Q3 2025 BARK Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to box third quarter fiscal year 2025 earnings call. 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 you'd like to ask a question during that time press star followed by the number one on your telephone.
Pat: Pat if you want to withdraw your question Press Star one.
Speaker Change: I will now hand todays call over to my mum gifts. The VP of IR. Please go ahead Sir.
Speaker Change: Good afternoon, everyone and welcome to <unk> third quarter fiscal year 2025 earnings call. Joining me today are mapmaker co founder and Chief Executive Officer, and doubt here 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.
Speaker Change: 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 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 please refer.
Speaker Change: To our SEC filings for more information on some of the factors that could affect our future results and outcomes.
Speaker Change: 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.
Matt: With that let me now pass it over to Matt.
Matt: Thanks, Mike.
Speaker Change: Calendar 2024 on a strong note surpassing the high end of our revenue expectations and delivering a $4 9 million year over year improvement in adjusted EBITDA, our 10th consecutive year over year improvement.
Speaker Change: Over the past year, we focused on building a leadership team capable of driving transformative results.
Speaker Change: Only two or three quarters in the team's efforts are gaining traction and we're seeing momentum across our key business segments.
Speaker Change: And our direct to consumer segment, we achieved our highest quarter for new subscriptions and three years up 11% year over year on a lower acquisition cost.
Speaker Change: In our Commerce segment revenue grew by an impressive 43%.
Speaker Change: We introduced new partners and expanded shelf space.
Speaker Change: Also bark air delivered $2 million in revenue last quarter and is generating positive gross profit just seven months after its launch.
Speaker Change: These are encouraging trends and we believe it's just the beginning.
Speaker Change: These achievements coupled with ongoing improvements in G&A and resulted in positive adjusted EBITDA through the first three quarters of fiscal 2025.
We are on track to deliver our first EBITDA positive year embarked history.
Speaker Change: Critical milestone and a huge turnaround from just a few years ago.
Speaker Change: With this strong foundation and the right team in place Park is positioned for sustainable long term profitable growth.
Speaker Change: With that backdrop.
Speaker Change: In late October we transitioned all paid media traffic to our new Shopify platform.
Speaker Change: This was a big deal.
Speaker Change: Well transitions of this nature inherently carry some uncertainty I am pleased to report that the early results have been encouraging.
Speaker Change: New subscriptions grew 11% year over year, and we achieved this at a lower customer acquisition costs.
Speaker Change: Another encouraging data point is that 43% of checkout on the shopify platform last quarter worthy of shop pay.
Speaker Change: Shop pay and Apple pay features that didn't exist on our legacy platforms.
Speaker Change: The new platform modernizes, the customer experience, which we expect to continue to drive increased conversion over time.
Speaker Change: We plan to migrate our remaining active subscriber cohorts from our legacy sites to the Shopify platform this quarter.
Speaker Change: While we continue to refine and optimize our approach there.
Speaker Change: Initial performance on the new platform reinforces our confidence in this transition.
Speaker Change: We are also evolving our marketing strategy by moving further up the funnel.
Speaker Change: Shifting focus away from promotional and direct purchase advertising and investing more in brand building efforts.
As we look to the year ahead, we see significant opportunities to connect with prospective customers in new and engaging ways.
Which we believe will enhance our long term DTC performance.
Over the past 18 months, our progress has been challenged not only by industry headwinds.
Speaker Change: But also by the limitations of outdated customer solutions.
Speaker Change: With these changes, we're addressing those gas and positioning ourselves for growth with a lot of room for upside.
As highlighted earlier the additions we made to our leadership team. This fiscal year are driving immediate and meaningful results.
Speaker Change: Last quarter, our commerce segment delivered over $20 million in revenue of 43% year over year increase.
Speaker Change: Year to date, our commerce segment is up over 25%.
Speaker Change: This is fantastic progress and we are confident this is accelerating.
Speaker Change: Growth in this segment is being fueled by adding new partners and increasing shelf space with existing partners for.
Speaker Change: For example, we launched 30 Skus with Chewy and June.
Speaker Change: Today, we have over 150, skus and growth in that channel is accelerating.
Speaker Change: Similarly, we are expanding our presence on Amazon where.
