BARK Q3 2025 Earnings Call Transcript

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February 5, 2025
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Bak Third Quarter Fiscal Year twenty twenty five 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. I will now hand today's call over to Mike Mungus, VP of IR. Please go ahead, sir.

Michael Mougias
Michael Mougias
Vice President - IR at BARK

Good afternoon, everyone, and welcome to Vark's third quarter fiscal year twenty twenty five earnings call. Joining me today are Matt Meeker, Co Founder and Chief Executive Officer and Zahir Ibrahim, Chief Financial Officer. Today's conference call is being webcast in its entirety on our website and a replay of the webcast will be made available shortly after the call. 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.

Michael Mougias
Michael Mougias
Vice President - IR at BARK

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 now pass it over to Matt.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Thanks, Mike. We closed calendar twenty twenty four on a strong note, surpassing the high end of our revenue expectations and delivering a $4,900,000 year over year improvement in adjusted EBITDA, our tenth consecutive year over year improvement. Over the past year, we focused on building a leadership team capable of driving transformative results. Only two or three quarters in, the team's efforts are gaining traction and we're seeing momentum across our key business segments. In our Direct to Consumer segment, we achieved our highest quarter for new subscriptions in three years, up 11% year over year at a lower acquisition cost.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

In our Commerce segment, revenue grew by an impressive 43% as we introduced new partners and expanded shelf space. Also, Bargare delivered $2,000,000 in revenue last quarter and is generating positive gross profit just seven months after its launch. These are encouraging trends and we believe it's just the beginning. These achievements coupled with ongoing improvements in G and A have resulted in positive adjusted EBITDA through the first three quarters of fiscal twenty twenty five. We are on track to deliver our first EBITDA positive year in Bark's history, a critical milestone and a huge turnaround from just a few years ago.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

With this strong foundation and the right team in place, Mark is positioned for a sustainable long term profitable growth. With that backdrop, let's look ahead. In late October, we transitioned all paid media traffic to our new Shopify platform. This was a big deal. While transitions of this nature inherently carry some uncertainty, I'm pleased to report that the early results have been encouraging.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

New subscriptions were 11% year over year and we achieved this at a lower customer acquisition cost. Another encouraging data point is that 43% of the checkouts on the Shopify platform last quarter were via Shop Pay. Shop Pay and Apple Pay are features that didn't exist on our legacy platforms. The new platform modernizes the customer experience, which we expect to continue to drive increased conversion over time. We plan to migrate our remaining active subscriber cohorts from our legacy site to the Shopify platform this quarter.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

While we continue to refine and optimize our approach, the initial performance on the new platform reinforces our confidence in this transition. We are also evolving our marketing strategy by moving further up the funnel. This means 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 B2C performance. Over the past eighteen months, our progress has been challenged not only by industry headwinds, but also by the limitations of outdated customer solutions.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

With these changes, we're addressing those gaps 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. Last quarter, our commerce segment delivered over $20,000,000 in revenue, a 43% year over year increase. Year to date, our Commerce segment is up over 25. This is fantastic progress and we are confident this is accelerating.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Growth in this segment is being fueled by adding new partners and increasing shelf space with existing partners. For example, we launched 30 SKUs with Chewy in June. Today, we have over 150 SKUs and growth in that channel is accelerating. Similarly, we are expanding our presence on Amazon, where we've historically been underrepresented. Amazon has become a key focus and we expect our revenue from this channel to grow over 70% this year with further expansion ahead.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Additionally, I'm pleased to share that Bark is now available on Amazon Europe, marking another important milestone. Overall, we anticipate expanding our offerings across both toys and consumables with partners including Target, Walmart, Costco, TJ Maxx and many more. We expect this segment to grow approximately 30% this year over last year with even faster growth expected in fiscal year twenty twenty six. Moving on, Spark Air has exceeded expectations. Our first flight took off in May and just two quarters later, the business delivered $2,000,000 in revenue with a positive gross margin as a result of our high utilization rates.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

