BARK, Inc. — Q3 FY2024 Form 10-Q
Reporting period: Three and nine months ended December 31, 2023. BARK sells dog toys, accessories and consumables through Direct to Consumer (DTC) and retail and marketplace channels (Commerce). Amounts below are in millions of dollars unless stated otherwise.
Financial performance
| Metric | Q3 FY2024 | Q3 FY2023 | Nine months FY2024 | Nine months FY2023 |
|---|---|---|---|---|
| Revenue | $125.1 | $134.3 | $368.7 | $409.3 |
| Gross profit / margin | $77.2 / 61.8% | $80.2 / 59.7% | $225.9 / 61.3% | $236.3 / 57.7% |
| Operating expenses | $91.2 | $101.9 | $265.0 | $287.4 |
| Operating loss | $(14.0) | $(21.7) | $(39.1) | $(51.0) |
| Net loss | $(10.1) | $(21.3) | $(32.1) | $(47.3) |
| Adjusted EBITDA (non-GAAP) | $(6.4) | $(12.8) | $(12.8) | $(28.1) |
| Adjusted net loss (non-GAAP) | $(8.6) | $(16.8) | $(19.5) | $(38.6) |
Q3 DTC revenue fell 7.6% to $110.9 million; Commerce revenue was nearly flat at $14.2 million. For the nine-month period, DTC revenue declined 8.1% to $327.1 million and Commerce fell 21.9% to $41.6 million. Management attributed DTC weakness mainly to fewer orders and slightly lower average order value (AOV); Commerce’s year-to-date decline reflected retail-partner inventory reductions and macroeconomic pressure.
Q3 total orders decreased 5.8% to 3.504 million and AOV fell 1.9% to $31.65. Nine-month orders declined 7.6% to 10.425 million and AOV decreased 0.6% to $31.38. Gross margin improved despite lower revenue, with DTC margin at 63.8% in Q3 and 63.6% year to date. BARK cited lower inbound freight and product costs. General and administrative expense declined, while advertising and marketing expense rose 15.4% in Q3 and 13.3% year to date.
Cash, debt and liquidity
At December 31, 2023, cash and cash equivalents were $131.3 million, down from $177.9 million at March 31, 2023; restricted cash was another $5.1 million. Current assets were $240.6 million and current liabilities $91.0 million. Inventory declined to $98.5 million from $124.3 million.
For the nine months, operating cash flow was positive $7.1 million, compared with cash use of $14.5 million a year earlier. Capital expenditures were $6.7 million, producing reported free cash flow of $0.4 million, versus negative $33.3 million. Cash and restricted cash decreased $46.6 million, largely reflecting financing outflows, including $42.3 million of debt payments and $4.1 million of share repurchases. Q3 operating cash flow was $15.0 million and free cash flow was $13.3 million.
Debt consisted principally of 5.50% convertible notes due December 1, 2025: $39.8 million net carrying value and $40.6 million principal outstanding at quarter-end. In November, BARK repurchased $45.0 million principal for $44.4 million cash and recognized a $1.8 million extinguishment gain. The notes accrue interest in kind; if not converted, principal plus accrued interest is due at maturity. BARK had no borrowings under its $35 million revolving credit facility, amended to mature December 13, 2024. It is secured by substantially all assets and includes covenants, including minimum cash requirements.
Outlook, risks and notable items
BARK provided no specific revenue or earnings guidance in the supplied filing text. Management said cash, together with expected operating cash flows and available borrowing proceeds, should fund operations for at least the next 12 months, and stated it expects covenant compliance over that period. The company has recurring losses and says future capital needs depend on customer growth and investment plans; additional financing may be needed.
Management’s strategy includes expanding consumables and pursuing profitability. BARK said it secured commitments from two major retailers to distribute a new treat offering in nearly 2,500 stores beginning spring 2024. This is a planned rollout, not reported revenue.
Key risks include declining orders and discretionary spending, customer acquisition and retention costs, competition, dependence on a limited number of suppliers and logistics providers, supply-chain disruption, and execution of new products and channels. Two customers represented 51% of gross receivables at December 31, 2023; two suppliers represented 29% of accounts payable. The company also faces debt repayment and covenant constraints, potential dilution from equity awards and convertible securities, and risks from cybersecurity, privacy and regulatory compliance.
A putative California class action alleged inadequate disclosure of subscription auto-renewals. The plaintiff filed a voluntary dismissal with prejudice on January 2, 2024; on February 6, the court struck that dismissal and ordered an amended request by February 16. The filing does not provide a final resolution. BARK reported disclosure controls were effective and no material quarterly change to internal control over financial reporting.
Most important facts for investors to verify
- Whether order declines stabilize and whether DTC and Commerce revenue trends improve.
- Whether margin gains from freight and product-cost improvements persist as marketing spending increases.
- Cash use, working-capital movements and capital spending, alongside the remaining liquidity and covenant requirements.
- The terms and potential cash impact of the 2025 notes at maturity, including accrued payment-in-kind interest and change-of-control true-up provisions.
- The outcome of the subscription-renewal litigation and the planned spring 2024 retail treat launch.
- Non-GAAP results alongside GAAP losses; adjusted measures exclude items including stock compensation and other expenses and are not substitutes for GAAP results.