Q4 2024 BARK Inc Earnings Call

Operator: Good afternoon, and welcome to the Bark fiscal fourth quarter and full year 2024 earnings conference call. Please note that this call is being recorded. All lines have been placed on mute to prevent any background noise.

Good afternoon, and welcome to the bark fiscal fourth quarter and full year 'twenty 'twenty four earnings conference call.

Please note that this call is being recorded.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw your question, please press star 1 again. I will now turn the call over to Mike Mougias, Vice President, Investor Relations. Please go ahead.

After the Speakers' remarks, there will be a question and answer session.

Speaker Change: I would like to ask a question. Please press star followed by the number one on your telephone keypad.

Speaker Change: To withdraw your question. Please press star one again.

Max Rakhlenko: I'll now turn the call over to Mike <unk>, Vice President Investor Relations. Please go ahead.

Michael K. Mougias: Good afternoon, everyone, and welcome to BARC's fiscal fourth quarter and full year 2024 earnings call. Joining me today are Matt Meeker, co-founder and chief executive officer, and Zahir Ibrahim, chief financial officer.

Max Rakhlenko: Good afternoon, everyone and welcome to box fiscal fourth quarter and full year 2024 earnings call. Joining me today are not meager co founder and Chief Executive Officer, 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.

Michael K. Mougias: 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 demand results was issued this afternoon and can be found on the Investor Relations website. Before I pass it over to Matt, I want 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.

Max Rakhlenko: Additionally, a press release covering the company's financial results was issued this afternoon and can be found on the Investor Relations website.

Max Rakhlenko: Before I pass it over to Matt I want 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.

Michael K. Mougias: Please refer to our SEC filings for more information on some of the factors that could affect our future results and outcomes. We will also discuss certain non-GAAP financial measures on today's call. Reconciliation of our non-GAAP financial measures is contained in this afternoon's press release. And with that, I now pass it over to Matt.

Please refer to our SEC filings for more information on some of the factors that could affect our future results and outcomes.

Matt: We will also discuss certain non-GAAP financial measures on today's call reconciliations of our non-GAAP financial measures is contained in this afternoon's press release.

Matt: And with that let me now pass it over to Matt.

Matt Meeker: Thanks, Mike, and good afternoon, everyone. Today's call marks a meaningful milestone for Bark. Just over two years ago, when I returned to the CEO role, the company was burning significant cash, had poor unit economics, a bloated organization, and did not have growth momentum. Today, I'm proud to share that Bark is back.

Matt: Thanks, Mike and good afternoon, everyone.

Matt: Today's call marks a meaningful milestone for bark just over two years ago. When I returned to the CEO role. The company was burning significant cash at poor unit economics are bloated organization and did not have growth momentum.

Matt Meeker: The team should be proud, and I'm proud of them for putting Bark on a solid path to profitability as we improve margins through supply chain, mix, and organizational changes. Collectively, this has resulted in a strong balance sheet as we improve our working capital while driving toward profitability. We're now positioned to accelerate growth supported by an A-plus senior management team. Let me dive a bit deeper into some of the specific business improvements over the past two years from fiscal 2022 to fiscal 2024.

Matt: Today I'm proud to share that Barrick is back.

Speaker Change: Team should be proud and I'm proud of them for putting embark on a solid path to profitability as we improve margins through supply chain mix and organizational changes.

Collectively this has resulted in a strong balance sheet as we improved our working capital while driving towards profitability for.

Now positioned to accelerate growth supported by an a plus senior management team.

Speaker Change: Let me dive a bit deeper into some of the specific business improvements over the past few years from fiscal 2022 to fiscal 2024.

Matt Meeker: Gross margin improved by 600 basis points to 61.6% this year, with notable gains in product quality and safety. Shipping and fulfillment expenses decreased by nearly 300 basis points, with impressive improvements in delivery speed and accuracy. Collectively, that's a 900 basis point improvement in two years, on approximately $500 million in revenue. That's about $45 million in savings.

Gross margin improved by 600 basis points to 61, 6% this year with notable gains in product quality and safety.

Speaker Change: Shipping and fulfillment expenses decreased by nearly 300 basis points with impressive improvements and delivery speed and accuracy.

Collectively.

Speaker Change: It's a 900 basis point improvement in two years.

Speaker Change: On approximately $500 million in revenue, that's about $45 million of savings.

Matt Meeker: All those improvements led to adjusted EBITDA improving by $47 million from a loss of $57.8 million to a loss of $10.6 million, along with two quarters of positive adjusted EBITDA in fiscal 2024, including the most recent quarter. To strengthen our balance sheet, we cut our inventory balance by 45%, releasing $69 million of cash without impacting customer satisfaction. Free cash flow improved by over $190 million to $-2.8 million this year. We ended the year with $125 million of cash on hand, and that's after repurchasing $6 million of our own shares and $45 million of our long-term debt.

Speaker Change: All of those improvements led to adjusted EBITDA, improving by $47 million from a loss of $57 $8 million.

Speaker Change: To a loss of $10 $6 million, along with two quarters of positive adjusted EBITDA in fiscal 2024, including the most recent quarter.

Speaker Change: To strengthen our balance sheet, we cut our inventory balance by 45%.

Releasing $69 million of cash without impacting customer satisfaction.

Speaker Change: Free cash flow improved by over $190 million to a negative.

Speaker Change: <unk> $2 $8 million this year.

Speaker Change: We ended this year with $125 million of cash on hand, and that's after repurchasing 6 million.

Speaker Change: Shares and $45 million of our long term debt.

Matt Meeker: Two years ago, we said getting to profitability would be our focus. We focused on improving our operating discipline and invested in great leaders like Zahir and James, our CFO and Chief Supply Chain Officer, to get us there. Our investments paid off as we delivered two adjusted EBITDA positive quarters this year, and we're guiding fiscal 2025 to be our first EBITDA positive year in history. More on that shortly.

Speaker Change: Two years ago, we said getting to profitability would be our focus.

Speaker Change: We focused on improving our operating discipline and invest isn't great leaders like Zahir and James <unk>, our CFO and chief supply chain officer to get us there.

Speaker Change: Our investments paid off as we delivered to adjusted EBITDA positive quarters. This year and we're guiding fiscal 2025 to be our first EBITDA positive year in history.

Speaker Change: More on that shortly.

Matt Meeker: Before we get into the results for our most recent quarter, let's talk about some exciting developments regarding the growth side of our leadership team, with four new additions reporting to me. Michael Black joined us as Chief Revenue Officer to lead our move from 11% of revenue in our Commerce Channel to one-third of revenue over the next five years. His experience as a pet buyer at Walmart and the CEO and board member of other successful pet companies makes him perfect for this role.

Speaker Change: Before we get into the results for our most recent quarter let's.

Speaker Change: Let's talk about some exciting developments regarding the growth side of our leadership team with four new additions reporting to me.

Speaker Change: Michael Black joined US as Chief revenue officer to lead our move from 11% of revenue and our Commerce channel to one third of revenue over the next five years.

Michael K. Mougias: His experience as a pet buyer at Walmart and the CEO and board member of other successful companies makes it perfect for this role.

Matt Meeker: Michael Parnes joined us as Chief Marketing Officer to take us from being solely driven by bottom of the funnel digital marketing to a more comprehensive approach to building our brand, expanding our awareness, and driving growth. He comes to us from Just Food for Dogs and, before that, Outward Hound, where he was the CMO at both. Megan Noll joined us today as Chief Direct-to-Consumer Officer. Megan is returning to Bark after taking some time to lead another pet company to a successful acquisition as their CEO. Megan knows Bark as well as anyone due to her seven years with us previously.

Michael K. Mougias: Mike <unk> joined Us as Chief marketing officer to take us from being solely driven by bottom of funnel digital marketing to a more comprehensive approach to building our brand expanding our awareness and driving growth in.

He joins us from just food for dogs and before that outward town, where he was CMO at both.

Michael K. Mougias: Mega Noel joined US today, as chief direct to consumer officer.

Megan: Megan is returning to bark after taking some time to lead another tech company to a successful acquisition as their CEO.

Megan Bark: Megan knows bark as well as anyone due to her seven years with us previously.

Matt Meeker: She is a strong product and tech leader who's been leading a Shopify-powered company, and she will complete our move to a unified Bark.co platform. And Christina Donnelly was promoted to chief people officer to round out our leadership team. Christina has been with Bark for 10 years and is the right person for this job as she knows our team better than anyone and will lead us in building and retaining the best talent for our future.

Megan Bark: Strong product and tech leader Who's been leading a shopify powered company.

Speaker Change: We will complete our move to a unified dark dark Hela platform.

Speaker Change: And Kristina Donnelley was promoted to chief people officer to round out our leadership team.

Kristina Donnelley: Kristina has been with Bard for 10 years and is the right person for this job as she knows our team better than anyone.

