BARK Q2 2027 Earnings Call Transcript

BARK (NYSE:BARK) reported second-quarter financial results on Thursday. The transcript from the company’s second-quarter earnings call has been provided below.

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View the webcast at https://events.q4inc.com/attendee/829576715

Summary

BARK reported total revenue of $87.6 million for the second quarter, exceeding the guidance range and highlighting strong performance in the Commerce segment.

Adjusted EBITDA was $2.0 million, within the guidance range, and the company reaffirmed its full-year guidance of $325 to $340 million in revenue and $7 to $10 million in adjusted EBITDA.

The launch of Licksters, a new line of enrichment toys, was a key development, expected to drive future growth due to its recurring revenue model.

Partnerships with brands like Liquid Death and Crocs, and upcoming collaborations with Girl Scouts and Harry Potter, are expanding BARK’s market reach.

The company decided to exit the BARK Air business to focus on higher-return areas such as Commerce, partnerships, and innovative products.

Gross margin improved to 58.9% due to better DTC margins and a favorable product mix, despite a decrease in overall gross profit due to lower revenue.

Net loss for the quarter improved to $3.8 million, compared to a $10.7 million loss in the prior year, driven by reduced G&A and marketing expenses.

BARK continues to focus on efficient growth, with an improved retention rate of 94% and an increased average order value.

Cash position increased to $19.0 million, with no debt, and the company is actively managing inventory and repurchasing shares.

Full Transcript

OPERATOR

Now hand the conference over to Christina Donnelly, General Counsel. Please go ahead.

Christina Donnelly (General Counsel)

Good afternoon, everyone, and welcome to BARK’s fiscal second quarter 2027 earnings call. Joining me today are Matt Meeker, Co‑Founder and Chief Executive Officer, and Anna Hamill, 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, 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 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, let me pass it over to Matt.

Matt Meeker (Executive Chairman)

Thanks, Christina, and good afternoon, everyone. Our second fiscal quarter was one where the strategy we’ve been building toward over the past two quarters started showing up everywhere we look — in the top line, in the products on our shelves, and in the harder calls we made about where this company spends its energy and capital going forward. Total revenue was $87.6 million, above the high end of our guidance range of $83 to $85 million, powered by continued strength in Commerce, which returned to growth this quarter and contributed 29% of total revenue.

As expected, the year‑over‑year revenue comparison reflects the smaller DTC subscriber base we carried into fiscal 2027 following last year’s planned pullback in marketing spend. Adjusted EBITDA was $2.0 million, landing in the middle of our $1 to $3 million guidance range. We had an opportunity to increase marketing sequentially this quarter as retention and customer economics continue to improve, and we did so selectively while still delivering positive adjusted EBITDA and protecting profitability — exactly the kind of disciplined trade‑off we want to be making as the business re‑accelerates.

We are reiterating our full‑year guidance of $325 to $340 million in revenue and $7 to $10 million in adjusted EBITDA, and we feel good about where we sit relative to that range given how the first half of the year has played out. On the balance sheet, we ended the quarter with $19.0 million in cash, up $2.9 million sequentially, even as we continue to repurchase shares under our buyback program. Inventory stood at a healthy $72.4 million, unchanged from last quarter, and we expect that number to come down meaningfully over the next two quarters as it converts into cash, giving us even more flexibility over the balance of the year and into fiscal 2028. Importantly, being more disciplined about the economics of the business does not mean pulling back from growth — it means being more selective about where we pursue it.

I’m going to spend some time on what I think was the most important development of the quarter: the launch of Licksters, our new line of enrichment toys. Enrichment is the fastest‑growing category in the dog toy aisle, and we believe we just launched a genuine hit. Licksters has been in development for more than two years, built on a simple but important insight. BARK gets to hear from and test products with millions of direct‑to‑consumer customers every single month.

