Q2 2026 BARK Inc Earnings Call
Speaker #1: Thank you for standing by and welcome to the Bark second quarter fiscal year 2026 earnings conference call. All lines have been placed on mute to prevent any background noise.
Speaker #1: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.
Speaker #1: If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Mike Mougias, VP of Investor Relations.
Speaker #1: You may begin.
Speaker #2: Good morning, everyone. And welcome to Bark's second quarter fiscal year 2026 earnings call. Joining me today are Matt Meeker, co-founder and chief executive officer, and Zahir Ibrahim, chief financial officer.
Speaker #2: Today's conference call will be webcast in its entirety on our website, and a replay will be made available shortly after the call. Additionally, a press release covering the company's financial results was issued this morning, and can be found in our Investor Relations website.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: Reconciliation of our non-GAAP financial measures is contained in this morning's press release. And with that, I may now pass it over to Matt.
Speaker #3: Thanks, Mike. And good morning, everyone. Midway through the year, we're on track with expectations and gaining confidence and momentum as we go. But first, I'm happy to start this call with an important update.
Speaker #3: Last week, we paid off our $45 million convertible note using cash from our balance sheet. Bark is now debt-free. We're proud of our decision and our ability to pay this off in cash rather than refinance it, which reflects our long-term confidence in the business.
Speaker #3: In addition, we extended our $35 million credit line with Western Alliance Bank. Continuing a nearly decade-long partnership that gives us added flexibility on competitive terms.
Speaker #3: Together, these actions strengthen our balance sheet and position Bark to grow and create long-term value even in a volatile macro environment. Our confidence comes from how well we've executed on the plan we set at the start of the fiscal year.
Speaker #3: To drive revenue diversification and maintain bottom-line discipline. This quarter reflects that progress, with total revenue of $107 million above the high end of our guidance range and adjusted EBITDA of negative $1.4 million within our guidance range.
Speaker #3: Adjusted EBITDA would have been stronger, but we chose to invest roughly $1 million in incremental efficient growth during the quarter—an investment we expect will pay off as the year goes on.
Speaker #3: So let's talk about our progress this quarter on diversification, and the bottom line. First, our commerce segment delivered another standout quarter with 24.8 million dollars in revenue, up 6% year over year, and representing 24% of total revenue and all-time high revenue mix contribution.
Speaker #3: Year to date, we're seeing strong traction across key partners, including Walmart, Chewy, Amazon, and Costco, where our popular advent calendar is already sold out for the holiday season.
Speaker #3: And speaking of Chewy and Amazon, you can now find our Bark in the belly kibble on both of their digital shelves following its August launch.
Speaker #3: Second, when it comes to diversification, Bark Air continues to exceed expectations. Delivering $3.6 million in revenue this quarter, up more than 138% from last year and 54% from the prior quarter.
Speaker #3: We also maintain the 99% five-star review rate which speaks volumes about the quality of experience we're delivering. This quarter, we achieved our highest gross margin, driven by a 93% seat fill rate.
Speaker #3: Bark Air continues to validate the incredible demand for dog-first travel and reinforces our belief that we're solving a real problem for dog parents. And finally, as a reminder, we received the green light from the Girl Scouts to participate in their annual cookie program, and we'll begin shipping products next summer.
Speaker #3: This partnership represents a huge opportunity not just for revenue, but for awareness. Millions of families will see Bark alongside one of the most iconic brands in the country, and we're thrilled to partner with the Girl Scouts.
Speaker #3: Each of these are initiatives that only Bark can do. When we do Bark things, we excel. So we made great progress on diversification this quarter.
Speaker #3: Now let's talk about our bottom line performance. This has been a challenging year with tariffs, changes at the U.S. Postal Service, and a volatile macro environment.
Speaker #3: But as planned, we're emerging stronger. A meaningful milestone this quarter was moving our last mile delivery to Amazon. That means your Bark box now arrives on those Amazon Blue trucks.
Speaker #3: We're off to a great start with this partnership, which reduces our last mile delivery costs and gets packages to customers about a day faster; that's a meaningful improvement to the customer experience.
Speaker #3: In addition, this quarter marked the lowest customer acquisition cost we've seen since fiscal 2023. And with that efficiency, we saw an opportunity to deploy an additional $1 million beyond our plan at a highly efficient rate to drive both short and long-term growth.
