitive right out of the gate.
If we were if we were a startup company.
Doing our first deal and a big retailer with treats.
We probably wouldn't have significant volume and they have higher costs and maybe be pressured on price, but being one of the largest treat companies in the U S by revenue today at all.
<unk> has to come out of the gate really strong with great.
Buying power.
It really appropriately have good margins from right there and so we're not we're not fighting.
On winning battle as a new brand, we're a recognized brand with a lot of trial already in the market at a really competitive price point.
Got it thank you for the color.
This will conclude the <unk> third quarter fiscal 2024 earnings conference call. Thank you all for joining US today you may now disconnect.
[music].
Operator: Got it. Thank you to the caller. This will conclude Bark's third quarter fiscal 2024 earnings conference call. Thank you all for joining us today. You may now disconnect.
Sure.
Yes.