Few companies in this category have anything close to that kind of real‑time feedback before bringing a product to market at scale, and it gives us a meaningful advantage in developing products we believe will resonate with dogs and their people. The product itself delivers on its promise. Licksters gives dogs more than 40 minutes of focused, uninterrupted play. It’s simple for owners to load with treats and it’s easy to clean — the kind of combination that turns a toy into a daily ritual rather than a one‑time purchase.

And because it operates on a razor‑and‑blade model, with refills creating a recurring revenue opportunity, we believe Licksters has the potential to become a genuine growth engine for years to come rather than a strong launch in a singular quarter. We’d also note that the largest competitor in this space was just acquired with roughly $100 million in revenue and healthy margins. That transaction is a useful data point on the size of this opportunity, and we believe we have a meaningfully better product to go after it with.

Beyond Licksters, this was a terrific quarter for partnerships, which continue to demonstrate the strength of BARK’s brand affinity and distribution well beyond our four walls. We launched collaborations with Liquid Death and with Crocs — bringing a new line of Crocs for dogs to market — and had a standout activation with Dunkin. Looking ahead, we begin shipping in the third quarter for our Girl Scouts cookie program and for a Harry Potter themed collection headed to Costco, representing the two largest retail orders in BARK’s history.

This momentum matters greatly to our business and to the strategy we’ve laid out this fiscal year, primarily because it shows the model becoming more diversified. We are taking a brand and product engine that was historically concentrated in DTC and subscriptions and increasingly monetizing it across retail, marketplaces, and partnerships — allowing us to reach more dogs and introduce BARK to customers well beyond our existing subscriber base. As Commerce grows, we are creating more ways to reach dog parents, extend the BARK brand across retail, marketplaces, and partnerships, and drive growth from those products and customer relationships we’ve already built through DTC. Our broader presence has also brought new customers and partners into the BARK ecosystem and has meaningfully expanded the relationships we’re able to grow and build over the long term.

Finally, I want to address a significant decision we made this quarter regarding BARK Air. Subsequent to quarter end, we reached a preliminary understanding to sell the BARK Air customer list and license the BARK Air brand beginning January 1, 2027. The arrangement remains subject to definitive documentation and there can be no assurance it will be completed on these terms or at all. That being said, BARK Air proved something real. We ran utilization rates around 90%, with 99% of passengers giving five‑star reviews, and we remain confident there is a meaningful demand for a more dignified, safe, and accessible way to travel with dogs.

We’re genuinely glad that problem will continue to be worked on. What changed is not our belief in the problem or the consumer demand — it is our conviction about whether continuing to operate BARK Air ourselves is the best use of our capital and attention right now. Taking into consideration the broader macro environment, BARK Air no longer aligns with where we see our long‑range strategy heading and was not generating the bottom‑line contribution needed to justify continued investment.

Exiting it allows us to redirect our capital and focus toward the areas where we see the clearest and largest returns, which are Commerce, our partnership pipeline, strengthening the supply chain, and innovative enrichment products like Licksters. Turning to guidance for the third quarter, we expect total revenue of $88 to $92 million and adjusted EBITDA of $1 to $3 million. Taken together, I come away from this quarter increasingly confident that we are building a great business and our strategy is taking hold in meaningful ways. We have a healthier DTC customer base, Commerce is expanding the ways BARK reaches customers, and our product and partnership pipeline are operating at significantly higher scale and creating new opportunities for growth.

While there is more work to do, we believe this combination is rare and gives us strong momentum and deliberate focus. I’m genuinely excited about what’s ahead, and with that I’ll turn the call over to our new CFO, Anna Hamill.

Anna Hamill (Chief Financial Officer)

Thank you, Matt, and good afternoon, everyone. It is a pleasure to be here with you today on my first earnings call as BARK CFO. I will start by walking through our second quarter fiscal 2027 financial results and then cover the balance sheet and our outlook for the third quarter and the full year. We delivered total net revenue of $87.6 million in the second quarter of fiscal 2027. As Matt noted earlier, this exceeded the high end of our guidance range of $83 to $85 million, compared to $107 million in the prior year period. The year‑over‑year change primarily reflects the planned pullback in marketing spend and resulting smaller direct‑to‑consumer subscriber base, and is partially offset by growth in the Commerce segment.

