Release Date: June 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross margin improved by 600 basis points to 61.6% this year.
- Shipping and fulfillment expenses decreased by nearly 300 basis points.
- Adjusted EBITDA improved by $47 million, from a loss of $57.8 million to a loss of $10.6 million.
- Free cash flow improved by over $190 million to negative $2.8 million this year.
- Ended the year with $125 million of cash on hand.
Negative Points
- Total fourth quarter revenue was down 3.6% compared to last year.
- Direct to consumer revenue was down 5.9% year over year.
- Total revenue for the year was down 8.4%.
- Commerce revenue was down 15% to $53.7 million.
- Guidance for Q1 revenue is expected to be down from last year.
Q & A Highlights
Q: Is the continued softness in discretionary categories what you have been expecting, and have you factored any improvements into 2025 guidance?
A: Matt Meeker, CEO: We are monitoring macro trends and seeing some positive signals, but it's too soon to call it an industry turnaround. For example, Chewy reported that adoptions were greater than relinquishments for the first time since 2022. However, Nielsen data shows dog toys in retail were down 10% in Q4, while BARK toys were only down 1.5%. We are factoring these trends into our guidance.
Q: Can you provide commentary on the cadence of the guidance, particularly regarding EBITDA seasonality?
A: Zahir Ibrahim, CFO: The general shape of the P&L from an EBITDA perspective will follow a similar cadence to fiscal '24, with stronger performance expected each quarter. Q3 will be our biggest quarter due to the holiday season. We will continue to invest in marketing to drive top-line growth, given our improved profitability profile.
Q: Can we assume that positive EBITDA guidance also means free cash flow should be positive for the year?
A: Zahir Ibrahim, CFO: Yes, EBITDA is a good proxy for free cash flow for our business in the coming year. We expect similar figures for free cash flow positivity in fiscal '25.
Q: What should be the incremental contribution from new retail opportunities by 2026?
A: Matt Meeker, CEO: We expect significant growth in retail channels, driven by new talent and product development. This year, commerce was about 11% of our revenue, and we expect it to be 12-13% next year. Over the next three years, we anticipate commerce to be 30-35% of our business.
Q: How did your incremental marketing spend perform in Q4, and what are your plans for marketing spend this year?
A: Matt Meeker, CEO: Our marketing spend in Q4 was very effective, with significant year-over-year growth in new subscribers and improved lifetime value. We plan to invest more in upper and mid-funnel activities to drive awareness and cross-channel marketing, led by our new CMO, Michael Perna.
Q: Can you discuss your inventory levels and how they impact your DTC business growth?
A: Zahir Ibrahim, CFO: We have managed down inventory levels over the past couple of years and are now carrying a healthy level of inventory. We still see opportunities to pare back inventory further over the next 18 months, but our current levels are more than adequate for customer service.
Q: What are the benefits of moving to a unified platform, and what is left to do?
A: Matt Meeker, CEO: The technical integration is the easier part; the bigger challenge is maintaining customer retention and acquisition rates during the transition. Benefits include improved cross-sell and upsell opportunities, more effective marketing, and consolidation efficiencies. Megan Knoll, our new Chief Direct to Consumer Officer, will lead this effort.
Q: How has BARK Air performed compared to expectations, and what are your thoughts on expanding to other services?
A: Matt Meeker, CEO: BARK Air has exceeded expectations with strong bookings and positive customer feedback. While we have many ideas for additional services, our focus is on getting BARK Air right before expanding further.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
