Bark(BARK) - 2023 Q2 - Quarterly Report

PART I. Financial Information This section provides unaudited financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Financial Statements (Unaudited) This section presents BARK, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, equity, and cash flows, with detailed notes on accounting policies and financial items Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | March 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $166,310 | $199,397 | | Inventory | $160,634 | $153,115 | | Total current assets | $356,604 | $368,142 | | Total Assets | $444,854 | $434,061 | | Liabilities & Equity | | | | Accounts payable | $45,275 | $36,834 | | Total current liabilities | $111,325 | $108,611 | | Long-term debt | $76,517 | $76,190 | | Total Liabilities | $244,747 | $217,000 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net income or loss Statement of Operations Summary (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $143,814 | $120,162 | $274,964 | $237,768 | | Gross Profit | $80,341 | $69,886 | $156,155 | $139,677 | | Loss from Operations | ($9,146) | ($15,424) | ($29,284) | ($32,282) | | Net Income (Loss) | ($10,639) | $6,455 | ($26,047) | ($18,349) | | Net income (loss) per share—basic | ($0.06) | $0.04 | ($0.15) | ($0.13) | Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity over time, including net income, stock-based compensation, and share transactions - Total stockholders' equity decreased from $217.1 million to $200.1 million as of September 30, 2022, primarily due to a net loss of $26.0 million, partially offset by $8.2 million in stock-based compensation[16] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flow Summary for Six Months Ended September 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($19,563) | ($108,019) | | Net cash used in investing activities | ($14,108) | ($11,003) | | Net cash provided by financing activities | $586 | $354,168 | | Net (Decrease) Increase in Cash | ($33,083) | $235,146 | - The significant decrease in cash provided by financing activities in 2022 compared to 2021 is attributed to the prior year's inclusion of $227.1 million from the Merger and $200.0 million from the PIPE Issuance[22] Notes to Condensed Consolidated Financial Statements These notes offer detailed explanations of the company's accounting policies and financial statement line items, covering revenue recognition, long-term debt, stock-based compensation, leases, legal contingencies, and segment reporting Disaggregated Revenue by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Direct to Consumer | $117,547 | $106,817 | $235,944 | $212,193 | | Commerce | $26,267 | $13,345 | $39,020 | $25,575 | | Total Revenue | $143,814 | $120,162 | $274,964 | $237,768 | - As of September 30, 2022, the company reported $76.5 million in total long-term debt, primarily from the 2025 Convertible Notes[57][58] - The company is involved in a class-action lawsuit filed on September 1, 2022, alleging violations of California's Automatic Renewal Law, for which a Motion to Dismiss and Compel Arbitration was filed[85] Segment Gross Profit (in thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Direct to Consumer | $71,611 | $64,318 | $142,860 | $128,874 | | Commerce | $8,730 | $5,568 | $13,295 | $10,803 | | Total Gross Profit | $80,341 | $69,886 | $156,155 | $139,677 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting revenue growth, key performance indicators, liquidity, and non-GAAP measures, despite reporting a net loss Key Performance Indicators This section outlines key metrics such as Subscription Shipments, Active Subscriptions, Customer Acquisition Cost, and Average Order Value used to evaluate business performance Key Performance Indicators Comparison | Metric (in thousands, except CAC, LTV:CAC, AOV) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Subscription Shipments | 3,653 | 3,593 | 7,464 | 7,201 | | Active Subscriptions | 2,241 | 2,089 | 2,241 | 2,089 | | New Subscriptions | 218 | 271 | 477 | 551 | | CAC | $53.19 | $51.71 | $51.89 | $50.01 | | Average Order Value | $32.18 | $29.73 | $31.61 | $29.47 | Results of Operations This section details the company's operational results, including revenue growth across segments, changes in gross profit and margin, and the narrowing of loss from operations - For the three months ended September 30, 2022, Direct to Consumer revenue increased 10.0% year-over-year, driven by a 1.7% rise in Subscription Shipments and an 8.2% increase in average order value[131] - Commerce revenue for the three months ended September 30, 2022, surged 96.8% year-over-year, primarily due to increased volume and accelerated seasonal product orders from retail partners[131] - Gross margin for the three months ended September 30, 2022, decreased