Speaker Change: We've historically been underrepresented.
Speaker Change: Amazon has been a key focus and we expect our revenue from this channel to grow over 70%. This year with further expansion ahead.
Speaker Change: Additionally, I'm pleased to share that park is now available on Amazon in Europe, marking another important milestone.
Speaker Change: Overall, we anticipate expanding our offerings across both toys and consumables with partners, including target Walmart Costco T J Maxx and many more.
Speaker Change: We expect this segment to grow approximately 30% this year over last year with even faster growth expected in fiscal year 2026.
Speaker Change: Moving on.
Speaker Change: <unk> has exceeded expectations. Our first flight took off in May and just two quarters later, the business delivered $2 million in revenue with a positive gross margin.
Speaker Change: As a result of our high utilization rates.
Speaker Change: When we initially introduced park there we acknowledged that the cost of air travel for dogs, whereas prohibitive for many pet parents.
Speaker Change: However, we emphasized our long term goal of making her travel accessible to all dogs not just those with wealthy owners.
Speaker Change: Overall, we are thrilled with the speed and efficiency with which the team has grown this business.
Speaker Change: These early successes lay a strong foundation for the future of Parker.
Speaker Change: And that now, let's turn to profitability and an area. We have delivered consistent improvements for the past few years.
Speaker Change: Last quarter, we delivered a 63% consolidated gross margin an improvement of 90 basis points compared to last year.
Speaker Change: As I said before.
Speaker Change: Profitability drives revenue.
Speaker Change: These margin gains empower us to invest more efficiently and effectively and driving top line growth.
Speaker Change: And we are now at an inflection point in that journey.
Speaker Change: In addition to gross margin improvements, we've continued to drive down G&A costs, including savings in both shipping and fulfillment as well as reductions related to head count.
Speaker Change: These efforts enabled us to achieve our 10th consecutive quarter of year over year adjusted EBITDA improvement.
Speaker Change: Most importantly, we are on track to reach our first full year of adjusted EBITDA profitability in two months time.
Speaker Change: This is a critical milestone and we intend to expand the bottom line further in the years ahead.
Speaker Change: Looking beyond fiscal year 2025, we anticipate our top line returning to growth in fiscal year 2026, with mid to high single digit gains.
Speaker Change: This growth will be built on a farm we're profitable foundation.
Speaker Change: Beyond that we expect both revenue and EBITDA margin to improve steadily with each passing year.
Speaker Change: As I reflect on the past three years back as CEO, It's clear that Barack has made meaningful strides bill.
Speaker Change: And substantial improvements in profitability building, an impressive leadership team executing key growth initiatives and laying a strong foundation for the future.
Speaker Change: We believe in our progress in future. So much that we've invested around $17 million to repurchase over 11 million shares to date.
Speaker Change: And we will continue to repurchase shares for as long as we believe the company is significantly undervalued as we feel it is today given this progress.
Speaker Change: The investments we've made to strengthen our platform streamline operations and elevate our brand.
Speaker Change: Are setting the stage for a return to revenue growth in FY 'twenty six and beyond.
Speaker Change: With a more sustainable cost base and exciting opportunities on the horizon. We are confident that barks best days are yet to come.
Stay: And with that I will turn the call over to stay here.
Speaker Change: Thanks, Matt and good afternoon, everyone.
Speaker Change: Last quarter demonstrate our consistent progress executing our roadmap we outlined at the start of fiscal 'twenty five.
Speaker Change: Herbicide for my New leadership team, we're beginning to see early momentum on the top line, while maintaining a sharp focus on profitability, we delivered our 10th consecutive quarter of year over year adjusted EBIT improved by the last quarter.
Speaker Change: On track to achieve our first full year of adjusted EBITDA profitability at the end of March.
Speaker Change: Beyond fiscal 'twenty five we expect to build on this foundation with stronger top line growth.
Speaker Change: Profitability improvements.
Speaker Change: With that well.
Speaker Change: Diving into our fiscal third quarter results in more detail.
Speaker Change: Total revenue for the quarter was $126 4, million% to 1% increase year over year and while our long term growth ambitions for fog later this month, our second consecutive quarter of year over year revenue growth following eight quarters of.