Lead us in building and retaining the best talent for our future.

Matt Meeker: I've never been more excited about the senior team at Bark. This team and our second half momentum are why I'm so confident and enthusiastic about our future. With all of that said, and even before this team came together, we delivered another strong quarter.

Speaker Change: I've never been more excited about the senior team at park.

This team and our second half momentum or why I'm, so confident and enthusiastic about our future.

With all of that said and even before this team came together we delivered another strong quarter.

Matt Meeker: Last quarter, we delivered $121.5 million in revenue, the midpoint of our guidance range. This landed us at $490.2 million for the year, with strong acceleration in the back half of the year. We improved our gross margin to 62.7% this quarter, our fourth consecutive quarter of sequential growth and 580 basis points higher than the same quarter last year. Our leverage on the cost side will continue to deliver stronger gross margins in the year ahead. We also delivered $2.2 million of adjusted EBITDA, our second positive EBITDA quarter of the year, as we promised we would at the start of the year.

Speaker Change: Last quarter, we delivered 121 $5 million of revenue.

Speaker Change: The midpoint of our guidance range.

Speaker Change: This land is at $492 million for the year with strong acceleration in the back half of the year.

Speaker Change: We improved our gross margin to 62, 7% this quarter, our fourth consecutive quarter of sequential growth.

Speaker Change: And 580 basis points higher than the same quarter last year.

Speaker Change: Our leverage on the cost side will continue to deliver strong gross margins in the year ahead.

Speaker Change: We also delivered $2 $2 million of adjusted EBITDA, Our second positive EBITDA quarter of the year as we promised we would at the start of the year.

Matt Meeker: Returning to profitability was our core focus when I returned to CEO two years ago, so we're all especially excited about this milestone. We ended the quarter with $125 million in cash and $84 million of inventory on hand.

Returning to profitability was our core focus when I returned to CEO two years ago.

Speaker Change: So we're all especially excited about this milestone.

Speaker Change: We ended the quarter with $125 million of cash and $84 million of inventory on hand.

Matt Meeker: We achieved year-over-year growth in new customer acquisition for the second consecutive quarter. And towards our goal of expanding in the wholesale channel and our consumables products, our new cereal treats are now available nationwide at 2400 Target and PetSmart stores. The initial customer feedback has been great, and we are excited to expand further this year. That's a great quarter to end the year and build momentum into next year. Zahir will share our formal guidance, but at a higher level, we are guiding the Dean's Adjusted EBITDA positive for the fiscal year, which would mark our first Adjusted EBITDA positive year in our history.

We achieved year over year growth in new customer acquisition for the second consecutive quarter.

And towards our goal of expanding in the wholesale channel and our consumables products, our new cereal treats are now available nationwide at 'twenty 400 target and Petsmart stores.

Speaker Change: The initial customer feedback has been great and we are excited to expand further this year.

Speaker Change: That's a great quarter to end the year and build momentum into next year.

Speaker Change: The here, we will share our formal guidance, but at a high level, we are guiding to being adjusted EBITDA positive for the fiscal year, which would mark our first adjusted EBITDA positive year in our history.

Matt Meeker: In order to do this, this year and every year in the future, we need to grow. Well, let me share how we plan to grow now that we've invested in the leadership team to deliver it. It's easy to think of Bark as a subscription box company or a company that sells dog toys. We have served over 7 million customers directly and millions more via retail partners. So what sets us apart and frames our growth today and for the future?

Speaker Change: And in order to do this this year and every year in the future we need to grow well.

Speaker Change: So let me share how we plan to grow now that we've invested in the leadership team to deliver it.

It's easy to think of <unk> as a subscription box company or a company that sells dog choice we.

Speaker Change: We have served over 7 million customers directly and millions more via retail partners.

Speaker Change: So what sets us apart and frames our growth to date and for the future.

Matt Meeker: Bark doesn't just sell dog toys; we sell emotional experiences with your dog. The relationship people have with their dogs is filled with passion and emotion, and we're great at understanding that relationship and reflecting it in otherwise mundane products. We apply this approach to dog toys, treats, food, toppers, partnership with the Girl Scouts and others, and now to travel experiences with our new long-distance travel experience, Bark Air. The possibilities for us are endless. This approach has led to our strong brand relationship with millions of customers, and that emotional appeal and strong brand lead to the great margins we're now enjoying.

Speaker Change: Bark doesn't just sell dark toys, we sell emotional experiences with your dog.

Speaker Change: The relationship people have with their dogs is filled with passion and emotion and we're great at understanding that relationship and reflecting it and otherwise mundane products.

Speaker Change: We apply this approach to dark toys treats food toppers partnership with the girl Scouts and others and now travel experiences with our new long distance travel experience for our care.

The possibilities for US are endless. This approach has led to our strong brand relationship with millions of customers and that emotional appeal and strong brand lead to the great margins, we're now enjoying.

Matt Meeker: These relationships also lead to valuable data, and we believe we have more first-party data on this than anyone. This is valuable because we can process it and learn which products each person and dog wants to buy, which products will sell well in retail outlets, and what routes people want to fly with their dog next. Our ability to understand and use this data is accelerating with the rapid development of AI-based tools that allow us to turn this data into actionable insight.

These relationships also lead to valuable data.

Speaker Change: We believe we have more first party data on this than anyone.

Speaker Change: This is valuable because we can process, it and learn which products each person in dog wants to buy which products will sell in retail outlets and what routes people want to fly with our diagnostics.

Speaker Change: Our ability to understand and use this data is getting amplified by the rapid development of AI based tools that allow us to turn this data into actionable insights.

Matt Meeker: When we have a question, we can ask and get clear answers from millions of customers. This is an advantage we've spent 12 years building, and we're starting to use that leverage for growth. One way we're leveraging that is the launch of Bark Air. This is an initiative I've thought about for over 10 years due to being unable to fly with my great Dane, Hugo. Hugo, who also inspired Bark Box, wasn't well served as a large dog living in New York City.

Speaker Change: When we have a question we can ask get clear answers for millions of customers.

Speaker Change: This is an advantage we have spent 12 years building and we're starting to use that leverage for growth.

One way, we're leveraging that as the launch of <unk>.

Speaker Change: This is an initiative I've thought about for over 10 years due to being unable to fly with my great Dane Hugo.

Speaker Change: Hugo who also inspired barked box wasn't well served as a large dog living in New York City.

Matt Meeker: One of the biggest hurdles I and millions of other dog parents face is travel. More often than not, dogs are denied travel, confined to a duffel bag, or forced to endure the stress and potentially life-threatening conditions of flying as cargo. Since launching Bark Air, it's become even more obvious how much this service is needed, with an outpouring of supportive messages from all over the world cheering us on. Since its announcement in April, the response has been incredible. Bark Air has garnered more coverage than anything in the 12 year history of Bark. Here are some numbers from the first month before the first flight even took off.

Speaker Change: One of the biggest hurdles I and millions of other dog parents space is travel.

Speaker Change: More often than not dogs are denied travel confined to a duffel bag are forced to endure the stress and potentially life threatening conditions of flying as cargo.

Speaker Change: Since launching <unk>, it's become even more obvious how much of the services needed with an outpouring of support of messages from all over the world cheering us on.

Speaker Change: Since its announcement in April the response has been incredible spark era has garnered more coverage than anything the 12 year history of park.

Speaker Change: Here's some numbers from the first month before the first flight even took off.

Matt Meeker: Air has over $1 million in bookings, already selling out several of our flights. As we are only a few days into actual flight operations, we'll need more time to report on results here, but the impact on awareness is clearly amazing. Air's Instagram has over 100,000 followers, which, unsurprisingly, has had a hailing effect on our core social channels.

Speaker Change: <unk> has over $1 million of bookings.

Speaker Change: Already selling out several of our flights.

Speaker Change: As we are only a few days into actual flight operations, we will need more time to report on results here.

Speaker Change: However, the impact on awareness is clearly amazing.

Speaker Change: <unk> Instagram has over 100000 followers, which unsurprisingly has had a halo effect on our core social channels. The engagement level on every post is 65%.

Matt Meeker: The engagement level on every post is 65%. We had over 15,000 requests for destinations and routes in the first week. Prior to our first flight, we had over four billion media impressions around the world, and this continues today as our first flights take to the sky. This is also great marketing for Bark. The visibility has had a noticeable halo effect on our core business at Bark.co, and this was accomplished with an investment smaller than what we normally spend on five days of direct-to-consumer marketing.

Speaker Change: We had over 15000 requests for destinations in routes in the first week.

Speaker Change: And prior to our first flight, we had over 4 billion media impressions around the world and this continues today as our first flights take to the skies.

Speaker Change: This is also a great marketing for Bart.

Speaker Change: The visibility has had a noticeable halo effect on our core business at Parque Das <unk> and.

