Ladies and gentlemen, thank you for standing by, and welcome to the Bark First Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in listen only mode. After the speaker presentation, there will be a question and answer I would now like to hand the conference over to your speaker today, Mr. Mike Mooges, Vice President of Investor Relations. Thank you.
Please go ahead.
Good afternoon, everyone, Welcome to Bark's Q1 fiscal 2022 earnings call. Joining me today are Manish Chaneja, CEO and John Toth, CFO. Today's conference call is being webcast in its entirety on our website and a replay of the webcast will be made available shortly after the Additionally, a press release covering the company's financial results was issued this afternoon and can be found on our Investor Relations website. Before we begin, I would like to remind you of the following information regarding forward looking statements. The statements made on today's call are based on management's current expectations and are subject to risks and uncertainties that could cause actual future results and outcomes to differ.
Please refer to our SEC filings for more information on some of the factors that could affect our future results and outcomes. Also during today's call, we will discuss certain non GAAP financial measures. Reconciliation to our non GAAP financial measures are also contained in this afternoon's press release. Lastly, I would like to remind everyone that our fiscal year ended March 31, we are currently in fiscal 2020 2, which will consist of the last 3 calendar quarters of 2021 and the 1st calendar quarter of 2022. With that, let me now turn the call over to Manish.
Thanks, Mike, and good afternoon, everyone. Thank you for joining our first earnings call trading under the bar ticker. I would also like to thank our employees, I will then turn the call over to John Coth, Mark's CFO, to walk you through our recent financial performance in more detail. First, let's begin with some key highlights from our strong Q1. Fiscal 2022 is off to a great start.
We saw robust growth in subscription shipments, driving total revenue to the top end of our guidance range. Our top line was accompanied once again by strong margins and healthy customer acquisition costs. In fact, our customer acquisition costs were lower last quarter Then the quarter is going back to fiscal 2019 despite doubling our subscription base over that time period. Looking at the business in more detail, revenue in our core direct to consumer segment came in at 105,000,000, An impressive 55% increase year over year. We added 280,000 new subscriptions last quarter, bringing total active subscriptions to over $1,900,000 We delivered a record 3,600,000 subscription shipments in the quarter, a fifty compared to the same period last year.
Our Atabox feature, which reflects our cross selling capabilities, also drove significant growth, Accounting for over $7,000,000 in revenue in the quarter, a 174% increase compared to last year. Average order value was also up $0.87 to $29.21 versus last year. Turning to our commerce business, which includes sales of bought products through retailers such as Target, Costco and Amazon. Total revenue in this segment was $12,200,000 A 59% increase year over year driven by growth in revenue from both existing partners as well as new partners such as Lowe's. This performance is encouraging as this segment helps broaden awareness of BAW products and presents an opportunity for us To convert these customers to monthly subscribers, we have had a lot of recent success in this segment.
To date, 20 individual Hughes have topped $1,000,000 in sales at a single retail partner with $7,000,000 falling between $2,000,000 $4,000,000 Our total revenue for the Q1 was $117,600,000 which came in at the top end of our guidance range for the quarter while maintaining our Industry gross margin at 59 percent plus. We are also pleased with our customer acquisition costs, which came in at $48.36 down 6% from the previous quarter. This in an environment of raising media costs. Additionally, the customers we acquired were of higher value, thereby delivering a healthy 3 to 4 months payback on a gross margin basis. On a year over year basis, Our CAC was up from particularly low $30.83 we had achieved last year.
However, this comparison isn't as relevant in our view As we were lapping impact from COVID, which resulted in lower than normal customer acquisition costs. Nonetheless, we are extremely pleased with the strong start to the fiscal year We believe we are strongly positioned to capitalize on the immense market opportunity. Taking a step back, I would like to reiterate the broader bar Opportunities for those on the call that are newer to our story. Box mission is simple and has not changed since our first pitch deck 9 years ago. Make all dogs happy.
Our customer service, our happy team and wellness advisors help us build lifelong relationships The dogs and the parents, which drives high retention and lifetime value. This is a core and highly differentiating asset, Particularly as we expand into new product categories like food and health, as a positive experience our customers have had with the BarkBox Product will have a halo effect on our newer categories, which have larger addressable markets and are less discretionary. On the broader industry side, we continue to benefit from durable secular tailwinds. Globally, dog ownership continues to grow at a healthy clip. Today, an estimated 63,000,000 households in the U.
S. Own a dog, of which we serve only 1,900,000. Internationally, that figure is much higher. Furthermore, the humanization of pets is an ongoing trend that we continue to benefit from. Dog parents are spending more time and more money on their pets, often viewing them as members of the family.
This is particularly apparent amongst millennials and Gen Z. This presents a significant opportunity for Spark to grow its market share across our sun, food, health and home verticals. So why is Park uniquely positioned to capitalize on these rising tides? First, we have an incredible asset in our customer experience happy team, which delivers highly personalized experiences and ensures complete customer satisfaction. To that end, our customer satisfaction scores have been around 95% for the past 4 years.