Speaker Change: The year over year declines.
Speaker Change: These are important first steps when much of the team's efforts are just beginning to be reflected in our top line results, particularly within our E Commerce segment.
Speaker Change: Breaking it down by segment <unk> contributed $106 1 million in revenue, which includes $2 million of bulk Oh.
Speaker Change: In total the segment declined 4% compared to last year.
As we have discussed in prior quarters, we have been migrating customer cohorts to all new shopify based platform throughout the year.
Speaker Change: In October we also moved all of our paid media right.
Speaker Change: <unk> mentioned there is always a degree of uncertainty we're moving to a new platform. However, the early results are encouraging for instance, last quarter was our strongest new subscription quarter in three years.
Speaker Change: At the same time, we're also moving up the funnel prioritizing customers, who engage with bought because of the value they see how Brian and our products on the unique experiences. We bring you into that household rather than loan driven primarily by discounts.
Speaker Change: Building and maintaining an engaged customer base is critical and under Michael Pollan leadership, we have some exciting initiatives in the pipeline.
Speaker Change: The D. C segment has seen headwinds some driven by industry optimism, others, reflecting areas, we need to execute more effectively.
Speaker Change: However, we expect this segment to stabilize in fiscal 'twenty six.
Speaker Change: We continue to enhance the customer experience on shopify and implement targeted measures to address the challenges that have impacted this segment in the past year.
Speaker Change: For example, revamping our D to C supply chain network in fiscal 'twenty five caused shipment delays from some customers, which impacted retention. The team has been focused on tackling these challenges and we're beginning to see progress with further advancement as expected as we go into fiscal 'twenty six.
Speaker Change: On the commerce side of the business and under the leadership of Michael Block, we're seeing substantial top line acceleration with much of the new teams up is only just beginning to flow through the P&L.
Speaker Change: Last quarter, our Commerce segment delivered $20 3 million in revenue, representing a 43% increase year over year and up two.
Speaker Change: 97% year to date.
Speaker Change: This growth has been driven by the addition of promising new partners like Chewy and garden shelf space and SKU count with existing partners. We're also seeing strong encouraging growth with previously underserved partners, such as Amazon and T J Maxx.
Speaker Change: Additionally, we're in the early stages of expanding our international footprint. For example, following international wins with fresh map in Europe and parts of home in the U K, We recently launched on Amazon Europe.
Speaker Change: The lions share of Docomo <unk> growth, we see today is concentrated in the toy category.
Speaker Change: As we head into fiscal 2026, we anticipate further expansion of our consumable products unlocking additional growth opportunities in categories with much bigger times.
Speaker Change: While it's too early to provide formal guidance. We expect this segment to grow approximately 30% this year with an even higher growth rate next year as we continued to take market share both domestically and internationally.
Speaker Change: Moving on.
Speaker Change: Consolidated gross margin was 62, 7% up 19 basis points versus last year.
Speaker Change: We have grown gross margin percentage by over 400 basis points over the last couple of years looking ahead, we see opportunities for further margin improvement, which we will balance with investments to help fuel top line growth.
Speaker Change: Overall, we're pleased with our progress over the past few years and it's been relatively stable gross margin, but at the beach E Commerce segments moving forward.
Speaker Change: As a reminder, as commerce becomes a larger part of our revenue mix. It will naturally weigh on consolidated gross margin. However, the contribution margins are comparable across both segments supporting our long term profitability goals.
Speaker Change: Turning to operating expenses shipping and fulfillment expenses was $36 7 million in the quarter up three 4% versus last year.
Speaker Change: And this quarter's shipping and fulfillment expense was $2 4 million of warehouse restructuring costs relating to our network transition. Excluding this expense shipping and fulfillment costs went down a million versus last year, reflecting more favorable shift in terms from a new partner.
Speaker Change: As I mentioned earlier, there are opportunities to improve our supply chain further network optimization, which will be a focus area for us in fiscal 'twenty six.
Speaker Change: Other G&A expenses, which primarily consist of headcount and overhead costs totaled $27 5 million for the quarter of $3 2 million improvement year over year.
Speaker Change: This reduction reflects lower headcount costs as we continue to align our organization structure with the evolving needs of the business.