Speaker Change: And this was accomplished with an investment smaller than what we normally spend in five days of direct to consumer marketing.

Matt Meeker: It's so early, however, I'm thrilled with the early results. [inaudible] Moving on, another category where we've started selling these experiences with your dog is consumables. Two years ago, one of our retail partners said to us, We want you to bring Bark's fun to the treetile, the same as you've done with our Toaya. That was the start of our brief that led to our Cereal Treats line. Today, I'm thrilled to share that our new cereal treat experience is now available nationwide in over 2400 Target and PetSmart stores.

Speaker Change: Still early however, I'm thrilled with the early results.

Speaker Change: Strong consumer interest and demand and positive feedback from all over the world on how important this services.

Speaker Change: Moving on another category, we started selling these experiences with your dog is consumables.

Speaker Change: Two years ago, one of our retail partners said to us we.

Speaker Change: We want you to bring bark fund to the <unk> the same as you've done with our toy.

Speaker Change: That was the start of our brief that led to our cereal treats line.

Speaker Change: Today, I'm thrilled to share that our new cereal treat experience is now available nationwide and over 2400 target and petsmart stores.

Matt Meeker: Like with our first retail toy agreements, we asked for exclusivity with these launch partners, allowing us to test, learn, and grow more effectively. The initial customer feedback is great, and we will leverage our early learnings to bring this experience to many more retail partners in the future. This approach has been highly effective for us selling our toy experiences to retailers, and we anticipate similar success with these cereal treats and, ultimately, all our consumables products.

Speaker Change: Like with our first retail toy agreements, we asked for exclusivity with these launch partners, allowing us to test learn and grow more effectively.

Speaker Change: The initial customer feedback is great and we will leverage our early learnings to bring this experienced and many more retail partners in the future.

Speaker Change: This approach has been highly effective for us selling our toy experiences to retailers and we anticipate similar access with these serial treats and ultimately all of our consumables products.

Matt Meeker: This is step one of our consumables expansion in retail. And now, with Michael Black on board, we're more confident than ever that we have a significant runway for growth in this category and the retail channel. In addition to traditional retail, partnerships are a growth engine for us, as they've always been. In recent years, we've partnered with big brands including Dunkin, Subaru, Disney, and many more. One exciting partnership we're expanding on this fall is with the Girl Scouts. When I talk about an experience, this is it.

This is step one of our consumables expansion in retail and now with Michael Black onboard we're more confident than ever that we have a significant runway for growth in this category in the retail channel.

Michael K. Mougias: In addition to traditional retail partnerships or a growth engine for us as they have always been in recent years, we've partnered with big brands, including Dunkin' Subaru Disney many more.

Speaker Change: One exciting partnership we're expanding on this fall with the girl Scouts.

Speaker Change: When I talk about an experience this is ed.

Matt Meeker: Millions of Girl Scouts across the country are funding their organization activities in part by selling Bark products. Anyone who has ever had a Girl Scout come to their door selling cookies knows this is a channel with a high success rate. We're also seeing continued strong growth in consumables revenue via our direct-to-consumer channel, although excluding consumables revenue from our subscription boxes, which is a nine-figure revenue number on its own. Consumables drove over $20 million of DTC revenue in fiscal 2024, a 28% increase versus last year. However, this excludes consumables revenue from BarkBox and SuperChure.

Speaker Change: A girl scouts across the country are funding their organization activities and part by selling <unk> products.

Anyone who has ever had a girl scouts come to their door selling cookies knows this is a channel with a high success rate.

Speaker Change: We're also seeing continued strong growth in consumables revenue via our direct to consumer channel.

Speaker Change: Excluding consumables revenue from our subscription boxes.

Speaker Change: Which is a nine figure revenue number on its own.

<unk> drove over $20 million of PTC revenue in fiscal 2024.

28% increase versus last year.

Again, this excludes consumables revenue from <unk> and Super Tour.

Matt Meeker: This growth is encouraging as the category represents one of the most important long-term revenue drivers, and we anticipate this growth to continue, particularly as we migrate all of our sites under the Bark.co platform later this year. Zahir will cover our guidance in more detail shortly.

Speaker Change: This growth is encouraging as the category represents one of the most important long term revenue drivers and.

Speaker Change: And we anticipate this growth to continue particularly as we migrate all of our sites under the bark Dacko platform later this year.

Speaker Change: The here, we will cover our guidance in more detail shortly.

Matt Meeker: But with all these recent wins and positive momentum, I wanted to offer some context for the Q1 and Fiscal 25 guidance. First, we are getting to our first EBITDA positive year. That's the most important thing and something we've been working towards for two years. On the revenue side, we are getting to a year of flat to low single-digit revenue growth. For Q1, we are cutting to $113 to $116 million, which is down from last year. So if we have all of this positive momentum, then why are the growth results not reflecting it yet? The keyword is yet.

But with all of these recent wins and positive momentum I wanted to offer some context for the Q1 and fiscal 'twenty five guidance.

Speaker Change: First.

We are guiding to our first EBITDA positive year.

Speaker Change: That's the most important thing and something we've been working towards for two years.

On the revenue side, we're guiding to a year of flat to low single digit revenue growth.

Speaker Change: For Q1, we are guiding to $113 million to $116 million, which is down from last year.

Speaker Change: So if we have all of this positive momentum.

Speaker Change: The growth results not reflecting it yet.

Speaker Change: Keywords yet.

Matt Meeker: Please remember these key growth hires have been on the team for between 1 and 60 days. They need a bit of time to make an impact. But more so, this is about the timing of Bark's business model. On the retail wholesale side, great action today takes time to show up in the results. Sales meetings with most retailers happen in the spring, or orders that will come the following spring.

Speaker Change: Please remember these key growth hires have been on the team for between one and 60 days.

Speaker Change: Need a bit of time to make an impact.

Speaker Change: But more so this is about the timing of <unk> business model.

Speaker Change: On the retail wholesale side, great action today, It takes time to show up in the results.

Speaker Change: Sales meetings with most retailers happened in the spring or orders that will come the following spring.

Matt Meeker: So a strong performance from Michael Black today will yield results in fiscal 2026. That's just the natural cycle of the business. And yet, we're still expecting this part of the business to grow roughly 20% this year, with the bigger growth coming in fiscal 26 and beyond. On the direct consumer side, we are catching up on the compounding effects of a subscription business, and we are entering this year with fewer active subscribers than we entered last year.

Speaker Change: The strong performance from Michael Black today will yield results in fiscal 2026, that's just the natural cycle of the business.

And yet we're still expecting this part of the business to grow roughly 20% this year with the bigger growth coming into fiscal 'twenty six and beyond.

Speaker Change: On the direct to consumer side, we are catching up on the compounding effects of the subscription business for <unk>.

Speaker Change: Entering this year with fewer active subscribers than we entered last year.

Matt Meeker: The good news is we started turning that corner two quarters ago and we're gaining, but filling that hole will take the next two to three quarters with solid performance. Great performance today will lead to compounding results over time, but we must first lap the prior year. We're confident in our team and our plans to deliver that growth and profitability. And to that end, let me conclude with one final development.

Speaker Change: The good news is we started turning that corner two quarters ago, and we're gaining that filling that hole will take the next two to three quarters with solid performance.

Speaker Change: Great performance today, it will lead to compounding results over time, but it will be much first lap the prior year.

Speaker Change: We're confident in our team and our plans to deliver that growth and profitability and to that end, let me summarize with one final development.

Matt Meeker: At the top, I said Bark is back, standing on a solid path to profitability with a fully formed management team and gaining momentum across the board. We feel more confident than ever about our future, and we will continue to evaluate deploying our cash into buying back stock, fiscal 2024. We repurchased $6 million of stock in Bark, and last week our board authorized the purchase up to an incremental $15 million of stock.

Speaker Change: At the top I said park is back standing on a solid path to profitability with a fully formed management team and gaining momentum across the board.

Speaker Change: We feel more confident than ever about our future and we will continue to evaluate deploying our cash into buying back stock.

Speaker Change: In fiscal 2024.

We repurchased $6 million of stock embark and last week, our board authorized the purchase of up to an incremental $15 million of stock.

Matt Meeker: We will buy more of this great company while we consider it to be undervalued. In conclusion, this was a great quarter to close out the year with momentum building. Closing with an EBITDA positive quarter, $125 million of cash on hand, and strong and complete leadership is a great launchpad for the year ahead. This year, for the first time in our history, we expect to deliver positive adjusted EBITDA for the full year. And for the many growth engines I've mentioned today, I expect them to accelerate meaningfully. And with that, I will turn it over to Zahir.

Speaker Change: We will buy more of this great company, while we consider it to be undervalued.

In conclusion, this was a great quarter to close out the year with momentum building.

Speaker Change: Closing with an EBITDA positive quarter $125 million of cash on hand, and a strong incomplete leadership is a great launch pad for the year ahead.