When we initially introduced Park Air, we acknowledged that the cost of air travel for dogs was prohibitive for many pet parents. However, we emphasized our long term goal of making air travel accessible to all dogs, not just those with wealthy owners. Overall, we are thrilled with the speed and efficiency with which the team has grown this business. These early successes lay a strong foundation for the future of BarkAir. On that note, let's turn to profitability, an area we have delivered consistent improvements for the past two years.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Last quarter, we delivered a 63% consolidated gross margin, an improvement of 90 basis points compared to last year. As I said before, profitability drives revenue. These margin gains empower us to invest more efficiently and effectively in driving top line growth, and we are now at an inflection point in that journey. In addition to gross margin improvements, we continue to drive down G and A costs, including savings in both shipping and fulfillment, as well as reductions related to headcount. These efforts enabled us to achieve our tenth consecutive quarter of year over year adjusted EBITDA improvement.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Most importantly, we are on track to reach our first full year of adjusted EBITDA profitability in two months' time. This is a critical milestone and we intend to expand the bottom line further in the years ahead. Looking beyond fiscal year twenty twenty five, we anticipate our top line returning to growth in fiscal year twenty twenty six with mid to high single digit gains, this growth will be built on a far more profitable foundation. Beyond that, we expect both revenue and EBITDA margin to improve steadily with each passing year. As I reflect on the past three years back as CEO, it's clear that Bart has made meaningful strides, delivering substantial improvements in profitability, building an impressive leadership team, executing key growth initiatives and laying a strong foundation for the future.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

We believe in our progress and future so much that we've invested around $17,000,000 to repurchase over 11,000,000 shares to date. And we'll continue to repurchase shares for as long as we believe the company is significantly undervalued as we feel it is today given this progress. The investments we've made to strengthen our platform, streamline operations and elevate our brand are setting the stage for a return to revenue growth in FY 'twenty six and beyond. With a more sustainable cost base and exciting opportunities on the horizon, we are confident that Bark's best days are yet to come. And with that, I will turn the call over to Zaheer.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Thanks, Matt, and good afternoon, everyone. Our results last quarter demonstrate our consistent progress executing the roadmap we outlined at the start of fiscal 'twenty five. With oversight from our new leadership team, we're beginning to see early momentum on the top line while maintaining a sharp focus on profitability. We delivered our tenth consecutive quarter of year over year adjusted EBITDA improvement last quarter, and we're on track to achieve our first full year of adjusted EBITDA profitability at the March. Looking beyond fiscal 'twenty five, we expect to build on this foundation with stronger top line growth and sustained profitability improvements.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

With that, let's dive into our fiscal third quarter results in more detail. Total revenue for the quarter was $126,400,000 a 1% increase year over year. And while our long term growth ambitions are far greater, this marked our second consecutive quarter of year over year revenue growth following eight quarters of year over year declines. These are important first steps and much of the team's efforts are just beginning to be reflected in our top line results, particularly within our commerce segment. Breaking it down by segment, B2C contributed $106,100,000 in revenue, which includes $2,000,000 of Barcare.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

In total, the segment declined 4% compared to last year. As we have discussed in prior quarters, we have been migrating customer cohorts to our new Shopify based platform throughout the year. And in October, we also moved all of our paid media over. As Matt mentioned, there is always a degree of uncertainty when moving to a new platform. However, the early results are encouraging.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

For instance, last quarter was our strongest new subscription quarter in three years. At the same time, we're also moving up the funnel prioritizing customers who engage with BOP because of the value they see in our brand, in our products and the unique experiences we bring into their household, rather than those driven primarily by discounts. Building and maintaining an engaged customer base is critical. And under Michael Parnas' leadership, we have some exciting initiatives in the pipeline. The Deep Sea segment has seen headwinds, some driven by industry factors and others reflecting areas we need to execute more effectively.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

However, we expect this segment to stabilize in fiscal 'twenty six as 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. For example, revamping our D2C supply chain network in fiscal 'twenty five caused shipment delays for some customers, which impacted retention. The team has been focused on packing these challenges and we're beginning to see progress with further advancements expected as we go into fiscal 'twenty six. On the commerce side of the business and under the leadership of Michael Black, we're seeing substantial top line acceleration with much of the new team's efforts only just beginning to flow through the P and L. Last quarter, our commerce segment delivered $20,300,000 in revenue, representing a 43% increase year over year and up 27% year to date.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

This growth has been driven by the addition of promising new partners like Chewy and growing shelf space and SKU count with existing partners. We're also seeing strong encouraging growth with previously underserved partners such as Amazon and TJ Maxx. Additionally, we're in the early stages of expanding our international footprint. For example, following international wins with Freshnout in Europe and Pets at Home in The UK, we recently launched on Amazon Europe. The lion's share of the commerce growth we see today is concentrated in the toy category.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