Speaker Change: Marketing expenses were $27 4 million for the quarter up $2 3 million year over year. This increase reflects strategic investments to acquire new customers at attractive acquisition costs, which we expect will benefit the business in the months ahead.
Speaker Change: Looking forward. This is a law and we can flex up or down depending on the returns we see on these investments.
Speaker Change: Lastly, adjusted EBITDA for the quarter was negative $1 6 million, an improvement of $4 9 million compared to last year.
Speaker Change: And by the improvements in our gross margin percentage shipping and fulfillment costs on the other G&A costs.
Speaker Change: Free cash flow for the quarter was negative $2 million.
A negative $1 2 million year to date for the full year, we expect to be in the ZIP code of breakeven from a free cash flow perspective.
Speaker Change: Turning to the balance sheet.
Speaker Change: We ended the quarter with $115 million in cash consistent with the prior quarter. This reflects $2 8 million spent in the quarter to repurchase one 7 million shares at an average price of $1 69.
Speaker Change: Since initiating the buyback program in August 2023, we have invested approximately $17 million repurchasing 11 million shares at an average price of $1 53.
Speaker Change: We currently have approximately 6 million remaining under our existing authorization and plan to continue to Opportunistically repurchase shares at these levels, especially given our excitement for fiscal 'twenty six.
Speaker Change: Overall, we're closing out fiscal 'twenty five on our solid foundation and with a large runway ahead.
Speaker Change: With that in mind, let me turn to guidance for the fiscal fourth quarter and full year.
Speaker Change: For the full year, we are reaffirming our original guidance provided on our Q4 call specifically, we expect total revenue to be between 490 and 500 million.
Speaker Change: And year over year growth of flat to 2% this.
Speaker Change: This implies fourth quarter revenue in the range of $121 2 million to $131 2 million. While we recognize this is a wide range with less than two months left in the fiscal year. It reflects the inherent timing variability and our commerce segment. Many shelf resets occur in the March April timeframe.
Speaker Change: The exact timing of retail shipments, whether a week earlier or later doesn't have a meaningful impact on the quarter.
Speaker Change: Furthermore, given the strong growth we're seeing in this segment. This dynamic is amplified.
Speaker Change: On the adjusted EBITDA side, we also reaffirm our original guidance of 1 million to $5 million for the full year.
Speaker Change: Mid point this represents an approximately $14 million improvement compared to last year.
Speaker Change: The first positive adjusted EBIT.
Speaker Change: Bogs history.
Speaker Change: This implies a range of <unk> 9 million to $4 9 million for the fourth quarter with the midpoint, reflecting a $1 $1 million improvement versus last year.
Speaker Change: Looking ahead to fiscal 2006, while we are still finalizing our operating plan. We are confident in achieving mid to high single digit top line growth.
Speaker Change: Guidance will be provided on our fourth quarter call in June but Directionally. We believe this is a reasonable and achievable range.
Speaker Change: Talking your fiscal 'twenty six I want to share a brief perspective regarding tariffs we are confident in our ability to navigate the current round of tariffs, while continuing to drive growth.
Speaker Change: First one third of our volume coming from consumables, which are almost entirely sourced domestically.
Speaker Change: We are all affected by the latest tariff.
Speaker Change: So the remaining two thirds.
Speaker Change: And do you believe working with our key suppliers in China to implement productivity improvements that dampen the impact of the latest 10% tariffs.
Speaker Change: And I was one of the largest dog toy companies in the U S. Our scale coupled with our strong gross margin provide flexibility to address these costs.
Speaker Change: As a result, we believe we have the opportunity to capture shelf space.
Speaker Change: From competitors, who don't have the same leverage while we will remain vigilant and adaptable in this dynamic environment, we do not anticipate any material impact on our gross margins.
Speaker Change: In closing we are proud of the significant progress we've made over the past two years. While there is still work to be done we are entering fiscal 'twenty six with momentum a clear strategic path and a leadership team are laser focused on driving the business forward, we remain confident in our ability to deliver long term value for our customers.
Speaker Change: Partners.
Speaker Change: Shareholders with that I will.
Speaker Change: Turn the call over to our operator for Q&A.