Speaker Change: This year for the first time in our history, we expect to deliver positive adjusted EBITDA for the full year.

Speaker Change: And for the many growth engines I have mentioned today I expect it to accelerate meaningfully.

Speaker Change: And with that I will turn it over to say here.

Zahir M. Ibrahim: Thanks, Matt, and good afternoon, everyone. I will start by providing additional color on our fourth quarter financial performance and then expand on Matt's comments regarding our outlook for fiscal 2025. Overall, we executed the strategy we laid out at the beginning of the year. We delivered healthy gross margin improvements, gained operating leverage in the P&L, and significantly reduced our inventory levels and cash burn. For fiscal 2025, we are focused on driving long-term top-line growth and now have the cost structure to enable it.

Mark: Thanks, Matt and good afternoon, everyone I will start by providing additional color on our fourth quarter financial performance and then expand on Mark's comments regarding our outlook for fiscal 2025.

Speaker Change: Overall, we executed the strategy, we laid out at the beginning of the year, we delivered healthy gross margin improvements gained operating leverage in the P&L significantly reduced our inventory levels and cash burn.

Mark: For fiscal 2025, we are focused on driving long term top line growth and now have the cost structure to enable it.

Zahir M. Ibrahim: Beginning at the top of the P&L, total fourth-quarter revenue was $121.5 million, down 3.6% compared to last year. To put this in perspective, last quarter, the toy industry in retail for dogs was down 10% year over year, according to Nielsen data. So we're continuing to improve our execution relative to industry headwinds. From a segment perspective, direct-to-consumer revenue was $109.3 million, down 5.9%. The year-over-year decline in D2C revenue is primarily due to carrying fewer total box subscriptions into the current period. Total shipments in the quarter declined 3.3 percent to 3.5 million, while average order value was down roughly 2.5 percent to $31.25.

Beginning at the top of the P&L total fourth quarter revenue was $121 5 million down three 6% compared to last year to put this in perspective last quarter of the toy industry and retail for dogs was down 10% year over year. According to Nielsen data.

Speaker Change: We're continuing to improve our execution relative to industry headwinds.

Speaker Change: From a segment perspective direct to consumer revenue was $109 3 million down five 9%.

Speaker Change: The year over year decline in DTC revenue is primarily due to carrying fewer total bulk subscriptions into the current period.

Speaker Change: Total shipments in the quarter declined three 3% to $3 $5 million, while average order value was down roughly two 5% to $31 25.

Zahir M. Ibrahim: Total commerce revenue was $12.1 million, up 21% compared to last year. The large uptick in this line is driven by incremental revenue from our new treat line in Target and Petsmart, along with Girl Scouts revenues. Total revenue for the year was $490.2 million, down 8.4%. On a segment basis, D2C was down 7.5% to $436.4 million.

Speaker Change: Total commerce revenue was $12 1 million up 21% compared to last year.

Speaker Change: Large uptick in Miss lime is driven by incremental revenue from our new treat line and target small along with girl Scouts revenues.

Speaker Change: Total revenue for the year was $490 2 million down eight 4% on a segment basis DTC was down seven 5% to $436 4 million.

Zahir M. Ibrahim: As Matt mentioned, we face headwinds in our more discretionary toy category, particularly in the first half of the year. Nonetheless, we have been encouraged by our second half customer acquisition trends, and we'll look to build on this momentum in the quarters ahead. It is also worth reiterating that our consumables category, excluding consumables in our subscription boxes, grew nearly 30% to $20 million in fiscal 2024. This is encouraging, and we expect this category to become an increasingly important revenue driver in the future.

Speaker Change #100: Mentioned, we face headwinds in a more discretionary toy category, particularly in the first half of the year.

Speaker Change #101: Nonetheless, we have been encouraged by our second half customer acquisition trends and we will look to build on this momentum in the quarters ahead.

Speaker Change #102: It is also worth reiterating consumables category, excluding consumables in our subscription boxes grew nearly 30% to $20 million in fiscal 2024.

Speaker Change #103: This is encouraging and we expect this category to become an increasingly important revenue driver in the future.

Zahir M. Ibrahim: Moving on, commerce revenue was down 15% to $53.7 million. As I noted on our Q4 call last year, we expected softness in commerce in fiscal 2024 as our retail partners were focused on managing down their inventory levels and remained cautious throughout the year given the macroeconomic environment. And that's how the year played out.

Moving on Commerce revenue was down 15% to $53 7 million.

Speaker Change #104: Noted on our Q4 call last year, we expected softness in commerce in fiscal 2024 is our retail partners with a focus on managing down their inventory levels and remain cautious throughout the year given the macroeconomic environment.

Speaker Change #105: And that is how the year played out. Nevertheless, we are excited to introduce a new treat line and over 2400 doors nationwide and plan to broaden our retail offerings over the next 12 to 24 months.

Zahir M. Ibrahim: Nevertheless, we are excited to introduce our new treat line in over 2,400 doors nationwide and plan to broaden our retail offerings over the next 12 to 24 months. From a margin perspective, we delivered an impressive 580 basis points increase in our fourth quarter gross margin. DTC gross margins improved 590 basis points, while commerce gross margins improved 990 basis points in the quarter. For the full year, our consolidated gross margin was up 410 basis points to 61.6%, while D2C and commerce gross margins came in at 63.9% and 43.4%, respectively, reflecting a 340 and 730 basis point improvement, respectively.

Speaker Change #106: From a margin perspective, we delivered an impressive 580 basis points increase in our <unk>.

Speaker Change #106: Fourth quarter gross margin.

Speaker Change #106: Gross margins improved 590 basis points, while commerce gross margins improved 990 basis points in the quarter.

Speaker Change #106: For the full year, our consolidated gross margin was up 410 basis points to 61, 6% while D to C. M. Commerce gross margins came in at 63, 9% from 43, 4% respectively.

Speaker Change #107: 340, 730 basis point improvement respectively.

Zahir M. Ibrahim: We have made significant improvements in delivering productivity savings in our cost of goods. Looking ahead, we anticipate our consolidated gross margin to remain strong in fiscal 25, driven by new vendor contracts on the consumable side of the business, although these will be partly offset by channel mix dynamics. Turning to G&A, shipping and fulfillment expense was down 6.6% to $33.6 million in the fourth quarter. For the full year, shipping and fulfillment expense was $139.8 million, down nearly 11% compared to last year. While lower order volume was responsible for some of the decline, we also drove efficiencies through our network.

Speaker Change #108: <unk> made significant improvements in delivering productivity savings in our cost of goods.

Looking ahead, we anticipate our consolidated gross margin to remain strong in fiscal 'twenty five driven by new vendor contracts on the consumables side of the business. Although these will be partly offset by channel mix dynamics.

Speaker Change #109: Turning to G&A shipping and fulfillment expense was down six 6% to $33 6 million in the fourth quarter for.

Speaker Change #109: For the full year shipping and fulfillment expense was $139 8 million down nearly 11% compared to last year.

Speaker Change #110: While lower order volume was responsible for some of the decline. We also drove efficiencies throughout our network in Q4, we entered into new long term agreements for both shipping and fulfillment, which will continue to bring meaningful benefits for FY 'twenty five.

Zahir M. Ibrahim: In Q4, we entered into new long-term agreements for both shipping and fulfillment, which will continue to bring meaningful benefits for FY25. Other G&A in the fourth quarter was down $2.9 million to $30.2 million and down $17.2 million for the full year to $128.6 million. The $17 million full-year savings were driven by the two cost reduction initiatives we instituted in February and July 2023. In fiscal 2025, we will have some run rate benefits from the July 23 initiative.

Speaker Change #111: Although G&A in the fourth quarter was down $2 9 million to $32 million and down $17 2 million for the full year to $128 6 million 17 million full year savings were driven by the two cost reduction initiatives, we instituted in <unk>.

Speaker Change #112: Worry in July 2023.

Speaker Change #113: In fiscal 2025, we will have some run rate benefits from the July 2003 initiative.

Zahir M. Ibrahim: Furthermore, as we move all of our sites to the Bark.co platform later this fiscal year, additional efficiencies will flow through the PML. Total advertising and marketing expense was $18.8 million in the quarter and $79.3 million for the year.

Speaker Change #114: Furthermore, as we move all of our sites to the <unk> platform. Later this fiscal year additional efficiencies will flow through the P&L.

Speaker Change #115: Total advertising and marketing expense was $18 8 million in the quarter and $79 3 million for the year.

Zahir M. Ibrahim: The full-year figure represents a 14.7% increase compared to last year. As we discussed in previous calls, our improved profitability profile delivers stronger LTV from new subscribers and affords us more flexibility to invest in marketing to drive the top line. We will continue to balance this investment with profitability; however, we anticipate increasing our marketing spend in the current fiscal year, although not to the extent we did in fiscal 24. This includes traditional marketing, as well as new initiatives such as Bark Air, where we'll be investing 1 to 1.5 million in marketing this year.

