BARK, Inc. Q4 FY2026 earnings call

- Overall Financial Performance * Achieved positive full year adjusted EBITDA of $0.2 million, marking the second consecutive year of positive adjusted EBITDA, meeting management's profitability target. This follows a $58 million adjusted EBITDA loss just three years prior. * Maintained a consolidated gross margin of 61% for the full year, consistent with fiscal 2025, despite a higher share of revenue from lower-margin commerce and Bark Air. Fourth quarter gross margin was 62.7%. * Reduced total annual costs by $55 million year-over-year across marketing, G&A, shipping and fulfillment; total marketing spend was cut by over $24 million year-over-year to $59.2 million as the company prioritized margin over inefficient top-line growth. * Ended the period with a debt-free balance sheet, $19 million in cash, and $75.5 million in inventory (a $13 million year-over-year reduction, improving working capital efficiency).

- Revenue Diversification Progress * Commerce and Bark Air collectively represented 21% of total full year 2026 revenue, up from 15% in fiscal 2025, reducing reliance on the core D2C subscription segment. * Commerce and Bark Air are expected to collectively exceed $100 million in revenue in fiscal 2027, further advancing diversification goals.

- Strategic Update: Relationship Commerce * Management reaffirmed that the U.S. pet product market is large, structurally growing, and fragmented with no dominant leader, supporting long-term opportunity for BARC. * The company is shifting its core strategy from traditional subscription box personalization (based on basic dog attributes like size and age) to 'relationship commerce', which focuses on deeper, specific understanding of individual dogs' needs, health profiles, and owner community interests. This strategy is built on three pillars: depth of customer understanding, density of customer touchpoints, and long-term relationship durability. * AI is positioned as a key competitive advantage to enable this strategy at scale, with work already underway. * The company is consolidating its product portfolio to reallocate resources to high-return opportunities: the low-return kibble and toppers product lines will be sunsetted to simplify operations and improve overall profitability.

- Operational Quality Improvements * The deliberate pullback in marketing spend resulted in a smaller D2C subscriber base entering fiscal 2027, but underlying base quality has improved, with steadily rising retention rates and growing average order values.

Total full year 2026 revenue was $394.8 million, down from $484.2 million in fiscal 2025. Fourth quarter 2026 revenue was $86.6 million, down from $115.4 million year-over-year. 1. D2C Segment: Full year revenue was $324.9 million, accounting for ~82.3% of total full year 2026 revenue. Fourth quarter D2C revenue was $74 million. D2C gross margin reached 68%, up 200 basis points year-over-year. Included within D2C is Bark Air, which delivered full year revenue of $12.4 million (more than doubling year-over-year), with $3.1 million of Bark Air revenue generated in the fourth quarter. Bark Air holds average utilization rates of 90% and consistent 5-star customer ratings. 2. Commerce Segment: Full year revenue was $69.9 million, a 2% increase year-over-year, accounting for ~17.7% of total full year 2026 revenue. Fourth quarter commerce revenue was $12.5 million, down 18.3% year-over-year due to timing shifts in retail partner shipments.

- Fiscal 2027 First Quarter: Management expects total revenue of $77 to $79 million, and adjusted EBITDA of $0 to $1 million. - Full Year Fiscal 2027: Management expects total revenue of $325 to $340 million (down from fiscal 2026's $394.8 million, reflecting the intentional pullback in D2C marketing), and adjusted EBITDA of $7 to $10 million, which represents a meaningful improvement from fiscal 2026 and is consistent with the company's commitment to sustained profitability. - D2C revenue is expected to decline year-over-year in the first half of fiscal 2027, before stabilizing in the second half and returning to growth thereafter. - Commerce segment revenue is expected to grow, reaching nearly one quarter of total fiscal 2027 revenue (up from 18% in fiscal 2026), driven by expansion with new and existing retail partners. - Bark Air: No significant revenue growth is expected for fiscal 2027, as the segment will prioritize improving unit economics and profitability over top-line expansion. - The BARC board of directors authorized a new share repurchase program of up to $40 million, to be funded by ongoing free cash flow, reflecting confidence in the company's long-term value at current share prices. - Management expects to generate positive free cash flow in fiscal 2027.

- Historic tariffs and ongoing macroeconomic volatility created pressure on margins and top-line growth, leading the company to prioritize profitability over near-term growth in fiscal 2026. - Uncertainty around tariffs created caution among retail commerce partners in the first half of fiscal 2026, limiting near-term commerce growth. - $7.1 million in IEPA tariff refunds paid in fiscal 2026 were not eligible for recording as a cost reduction in FY26 under U.S. Customs and Border Protection rules, suppressing full year profitability. - Core subscription box personalization that was once differentiated has become table standards in the market, putting pressure on retention and growth if the company does not successfully execute its new relationship commerce strategy.

Q: The analyst asks what operational levers drive the 2027 $7 to $10 million adjusted EBITDA guidance, given the lower revenue base from the smaller D2C subscriber base. / A: Management notes that broad unit economics have improved across the business. Higher average order values and stronger retention have increased the quality of the existing subscriber base. Structural cost reductions, including earlier workforce downsizing, broader adoption of AI and automation, and replacement of high-cost SaaS contracts, have created a leaner overall operation. Tariff burdens that weighed on 2026 product costs are expected to be far smaller in 2027. These improvements position the company to invest in growth once the new strategic playbook is fully implemented.

Q: The analyst asks if BARC still relies almost entirely on China for toy/non-consumable production, or if the company has changed this approach. / A: Management confirms that entering fiscal 2026, BARC almost entirely sourced toys and non-consumables from China. After facing significant tariff headwinds during the year, the company rapidly built out supply chain diversification. It now has the ability to source from multiple countries across Southeast Asia and South America, mixing suppliers based on total all-in cost (including tariffs), quality, and other factors. This diversification creates flexibility to quickly shift production away from China if new large tariffs are implemented.