Speaker Change: Thank you. Our first question comes from the line of Maria mechanically.
Great Good afternoon, and thanks for taking my question.
Speaker Change: First when you DTC segment, given all the progress with migrating to the shopify platform and marketing efficiencies that you've been seeing there how should we think about sort of the trajectory of revenue returning to growth for that segment and I think you mentioned.
Speaker Change: In 2026, I guess any color you can share that or not.
Speaker Change: These two segments in the context of your outlook for mid to high single digit next year.
Maria: Sure. Thanks Maria.
Speaker Change: And you took the words out of my mouth, there and he said stabilization in fiscal year 2026.
Maria: Sure.
Maria: That's that's you couldn't I couldn't have said it better myself. So you've got that just right and that means stabilizing therefore, when we're saying like the high single digit growth.
Maria: On the overall enterprise and most of it.
Maria: It's coming in across the Commerce channel, which we have stated in the past is.
Maria: As a golfer us.
Maria: You have that take more and more the revenue share.
Maria: We said at least a third and we're on pace with that.
We had a good quarter, 43% year over year growth in that channel year over year.
Maria: And then embark are contributing as well.
Maria: That's where you get.
Maria: Most of the growths when we talk about that.
Maria: Mid to high single digits number four for next year.
Got it that's helpful. And then can you maybe spend a few minutes.
Maria: Talk about some of your strategic vision for a buck.
Maria: Did you see developing into a meaningful contributor to your financials over time would that impact sort of cap.
Maria: Requirements on profitability of the overall business.
Maria: Maybe talk about sort of your thoughts on it.
Maria: Just in terms of leveraging your existing customer base and expanding your brand.
Maria: Sure on bark are I would say it's it's.
Maria: Too soon to call it.
Maria: A material driver for us are a material.
Maria: Opportunity.
Maria: Remember we're a.
Maria: Eight nine months into it right now.
Maria: It's been a great eight or nine months the planes are filled.
Maria: We are gross margin positive last quarter, we did $2 million of revenue last quarter I think everything we've seen in these eight or nine months tells us that.
Maria: But there's a really good opportunity for us, but we don't know yet is how far does that demand stretch.
Maria: And the path to get there so you'll see in the in the year ahead for sure is a lot of experimentation opening up some new routes to task.
Maria: Different plane formats to task.
Maria: Different price points as you see next week, we have some flights between New York, and Florida that bring the cost down to $8000 per ticket from.
Maria: Six of our $8000 so.
Maria: Hopefully that opens up a lot of demand, but on the haul I think it's too early to say just how material it will be the thing.
Maria: That we're committed to.
Maria: With respect to the capital expenditures or requirements.
Maria: We're we're very happy with the model that we run right now which is.
Maria: An asset light model, we partner with those who operate.
Maria: Different aviation companies they do the heavy lifting there we lease.
Maria: The equipment and the infrastructure from them, we let them do what they do well, we we take care of the dogs in the marketing.
Maria: And that's working out really well.
Maria: I don't see a change in that in the foreseeable future and short here would like me to say, we're not buying a plane anytime soon.
Speaker Change: Hi, great. Thanks for the column that and good luck with the rest of the quarter.
Maria: Thanks.
Maria: Yeah.
Speaker Change: Your next question is from the line of Ryan Meyers with Lake Street capital.
Ryan Meyers: Hey, guys. Thanks for taking my question.
Ryan Meyers: First one for me I, just want to make sure I fully understand kind of the commentary on the fourth quarter guidance. So it sounds like there's just a lack of a little bit of visibility just due to the stock reset. So is the right way to think about it is that you wouldn't know kind of where the numbers would come in until the very end of the quarter as far as if those shelf resets will happen and just where we're at right now on the quarter.
Ryan Meyers: Really too hard to tell.
Ryan Meyers: Were those orders will come in at.
Ryan Meyers: Yeah.
Speaker Change: Hey, Ryan how are you doing this as I have.
Ryan Meyers: Yeah, I think you've summed it up well you know I'm sure.
Speaker Change: Shelf resets generally and.
Ryan Meyers: Retail happened in the March April timeframe.
Ryan Meyers: So you always got some timing variability as you got home firms on research one product is going to shift depending on customer to customer so some volume.
