Bark(US:BARK)2023-11-07 16:00PART I. Financial Information Financial Statements (Unaudited) This section presents BARK, Inc.'s unaudited condensed consolidated financial statements for Q3 2023, detailing financial position, operations, equity changes, and cash flows, along with related notes and a subsequent debt repurchase Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $286,618 | $312,353 | | Cash and cash equivalents | $160,541 | $177,911 | | Inventory | $109,391 | $124,336 | | Total Assets | $368,986 | $400,420 | | Total Current Liabilities | $85,962 | $99,601 | | Long-Term Debt | $81,594 | $81,221 | | Total Liabilities | $218,039 | $229,883 | | Total Stockholders' Equity | $150,947 | $170,537 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $123,036 | $143,814 | $243,626 | $274,964 | | Gross Profit | $75,642 | $80,341 | $148,678 | $156,155 | | Loss from Operations | $(11,099) | $(9,146) | $(25,103) | $(29,284) | | Net Loss | $(10,337) | $(10,639) | $(22,000) | $(26,047) | | Net Loss per Share | $(0.06) | $(0.06) | $(0.12) | $(0.15) | - The company operates in two reportable segments: Direct to Consumer (DTC) and Commerce, with DTC revenue at $216.2 million and Commerce revenue at $27.4 million for the six months ended September 30, 20239193 - Subsequent to quarter end, on November 2, 2023, the company repurchased $45.0 million of its outstanding 5.50% Convertible Secured Notes due 2025 for a total cash price of $44.4 million9495 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses BARK's financial performance, noting decreased revenue due to lower order volumes, improved gross margin, reduced net loss, positive Adjusted EBITDA, and strong liquidity, as the company focuses on profitability Overview and Key Performance Indicators BARK, an omnichannel dog brand, operates across Toys & Accessories and Consumables, selling DTC via subscriptions and through retail partners, with Total Orders and Average Order Value as key performance indicators Key Performance Indicators | Indicator | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Orders (in thousands) | 3,361 | 3,689 | 6,921 | 7,557 | | Average Order Value | $31.03 | $31.87 | $31.24 | $31.22 | - The company has expanded into larger consumables markets such as kibble, toppers, supplements, and dental products, which is expected to significantly increase its total addressable market100 Results of Operations Q2 FY2024 total revenue decreased 14.4% to $123.0 million due to lower order volumes in DTC and Commerce, yet gross profit declined less at 5.8% due to margin expansion, resulting in a slightly improved net loss Revenue by Segment - Q2 FY2024 vs Q2 FY2023 (in thousands) | Segment | Q2 2023 Revenue | Q2 2022 Revenue | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Direct to Consumer | $104,312 | $117,547 | $(13,235) | (11.3)% | | Commerce | $18,724 | $26,267 | $(7,543) | (28.7)% | | Total Revenue | $123,036 | $143,814 | $(20,778) | (14.4)% | Gross Profit by Segment - Q2 FY2024 vs Q2 FY2023 (in thousands) | Segment | Q2 2023 Gross Profit | Q2 2022 Gross Profit | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Direct to Consumer | $67,679 | $71,611 | $(3,932) | (5.5)% | | Commerce | $7,963 | $8,730 | $(767) | (8.8)% | | Total Gross Profit | $75,642 | $80,341 | $(4,699) | (5.8)% | - General and administrative expenses decreased by $5.2 million (7.0%) in Q2 2023, primarily due to lower shipping and fulfillment costs, reduced compensation expense, and lower consultant fees, partially offset by a $3.0 million non-cash impairment charge131 - Advertising and marketing expense increased by $2.5 million (16.2%) in Q2 2023 due to increased marketing spend132 Non-GAAP Financial Measures The company utilizes non-GAAP measures like Adjusted Net Loss, Adjusted EBITDA, and Free Cash Flow, reporting improved Q2 2023 Adjusted EBITDA of $1.0 million and positive Free Cash Flow of $0.9 million Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net loss | $(10,337) | $(10,639) | | Adjustments (Interest, D&A, SBC, etc.) | 11,341 | 8,629 | | Adjusted EBITDA | $1,004 | $(2,010) | Reconciliation of Net Loss to Adjusted Net Loss (in thousands) | Line Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net loss | $(10,337) | $(10,639) | | Adjustments (SBC, Warrants, Impairment, etc.) | 8,897 | 5,289 | | Adjusted net loss | $(1,440) | $(5,350) | Free Cash Flow (in thousands) | Line Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,825 | $(2,138) | | Capital expenditures | $(1,961) | $(9,373) | | Free cash flow | $864 | $(11,511) | Liquidity and Capital Resources As of September 