Speaker Change #115: With full year figure represents a 14, 7% increase compared to last year.

Speaker Change #116: We've discussed in previous calls improved profitability profile and deliver stronger LTV from new subs and affords us more flexibility to invest in marketing to drive the top line.

We will continue to balance this investment with profitability. However, we anticipate increasing our marketing spend in the current fiscal year, although not to the extent we did in fiscal 2004. This includes traditional marketing as well as new initiatives such as bulk.

Speaker Change #117: We will be investing one to one 5 million in marketing this year.

Zahir M. Ibrahim: Moving on, we delivered fourth-quarter adjusted EBITDA of $2.2 million, a $5.7 million improvement compared to last year. For the full year, adjusted EBITDA was negative $10.6 million, an almost $21 million improvement compared to last year, and $48 million better than two years ago, driven by our significant margin and cost improvement. We also reduced our total cash burn to just $2.8 million for the year, a nearly $14 million improvement compared to last year and over $190 million better than fiscal 2022.

Speaker Change #118: Moving on we delivered fourth quarter, adjusted EBIT of $2 2 million or $5 7 million an improvement compared to last year.

Speaker Change #119: For the full year adjusted EBITDA was negative $10 6 million on almost $21 million improvement compared to last year and $48 million invested them two years ago, driven by a significant margin and cost improvements. We also reduced our total cash burn to just $2 8 million for the year and nearly 14.

Speaker Change #119: Million improvement compared to last year and over $190 million better than fiscal 2022.

Zahir M. Ibrahim: The profit improvement has been a major component of this, as has the reduction in our inventory levels, which ended the period at $84 million, reflecting a $14 million reduction in fiscal Q3 and a $40 million reduction during fiscal 2024. We ended the quarter with a total cash balance of $125 million.

Speaker Change #119: The profit improvement has been a major component of this.

Speaker Change #119: The reduction in our inventory levels, which ended the period at $84 million, reflecting a $14 million reduction to fiscal Q3 on a $40 million reduction during fiscal 2024.

Speaker Change #120: We ended the quarter with a total cash balance of $125 million. In addition to repurchasing $45 million of our convertible notes in Q3 ahead of schedule. The cash balance reflects purchasing 2 million of common stock in the fourth quarter and over $6 million throughout fiscal 2024.

Zahir M. Ibrahim: In addition to repurchasing $45 million via a convertible note in Q3, ahead of schedule, the cash balance reflects purchasing $2 million of common stock in the fourth quarter and over $6 million throughout fiscal 2024. We ended the year with a cash position net of debt of approximately $86 million, which affords us ample opportunities to invest in growth, continue repurchasing shares, or pay down the balance of our convertible note. To that end, we also announced that our board of directors authorized a $15 million share repurchase program, which we plan to use opportunistically in the periods ahead. As we deliver year-over-year improvements in our profitability profile in fiscal 2025, this will allow for further flexibility in the future. On that note, let's turn to guidance, beginning with the fall semester.

Speaker Change #121: We ended the year with a cash position net of debt of approximately $86 million, which affords us ample opportunities to invest in growth.

Speaker Change #122: Repurchasing shares or pay down the balance of our convertible note.

Speaker Change #123: To that end, we also announced that our board of directors authorized a $15 million share repurchase program, which we plan to use opportunistically in the periods ahead.

Speaker Change #123: As we deliver year over year improvements in our profitability profile in fiscal 2025. This will allow further flexibility in the future.

Speaker Change #124: On that note, let's turn to guidance beginning with the full year.

Zahir M. Ibrahim: Overall, we're seeing encouraging trends across several indicators. Year over year, we've grown new Play subscriptions for two consecutive quarters. In addition, consumables are growing across the beach, and our new cereal treats are available nationwide at Target and PetSmart.

Speaker Change #124: Overall, we are seeing encouraging trends across several indicators.

Speaker Change #124: Year over year, we have grown new place subscriptions for two consecutive quarters.

Speaker Change #124: In addition, consumables are growing across the DTC channel.

Speaker Change #125: On a new cereal treats are available nationwide to target small.

Zahir M. Ibrahim: Like Matt said, it's early days, and we would like to err on the side of caution, particularly given our place subscription business is more susceptible to macroeconomic trends. On that note, we anticipate total revenue of between $490 and $500 million, reflecting year-over-year growth of flat to up 2% compared to fiscal 2024. From a profitability perspective, we currently expect an adjusted EBITDA range of 1 million to 5 million for the year, reflecting a strong improvement of between 12 million and 16 million year-over-year.

Speaker Change #126: It's early days.

Speaker Change #127: We would like to err on the side of caution, particularly given our play subscription business is more susceptible to macroeconomic trends.

Speaker Change #128: No we.

Speaker Change #129: Total revenue of between 490 $500 million, reflecting year over year growth of flat to up 2% compared to fiscal 2024.

Speaker Change #130: From a profitability perspective, we currently expect an adjusted EBIT dollar range of 1 million to $5 million for the year, reflecting a strong improvement of between $12 million and $16 million year over year.

Zahir M. Ibrahim: This is a pivotal moment reflecting Bark's first year of profit delivery in our history. For the first quarter, we expect total revenue between $113 million and $116 million. This reflects a year-over-year decline between 6.3 percent and 3.8 percent.

Speaker Change #131: This is a pivotal moment, reflecting box per share profit delivery in our history.

Speaker Change #132: For the first quarter, we expect total revenue between 113 and $116 million. This reflects a year over year decline between six 3% and three 8%.

Zahir M. Ibrahim: The anticipated first quarter decline is primarily from carrying fewer total box subscriptions into the current period compared to Q1 last year due to a decline in our first half new subscriber performance last year. Nevertheless, on the back of our second half fiscal 24 new subscriber performance coupled with anticipated momentum building through fiscal 2025, we anticipate year-over-year growth indeed to see in the second half of this year. From an adjusted EBITDA standpoint, we currently expect a first quarter loss between $4 million and $2 million, reflecting a 4.4 million year-over-year improvement and the midpoint of that range. Relative to Q4 fiscal 24, our profit is down $4 million to $6 million, driven by the top line, which is impacted mainly by commerce seasonality and partly from the promotions calendar in D2C in Q1.

<unk> first quarter decline was primarily from carrying fewer total bulk subscriptions into the current period compared to Q1 last year due to the loss in our first half new subs performance last year.

Speaker Change #133: Nevertheless on the bulk of our second half fiscal 'twenty for new subs performance, coupled with anticipated momentum building through fiscal 2025, we anticipate year over year growth in D. C. In the second half of this year.

Speaker Change #134: From an adjusted EBIT loss standpoint, we currently expect first quarter loss between 4 million and $2 million, reflecting a $4 4 million year over year improvement on the midpoint of that range.

Speaker Change #134: Relative to Q4 fiscal 'twenty four.

Speaker Change #134: It is down 4 million to $6 million driven by the top line, which was impacted mainly by commerce seasonality and partly from the promotions calendar in DTC in Q1.

Zahir M. Ibrahim: All in all, we are seeing encouraging trends across the business. We expect our top line to accelerate out of Q1, while our gross margins for D2C and commerce will continue to perform strongly. And segment profitability will largely show improvements in each quarter versus fiscal 2024. As I mentioned earlier, we also expect 2025 to be our first full year of adjusted EBITDA profitability. Improving by approximately 60 million since fiscal 2022 demonstrates great progress in the financial health of the business over a relatively short period of time.

Speaker Change #135: All in all we are seeing encouraging trends across the business, we expect our topline to accelerate out of Q1, while our gross margins with DTC and commerce, we will continue to perform strongly.

Speaker Change #136: And segment profitability will largely show improvements over each quarter versus fiscal 2024.

As I mentioned earlier, we also expect 2025 to be our first full year of adjusted EBITDA profitability improved.

Improving approximately $60 million since fiscal 2022 demonstrates great progress in the financial health of the business over a relatively short period of time.

Zahir M. Ibrahim: And as our consumables category gains momentum, we believe there is a lot of ongoing growth potential across the P&L. In addition, our balance sheet is in a strong position, so we will have ample opportunities to invest in growth and deliver long-term shareholder value. And with that, I will turn the call over to the operator's Q&A.

Speaker Change #137: And as our consumables category gains momentum. We believe there is a lot of ongoing growth potential across the P&L and.

Speaker Change #138: In addition, our balance sheet is in a strong position and so we will have ample opportunities to invest in growth and deliver long term shareholder value.

Speaker Change #139: And with that I will turn the call over to the operator for Q&A.

Operator: Thank you. We will now open the line for questions. Our first question comes from Ryan Meyers with Lake Street Capital Markets. Please go ahead. Ibrahim.

Speaker Change #140: Thank you we will now open the line for questions.