2nd, we leverage our growing data set to personalize and optimize our products at scale. This data enables us to better understand our customers' needs, while machine learning capabilities allow us to predict and tailor our suite of products and recommend specific and individualized add on products for our customers, which drives higher average order value and margin accretion. 3rd, We are the only vertically integrated dog brand. All of our product categories are designed, manufactured and distributed by us. Bark is a brand.
We are not a marketplace selling third party products. We are happy to sell our products to marketplaces to reach all dog parents And further raise brand awareness in the same way that Nike sell with sneakers and Foot Locker. However, the value proposition is different across these businesses. For example, we regularly partner with other iconic brands like Warner Brothers and the NBA. Our margins are 2 to 3 times higher than that of The traditional pet marketplace and a social media presence, which exceeds 9,000,000 followers across our various channels, is significantly larger.
To put that last figure in context, our BarkBox Instagram handle alone has more followers than iconic lifestyle brands such as Peloton, Otley and Beyond Meat, which is extremely powerful as it serves as a force multiplier for us to launch and market new products and categories. Lastly, we are omni channel. We sell products direct to consumer, but we also leverage partnerships with top retailers like Petco and PetSmart In addition to the ones I mentioned before, you can buy box toys waiting in line in Dunkin' Donuts, walking through the Costa Food Court or strolling through the pet island target. So how do we intend to capitalize on these opportunities and deliver long term shareholder value? To that end, we remain focused on the Following key growth strategies: 1, expansion to new product categories 2, scaling and optimizing existing products 3, Enhancing cross selling and add on opportunities 4, increasing our presence in retailers and other marketplaces.
I will touch on each of these, but first, I'd like to spend some additional time on our expansion into new categories. We are more than just a dog We are the only company offering dogs and their parents a suite of products spanning the 4 core pet categories, fun, food, health and home. We are replicating the success we have had in the fun category by applying our learnings and data into our newer categories, extend the lifetime value of our customers and drive increases in average order value. While we are still in early days, we have progressed in these categories and we are confident that the halo effect Bark Eats is a highly personalized meal plan created for your specific dog and delivered in portioned daily meals. Our wellness advisors work with dog parents to understand their dog and create a meal plan consisting of high quality kibbles, toppers and other supplements.
Our nutritionists maintain ongoing relationships with our customers, navigating their dog's wellness over time And recommending different meal plans and supplements as a dog matures. Currently, personalization in the kibble market is limited and generally consists of a label on the bag indicating puppy, adult or senior. This presents Bard with a significant opportunity to capture market share of the $40,000,000,000 plus cable business in the United States alone, but creating a highly personalized and premium product at a more mass market Price point. We are confident in our ability to scale this business as we leverage our data and customers from our existing play category. Given the magnitude of the opportunity, investing in our Eats product and infrastructure is a key priority, which will enable us to reach more markets in line with the We have also made a number of recent enhancements in our each products as well.
First, We redesigned the packaging to be more consistent with the brand identity. We also launched an Add in Box feature for existing BarkBox and Superchure customers, which will allow us to cross sell into our 1,900,000 active subscriptions. This will enable our current subscribers to add Eats From the existing dashboard in a couple of easy clicks, the same is true for our proprietary Bright Dental product as well as home products like bed. While still early days, we are extremely pleased with the early reception of Eats. We cannot provide specific numbers at this time.
However, July was by far our strongest month to date and it is looking like August will be even stronger. The encouraging early data from Eats is notwithstanding the fact But we have spent minimal marketing dollars. Most of our customer acquisition has been through word-of-mouth. 1 of our founders, Carly Streis, is leading each for us and is dedicated to its long term success. All in all, we are excited about these new categories and look forward to updating you on our progress over the coming months.
Moving on, our second priority is to continue scaling and optimizing our toy and treats subscription business. Our passionate Happy team engages over 250 A creative team then leverages this data to inform product design and development decisions as part of the flywheel. Our 3rd priority is to enhance cross selling opportunities. We utilize our data centric model to recommend add ons. Historically, this was focused on just toys and treats.
However, we are scaling this opportunity by including Eats, Bright Home products as additional add on features. This is a meaningful opportunity for us as we look to grow average order value and extend the lifetime value of a customer. As I mentioned, we increased our add to box revenue by 174% last quarter. We anticipate additional growth As we execute on these priorities and continue to improve our machine learning capabilities enabling us to cross sell our products more effectively. And 4th, we are focused on increasing brand partnerships and retail distribution.
We have had the privilege of partnering with some truly iconic brands, including the NBA, Warner Brothers, Universal Studios, Dunkin' Donuts and more. These partnerships raise awareness of Our brand and drive incremental sales. Recently, we signed a unique collaboration with Netflix, which will roll out next year. These types of opportunities remain a key priority and we will continue to secure new and exciting licensing deals. We are also looking to expand our presence in retail.
