BARK, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended December 31, 2021. Amounts are in U.S. dollars; financial statement amounts below are in millions unless stated otherwise. BARK sells dog products through Direct to Consumer subscriptions and online sales, and through retail and online marketplace partners. The June 2021 business combination with Northern Star was accounted for as a reverse recapitalization; historical results reflect Legacy BARK.
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2021 | Prior-year quarter | Nine months ended Dec. 31, 2021 | Prior-year period |
|---|---|---|---|---|
| Revenue | $140.8 million | $105.2 million | $378.6 million | $266.4 million |
| Gross profit / margin | $78.4 million / 55.7% | $59.5 million / 56.6% | $218.1 million / 57.6% | $158.0 million / 59.3% |
| Operating loss | $27.1 million | $19.3 million | $59.3 million | $16.7 million |
| Net loss | $13.2 million | $25.0 million | $31.6 million | $24.3 million |
| Adjusted EBITDA loss (non-GAAP) | $18.3 million | $14.1 million | $34.7 million | $8.0 million |
| Operating cash flow | Not separately stated for quarter | Not separately stated for quarter | $(146.5) million | $(8.8) million |
- Revenue mix and growth: Quarterly Direct to Consumer revenue rose 31.0% to $118.1 million; Commerce rose 51.5% to $22.7 million. For nine months, the respective increases were 42.0% and 43.1%. Management attributed Direct to Consumer growth mainly to more subscription shipments and higher average order value, and Commerce growth to existing and new retail partners.
- Costs and margins: Quarterly gross margin declined 0.9 percentage points and nine-month margin declined 1.7 points, primarily from higher inbound freight costs. General and administrative expense increased 49.6% for the quarter and 74.7% for nine months, including fulfillment and shipping, compensation, and public-company-related costs. Nine-month advertising expense increased 20.2%.
- Net loss and unusual income: Net loss improved in the quarter but worsened for the nine-month period. Other income included a $14.5 million quarterly and $34.0 million nine-month noncash gain from changes in warrant fair value. This materially benefited reported net loss; it is not an operating revenue source.
- Cash and debt: At December 31, cash and cash equivalents were $228.7 million, with another $2.3 million classified as restricted cash. Long-term debt was $76.0 million net of fees and discount; it consisted of $79.2 million principal on 5.50% convertible notes due December 2025. The notes accrue interest in kind; $4.2 million was added to principal in December 2021. The $35.0 million Western Alliance revolving facility had no borrowings outstanding and was available through May 31, 2022.
- Cash flow and working capital: Nine-month operating cash use rose to $146.5 million, including a $73.2 million inventory cash outflow as the company built inventory to support demand. Investing cash use was $17.6 million, primarily capital expenditures. Financing provided $355.4 million, including $227.1 million of merger proceeds and $200.0 million from the PIPE, partly offset by debt repayments and transaction costs.
Changes, outlook, and material matters
- Active subscriptions were 2.254 million, up from 1.729 million; quarterly subscription shipments increased 22.0%. Average monthly shipment churn was 6.5%, unchanged year over year for the quarter, while nine-month churn rose to 7.0% from 6.0%. Quarterly customer acquisition cost increased to $64.42 from $60.50. LTV:CAC was 4.5x versus 4.4x for the quarter and 4.7x versus 6.3x for nine months.
- Management said cash and cash equivalents, together with expected operating cash and borrowing proceeds, should fund operations for at least 12 months. The filing provides no specific numerical revenue, earnings, or margin guidance.
- Management expected elevated freight costs and supply-chain disruption, including demurrage fees, to continue, but could not predict their duration or magnitude. It also cited uncertainty around COVID-19, consumer demand, subscriber retention and acquisition costs, competition, and the ability to scale new offerings such as BARK Eats.
- On January 10, 2022, CEO Manish Joneja resigned and Matt Meeker was appointed CEO while remaining Executive Chairman. Joneja’s separation arrangements include salary continuation, benefits, and additional option vesting.
- The company reported ineffective disclosure controls due to material weaknesses involving account reconciliations, inventory controls, warrant accounting, and review of complex or non-routine transactions. Remediation was ongoing. The filing also describes correction of a prior-period equity and EPS presentation error, which management characterized as immaterial to previously issued statements.
- The company disclosed no legal proceedings believed likely to have a material effect, but noted ordinary-course claims and that outcomes cannot be assured. It expected to lose emerging growth company status at March 31, 2022; adoption of lease accounting standards was expected to materially affect the balance sheet.
Most important facts for investors to verify
- Whether subscription growth, churn, acquisition cost, and customer lifetime economics remain sustainable as pandemic-related demand conditions change.
- Whether freight, supply-chain, and fulfillment costs stabilize, and whether inventory investment converts into sales without adverse markdowns or cash-flow pressure.
- Underlying operating performance excluding warrant fair-value gains, including the trend in gross margin, operating expenses, and non-GAAP adjustments.
- Cash burn, cash availability, and financing needs after the revolving facility expires; also the terms, dilution potential, and repayment or conversion outcome of the 2025 convertible notes.
- Progress in remediating material weaknesses and the accuracy and timeliness of future financial reporting, especially as BARK transitions out of emerging growth company status.
- Execution of the CEO transition and new product initiatives, including BARK Eats, and the effect of competition and retail-channel concentration.