Speaker #3: And for the second quarter in a row, two-thirds of our new subscribers opted into our more premium SuperChewer and Combo Box offerings. On top of that, we've seen six consecutive months of improvement in subscriber retention, as we continue to capitalize on the Shopify platform.
Speaker #3: One driver of that progress is finding new ways to deepen our relationship with dog parents and strengthen our core offering. Last month, we launched Bark Subscriber Perks.
Speaker #3: A new membership benefit that gives Bark Box subscribers access to exclusive discounts and offers from Bark and our partners, delivering up to $1,500 in annual value at no additional cost.
Speaker #3: It's another way we're rewarding loyalty and adding everyday value for our most engaged customers. Bringing all of that together, we acquired more new subscribers than planned, at our most efficient rate in several years.
Speaker #3: Those subscribers are retaining longer, and with partnerships like Amazon for last-mile delivery, they'll generate higher margins for us while enjoying an even better customer experience.
Speaker #3: Our brand now extends well beyond subscriptions, with strong sales across 50,000 retail locations and record passengers and revenue for Bark Air. Finally, we feel so good about our performance that we paid off our convertible debt in cash ahead of schedule without refinancing or selling equity to do it.
Speaker #3: Our strategy is working, we're balancing growth and profitability, expanding into new categories and channels, and doing it with a debt-free balance sheet. I'm excited about what's ahead in the second half of the fiscal year.
Speaker #3: And with that, I'll turn it over to Zahir.
Speaker #2: Thanks, Matt, and good morning, everyone. We've made solid progress executing our plan through the first half of fiscal 2026. We're diversifying revenue beyond our subscription business, our profitability discipline remains strong, and as Matt highlighted, Bark is debt-free for the first time as a public company.
Speaker #2: A tremendous milestone for our team and our shareholders. Let me walk you through the quarter in more detail. Total revenue for the second quarter was 107 million dollars, above the high end of our guidance range.
Speaker #2: This outperformance was driven by stronger-than-expected D2C performance and a modest timing benefit in commerce. Excluding Bark Air, D2C revenue was 78.5 million dollars, down versus last year.
Speaker #2: Primarily from entering the year with a smaller subscriber base, and our decision to moderate marketing spend in light of tariff and macro uncertainty. However, as we saw stronger new subscriber momentum in the quarter at a highly efficient acquisition cost, we leaned in and invested an incremental million dollars on marketing spend.
Speaker #2: Even with the incremental spend, total marketing expense will still be down 18% versus last year. And we expect H2 to decline at a greater pace.
Speaker #2: While total subscribers are down year over year, retention remains strong. And the customers we are acquiring today are higher value. This improvement reflects our deliberate shift away from discount-driven acquisition toward higher value loyal customers supported by ongoing Shopify enhancements and initiatives like Amazon Last Mile delivery.
Speaker #2: Our commerce segment delivered another strong quarter with 24.8 million in revenue, up 6% year over year, and reaching 24% of total revenue. This segment continues to be a highlight, and we expect sustained growth in the years ahead as we expand both retail distribution and product assortment over time.
Speaker #2: Bark Air also continued to outperform expectations, contributing 3.6 million in revenue. Our strongest quarter yet. Consolidated gross margin was 57.9%, down 250 basis points year over year.
Speaker #2: Two primary factors impacted the quarter. First, revenue mix as commerce and air represented a larger share of total revenue, 26.5% versus 20% last year.
Speaker #2: And second, higher tariff-related costs. Through the first half, we've incurred roughly 7 million dollars in elevated tariff-related costs, and we expect to incur between 12 and 13 million dollars for the full year.
Speaker #2: Vendor pricing, productivity improvements, and the move in D2C from box to bag have partially offset these costs. In addition, in the second half of fiscal 26, we'll further mitigate these headwinds by sourcing products from other geographies and implementing a price increase in commerce.
Speaker #2: As a result, we expect gross margins in both D2C and commerce to improve in the balance of the year. Turning to operating expenses, marketing was 15.4 million dollars, down 18% year over year, reflecting continued discipline and a focus on efficient, customer acquisition.
Speaker #2: Shipping and fulfillment expense was 31.5 million dollars, down about 8% year over year, driven by lower D2C volume. G&A expense was 25.7 million dollars, down over 11%, benefiting from lower headcount and ongoing cost management.