Ryan Meyers: Flow out of Q4 into Q1.
Ryan Meyers: And so you'll know that nearer to the time when a lot of it depends on the customer supply chain as well in terms of picking.
Ryan Meyers: Picking up the product around quarter end.
Ryan Meyers: So that's probably the biggest biggest driver.
Ryan Meyers: Military.
Ryan Meyers: Okay makes sense and then the other question for me just you know obviously, the chewy business as our newer piece of business for you guys, but any commentary there on how that's kind of trend I know, Matt you gave some commentary about the kind of SKU expansion that you've been able to see maybe if you guys could give the dollar amount contribution that you've seen that'd be helpful. But yes, any commentary there would be great.
Ryan Meyers: Okay.
Ryan Meyers: Sure I can tell you I don't want them so yeah.
Ryan Meyers: Shut in his commentary we started.
Ryan Meyers: With chewy in June.
Ryan Meyers: With about 30, Skus, we quickly expanded to well over 150 Skus as we speak.
Ryan Meyers: Most of our Assortments on the consumables side as well what we're seeing is a continued momentum in that customer growth in the topline on.
Ryan Meyers: On a week on week basis.
Ryan Meyers: The conversations we have with chewy are extremely positive about our performance.
Ryan Meyers: A ton of excitement about the potential growth in the future.
Ryan Meyers: When you look at our toys performance for example, we're already one of the biggest pet toy.
Ryan Meyers: Suppliers on their site, so just a lot of positive.
Ryan Meyers: Sentiment.
Ryan Meyers: I'll, probably take it beyond chewy, Ryan, we're performing really strongly with Amazon as well.
Ryan Meyers: As Matt mentioned up 70% year over year.
Ryan Meyers: And similarly in a couple of other major retail customers as well.
Speaker Change: Got it that's great to hear thanks for taking my questions.
Ryan Meyers: Thanks.
Speaker Change: The next question is from the line of Camille go Waller with Jefferies.
Ryan Meyers: Yes.
Camille Waller: Good afternoon, I guess, the first thing is.
Ryan Meyers: You're growing again on DTC or new subs.
Ryan Meyers: Can you maybe just talk about.
Ryan Meyers: If there's a way to sort of parse out.
Ryan Meyers: The market kind of coming back your way after a few years.
Ryan Meyers: Working itself out or.
Ryan Meyers: If you're able to.
Ryan Meyers: Maybe parse out how much of that is coming from.
Ryan Meyers: New meeting structure, and shopify and such.
Ryan Meyers: Yeah.
Ryan Meyers: This is Matt by the way.
Ryan Meyers: It's a I would say it's.
Ryan Meyers: 99% the latter.
Ryan Meyers: Maybe maybe even the market being continuing to be a little bit of a headwind.
Ryan Meyers: If we go back.
Ryan Meyers: Year.
Ryan Meyers: I talk a lot about that.
Ryan Meyers: There were things that we could do as a company to improve our performance.
Ryan Meyers: Cut through everything it's.
Ryan Meyers: The approach, we take to creative to testing.
Ryan Meyers: The channels that we're choosing to invest in and how we're allocating dollars to those channels.
Ryan Meyers: Our expanding them, how we are going more mid and upper funnel with those dollars because we think they are more efficient and that will pay off over the long time horizon and then specifically within this quarter.
Ryan Meyers: We made a.
Ryan Meyers: Moved all of our AD spending for dark box and Super cure over.
Ryan Meyers: To the Shopify platform, because we were so encouraged by that conversion results that we're seeing on the platform that we thought we would perform better on the holiday season over there rather than on our legacy platforms.
Ryan Meyers: And that turned out to be trip. So again, we saw that that big uplift in new subscribers over last year.
Ryan Meyers: At a more efficient cost of acquisition and that was really with only.
Ryan Meyers: Two months of the quarter being on there you saw some other.
Some other strong indicators that there's there's just a lot of headroom in it for US for example.
Ryan Meyers: We obviously on our legacy platform, we can't offer shop pay as a way to checkout.
Ryan Meyers: When we moved over 43% of the customers who are checking out are using shop pay.
Ryan Meyers: That should help us in retention downstream as well.