Turning to our segments, DTC net revenue was $61.8 million compared to $82.1 million in the prior year period and contributed 71% of total revenue, as we focus on improving profitability and driving more efficient growth. Within that, BARK Air contributed $3.5 million in revenue. I would like to point out the composition of Q2 DTC revenue. Total orders were 1.9 million. Average order value rose to $31.40 from $30.87, an increase of $0.53 per order compared to prior year. Retention was 94%, up approximately 200 basis points year over year. These improvements are consistent with our focus on the quality of our subscriber base.

Commerce segment revenue returned to growth, increasing 3.6% year over year to $25.7 million, and expanded to 29% of total revenue compared to 23% a year ago. The growth was supported by strength across retail and marketplaces, continued expansion in the club channel, and the initial launch of Licksters. Gross profit in the second quarter was $51.6 million compared to $62.0 million in the prior year period, while gross margin expanded by approximately 100 basis points to 58.9% from 57.9% last year. There were no tariff recoveries related to 2026 in the quarter, so reported gross margin reflects the underlying business. The expansion in gross margin was driven by stronger DTC margins reflecting lower product costs and favorable product mix. It more than made up for the shift towards Commerce, which carries a lower margin than DTC.

Advertising and marketing expense was $10.4 million, down 32.5% from $15.4 million in the prior year period, representing 11.9% of revenue compared to 14.4% of revenue last year. Sequentially, marketing increased 9.4% from $9.5 million in the first quarter. As Matt mentioned before, we saw an opportunity to invest more into marketing this quarter, and that investment resulted in a 26% increase in subscribers compared to the first quarter of this year.

We will continue to protect our bottom line and remain disciplined in how we invest in customer acquisition. General and administrative expenses were $46.4 million, down 19% from $57.2 million. G&A includes shipping and fulfillment expense of $24.5 million, down from $31.5 million last year, and improved to 28% of revenue from 29.4% of revenue, reflecting the lower DTC segment mix as a percentage of the total and continued network efficiency work. Other G&A was $21.9 million, down 15% versus prior year, driven by lower payroll taxes and benefits and lower stock‑based comp, both due to lower headcount.

Also, $0.8 million of impairment charges were recorded in the prior year period with none recorded this quarter. These decreases were partially offset by a $1.8 million increase in legal fees. G&A for the quarter included $1.1 million of litigation expenses related to the shareholders class action lawsuit, $0.4 million of warehouse restructuring costs, and $0.2 million of restructuring charges, all of which are excluded from adjusted EBITDA. Net loss for the second quarter improved to $3.8 million, or $0.43 per basic and diluted share, compared to a net loss of $10.7 million, or $1.25 per share, in the prior year period. Loss from operations narrowed to $5.2 million versus $10.7 million last year, reflecting lower G&A and marketing expense and higher gross margins, partially offset by lower revenue. Adjusted EBITDA was positive $2 million in the second quarter, landing within our guidance range of $1 to $3 million, compared to negative $1.4 million in the prior year period, an improvement of $3.4 million.

Adjusted EBITDA margin was 2.3% compared to negative 1.3% last year. A detailed reconciliation of net loss to adjusted EBITDA is included within the earnings release. The improvement versus last year was driven by lower G&A and marketing spend as well as gross margin expansion, which more than offset the declining gross profit dollars from lower revenue. Turning to the balance sheet, we ended the second quarter with cash of $19 million, up $2.9 million from $16.1 million at the end of the first quarter and compared to $19.3 million at fiscal year end. We continue to carry no debt. The sequential increase in cash reflects $4.7 million of net cash provided by operating activities, partially offset by $2 million of share repurchases and other items. Under our up to $40 million share repurchase program, we repurchased approximately 194,000 shares for $2.0 million in the quarter and have $37.7 million remaining under the authorization.

