BARK - NYSE

Good afternoon, everyone and welcome to BARK, Inc.'s fiscal fourth quarter and full year 2025 earnings call. Joining me today are Matt Meeker, co-founder and chief executive officer, and

Thanks, Mike, and good afternoon, everyone. There are three big takeaways I want to share with you today. First, we delivered our first-ever adjusted EBITDA positive year. Second, we intend to remain adjusted EBITDA positive this year and beyond. And third, we plan to accelerate the diversification of our revenue faster than previously planned. My remarks today will expand on each of these three takeaways. First, after fourteen years of working at it, we are adjusted EBITDA positive for the first year ever. This is huge. In Q4, we delivered $5.2 million in positive adjusted EBITDA, our best quarterly result ever. And for the full year, we achieved $5.4 million, our first full year in the black. Just three years ago, we lost $58 million and burned nearly $200 million in cash. At the time, many questioned our long-term viability. Now, three years later, we're not only standing, we're in a positive adjusted EBITDA territory.

Thanks, Matt, and good afternoon, everyone. I'll start by reviewing our fiscal fourth quarter and full year 2025 results, then share how we're approaching fiscal 2026, particularly in light of the evolving tariff environment. Fiscal 2025 was a significant year for BARK, Inc. We delivered our first full year of positive adjusted EBITDA driven by ongoing margin expansion and improvements in operating efficiency. These results reflect several years of focused execution and provide a strong financial foundation as we head into what we expect to be a more volatile macroeconomic environment. Starting at the top of the P&L, fourth quarter revenue was $115.4 million, bringing full year revenue to $484.2 million, down 1.2% year over year. The launch of BARK Air, coupled with strong growth in our commerce segment, were positive top-line drivers. However, the D2C business faced headwinds, particularly in Q4, primarily due to a deliberate fallback in marketing and promotions spend in response to growing tariff uncertainty and signs of weakening consumer sentiment. In that environment, we did not believe incremental spend would generate a sound return. This decision also reflects a broader shift in our customer acquisition strategy. Rather than relying on discount-heavy tactics that often attract lower-retaining customers, we're focusing on driving higher-quality, longer-term relationships that support stronger lifetime value and profitability characteristics. Turning to commerce, revenue was $15.4 million in Q4 and $68.3 million for the full year, both up 27% versus fiscal 2024. Despite outbound shipping timing delays and tariff-related retailer pullback in the quarter, this segment performed well and will be a focus area for significant future growth as we continue to expand our retail footprint and broaden the SKU assortment across our partner network. Commerce represented 14% of total revenue in fiscal 2025, up from 11% last year. And we continue to expect it to grow to approximately one-third of the business over the next two to three years. BARK Air, another bright spot. The segment delivered $1.8 million in revenue in Q4, and nearly $6 million for the full year, a strong performance for a business launched less than a year ago. We're encouraged by early demand, and we see continued opportunity as we scale routes and grow our service offering. We also made meaningful progress on our margin profile. Consolidated gross margin improved 80 basis points year over year in Q4 to 63.6%. For the full year, gross margin was 62.4%, up 70 basis points, reflecting margin expansion in both our DTC and Commerce segments, up 120 and 230 basis points respectively, driven by continued focus on unit costs and supply chain optimization. Total marketing expense in Q4 was $17.3 million, down roughly $1.5 million from the prior year. But the full year marketing spend was $83.8 million, up $4.5 million. As mentioned, we adopted a more cautious posture late in the year in response to macro uncertainty. And we expect to maintain this approach in the near term. Shipping and fulfillment expenses were $109 million for the year, roughly flat year over year. G&A expenses were $114 million, down $14 million from the prior year. In Q4, G&A totaled $28.7 million, a $1.6 million decline. These reductions reflect lower headcount and ongoing tighter cost management. Altogether, these efforts support meaningful gains in profitability. Adjusted EBITDA was $5.2 million in Q4, a $3 million improvement year over year. For the full year, we delivered $5.4 million in adjusted EBITDA, a $16 million improvement over fiscal 2024. To reiterate Matt's comment, we've improved the business adjusted EBITDA by over $60 million in the last three years, underscoring the leverage and underlying structural improvements we've built into the business. Turning to the balance sheet, we ended the year with $94 million in cash, down $21 million in the quarter. This reflects the repurchase of 6 million shares for $10.5 million as well as working capital timing, including a $7 million reduction in accounts payable. Inventory at year-end was $88 million, down $2 million from Q3. On share buybacks, it's worth noting that for the full year, we repurchased 11.4 million shares for an outlay of $18.5 million. Looking ahead to fiscal 2026, the recent tariff increases, particularly those targeting Chinese imports, are prompting a broader reassessment of global supply chains. At BARK, Inc., we've accelerated several initiatives that were already under evaluation, including productivity programs and changes to sourcing and logistics. Productivity initiatives have played an important role over the past few years in delivering improved margins for BARK, Inc. By collaborating with our supply partners, new productivity initiatives for fiscal 2026 will help offset some of the tariff headwinds. As Matt noted, our toys, representing roughly two-thirds of our revenue, are currently sourced from China and subject to the new tariffs. In response, we will shift a portion of production to other geographies. Manufacturing in these regions will commence in the coming weeks, and we expect to start shipping products from these facilities in time for the holiday quarter. By the end of fiscal 2026, we anticipate a more diversified and balanced sourcing footprint for our toy production. Additionally, we're evaluating modest price increases to help offset some of the tariff headwinds and maintain our gross margins. Our goal is to absorb as much of the cost pressure as possible while minimizing the impact on our customers. The domestic market is experiencing meaningful headwinds relating to USPS rate changes. However, we are confident we can mitigate these as we progress through the year and come through the other side in an even stronger position.