Ryan Meyers:
Ryan Meyers: And now that we're a couple months into it but.
Ryan Meyers: We're finding that we can everything that we thought we could do with this platform is turning out to be true that.
Ryan Meyers: We can move pieces around we can test faster, we can iterate faster learn.
Ryan Meyers: Open up new functionality that wasn't available to us.
Ryan Meyers: Is that faster because of the plugged in and the partners that are around the shock shopify ecosystem.
Ryan Meyers: So.
Ryan Meyers: It's still early days there.
Ryan Meyers: And obviously when you transition to a new platform like that not everything goes the way you expect it either it's not all wind at your back but in those instances.
Ryan Meyers: Usually comp into something that we like functionality that we had built on the legacy side.
Ryan Meyers: And it wasn't out of the box from Shopify, So we have to either plugging them from someone else or hack around it a little bit, but we know how to close those gaps pretty quickly all in all.
Ryan Meyers: It's we're exiting this year in terms of customer acquisition and conversion.
Ryan Meyers:
Ryan Meyers: Performing the best we have in a few years and gathering momentum as we do it. So I think we'll run into this next year really strong with a good plan and pretty excited about it.
Ryan Meyers: Sorry that was really long sorry that I just went on there.
Speaker Change: No, it's probably because you're excited.
Ryan Meyers: I guess here, if we could just.
Ryan Meyers: Talk about EBITDA.
Ryan Meyers: You also have a nice multiple squarely to provide.
Ryan Meyers: An initial sense of FIS.
Ryan Meyers: Fiscal 'twenty six top line.
Anything that's changed so far what would that mean for profit or EBITDA.
Ryan Meyers: Okay.
Ryan Meyers:
Ryan Meyers: Hi, Corrado.
Corrado: For fiscal 'twenty, six we expect good year over year improvements in EBITDA.
Ryan Meyers:
Ryan Meyers: And of course, I'll provide more specifics when we get to our call in early June.
Ryan Meyers: <unk> direct to me as you think about our profit profile over the longer term, we expect steady improvements in our EBITDA margin as we begin to scale the business and drive leverage across a number.
Ryan Meyers: Of areas of the business.
Ryan Meyers: Sure.
Ryan Meyers: A good step up to 26 versus 25, and then continued improvement driven by leverage and scale.
Ryan Meyers: Got it okay, great. Thanks, guys.
Ryan Meyers: Thanks.
Speaker Change: Our next question is from the line of ego ammonia with Citigroup.
Speaker Change: Hey, good afternoon guys.
Speaker Change: A few follow ups on the segments.
Speaker Change: To dive a little bit deeper I guess.
Speaker Change: For for direct to consumer and the marketing strategy moving.
Speaker Change: Further our funnel.
Speaker Change: Did that did that start this this quarter.
Speaker Change: Meaning that the increase and 11% of new customers that already reflective of this move to higher funnel and as you do that.
Speaker Change: That kind of advertising generally has more of a longer payback period, you expect that to have an impact or does the shopify platform offset that what that shift would be.
Speaker Change: We started it in the summer.
And as we weighed into it we're going pretty.
Speaker Change: Pretty cautiously are carefully so we can learn what's working or what's not not based on a.
Speaker Change: Subscriber number or a cost of acquisition by other signals, let's say the awareness is taking and so the accurate has scaled up through the year and maybe as you're suggesting they are longer lead and youre getting maybe we got some of that benefit.
Speaker Change: In in the last quarter.
Speaker Change: But what we're trying to do is continue to learn and continue to expand.
Speaker Change: Our spend.
Speaker Change: In those directions.
Speaker Change: While not over investing in it and blowing out our CAC for a quarter or two.
Speaker Change: So internally we call it our glide path into what would be the.
Speaker Change: Hmm the optimal state for us.
Speaker Change: So far so good we're learning a lot and then.
Speaker Change: What we're seeing with Shopify is giving us is given us some leeway.
To move that a little faster and make mistakes a little bit faster.
Okay is it more efficiency in CAC from the shop, five transition or do you think thats, mostly captured I know yet.
Speaker Change: Move some customers over but.
But largely in the numbers or are those more.
Speaker Change: It.