Speaker #2: Adjusted EBITDA for the quarter was negative $1.4 million, within our guidance range. As I mentioned, this includes the additional $1 million investment to acquire customers more efficiently, which we expect will contribute to near-term and long-term growth.
Speaker #2: We ended the quarter with 63 million dollars in cash, down 22 million sequentially, primarily due to working capital timing, including higher receivables tied to stronger commerce sales, and inventory build ahead of the holiday season.
Speaker #2: We expect to exit the year with lower inventory than the prior year end, despite carrying the impact of added tariff costs. As mentioned, we also repaid our 45 million dollar convertible note in cash days ago, which will be reflected on our balance sheet next quarter.
Speaker #2: With the debt fully repaid and our $35 million credit facility extended, we've strengthened our financial flexibility and simplified our balance sheet. Turning to guidance, we're continuing to maintain a cautious stance as many external variables remain fluid, including supplier transitions and tariff developments.
Speaker #2: As such, and consistent with previous quarters, we'll only be providing this quarter's guidance. For the fiscal third quarter, we expect total revenue to be between $101 million and $104 million, and adjusted EBITDA to be between negative $5 million and negative $1 million.
Speaker #2: In conclusion, we're in a strong position entering the second half of fiscal 26. Revenue is tracking well to expectations, we're maintaining strong cost discipline, we're building strong momentum across each segment, and our gross margins should improve thanks to a number of measures we have taken this year.
Speaker #2: We're proud to be debt-free, and with our ongoing focus on profitability and diversification, we're confident that Bark will exit fiscal 2026 as a stronger, more resilient, and more diversified company.
Speaker #2: And with that, I'll turn the call over to the operator for Q&A. Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad.
Speaker #2: If you would like to withdraw your question, simply press star 1 again. Your first question today comes from the line of Ryan Myers from Lake Street Capital Markets.
Speaker #2: Your line is open.
Speaker #3: Hey, good morning guys. Thanks for taking my questions. First one for me, you know, congrats on getting the convertible debt paid off. So I'm just curious, you know, what kind of flexibility do you think that now provides you guys with?
Speaker #3: Are you able to go out and invest more in the business, drive more subscriber growth, and enhance the commerce business? Just kind of, you know, at a high level, now that you guys don't have to worry about that potential overhang?
Speaker #3: How does that really change things for you?
Speaker #4: Hey Ryan, it's Matt. Thanks for the question. And I think you heard some of it, you know, we ended the quarter, ended September with 63 million in cash on the balance sheet, pay off 45, that gives you a sense of where the cash is right now, which as we've executed through the year, that's been our plan all along was to not dilute the shareholders any further by issuing equity to raise capital, and pay off that debt to pay it off the balance sheet as we did.
Speaker #4: Not to burden our financials with interest payments, in order to service it by refinancing it. So that's played out exactly as we hoped, or even better than we hoped.
Speaker #4: And that kind of carries forward into the answer here, which is keep going, keep executing, because we're just, as the year goes on, we're executing well and a little bit ahead of the plan in a pretty tumultuous environment.
Speaker #4: So we're happy about that, but not yet because of the external environment in a place to take really big swings or risks, because you never know where like in the, I think in the past 30 days, the tariffs from China were 30%, 130%, and 20%.
Speaker #4: So we really have to look around those corners and not get too far up over our skis. So the simple answer is to keep delivering, keep executing our plan, get the bottom line stronger and stronger, and reinvest that back into growth as we go on. But it's all about keep executing.
Great. Good morning and thanks for taking my questions. Um, so Matt you talked about acquiring more new subscribers at an efficient course and see an improved retention. Can you maybe give us a little bit more call in terms of what's driving? That are there any specific media channels or tactics that you would highlight? And then secondly, can you maybe talk about retention within your existing subscriber base? And at what point would you expect that to stabilize sort of given all the improvements that you've outlined?
Uh, let me take the first one. I wasn't quite sure I heard or understood the second, but the first is...
Uh there there is a bit more of a favorable mix on channels and more short more, so towards organic channels so direct customers, um, those that were acquiring via our email and SMS SMS list so anything that would be more on the organic or brand side. So as we've
um, as we've ramped up some of our brand activities, we've shifted those dollars away from
Uh, from the Meta channels from Google channels.