Overall, given the macro volatility and changing tariff landscape,

we feel very good about our plan for fiscal 2026. At the same time, though, we also appreciate the uncertainty that lies ahead. Supplier transitions of magnitude carry risk, and many key variables such as future tariff actions, trade policy, inflation, and consumer response remain outside of our control. Given this backdrop, we are unable to provide full-year guidance at this time. We will continue to monitor the environment closely and provide updates as conditions evolve and we gain more clarity. Let me now walk you through our outlook for the fiscal first quarter. Shortly after the 145% tariff took effect in early April, we paused inbound shipping and asked suppliers to delay shipping any finished goods from China. Several of our retail partners also asked us to do the same, opting to defer imports as they assess the situation. While we avoided the steepest portion of tariff exposure, we have purchased inventory with approximately $4 million in additional tariff-related costs. And these will flow through our P&L in H1. Delaying inbound products has also weighed on commerce revenue, as some retailers pause product intake for six to eight weeks. These commerce dynamics, along with our pullback in C marketing and promotion spend, impact revenue in the quarter. As a result, we expect Q1 total revenue of between $99 million to $101 million, down 14% at the midpoint versus last year. We anticipate a stronger performance in adjusted EBITDA with the first quarter coming in between minus $1 million and positive $1 million, midpoint reflecting a $1.8 million improvement versus last year. Despite including higher tariff-related costs. Following the government's temporary rollback of tariffs to 30%, we've resumed importing at an accelerated pace and we expect a notable inventory build this quarter which we anticipate will unwind through H2. Note this Q1 inventory build will impact our ending cash balance and free cash flow for the quarter. In closing, we remain focused on what we can control. Driving efficiency, staying agile, and investing with discipline. Thanks to the structural improvements we've made over the past several years, BARK, Inc. is in a much stronger position to navigate this period of uncertainty. While external pressures will persist, entering fiscal 2026 with stronger fundamentals, a more flexible operating model, and a focused strategy to manage through near-term disruption. With that, we will turn the call over to the operator for Q&A.

Your first question comes from Maria Ripps with Canaccord. Please go ahead.

Great. Good afternoon, and thanks so much for taking my questions. First, can you maybe give us a little bit more color on diversifying your supply base outside of China? I guess, what are some countries that you're considering? And are there any incremental expenses sort of to keep in mind as you sort of as a result of this transition?

Hi, Maria. How are you doing? Yeah. We've, you know, for some time, we've been working on looking at alternative geographies in terms of diversifying our manufacturing. And so we're looking at a number of continents where we'll be moving manufacturing to. Obviously, the extent of that shift will depend on how the tariff rates move going forward. But we have the flexibility if we wanted to manufacture all of our toys outside of China by the end of this fiscal year.