Speaker Change #140: Our first question comes from Ryan Meyers with Lake Street Capital markets. Please go ahead.

Ryan Robert Meyers: Hey guys, thanks for taking my questions. The first one for me, you know, I'm curious about the continued softness in the discretionary categories. Is that largely what you have been expecting, and there's really been no changes there? And then do you bake in any sort of improvements in those categories into the 2025 guidance?

Ryan Robert Meyers: Hey, guys. Thanks for taking my questions first one for me I'm curious the continued softness in the discretionary categories. I mean is that largely what you have been expecting and theres really been no changes there.

Ryan Robert Meyers: And then do you bake in any sort of improvement in those categories.

Speaker Change #142: <unk> 2025 guidance.

Speaker Change #142: Yes.

Speaker Change #142: Uh huh.

Zahir M. Ibrahim: Hey, Ryan, thanks for the question. I think overall, we're monitoring those macro trends and the signs. Maybe there are some positive signals that we're seeing, but I think for us, it's a little too soon to call it an industry turnaround, given the past couple of years of... Significant pet food inflation and where does that go, and maybe some uncertainty around the election and just the economy overall. As you may have heard from Chewy last week.

Ryan Robert Meyers: Hey, Ryan Thanks for the question.

Speaker Change #143: Overall, we're we're monitoring those macro trends and the science.

Speaker Change #143: And.

Speaker Change #143: Maybe there is some some positive signals that we're seeing but I think for us it's a little too soon to call. It an industry turnaround given the past couple of years of.

Speaker Change #143: Significant pet food inflation, and where does that go in.

Speaker Change #143: Maybe some uncertainty around like election, and just the economy overall.

Speaker Change #143: As you may have heard from QE last week.

Zahir M. Ibrahim: They reported that calendar Q1 was the first time since 2022 that adoptions were greater than relinquishments within shelters, so that's a positive signal. On the flip side, Nielsen is showing that dog toys in retail were down 10% in Q4. But relative to that, Bark toys were only down 1.5%, so while we're still down, we're gaining some share there. We're taking all that, factoring it into the year ahead, and making the best assessment that we can.

Speaker Change #144: They reported that calendar Q1 was the first time since 2022 that adoptions, where greater than relinquishment within shelters. So that's a positive signal.

Speaker Change #145: On the flip side Nielsen is showing the dog choice in retail were down 10% in Q4.

But relative to that park toys were only down one 5% so.

Speaker Change #146: While we are still downward we're gaining some share there.

Speaker Change #146: We're taking all of that factoring into the year ahead, and making the best assessment that we can.

Zahir M. Ibrahim: And maybe just to add to that a little bit because you're asking how that factored into the guidance. There's a, It's obviously, as I mentioned, the retail sales cycle is a long lead sales cycle. So adding someone as amazing as Michael Black. It's not going to pay off with big results this year because he could be the best salesperson in the world, and you're never going to change the way Target or Walmart or any retailer runs their business.

Speaker Change #147: Maybe just to add to that a little bit because you're asking about how does that factor into the into the guidance.

Speaker Change #148: There is a.

Speaker Change #148: Obviously as I mentioned, the retail sales cycle is a long lead sales cycle, so adding someone as amazing as Michael Black.

Speaker Change #149: It's not going to pay off with big results. This year, because he could be the best sales person in the world and Youre never going to change the way target or Walmart or any retailer runs their business.

Speaker Change #149: <unk>.

Zahir M. Ibrahim: That's another way of saying we have a lot of visibility for the year in that channel. It will be affected positively or negatively to some extent by the macro, but a lot of this is baked already.

Speaker Change #150: Another way of saying.

Speaker Change #150: We have a lot of visibility for the year in that channel it will be affected positively or negatively to some extent by the macro but a lot of this is baked already.

Ryan Robert Meyers: Okay, I got it. That's helpful. And then just thinking about sort of the cadence and seasonality. You said on the top line that you expect revenue acceleration coming out of Q1. So I think that makes sense. But then on the EBITDA side, I mean, do you guys plan to follow kind of the similar seasonality that you did here in 2024, you know, as in investing more in marketing in Q3, and that's kind of how the EBITDA will shake out? Just any commentary on the kind of the cadence of the guidance would be helpful.

Speaker Change #151: Okay got it that's helpful. And then just thinking about sort of a cadence season.

Speaker Change #152: Instead of the top line you expect revenue acceleration coming out of Q1, So I think that makes sense, but then on the EBITDA side I mean do you guys plan for follow on that.

Speaker Change #153: Seasonality that you did here in 2024.

As in investing more in marketing in Q3, and Thats kind of how sort of the EBITDA will shake out just any commentary on kind of the cadence of the guidance would be helpful.

Zahir M. Ibrahim: Hey Ryan, how are you doing? This is Zahir.

Hey, Ryan how are you doing this as I hear you.

Speaker Change #154: The general shape of the P&L from an EBITDA perspective.

Zahir M. Ibrahim: Yeah, the general shape of the P&L from an EBITDA perspective will kind of follow a similar sort of cadence to what it did in fiscal 24, just from an EBITDA perspective. For each of the quarters, you'll see a stronger performance and, therefore, a stronger performance for the year overall. In relation to marketing, Q3 is always going to be our biggest quarter because of the holiday season. But, you know, given where we are from a profitability perspective, we'll continue to look at opportunities to invest to drive top-line growth. We have that flexibility now, given the fundamentals of the business and the financial health of businesses in a much stronger position.

Ryan Robert Meyers: Kind of follow a similar sort of cadence to what it did in fiscal 2000 and for just from an EBIT perspective for each of the quarters Youll see a stronger performance and therefore, a stronger performance for the year overall in relation to marketing Q4, Q3, sorry is always going to be our biggest.

Ryan Robert Meyers: Quarter because of the holiday season.

Speaker Change #155: Given where we are from a profitability perspective, we'll continue to look at opportunities to invest to drive topline growth. We have that flexibility now given the fundamentals of the business and the financial health of our businesses and a much stronger position.

Operator: Got it. Thanks for taking my questions. Our next question comes from Camille Gajrawalla with Jeffreys. Please go ahead.

Speaker Change #156: Got it thanks for taking my questions.

Operator: Our next question comes from Kamil Ghajrawalla with Jeffreys. Please go ahead. Kamil Gadrawala, your line is now open.

Our next question comes from <unk> <unk> with Jefferies. Please go ahead.

Speaker Change #156: Campbell.

Speaker Change #157: <unk> Your line is now open.

Kamil Ghajrawalla: Hey, sorry about that, guys. I was speaking to myself on mute. On guidance, can we...

Speaker Change #158: Hey, sorry about that guys.

Speaker Change #159: I was speaking to myself on mute.

Speaker Change #159: <unk>.

Campbell: On guidance can we can you maybe dig down a little bit further on your EBITDA Guide is positive does that also mean free cash flow should be positive for the year.

Zahir M. Ibrahim: Hey, Carmel. How are you doing? This is Zahir. Yeah, the

Dennis: Hey, Continental how you Dennis yes.

Dennis: Yes.

Continental: EBITDA is a good proxy for free cash flow for our business for the coming year. So yes.

Continental: Similar sort of ZIP code from a free cash flow positive perspective for fiscal 'twenty five.

Zahir M. Ibrahim: Okay, great. Yeah, so there's nothing strange in the figures. It should, it should be aligned. I guess, Matt, you've been cautioning us about how quickly, or maybe cautioning us not to add, you know, revenue growth from some of the new retail, some of the new retail opportunities too quickly, but what should be the incremental contribution maybe for that year, 2026, when we're, you know, past the sort of shelf resets and that sort of thing?

Continental: Okay, great, yes, so nothing strange in the figures.

Speaker Change #163: You'd be aligned.

Speaker Change #163: Yes, I guess.

Speaker Change #164: <unk> bin.

Speaker Change #165: <unk> been cautioning us at how quickly.

Speaker Change #166: We caution you not to be not to add.

Speaker Change #167: Revenue growth from some of the new retail.

Speaker Change #167: New retail opportunities to quickly but.

Speaker Change #168: What should be the incremental contribution maybe for that year 2000 to 2026 when we.

Speaker Change #168: Past, the sort of shelf resets and that sort of thing.

Speaker Change #168: Oh.

Matt Meeker: I don't know that I have a numerical answer for you, but I think I can give you sort of a directional answer in terms of activity. Again, we've got new talent in the revenue-driving side of the house, and that gives us a full year of working with Michael and his team developing products for that channel and then taking those into retail and selling them, and we wouldn't have bet on him if we didn't feel very bullish about his ability to do that given his background.

Speaker Change #169: I don't know that.

Speaker Change #169: I don't know that I have.

Speaker Change #170: Numerical answer for you I think I can give you a sort of a directional answer in terms of activity.

Speaker Change #171: Again, we've got new talent in the revenue driving side of the house.