Speaker Change: Oh I'm sorry.
Speaker Change: I thought I understood. The question until right at the end there I'm sorry.
Speaker Change: Just like on so those transition to shopify is driving that incremental efficiency on the CAC.
Speaker Change: Is there more is there more on that on the shop transition awards, it's kind of Oh, Yeah, you realize yes, yes, okay.
Speaker Change: Yeah.
Speaker Change: Uh huh.
Speaker Change: It's it's definitely driving that efficiency largely through conversion.
Speaker Change: And then what we're doing is taking those efficiency gains.
Speaker Change: And largely pushing them back into exploring new channels that are upper and mid funnel more awareness building that don't pay off immediately.
Speaker Change: So if we just ran the same playbook that was all bottom of funnel.
Speaker Change: And moved over to Shopify, we'd have you been greater efficiency gains.
Speaker Change: What we're doing is reinvesting that to learn faster into that into the permanent model.
Speaker Change: Okay.
Speaker Change: Great Thats very helpful and then on the Commerce side.
Speaker Change:
Speaker Change: I know, it's early but can you talk about what you think the ultimate opportunity is internationally there.
Speaker Change: How big it can get and then in the commentary of next year.
Speaker Change: Growing faster in commerce and this year I.
Speaker Change: I know you've laid out the sit here you laid out the.
Speaker Change: The specific drivers, including international but.
Speaker Change: Can you kind of.
Speaker Change:
Speaker Change: Kind of break out what each component drives or how much with the largest contributors are.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Look our aim is a combination of several factors.
Speaker Change: You called out in his.
Speaker Change: As part of this.
Speaker Change: The call earlier on bringing on a new leadership team and their expertise their relationships.
Speaker Change: With our customers that vision, it's really been an accelerator for US overall, so talent infusion has been a major driver for us as you look at the results for this year.
Speaker Change: Part of part of what's driving the growth is we're focusing a lot more on growing while the customer shops.
Speaker Change: So new customers like chewy.
Speaker Change: Expiring with others.
Speaker Change: Really been under serving in the past such as Amazon and T J Maxx driving.
Speaker Change: Major opportunities and major white space opportunity for us so plenty of runway for growth.
Speaker Change: As it relates to Amazon and that's both domestically and in Europe.
Speaker Change: Literally in the last month or launched in Europe, and there's a huge runway there.
Speaker Change: As far as the international market is concerned.
Speaker Change: Other things I would look out from a commerce perspective.
Speaker Change: Growing in the partnerships area, we've been investing in that space for some time this year.
Speaker Change: Our rail.
Speaker Change: Strong initial launch with products.
Speaker Change: Which was a sell out in Q2 from from the products that we're offering.
Speaker Change: Then probably larger than not.
Speaker Change: But some way is a relationship that we build and the girl Scouts. So we launched a pilot program with them a year ago.
Speaker Change: With one SKU that run in the fall.
Speaker Change: Well, it's really well this year, we ran a similar program with.
Speaker Change: A number of Skus.
Speaker Change: Growing revenue this year and that's a program that we're going to continue to work on as far as an online program management girl scouts, but bigger than that.
Speaker Change: We will be launching with a national program with them in fiscal 2007, So we're really working out scale size size and the number.
Speaker Change: A number of Skus assortments and things like that.
Speaker Change: For fiscal 2007, we will launch a national Cookie program, which.
Speaker Change: It would be a significant revenue opportunity both rose.
Speaker Change: For Girl Scouts.
Speaker Change: Internationally, you asked we've already launched products into fresh amount, which is one of the bigger.
Speaker Change: Bricks and mortar retailers in Europe.
Speaker Change: We've got distribution in the UK one of the biggest pet specialty.
Speaker Change: Flyers switches pets at home.
Speaker Change: A lot of the bigger retailers in the U K will have seasonal programs with us.
Coming months, a mildly too big a relationship with those guys along with what I've said about Amazon in Europe.
Speaker Change: Across domestically and internationally, there's a ton of white space, yet both in toys consumables.
Speaker Change: Very helpful. Thank you guys.
Speaker Change: Thanks.
Speaker Change: Thank you. This does conclude today's call. Thank you for joining you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.