Got it. That's helpful. And then can you maybe update us on your progress migrating to the Shopify platform? Has it been completed at this point? And can you talk about any recent changes in conversion rates and any other core KPIs as a result? Thanks so much.

Sure. It, for the most part, has been complete. The only reason I say for the most part is if you were to go to barkbox.com, you would see that site is still live. But we don't send any traffic there. We don't pick up new subscribers or anything there. So that will sunset as the year goes on. But all of our active subscribers and new subscribers are coming through bark.co. All of our products are listed there. The performance in terms of new customer acquisition and conversion and managing the cost of acquisition has been pretty decent through the early part of this year or ever since we started to migrate last October and November in a meaningful way. Now there's a lot of experimentation going on, which is some of the benefit of the platform. We've stepped into a platform that is much more nimble and allows us to test and try things much quicker than we were before. So we're taking advantage of that. And that'll never be done. But we're learning a lot really quickly, and then there's, as we knew and as we signaled in past calls, when you move over a million people plus onto a new platform, things won't work the same way they did in the past. And we've identified a lot of those holes or gaps, filled them in, and we've got our functionality back to par as to where it was before or maybe just a little bit ahead of par. So from a platform perspective, feeling really good about where we are with Shopify and how we're operating on it. Still a learning curve, but we're accelerating every day.

Great. Thanks so much for the call, Ahmed.

Your next question comes from Ryan Meyers with Lake Street Capital Market. Please go ahead.

Yeah. Hi, guys. Thanks for taking my question. First one for me, I just want to make sure I fully understand kind of the dynamic in the direct-to-consumer business. Because if I think back to last quarter, I believe we were seeing some positive signs out of the subscriber growth there, and it looked like things were kind of pointing in the right direction. So, you know, one, curious what you guys kind of saw throughout the quarter, and then, you know, what really the big dynamic is as far as, you know, why not spend the marketing dollars there anymore? And why try to, you know, really diversify out of that business further.

Yeah. Ryan. It's and I think you captured it well. We had a very strong holiday quarter when it came to acquiring new customers. A lot of that on the strength of the move to the Shopify platform. And we came into calendar 2025, pretty excited about that. And January was off to a really great start, and you know, just about like, I guess, if you took, like, a consumer sentiment chart and overlaid that with the rollout of tariffs and our business performance, they would all look pretty similar. There's a real tracking there. So as the consumer got more nervous around, and the tariff noise got louder and the consumer got more nervous, our new customer acquisition and our retention was feeling more and more pressure. And we were also looking at the cost side of the business saying, you know, ten, twenty, eighty, hundred and forty-five percent tariff, is a meaningful and unsustainable headwind. And as

Got it. No. That's super helpful. And then, you know, lastly, thinking about the commerce segment, I know there was some stuff you talked about in the prepared remarks as far as the impact that that's going to have on the first quarter. So understand that. But just, you know, want to make sure I understand from a demand perspective. Have you guys seen any significant changes there? Or are the impacts you're expecting to see more just on the timing of orders? Really just to understand, you know, if the demand still remains strong for the commerce offering for you guys.

Yeah. Hey, Ryan. This is

Got it. Thanks for taking my questions, guys.

Sure. Thanks.

Your next question comes from Kaumil Gajrawala with Jefferies. Please go ahead.

Hey. I guess digging into the prior question a little more is, I guess, to understand the consumer sentiment obviously fell off. We saw a slowdown across the hall of most of different categories. So it makes sense to sort of fall back marketing, but was any part of that decision or any part of the logic in that there's a certain amount of pricing that you would need to take, or it's just each incremental new user was going to be unprofitable anyways, and so you didn't want them. Like, is that also part of it, or was it just, hey, we were in this really tricky time where, you know, halfway through February till end of March, the consumer just really fell off.

