BARK, Inc. — Form 10-Q Summary
Business context and reporting period. BARK sells dog toys, accessories and consumables through direct-to-consumer (DTC) subscriptions and online sales, plus retail and marketplace partners (Commerce). This report covers the three months ended June 30, 2023, BARK’s fiscal 2024 first quarter, compared with the three months ended June 30, 2022.
Financial and operating performance
| Metric | Q1 FY2024 | Prior-year quarter |
|---|---|---|
| Revenue | $120.6 million | $131.2 million |
| Gross profit / margin | $73.0 million / 60.6% | $75.8 million / 57.8% |
| Operating loss | $14.0 million | $20.1 million |
| Net loss / diluted loss per share | $11.7 million / $0.07 | $15.4 million / $0.09 |
| Adjusted EBITDA (non-GAAP) | $(7.4) million | $(13.0) million |
| Operating cash flow | $(10.7) million | $(17.4) million |
| Free cash flow (non-GAAP) | $(13.7) million | $(22.2) million |
Revenue fell 8.1%. DTC revenue declined 5.5% to $111.9 million; Commerce revenue fell 31.7% to $8.7 million. DTC orders decreased 7.9% to 3.56 million, partly offset by average order value rising 2.7% to $31.43. Management attributed Commerce weakness mainly to retail partners reducing inventory.
Gross margin improved 2.8 percentage points, with DTC margin at 62.2% (up 2.0 points) and Commerce margin at 39.7% (up 3.9 points). BARK cited a larger DTC revenue mix, higher average order value, product cost improvements and lower promotional costs. General and administrative expense decreased 12.8% to $69.4 million, including lower shipping and fulfillment costs and compensation expense; advertising and marketing expense increased 7.7% to $17.6 million.
Financial position and liquidity
- At June 30, cash and cash equivalents were $163.9 million; restricted cash was an additional $5.2 million. Cash and restricted cash together totaled $169.1 million, down $13.9 million from the start of the quarter.
- Inventory was $112.5 million, down from $124.3 million at March 31. Current assets were $286.7 million and current liabilities $80.6 million.
- Long-term debt had a carrying value of $81.4 million; outstanding principal on the 2025 Convertible Notes was $83.5 million. The notes bear 5.50% annual interest, paid in kind, and mature December 1, 2025 unless earlier converted, redeemed or repurchased.
- No borrowings were outstanding under the $35 million Western Alliance credit facility. Its then-current maturity was August 29, 2023; BARK said it was evaluating renewal or alternatives. The facility is secured by substantially all company assets, and BARK reported covenant compliance at June 30.
Outlook, commentary and material risks
Management stated that cash and cash equivalents, operating cash flows and borrowing proceeds were expected to fund operations for at least 12 months. No specific revenue, earnings or cash-flow guidance was provided. BARK has incurred recurring losses and said future capital needs depend on customer growth and investment plans; additional financing may be needed.
On July 13, 2023, after quarter-end, BARK announced a workforce reduction of 66 positions, approximately 8% of its workforce, as part of a cost-reduction initiative aimed at sustainable profitability and free cash flow. It estimated approximately $1.4 million of charges, primarily severance and payroll taxes, in fiscal 2024’s second quarter.
Risks highlighted include customer acquisition and retention, discretionary consumer spending, competition, reliance on a limited number of suppliers and logistics providers, retail-channel inventory decisions, shipping and fulfillment costs, and macroeconomic and supply-chain disruptions. Two customers represented 51% of gross receivables at quarter-end; three suppliers represented 43% of finished goods purchased during the quarter. BARK also disclosed a California putative class action alleging inadequate automatic-renewal disclosures for subscriptions; the case was at an early stage and the company could not estimate potential losses. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Quarterly net loss included $1.3 million of noncash income from changes in warrant fair value, compared with $6.0 million in the prior-year quarter. BARK reported no income-tax provision or benefit, citing expected losses and a full valuation allowance against net deferred tax assets.
Important facts for investors to verify
- Whether the credit facility was renewed or replaced after its August 29, 2023 maturity, and the resulting availability, pricing and covenant terms.
- Whether declining DTC orders and Commerce sales stabilize, and whether margin gains persist as product mix, pricing and costs change.
- Whether cash burn continues to improve and whether management’s stated minimum 12-month liquidity expectation remains supportable.
- Progress and realized savings from the workforce reduction, including the estimated $1.4 million charge.
- Potential dilution and repayment exposure from the $83.5 million convertible-note principal, accrued payment-in-kind interest, warrants and equity awards; the filing lists substantial excluded potential dilutive securities.
- Developments in the subscription-renewal litigation and any change in the company’s ability to estimate exposure.