We remain committed to balancing continued investment in the business with returning capital to shareholders. Inventory was $72.4 million, flat with the first quarter and down from $75.5 million at fiscal year end. We will continue to optimize inventory and improve turns, and we expect inventory to come down meaningfully over the next two quarters as it converts into cash, providing us additional flexibility heading into fiscal 2028. Accounts receivable was $20.3 million, essentially flat with last quarter and up from $12.3 million at fiscal year end, reflecting the timing of Commerce shipments late in Q2.

As of the balance sheet date, we received $14.4 million in our IPA tariff refunds, and the remaining balance of $1.1 million was subsequently received as well. Now turning to our guidance for the full fiscal year 2027, we are reaffirming our guidance of total revenue in the range of $325 to $340 million and adjusted EBITDA of $7 to $10 million. Based on BARK’s performance through the first half of fiscal 2027, we remain confident in achieving these ranges. For the third quarter, we expect total net revenue of $88 to $92 million and adjusted EBITDA of $1 to $3 million.

To summarize, the second quarter delivered net revenue of $87.6 million, above the high end of our guidance range, and adjusted EBITDA of $2 million within our guidance range. We expanded gross margins by approximately 100 basis points, generated $4.7 million of positive operating cash flow, and increased cash sequentially while remaining debt free and continuing to repurchase shares. Exiting BARK Air allows us to focus our capital on the areas of the business where we see the strongest returns, and we expect continued inventory reduction to provide additional cash for the balance of the year.

We are entering the second half with the Commerce segment back to growth, improved profitability, and a clear focus on where we’re utilizing our capital. Our priorities for the second half are to build on this momentum, drive consistent cash generation, and deliver against the full‑year guidance we reiterated today. And with that I will turn the call over to the operator for Q&A.

OPERATOR

We will now begin the question and answer session. Please limit yourself to one question and one follow‑up. If you would like to ask a question, please press star one. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ryan Myers with Lake Street Capital Markets. Please go ahead. Your line is now open.

Ryan Myers (Analyst at Lake Street Capital Markets)

Hey, thanks for taking my questions. First one for me, just thinking about the direct‑to‑consumer business — given the progress that you’ve made through the first half of the year, are you becoming more confident in a return to growth in that business?

Matt Meeker (Executive Chairman)

Hey, Ryan, thanks for the question. I would say we’re pretty happy with the first half of the year, and if it’s DTC, if it’s Commerce, pretty much across the board we’re happy with the progress, and we feel like we’re still on our plan for the year and returning to growth at the same pace that we always thought we would, across the board on both. As I mentioned on the call, some great wind in our sails with the launch of Licksters, which launched early August, so we got two months of that here. It’s doing well in DTC, it’s starting to make its way into Commerce, and we’re super encouraged by the start there. So that could give us a little bit of a boost as the year goes on.

Ryan Myers (Analyst at Lake Street Capital Markets)

Got it. And then just thinking about the reiterated guidance for the year — despite coming in ahead, are you guys just simply maintaining some conservatism in the back half, or are there any offsets that we should potentially be thinking about, just given where the quarter came in and the guidance remained unchanged?

Matt Meeker (Executive Chairman)

Yeah, I wouldn’t say conservative. I mean, we had a fairly — I don’t know if you’d characterize it as a wide range — but $325 to $340 as we started the year. I’d say we’re certainly trending to the higher end of that. And then also thinking about one quarter of BARK Air revenue that, if all goes according to plan, won’t be there, but yet still feeling very confident about that range and probably edging ourselves towards the higher end of it, even without that.

Ryan Myers (Analyst at Lake Street Capital Markets)

Okay, got it. That’s great to hear. Thanks for taking my questions.

Matt Meeker (Executive Chairman)

Thank you, Ryan.

OPERATOR

This concludes our question and answer session. This also concludes today’s call. Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.