I mean, certainly, the consumer fell off. And then you weigh the cost of the product and building a sustainable business. And, obviously, at a hundred and forty-five percent, if we're passing that through to a consumer who's already feeling a great deal of pressure, we're not fooling ourselves saying they were buying a thirty-dollar BarkBox but now they'll pay sixty dollars for it or fifty-five. That's just not tenable. And a bit of our vulnerability that we've been talking about for quite a few years is we have a very discretionary product. And if there's a headwind in terms of how the consumer is feeling or how much disposable income they have, the discretionary products are the ones that are going to take it first. And we're right there. We've got way too much in that segment. So there's also a recognition of we're not going to actively acquire or overpay or pay at all for customers that could potentially have a long-term unprofitable profile and put pressure on our bottom line. And also, we've just got to get away from being so discretionary in our product line, and we need to do that more urgently. So there was obviously the tariff conversation has been dominating probably every company for the past three, four months. But we've been having it day to day, and we like the plan that we put together before, I'll say before February, we felt really good about it as a team, as a board. And then the world changed, and we've got to change with it. So as I said on the call, we started from a place of being very happy and very proud that the bottom line was positive and a whole lot of resolution that we're not going back. We are going to protect that bottom line, and we're going to make the business more robust, which allowed us to diversification and making some of these shorter-term decisions within the quarter. That's how we got there.

Right. Okay. That makes sense. I think it relates to, you know, what to do now. You know, from a cash perspective, we might be at the or may have even passed the point of high drama on tariffs. Does it make sense to, you know, be more aggressive on share buybacks or given the sort of shakiness of the environment, maybe your cost structure, is it better to conserve at the moment than just wait this out and, yeah, keep as much cash on your balance sheet as possible.

Yeah. We've been pretty aggressive about it through the quarter. And like you said, now we're here, and I wish I felt like everything was settled and predictable, I don't feel that way. And then we're also talking about making some meaningful shifts into new categories. Certainly, there's some investment that's gone on in a lot of new brand development and packaging development and new product lines with consumables that we're looking forward to rolling out in August. So there's investment there. There's also the potential of M&A being a tool. So we, and of course, we want to manage the cash carefully. So we will, I think we want that dry powder available to us as the year goes on, but if those opportunities are there, I think we've shown we're not shy about jumping in when we think the stock is severely undervalued and buying back more. So we've got to weigh all those opportunities, but it's something we've been really aggressive about over the past year or two.

Okay. Alright. Great. Thank you.

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

Hey, guys. This is Wayne Chen on for Ygal. I was hoping to dig into the commerce segment a little bit more. I was just wondering maybe how your conversations with retailers have trended since that tariff rate came down a bit. And if you could give us maybe any sense of the backlog there of the pullback in deals and maybe if you could give us a sense of whether these pullbacks are more from your existing customers expanding versus new retail partnerships.

Hey, Ygal. How are you doing? Just as I was saying to Ryan earlier on the call, yeah, we had some pullback that we experienced in Q4. And that rolled into Q1. Just retailers being cautious and trying to manage to just a heavy tariff environment. As we've started to see the tariffs come down, you know, to a more reasonable level. I mean, thirty percent is reasonable, but at a more reasonable level, you're seeing that demand and the order placement coming back in. A lot of the seasonal demand that we've had drives Q2 and Q3 in the commerce segment. A lot of those orders have been placed, and product is either here or will be here in Q1 of fiscal 2026. So positive traction. I mean, I'd say there was just a temporary slowdown of placement of orders. But things are back on schedule. We expect to see that strong growth continuing across existing customers. As well as starting to have conversations with retailers as we launch our consumables offering, BARK in the Belly, which we plan to launch later this year. So having a lot of positive conversations on that front as well. We expect our pace of growth to accelerate as we exit fiscal 2026 and going into fiscal 2027.

Okay. Thank you. And I don't know if you guys have broken down before, have you given the breakdown in commerce between toys and consumables? Should we assume somewhere to DTC?

It's just more heavily skewed today towards toys. I would say it's at least 90% is toys. A small amount of consumables. We started with some of the treats launch last year. With the launch of BARK in the Belly, I think that's where you're going to see a lot more traction. We're seeing some good traction pre the launch on Amazon and Chewy of our consumables. Some strong performance there. So we expect Amazon and Chewy to continue to build performance and then get shelf placement and distribution at the back end of this year on the consumables overall launch.

Alright. Thank you.