to 55.9% from 58.2% year-over-year, primarily due to the higher proportion of lower-margin Commerce business revenue, with Direct to Consumer gross margin at 60.9% and Commerce at 33.2%[132][133] - Advertising and marketing expense decreased by 10.2% year-over-year for the quarter, reflecting reduced media spend due to fewer new subscriber acquisitions[135] Non-GAAP Financial Measures This section presents non-GAAP measures like Adjusted Net Loss and Adjusted EBITDA, which show improved performance despite continued losses Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | ($10,639) | $6,455 | ($26,047) | ($18,349) | | Adjusted EBITDA | ($2,010) | ($8,779) | ($15,042) | ($16,385) | | Adjusted EBITDA margin | (1.40)% | (7.31)% | (5.47)% | (6.89)% | Reconciliation of Net Income (Loss) to Adjusted Net Loss (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | ($10,639) | $6,455 | ($26,047) | ($18,349) | | Adjusted net loss | ($5,350) | ($11,032) | ($21,787) | ($21,043) | | Adjusted net loss per share | ($0.03) | ($0.07) | ($0.12) | ($0.15) | Liquidity and Capital Resources This section details the company's cash position, operating cash flows, and available credit facilities, which are expected to fund operations for the next 12 months - The company concluded the quarter with $166.3 million in cash and cash equivalents[161] - Net cash used in operating activities for the six months ended September 30, 2022, was $19.6 million, a significant improvement from $108.0 million used in the prior year period[173][175][176] - The company holds a $35.0 million secured revolving line of credit with Western Alliance Bank, maturing May 31, 2023, with no outstanding borrowings as of September 30, 2022[170] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company assesses its exposure to market risks, concluding no material impact from interest rates, inflation, or foreign exchange fluctuations - The company does not believe it has material exposure to interest rate risk, inflation risk, or foreign exchange risk[183][185][186] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of September 30, 2022, due to identified material weaknesses in internal control over financial reporting, for which remediation efforts are underway - Management concluded that disclosure controls and procedures were not effective as of September 30, 2022, due to identified material weaknesses[188] - Material weaknesses were identified in four key areas: insufficient review of account reconciliations, lack of formalized inventory management controls, improper accounting review for complex transactions, and ineffective IT general controls[191] - The company is implementing remediation efforts, including improving IT controls, hiring additional personnel, enhancing the inventory management system, and formalizing accounting review processes[192][193][194] PART II. Other Information This section provides additional disclosures, including legal proceedings, risk factors, and other required information not covered in the financial statements Item 1. Legal Proceedings This section discloses a class-action complaint filed against BarkBox, Inc., alleging violations of California's Automatic Renewal Law, which the company intends to vigorously defend - A class-action complaint was filed against BarkBox, Inc. on September 1, 2022, alleging inadequate disclosure of automatic subscription renewals in violation of California law[197] Item 1A. Risk Factors This section details various risks, including customer acquisition challenges, macroeconomic sensitivity, supply chain dependencies, competition, and internal control weaknesses, that could adversely affect the company's business - Strategic risks encompass challenges in cost-effective customer acquisition, brand reputation protection, and successful new product introductions like BARK Food[200][203][204] - The business faces macroeconomic risks due to its reliance on consumer discretionary spending, susceptible to inflation, economic downturns, and COVID-19 impacts[210][211] - Operational risks arise from critical reliance on a limited number of suppliers, manufacturers, and logistics partners, primarily in Asia, leading to potential supply chain disruptions[212] - The company has identified material weaknesses in internal controls over financial reporting, which could result in material misstatements if not remediated[244] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is marked as 'Not applicable' in the report Item 3. Defaults Upon Senior Securities The report indicates 'None' for this item Item 4. Mine Safety Disclosures This item is marked as 'Not applicable' in the report Item 5. Other Information The report indicates 'None' for this item Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and XBRL data files