30, 2023, the company held $160.5 million in cash, sufficient for 12 months, with $83.5 million in 2025 Convertible Notes outstanding and improved operating cash flow despite a credit facility expiration - As of September 30, 2023, the company had cash and cash equivalents of approximately $160.5 million164 - The company's $35.0 million secured revolving line of credit with Western Alliance Bank expired on October 31, 2023, with no outstanding borrowings, and the company is evaluating alternative options170 Cash Flow Summary - Six Months Ended (in thousands) | Cash Flow Activity | Sep 30, 2023 | Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,916) | $(19,563) | | Net cash used in investing activities | $(4,933) | $(14,108) | | Net cash (used in) provided by financing activities | $(4,665) | $586 | Quantitative and Qualitative Disclosures about Market Risk The company outlines its minimal exposure to market risks, including interest rate, inflation, and foreign exchange, none of which have materially impacted its business due to specific mitigating factors - The company's primary exposure to interest rate risk was its Western Alliance credit facility, which expired on October 31, 2023, with no outstanding borrowings182 - The company does not believe inflation has had a material effect on its business, financial condition, or results of operations183 - Foreign exchange risk is not expected to have a material impact as the company operates primarily within the United States and executes most transactions in U.S. dollars184 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective185 - There was no change in the Company's internal control over financial reporting during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting185 PART II. Other Information Legal Proceedings The company faces two early-stage legal proceedings: a California class action regarding automatic renewal disclosures and a Delaware shareholder class action challenging the corporate opportunity doctrine renunciation - A class action lawsuit, Farmer v. BarkBox, Inc., alleges the company failed to adequately disclose the automatic renewal of its subscription plans in violation of California law, with an appeal pending after denial of a motion to compel arbitration187 - A shareholder class action, Vernon v. BARK, Inc., was filed in Delaware seeking to have the renunciation of the corporate opportunity doctrine in the company's certificate of incorporation declared invalid188 Risk Factors This section details the company's comprehensive risk factors, including strategic, macroeconomic, operational, competitive, technological, regulatory, legal, and financial challenges, alongside its history of losses and stock price volatility - Strategic risks include challenges in acquiring new customers cost-effectively, maintaining high customer engagement, and successfully launching new products in a competitive market191193197 - The business is critically reliant on a limited number of suppliers and manufacturers, primarily located in Asia, and on third-party logistics providers, exposing it to supply chain, geopolitical, and shipping risks204207 - The company is subject to extensive and evolving laws and regulations regarding data privacy (e.g., CCPA/CPRA), consumer protection, and product safety, which could lead to significant costs and liabilities223225226 - Financial risks include a history of losses, potential inability to achieve or sustain profitability, limitations imposed by debt covenants, and potential for stock price volatility236239241 Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable252 Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - None253 Mine Safety Disclosures This item is not applicable to the company's business - Not applicable253 Other Information The company discloses no Rule 10b5-1 trading plan adoptions or terminations by directors/officers, and reports a post-quarter repurchase of $45.0 million of its 2025 Convertible Notes - During the reporting period, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5–1 trading arrangement254 - On November 2, 2023, the Company repurchased $45.0 million of its 5.50% Convertible Secured Notes due 2025 for a total cash purchase price of $44.4 million254255 Exhibits This section lists the exhibits filed with the Form 10-Q, including the Notes Purchase Agreement, Officer Certifications, and XBRL financial data - A list of filed exhibits is provided, including the Notes Purchase Agreement (10.1), Officer Certifications (31.1, 31.2, 31.3, 32.1, 32.2, 32.3), and XBRL data files (101 series)257260