As we head into fiscal twenty twenty six, we anticipate further expansion of our consumable products, unlocking additional growth opportunities in categories with much bigger TAMs. 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 continue to take market share both domestically and internationally. Moving on, consolidated gross margin was 62.7%, up 90 basis points versus last year. 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.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Overall, we're pleased with our progress over the past few years and expect relatively stable gross margins in both the B2C and commerce segments moving forward. 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. Turning to operating expenses, Shipping and fulfillment expenses were $36,700,000 in the quarter, up 3.4% versus last year. Included in this quarter's shipping and fulfillment expense is $2,400,000 of warehouse restructuring costs relating to our network transition.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Excluding this expense, shipping and fulfillment costs were down $1,000,000 versus last year, reflecting more favorable shipping terms from a new partner. As I mentioned earlier, there are opportunities to improve our supply chain through further network optimization, which will be a focus area for us in fiscal 'twenty six. Other G and A expenses, which primarily consist of headcount and overhead costs, totaled $27,500,000 for the quarter, a $3,200,000 improvement year over year. This reduction reflects lower headcount costs as we continue to align our organization structure with the evolving needs of the business. Marketing expenses were $27,400,000 for the quarter, up $2,300,000 year over year.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

This increase reflects strategic investment to acquire new customers at attractive acquisition costs, which we expect will benefit the business in the months ahead. Looking forward, this is a line we can flex up or down depending on the returns we are seeing from these investments. Lastly, adjusted EBITDA for the quarter was negative $1,600,000 an improvement of $4,900,000 compared to last year, driven by the improvements in our gross margin percentage, shipping and fulfillment costs and other G and A costs. Free cash flow for the quarter was negative $2,000,000 dollars and negative $1,200,000 year to date. For the full year, we expect to be in the zip code of Breakeven from a free cash flow perspective.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Turning to the balance sheet. We ended the quarter with $115,000,000 in cash, consistent with the prior quarter. This reflects $2,800,000 spent in the quarter to repurchase 1,700,000.0 shares at an average price of $1.69 Since initiating the buyback program in August 2023, we have invested approximately $17,000,000 repurchasing 11,000,000 shares at an average price of $1.53 We currently have approximately $6,000,000 remaining under our existing authorization and plan to continue to opportunistically repurchase shares at these levels, especially given our excitement for fiscal 'twenty six. Overall, we're closing out fiscal 'twenty five on a solid foundation and with a large runway ahead. With that in mind, let me turn to guidance for the fiscal fourth quarter and full year.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

For the full year, we are reaffirming the original guidance provided in our Q4 call. Specifically, we expect total revenue to be between $490,000,000 and $500,000,000 reflecting year over year growth of flat to 2%. This implies fourth quarter revenue in the range of $121,200,000 to $131,200,000 While we recognize this is a wide range with less than two months left in the fiscal year, it reflects the inherent timing variability in our commerce segment. Many shelf resets occur in the March timeframe and the exact timing of retailer shipments whether a week earlier or later can have a meaningful impact on the quarter. Furthermore, given the strong growth we're seeing in this segment, this dynamic is amplified.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

On the adjusted EBITDA side, we also reaffirm our original guidance of $1,000,000 to $5,000,000 for the full year. At the midpoint, this represents an approximately $14,000,000 improvement compared to last year and would mark the first positive adjusted EBITDA year in Barq's history. This implies a range of $900,000 to $4,900,000 for the fourth quarter, with a midpoint reflecting a $1,100,000 improvement versus last year. Looking ahead to fiscal 'twenty six, while we are still finalizing our operating plan, we are confident in achieving mid to high single digit top line growth. Formal guidance will be provided on our fourth quarter call in June, but directionally, we believe this is a reasonable and achievable range.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Talking of 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. First, one third of our volumes come from consumables, which are almost entirely sourced domestically and are unaffected by the latest tariffs. For the remaining two thirds, we have been proactively working with our key suppliers in China to implement productivity improvements that dampen the impact of the latest 10% tariffs. And as one of the largest dog toy companies in The U.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

S, our scale coupled with our strong gross margins provide flexibility to address these costs. As a result, we believe we have the opportunity to capture shelf space, particularly 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. 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 laser focused on driving the business forward.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

We remain confident in our ability to deliver long term value for our customers, partners and shareholders. With that, I'll turn the call over to our operator for Q and A.