Speaker Change #171: And.

Speaker Change #171: That gives us a full year of.

Working with Michael and his team developing products for that channel.

Speaker Change #172: And then taking those into retail and selling them and we wouldn't have bet on him. If we didn't feel very bullish about his ability to do that given his background. In addition to that.

Speaker Change #172: Sure.

Matt Meeker: In addition to that, we've started this year with the treat line that we put into Target and PetSmart. We purposely put exclusivity in with those two so we'd have time to learn and get feedback from them and our customers and get the right assortment and learn how to market it. So then we can take it out and get a much wider and more effective bang, if you will, across all retail channels. So that should help. And then, hopefully, we're expanding more into

Speaker Change #173: This year with the treat line that we put into target and petsmart, we purposely put exclusivity and with those two so we'd have time to learn and get feedback from them and our customers and get the right assortment and learn how to market. It.

Speaker Change #174: Then we can take it out and get a much.

Speaker Change #175: A much wider and more effective Bang if you will across all retail channels, so that should help.

Zahir M. Ibrahim: Yes, toppers and dental categories, but also from a channel perspective into the e-commerce side of things or the marketplace side, like an Amazon marketplace, and including internationally. So I think those are some directional indicators of why we think this might accelerate significantly in 26. Yeah, I mean, Cameron, just on that point. This year, commerce was about 11% of our revenue in fiscal 24. We expect next year it to be about 12 to 13% of our revenues.

Speaker Change #176: And then hopefully we're expanding more into.

Speaker Change #176: The.

Speaker Change #176: Toughness in dental.

Speaker Change #176: Toppers in dental categories, but also from a channel perspective into the e-commerce side of things or the marketplace side like an Amazon marketplace.

Speaker Change #177: And including internationally. So I think those are some some directional <unk>.

Speaker Change #178: Indicators of why we think this might accelerate significantly in 'twenty six.

Speaker Change #178: Yes, I mean comment just on that point.

Sure Commerce was about 11% of our revenue in fiscal 'twenty four we expect next year for it to be about 12% to 13% of our revenue and then looking beyond fiscal 2026.

Zahir M. Ibrahim: And then looking beyond fiscal 2026, over the next three years, we expect commerce to be about 30 to 35% of our business. So clearly, that gives you a signal of growth over the following couple of years.

Speaker Change #179: Over the next three years, we expect <unk> to be about 30% to 35% of our business. So clearly that gives you a signal.

Speaker Change #179: The growth over those following couple of years.

Zahir M. Ibrahim: Got it. That's useful. Thank you, guys.

Speaker Change #180: Got it Thats useful thank you guys.

Maria Ripps: Our next question comes from Maria Ripps with Canaccord. Please go ahead.

Maria Ripps: Our next question comes from Maria reps with Canaccord. Please go ahead.

Maria Ripps: Great, thanks so much for taking my questions. First, I just wanted to follow up a little bit more on marketing spend. Can you maybe just talk about sort of how your incremental marketing spend performed in Q4? Are you still sort of seeing healthy ROI sort of efficiencies after some of the sort of restructuring or optimizing some of the marketing functions late last year? And I guess, can you just tell us again how we should think about your marketing spend as we move into this year and as revenue sort of returns to growth?

Maria Ripps: Great. Thanks, so much for taking my questions.

Speaker Change #182: I just wanted to follow up a little bit more on marketing spend can you maybe just talk about sort of.

Maria: How your incremental marketing spend performed in Q4.

Maria: Are you still sort of seen healthy ROI sort of efficiencies. After some some of this restructuring optimizing some of the marketing functions late last year and I guess.

Maria: Can you just tell US again, how should we think about sort of your marketing.

Maria: Spend as we move through this year and as revenue returns to correct.

Matt Meeker: Yeah, the good news is that what we started in Q3 last year continued right through Q4. It was very steady, very solid. Our number of new subscribers acquired was up significantly year over year. The quality of those subscribers, or all of them, is up. Significantly, our lifetime value reflected in our lifetime value being up. I think there is an opportunity to further improve.

Maria: Yeah.

Speaker Change #184: The good news is what we started in Q3 of last year continued right through Q4. It was very steady very solid or a number of new subscribers acquired was up significantly year over year. The quality of those subscribers are all of them.

Speaker Change #185: <unk> are up significantly our lifetime reflected in our lifetime value being up.

Speaker Change #185: The.

Speaker Change #186: I think the opportunity to further improve.

Matt Meeker: Our customer acquisition and our marketing overall again comes from our new CMO, Michael Parnas, joining the team. And in spite of these past two quarters being very strong in terms of customer acquisition and the payback that we're getting from those customers. Our weakness that we know we have is that we are very focused on the bottom of the funnel, our only direct response and digital tactics to acquire a customer. And that's just not good enough that it leaves a huge amount of opportunity when it comes to upper and mid funnel activity creating awareness working across all of our sales channels together, not having them siloed.

Speaker Change #186: Our customer acquisition and our marketing overall again comes from our our new CMO and Mike <unk>, joining the team and in spite of these.

Max Rakhlenko: These past two quarters being very strong in terms of customer acquisition.

Max Rakhlenko: And the payback that we're getting from those customers.

Our our weakness that we know we have is that we are very focused on the bottom of the funnel. Our only direct response digital tactics to acquire a customer.

Max Rakhlenko: And.

That that's just not good enough that that leaves a huge amount of opportunity when it comes to upper and mid funnel activity.

Speaker Change #187: Creating awareness.

Speaker Change #188: Working across all of our sales channels, together and not having them siloed. So now we have a leader who's got.

Matt Meeker: So now we have a leader who's got great experience in two great companies in the pet industry over the last 12 years joining the team, leading that function, and taking that approach. And I think what we've seen with Bark Air in particular is a fairly modest investment, especially relative to what we spend on direct-to-consumer marketing, giving us this enormous outsized awareness benefit, and shows that some smart investment in the upper and mid funnel can have big gains for us and actually aid the bottom of the funnel activity that we've got. So we've got some change to do there. We've got the right leader to do it. We just have to give him a little time to roll that through.

Speaker Change #189: Great experience in two great companies in the pet industry over the last 12 years, joining the team leading that function taking that approach.

Speaker Change #190: And I think what.

What we've seen with <unk>.

With Barack area in particular.

Speaker Change #191: Is fairly modest.

Speaker Change #192: Investment, especially relative to what we spend on direct to consumer marketing.

Given us this enormous outsized awareness benefit.

Speaker Change #193: Jos that.

Speaker Change #194: Some smart investment and upper and mid funnel. It can have big gains for us and actually at the bottom of funnel activity that we've got so we've got some change there to do we've got the right leader to do it.

Speaker Change #195: We just got to give them a little time to roll that through.

Speaker Change #196: Got it that's very helpful. Thank you and then secondly, if I heard this right I think we mentioned.

Maria Ripps: Got it. That's very helpful, Matt. Thank you. And then secondly, if I heard this right, I think Zahir said that sort of carrying a little bit fewer boxes in the quarter contributed to sort of slower DTC revenue growth. Could you maybe talk about how you're thinking about sort of your inventory levels here, and especially as you work towards returning your DTC business back to growth?

Speaker Change #197: You said that you sort of carrying fewer boxes in the quarter contributed to sort of slowly did you see.

Speaker Change #197: Revenue growth.

Just can you maybe talk about how you're thinking about sort of your inventory levels here, and especially <unk> journey, new DTC business back to growth.

Zahir M. Ibrahim: Sure. I think if we go back in time, we drove our inventory levels up around the time of COVID, supply constraints, and concerns about supply continuity. And the reality is that we overbuilt inventory. So what we've been doing over the last couple of years, and the supply chain team has done a great job of it, has managed down inventory levels over that period of time. Where we are now, we're carrying a healthy level of inventory.

Speaker Change #197: Sure.

Speaker Change #198: I think if we if we go back in time, we drove our inventory levels during the ramp time of Covid.

Speaker Change #198: Supply constraints and concerns about.

Speaker Change #199: Supply continuity.

Speaker Change #199: And the reality is that we.

We havent built inventory so what we've been doing over the last couple of years.

Speaker Change #200: The supply chain team has done a great job of it is managed down inventory levels over that period of time.

Speaker Change #201: Well right now we're carrying a healthy level of inventory, we still see opportunities over the next 18 months to have pad inventory back further but not anywhere near the extent that we've done in the rearview mirror there'll be more modest incremental improvement.

Zahir M. Ibrahim: We still see opportunities over the next 18 months to pair that inventory back further, but not anywhere near the extent that we've done in the rear view mirror. There'll be more modest incremental improvement. But from a customer service level perspective, and all of those metrics, our inventory level is more than adequate, and we carry appropriate levels of safety stock.

Speaker Change #201: From a customer service level perspective, and all of those metrics our inventory level is more than adequate and we carry appropriate levels of safety stocks.