Uh, and that seems to be paying off um instead of paying those very high rates to acquire, a customer, you pay very, very little for someone who just um, shows up on the platform. So it's a more favorable mix and that seems to be pretty sustainable and and should grow
And that there seems to be good momentum in customer acquisition. On the retention side. I wasn't quite sure I heard or understood the question properly.
Yeah, I I was just trying to, uh, I would just, I was just trying to see if you can talk about retention within your existing sub subscriber base and uh, you've talked about sort of all the improvements, uh, on the platform. So it that the driving sort of uh, High retention, at least within the new subscriber base. So I was just wondering if you can talk about retention within your existing subscriber base,
Sure. I mean overall, um, we've seen retention improve each month throughout the year as a whole.
Uh some of the newer cohorts. Um, they're they're still fairly new. Obviously, if if we start at the beginning of the fiscal year in April, they're maybe 6 months in here at most
um, what we see is certainly higher quality in terms of
They are opting more for our Super Chewer line, which has a higher AOV.
Um, and a pretty similar retention. Uh, they are upgrading into um higher value plans like adding in extra toy to, to their plan. Uh, pre-paying at higher rates. So instead of paying their 6 or 12 month, commit month-to-month over that term. Pay it all at once. Upfront for a discount. Uh, all those things are
Really, really good.
And we seem to be making just bits of improvement each month. Um, as you mentioned some of that is platform related. Some of that is, uh, returning value to the customer and making them happier with what we're delivering.
Uh, and we still see a lot of possibility in that, especially as some of these Trends, continue out over time. Uh, the new, as I said, the newer customers who are in their first 6 months,
Are showing pretty good signs. Um, but
There, there are certainly coming in at a different environment right now, so we want to see how that plays out before getting too excited about it.
Great, thank you so much for the call.
Your next question comes from the line of Camille Gastro Walla from Jefferies. Your line is open.
Hey guys. Congratulations on being debt free. Um, can you maybe just talk about are there areas of investment or things that you may want to do? Now that, you know, your balance sheets in a different place or um, you know, are you thinking about BuyBacks as it relates to caskets or generate in the coming periods?
Uh yeah uh similar to what I had said to Ryan really looking at um, continuing to execute the plan. Um, to as zeir was talking about our aim is still to, to be Eva to break even for the year. Um and in a year like this, that's that's a real challenge, but um, but that's still the goal. That's still the aim uh, while we invest in the diversification. So um more of the business moving over to Commerce as it has the air business. Uh, more than doubling Revenue this year on a similar level of investment.
Uh and adding more more services and new products into the mix. All of that has been part of the plan, uh and then we are meeting with our board it next week.
And we'll be talking about our long-range Plan and the New State of our balance sheet and and our investments and our our plans for Capital. So I'd say over the next
Six months for the rest of this year—execute the plan. We will try everything we can to keep this company on the positive side of EBITDA.
And uh, and gear up and really understand what our long-term Investments need to be.
Okay, got it, you got something very interesting. Let me ask you. The last question and turn reducing, is there something specific about those customers? Or there's something related to your um, your marketing, or your execution that uh, sort of driving that?
I think it's a combination of factors. One is...
uh, we've spent
Basically the the last year.
um,
getting our Shopify tools. Are are the subscription oriented Shopify tools or platform.
Those in place.
that each one of them might contribute a tenth of a point, but you add up all of those and all of a sudden you've got like,
A point and a half or 2 points of monthly retention, and they're either like silent wins or silent killers, depending on how you look at it. But it's a lot of platform gains that we've made throughout the year.
And there's still more of those in front of us, but we've made great progress. So, that's 1 element of it. Another is, um,
As we've had.
Really good wins over the years in our supply chain and getting our costs into a much better place.
We're now able to and we've started to return some value to the customer that makes them happier and therefore it leads to better retention. And then I'd say um,
finally is when, when we're not, um,
I I I guess that that favorable mix of an organic customer coming in hearing about bark, from word of mouth because we've returned value because the customers just happier with us overall
um,
versus reaching to the, the farthest. Customer, we can reach to on Meadow with the most aggressive offer. We can. The organic customer is going to return better.
So as we've shifted that mix, we've also brought in higher value customers that have better retention profile and a better profile overall. So it's kind of a mix of all those elements.
Got it. Thank you.
and that concludes our question and answer session and today's conference call, we thank you for your participation and you may now disconnect