Operator

Thank you. Our first question comes from the line of Maria Ripps with Canaccord.

Maria Ripps
Managing Director, Senior Research Analyst at Canaccord Genuity Inc

Great. Good afternoon and thanks for taking my questions. First, on your 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 sort of stabilization in 2026. I guess any color you can share on your DTC segment in the context of your outlook for mid to high single digit growth next year?

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Sure. Thanks, Maria. And you took the words out of my mouth there when you said stabilization in fiscal year twenty twenty six. That's you couldn't have said it I couldn't have said it better myself. So you got that just right and that means stabilizing.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Therefore, when we're saying like the high single digit growth on the overall enterprise, then most of it is coming across the commerce channel, which we've stated in the past is a goal for us to have that take more and more of the revenue share. 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, and then Barcare contributing as well. So that's where you get most of the growth when we talk about that mid to high single digits number for next year.

Maria Ripps
Managing Director, Senior Research Analyst at Canaccord Genuity Inc

Got it. That's helpful. And then can you maybe spend a few minutes and talk about your strategic vision for BARC Air? I guess, did you see it developing into a meaningful contributor to your financials over time? And would that impact your sort of capital requirements or profitability of the overall business?

Maria Ripps
Managing Director, Senior Research Analyst at Canaccord Genuity Inc

And maybe talk about sort of your thoughts on synergies in terms of leveraging your existing customer base and expanding your brand?

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Sure. On Barcare, I would say it's too soon to call it a material driver for us or a material opportunity. Remember, we're eight, nine months into it right now. So it's been a great eight or nine months. The planes are filled.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

We are gross margin positive last quarter. We did $2,000,000 of revenue last quarter. I think everything we've seen in these eight or nine months tells us that there's a really good opportunity for it. What we don't know yet is how far does that demand stretch and the path to get there. So what you'll see in the year ahead for sure is a lot of experimentation, opening up some new routes to test, different plane formats to test, different price points.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

As you see next week, we have some flights between New York and Florida that bring the cost down to $1,000 per ticket from $6,000 or $8,000 So hopefully that opens up a lot of demand. But on the whole, I think it's do we really have to say just how material it will be? The thing that we're committed to with respect to the capital expenditures or requirements is we're very happy with the model that we run right now, which is an asset light model. We partner with those who operate different aviation companies. They do the heavy lifting there.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

We lease the equipment and the infrastructure from them. We let them do what they do well. We take care of the dogs and the marketing. And that's working out really well. So I don't see a change in that in the foreseeable future.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

In short, Xavier would like me to say, we're not buying a plane anytime soon.

Maria Ripps
Managing Director, Senior Research Analyst at Canaccord Genuity Inc

Great. Thanks for the color, Matt, and good luck for the rest of the quarter.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Thanks.

Operator

Your next question is from the line of Ryan Myers with Lake Street Capital.

Ryan Meyers
Senior Research Analyst at Lake Street Capital Markets, LLC

First one for me. Just want to make sure I fully understand kind of the commentary on the fourth quarter guidance. So it sounds like there's just some lack of a little bit of visibility just due to the stock reset. So 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 in the quarter, it's just really too hard to tell where those orders will come in at?

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Hey, Ryan. How are you doing? This is Ahir. Yes, I think you've summed it up well. You know, shelf resets generally in retail happen in March, April timeframe.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

And so you always get some timing variability as you get confirms on resets, when products are going to ship depending on customer to customer. So some volume can flow out of Q4 into Q1. And so you'll know that nearer to the time and a lot of it's dependent on the customer supply chain as well in terms of them picking up the product around the quarter end. So that's probably the biggest driver of the variability.

Ryan Meyers
Senior Research Analyst at Lake Street Capital Markets, LLC

Okay. Makes sense. And then the other question for me, just obviously the Chewy business is a 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 maybe dollar amount contribution that you've seen, that'd be helpful.