Maria Ripps: That's very helpful. Thank you.

Speaker Change #201: Okay.

That's very helpful.

Ygal Arounian: Our final question comes from Ygal Arounian with Citigroup. Please go ahead.

Speaker Change #201: Our final question comes from Eagle Iranian with Citigroup. Please go ahead.

Maksim Rakhlenko: Hey, guys, good afternoon. You have Maksim Arounian for Ygal. I just want to maybe start off with the unified platform. You know, you're expected to finish that this year. Maybe just help us walk through what's left. You know what? What's left to do there?

Speaker Change #202: Hey, guys good afternoon, Max more on for Yigal.

Speaker Change #203: I just wanted to maybe start off with.

Unified Platt.

Eagle Iranian: Platform Youre expected to finish that this year.

Speaker Change #205: Maybe just help us walk through what's left.

Speaker Change #205: What's left to do there and then.

Speaker Change #206: I understand it should help with the cross selling by bringing the different brands under the same platform, but are there other added benefits from going to the shopify.

Speaker Change #207: Platform that youre expecting better maybe better data better ability to engage with marketing.

Maksim Rakhlenko: And then, you know, understand it should help with cross-selling by bringing the different brands under the same platform. But are there other added benefits from going to the Shopify platform that you're expecting? You know, I don't know, maybe better data or a better ability to engage with marketing. And then maybe just help us understand some of the cost benefits from that. Yeah.

Speaker Change #208: And then maybe just help us understand.

Speaker Change #208: Some of the cost benefits from that.

Matt Meeker: Yeah, thanks for the question, Max. I think the most exciting thing when it comes to that is Megan Noel joining the team today to lead direct consumer, and she's the perfect person for it. We know that from her experience at Bark in the past and her learning as a CEO of a direct-to-consumer brand over the past year and a half. So that'll be hers to lead us there.

Speaker Change #208: Yeah.

Speaker Change #208: Thanks for the question Max.

Speaker Change #208: I think the most exciting thing when it comes to that is Meghan Noelle joining the team today.

Speaker Change #209: To lead direct to consumer and cheese.

Meghan Noelle: Perfect person for it we know that from her experience at park in the past in.

Her learning as a CEO of direct to consumer brand over the past year and a half.

Meghan Noelle: So that's when it'll be hers to lead us there.

Meghan Noelle: The.

Matt Meeker: Maybe surprisingly, the easy part of this, or the easier part, none of it's easy, but the easier part is the technical integration. The bigger thing that's, I don't want to say standing in the way, but the bigger thing for us to accomplish here is that we don't, in moving our BarkBox and SuperChewer customers over, have a deceleration in their activity, that we maintain our retention rate, which is very good, we maintain our add-to-box revenue, and that we're able to acquire the same number of customers at the same rate or And as soon as we have comps that look, that we're comfortable with, then we'll move the full base of subscribers over. The benefits are, as you mentioned, certainly the cross-sell and up-sell opportunities.

Speaker Change #211: Maybe surprisingly the easy part of this are the easier part none of it's easy, but the easier part is the technical integration.

<unk>.

Speaker Change #212: The bigger thing that I don't want to say standing in our way, but the bigger.

Thing for us to accomplish here is that we don't and moving our <unk> customers over that we don't have deceleration in their activity that we maintain our retention rate, which is very good we maintain our.

<unk> revenue.

Speaker Change #213: And that we're able to acquire the same number of customers at the same rate or better.

Speaker Change #213: And as soon as we have comps that look that we're comfortable with then then it's moving.

Speaker Change #214: The full base of subscribers over the benefits are as you mentioned certainly the cross sell and up sell opportunity we're not limited.

Matt Meeker: We're not limited. There are so many ways we're not limited. We're not limited by the product set, the timing, when we can ship, or having all of our products in a shared warehouse or shared fulfillment centers. There are so many ways that we benefit there. Another is from the...

Speaker Change #214: There are so many ways for not limited, but are not limited by the product set the timing when we can ship.

Speaker Change #215: Having all of our products in.

Shared warehouse or shared fulfillment centers. There are so many ways that we benefit there another is from the.

Matt Meeker: The marketing overall. And I was just talking about the upper and mid funnel and driving awareness. Right now, we go out in the world, and we talk about a bark product. That bark product drives to BarkBox.com or Superchure.com, not just one place.

Speaker Change #216: The marketing overall.

Speaker Change #217: And I was just talking about.

Speaker Change #218: Upper and mid funnel and driving awareness.

Speaker Change #219: Right now we got in the World and we talk about a bark product that bark product drives too barked box dot com or <unk> dot com not one place.

Matt Meeker: And so, flash forward to a unified platform; there's one home. You might hear about BarkBox, but you come into a unified platform, and you discover the full universe of all of our products in that place. So it makes our marketing just a lot more both effective and efficient in doing that. Certainly, there are some consolidation benefits with the team. But really, it's something where we're very eager to get there. We just want to make sure that as we get there, the business accelerates as we go into it.

Speaker Change #220: So flash forward to unified platform Theres, one home you might hear about bark box that you come into a unified platform and you discover the full universe of all of our products at that place. So it gives us it makes our marketing just a lot more both effective and efficient in doing that.

Maksim Rakhlenko: Okay, great. It's super helpful.

Speaker Change #220: Certainly some consolidation consolidation benefits with the team.

Speaker Change #221: But really it's something where we.

Speaker Change #222: We're very eager to get there, we just want to make sure that as we get there the businesses accelerating as we go into it.

Maksim Rakhlenko: And then maybe just bear with me a little bit, you know, it looks like. You guys might have sold out some flights, but I'm just curious about how this has, you know, kind of progressed compared to your expectations. And then maybe a bigger picture with, you know, it seems like the demand's been pretty good or interest has been good. Now, how does this kind of change or impact your thoughts on expanding to other kinds of services, you know, tangentially related to dogs going forward? Yeah,

Speaker Change #223: Okay, Great Super helpful. And then maybe just.

Speaker Change #224: And on bars are a little bit.

Speaker Change #224: It looks like.

Speaker Change #225: You guys made it sold out some flights, but just curious on how this has kind of progressed.

Speaker Change #225: Compared to your expectations.

Speaker Change #226: And then maybe bigger picture with.

Speaker Change #226: It seems like the demand has been pretty good very interest has been good now how does this kind of change for.

Speaker Change #227: Or impact your thoughts on expanding each other kind of services.

Speaker Change #228: Tangentially related to dogs going forward.

Matt Meeker: Yeah, I think relative to our expectations, it has blown away our expectations, or at least mine. We're just so encouraged and so grateful for the response that we've had and seeing it everywhere and the notes we get from people about how meaningful it is to their lives, to their dogs. www.youtube.com It's a really, really special product. And you see that, and the nice thing is that the bookings are following that, and you see a lot of opportunity that comes with it.

Speaker Change #229: Yes I.

Speaker Change #230: I think relative to expectations it has blown away our expectations.

Speaker Change #231: Or at least mine.

Speaker Change #231: We're.

Speaker Change #232: We're just so encouraged and so grateful for.

Speaker Change #233: The response that we've had and.

Speaker Change #234: Seeing it really everywhere in the notes we get from people about how meaningful it is to their lives to their dogs.

Speaker Change #234: Sure.

So it's.

It's a really really special product and you see that and the nice thing is that.

Speaker Change #235: The bookings are following that and you see a lot of opportunity that comes with it when it comes to services that follow.

Matt Meeker: When it comes to services that follow, I'd say at this point we have a load of ideas and a lot of opportunities, but getting this one right, you know, we're not taking a victory lap at all. We've put four flights in the air, so there's a lot more work to do. We have to continue to make this a great experience, continue to make it a great business, and once we get that and we get some infrastructure built around it, and we really know how to run the thing, then I think we can start talking about what's the next service that we pile on, but we're not, we're not close to that yet.

Speaker Change #235: I'd say at this point, we have a load of ideas and a lot of opportunities, but getting this one right.

Maksim Rakhlenko: Okay, awesome. Thanks, very helpful.

Speaker Change #236: We're not taking a victory lap.

Speaker Change #237: Put four flights in the air.

Speaker Change #237: So there's a lot more work to do we have to continue to make this a great experience then.

Speaker Change #237: Continuing to make it a great business.

Speaker Change #237: Once we get that and we get some infrastructure built around it and we we really know how to run the thing that I think we can start talking about what's the next service that we pile on but we're not we're not close to that yet.

Okay awesome, Thanks Super helpful.

Speaker Change #237: Okay.

Operator: There are no further questions at this time. With that, this will conclude today's call. Thank you all for your participation. You may now disconnect.

Speaker Change #238: There are no further questions at this time with that this will conclude today's call. Thank you all for your participation you may now disconnect.

Speaker Change #238: Okay.

Speaker Change #238: [music].