Ryan Meyers
Senior Research Analyst at Lake Street Capital Markets, LLC

But yes, any commentary there would be great.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Sure. I can take that one. So, yes, as Matt said in his commentary, we started with Chewy in June with about 30 SKUs. We quickly expanded that to well over 150 SKUs as we speak. They've got most of our assortments on the consumable side as well.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

What we're seeing is continued momentum in that customer, so growth in the top line on a week on week basis. The conversations we have with Shuri are extremely positive about our performance and a ton of excitement about the potential growth in the future. When you look at our toys performance, for example, we're already one of the biggest pet toy suppliers on their site. So just a lot of positive sentiment there. I'll probably take it beyond Shoei, Ryan, we're performing really strongly with Amazon as well.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

As Matt mentioned, up 70 year over year and similarly in a couple of other major retail customers as well.

Ryan Meyers
Senior Research Analyst at Lake Street Capital Markets, LLC

Got it. That's great to hear. Thanks for taking my questions.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Thanks.

Operator

Your next question is from the line of Kamil Goelala with Jefferies.

Kaumil Gajrawala
Kaumil Gajrawala
Managing Director at Jefferies Financial Group

Hey, guys. Good afternoon. I guess the first thing is you're growing again on DTC or new subs. Can you maybe just talk about if there's a way to sort of parse out, is it the market kind of coming back your way after a few years of working itself out? Or if you're able to, maybe parse out how much of that is coming from sort of new media structure in Shopify and such?

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Yes. This is Matt, by the way. I would say it's 99% the latter. Maybe even the market being continued to be a little bit of a headwind. If we go back like a year, I talk a lot about that there were things that we could do as a company to improve our performance.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

So it cuts through everything. It's the approach we take to creative to testing the channels that we're choosing to invest in and how we're allocating dollars to those channels, how we're expanding them, how we're 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, we made a we moved all of our ad spending for BarkBox and Superture over to the Shopify platform because we were so encouraged by the conversion results that we were seeing on the platform that we thought we performed better on the holiday season over there rather than on our legacy platforms. And that turned out to be true. So again, we saw that big uplift in new subscribers over last year at a more efficient cost of acquisition and that was really with only two months of the quarter being on there.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

You saw some other strong indicators that there's just a lot of headroom in it for us. For example, we obviously, on our legacy platform, we can't offer ShotPay as a way to check out. When we moved over, 43% of the customers who are checking out are using Shop Pay. That should help us in retention downstream as well. And now that we're a couple months into it, but we're finding that we can everything that we thought we could do with this platform is turning out to be true, that we can move pieces around, we can test faster, we can iterate faster, learn, open up new functionality that wasn't available to us, do that faster because of the plug ins and the partners that are around the Shopify ecosystem.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

So it's still early days there. And obviously, like when you transition to a new platform like that, not everything goes the way you expected either. It's not all wind at your back. But in those instances, we're usually comping to something that we like functionality that we had built on the legacy side and wasn't out of the box from Shopify. So we have to either plug it in from someone else or hack around it a little bit, but we know how to close those gaps pretty quickly.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

All in all, it's we're exiting this year in terms of customer acquisition and conversion, 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. Sorry, that was really long. Sorry that I just went out and on there.

Kaumil Gajrawala
Kaumil Gajrawala
Managing Director at Jefferies Financial Group

No, it's probably because you're excited. I guess, Zahir, if we could just talk about EBITDA, you guys have been nice enough this early to provide an initial sense of fiscal 'twenty six top line. With everything that's changed so far, what would that mean for profits or EBITDA?

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Hi, Carmel. For fiscal 'twenty six, we expect a good year over year improvement in EBITDA. And of course, I'll provide more specifics when we get to our call in early June. I think directionally, 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 of areas of the business. So good step up to 26 versus 25 and then continued improvement driven by leverage and scale.

Kaumil Gajrawala
Kaumil Gajrawala
Managing Director at Jefferies Financial Group

Got it. Okay, great. Thanks guys.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Thanks.

Operator

Our next question is from the line of Yigal Irwania with Citigroup.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Hey, good afternoon guys.

Ygal Arounian
Ygal Arounian
Analyst at Citigroup

A few follow ups on the segments. Just go dive a little bit deeper. I guess for direct to consumer and the marketing strategy moving further up funnel, did that start this quarter, meaning that increase in 11% of new customers, is that already reflective of this move to higher funnel? And as you do that, 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?

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

We started it in the summer. And as we weighed into it, we're going pretty cautiously or carefully, so we can learn what's working or what's not, not based on a subscriber number or cost of acquisition, but other signals that say the awareness is taking. And so the efforts have scaled up through the year. And maybe as you're suggesting, if they are longer lead and you're getting maybe we got some of that benefit in the last quarter. But what we're trying to do is continue to learn, continue to expand our spend in those directions, while not over investing in it and blowing out our CAC for a quarter or two.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

So internally, we call it our glide path into what would be the optimal state for us. So far, so good. We're learning a lot. And then what we're seeing with Shopify is giving us some leeway to move that a little faster and make mistakes a little bit faster. Okay.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Is there more efficiency

Ygal Arounian
Ygal Arounian
Analyst at Citigroup

in CAC from the Shopify transition or do you think it's mostly captured? I know you still have to move some customers over, but largely in the numbers or there's more?

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

I'm sorry. I thought I understood the question until right at the end there. I'm sorry.

Ygal Arounian
Ygal Arounian
Analyst at Citigroup

Just like on so the transition to Shopify is driving that incremental efficiency on the CAC. Is there more on the Shop transition or it's kind of you realize the number? Yes.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

Yes. There is. And it's definitely driving that efficiency largely through conversion. And then what we're doing is taking those efficiency gains and largely pushing them back into exploring new channels that are upper and mid funnel, more awareness building that don't pay off immediately. So if we just ran the same playbook that was all bottom of funnel and moved over to Shopify, we'd have even greater efficiency gains.

Matt Meeker
Matt Meeker
Co-Founder and Chief Executive Officer at BARK

What we're doing is reinvesting that to learn faster into the permanent model.

Ygal Arounian
Ygal Arounian
Analyst at Citigroup

Okay. Great. That's very helpful. And then on the commerce side,

Ygal Arounian
Ygal Arounian
Analyst at Citigroup

I know it's early, but can

Ygal Arounian
Ygal Arounian
Analyst at Citigroup

you talk about what you think the ultimate opportunity is internationally there? How big it can get? And then in the commentary of next year growing faster in commerce than this year, I know you laid out the specific drivers, including international, but can you kind of break out what each component drives or how much of the largest contributors are? Thanks.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Sure. Look, I think it's a combination of several factors. Matt called it out in his part of the call earlier on, bringing on a new leadership team and their expertise, their relationships with our customers, their vision has 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. Part of what's driving the growth is we're focusing a lot more on going where the customer shops.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

So new customers like Chewy, expanding with others that we've really been underserving in the past, such as Amazon and TJ Maxx, they're driving major opportunities and major white space opportunities for us. So plenty of runway for growth there as it relates to Amazon. That's both domestically and in Europe. So we've just literally in the last month or so launched in Europe and there's a huge runway there as far as the international market is concerned. Other things I would look out from a commerce perspective is growing in the partnerships area.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

We've been investing in that space for some time. This year, we had a real strong initial launch with Prox, which was a sellout in Q2 from the products that we're offering. And then probably larger than that by some way is our relationship that we're building with Girl Scouts. So we launched a pilot program with them a year ago with one SKU that ran in the fall, worked really well. This year, we ran a similar program with a number of SKUs, growing revenue this year, and that's a program that we're going to continue to work on as far as an online program is with Girl Scouts.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

But bigger than that, we will be launching with a national program with them in fiscal 'twenty seven. So we're really working out scale, size of the number of SKUs, assortment and things like that. But for fiscal 'twenty seven, we would launch a national cookie program, which would be a significant revenue opportunity both for us and for Girl Scouts. Internationally, you asked, we've already launched some product into Freshnout, which is one of the bigger bricks and mortar retailers in Europe. We've got distribution in UK, One of the biggest pet specialty suppliers, which is Pets at Home.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

A lot of the bigger retailers in The UK will have seasonal programs with us in the coming months and that will lead to a bigger relationship with those guys along with what I said about Amazon Europe. So across domestically and internationally, there's a ton of white space here, both in toys and consumables.

Ygal Arounian
Ygal Arounian
Analyst at Citigroup

Very helpful. Thank you guys.

Zahir Ibrahim
Zahir Ibrahim
CFO at BARK

Thanks.

Operator

Thank you. This does conclude today's call. Thank you for joining. You may now disconnect your line.

Executives
    • Michael Mougias
      Michael Mougias
      Vice President - IR
    • Matt Meeker
      Matt Meeker
      Co-Founder and Chief Executive Officer
    • Zahir Ibrahim
      Zahir Ibrahim
      CFO
Analysts
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Embraer Q3 2025
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