These channels raise the visibility of our products and creates additional channels for us to convert one time sales to monthly subscriptions. In summary, FY 'twenty two is off to a great start and the market opportunity for Bark is immense. Our mission is to make all dogs happy and we obsess over supporting a unique relationship and bond between each dog and the parent, be it at home, while many of us work from home or back in office. A strong brand enables us to profitably scale this business beyond that of a traditional marketplace or retailer. I'm proud of our team's customer obsession and dogged determination towards disciplined execution to deliver results.
We will continue to execute We look forward to updating you on our progress as we scale the Bar ecosystem. With that, I will turn the call over to John.
Thanks Manish and thank you everyone for joining us today. There have been a lot of new beginnings at Bark, but today is a really significant one. Filing associated with our transaction and with the filing of our 10 Q tomorrow, we truly begin our life as a public company. As Manish mentioned, we hit the ground running in the Q1 of fiscal 2022, the quarter ended June 30, 2021. As for many companies, this quarter's year over year comparisons are dominated by the outbreak of COVID in the U.
S. During this quarter last year. With that said, our growth this quarter is all the more significant given the relatively difficult year over year comparisons we faced given the surge in subscriptions this time last year. Nonetheless, we continued to see strong results as we profitably acquired new customers while simultaneously retaining our existing customer We were also able to maintain healthy unit economics in spite of media rates rising the pre COVID levels. The quick summary is our revenue, margins, CAC and other key performance metrics that best illustrate the health of the business are all on track or better than we expected.
We are affirming our full year guidance, notwithstanding the freight and shipping headwinds that we and others are experiencing. Starting at the top of the P and L, total revenue for the quarter was $117,600,000 a 57% increase year over year. Our direct to consumer segment, which represented 90% of our revenue last quarter, was 105 dollars up roughly 57% compared to last year. This growth was primarily driven by a 52% increase in subscription shipments. Additionally, average order value, AOV, was up $0.87 to $29.21 year over year.
These results largely reflect the continued performance of our Play subscription business. However, as Eats, Brite and Home become more meaningful contributors to our revenue, we expect our average order value to increase over time. Remember, the AOV of an Eat This fact coupled with a growing add to box strategy for products like Bright And Home give us confidence in our ability to grow both AOV and retention per customer over time. Turning to the Commerce segment, total revenue was $12,200,000 a 59% increase compared to the same period last fiscal Our strong top line results were accompanied by continued cost discipline. Total gross profit was $69,800,000 which resulted in a healthy gross margin of 59.3%.
This is in line with previous quarters despite the increases in freight And so we are responding to these challenges strategically. 1st, by accelerating investment in self managed fulfillment assets and further 2nd, we are actively managing our network of shippers, being more selective about who focuses where to take advantage of our We will continue to monitor this situation and expect freight rates to be a headwind throughout this fiscal year. Nonetheless, We are very pleased with our margin profile last quarter and the team has done a terrific job responding to the situation and putting us in the enviable position of having grown our gross profit and allowing us to affirm our guidance despite these headwinds. Moving on, we acquired 280,000 new subscriptions During the quarter, our customer acquisition costs came in at $48.36 down 6% from the previous quarter. However, up from the COVID driven low of $30.83 which we achieved in the same period last year.
Total advertising and marketing expense associated These new subscriptions was $13,500,000 This coupled with our high gross margin of 59% resulted in a very healthy LTV to CAC of 5 times. As Manish mentioned, we build lifelong relationships Our average monthly subscription shipment churn for the quarter was 7.4% versus 6.2% for the same quarter a year ago. This delta is due primarily to the surge of new subscriptions that occurred during the same quarter last year Because there was significant growth in subscribers at this time last year, there was a significant overweighting this quarter of customers hitting 1 year anniversary, which is typically when we see the majority of churn in a cohort. The behavior of this COVID surge cohort is not significantly different from the behavior of any other cohort. It just resulted in a disproportionate number of subscribers Coming to their anniversary at the same time and so putting pressure on the shipment churn number for the overall subscriber For prior commentary, we believe 6% average monthly subscription churn is a reasonable baseline for Bark with its current business mix.
We expect this number to vary from this baseline in individual quarters, but decrease over the longer term as As a follow on note, we've been told that we may be somewhat punitive in our definition of churn. We use this metric as defined primarily because the inverse of shipment churn is a reasonably accurate approximation of Average monthly lifetime, 1 divided by 0.06 equals roughly 16.5 months, which is terrific for a subscription company. We do also look at churn on an active subscription basis, which is more aligned with how our peers in the dog space report churn. This quarter, our retention would be approximately 97.5% or a churn of 2.5%. And if we look at it on a customer basis as opposed to a subscription basis, it would be even lower.
Moving on, total G and A for the Half of this increase was in our shipping and fulfillment costs due to a combination of higher volume from increased sales as well as higher rate. Another roughly $10,000,000 is associated with investments in people to build our new businesses and technology to support our cross selling initiatives. And the balance is attributed to a variety of items including over $5,000,000 Moving down the P and L, interest expense, which is associated with our outstanding convertible notes was $1,600,000 in the quarter, largely offset by other income of $1,400,000 Net loss for the quarter was $24,800,000 on a GAAP basis and $10,000,000 if you exclude one time costs associated with the closing of the transaction, non cash charges and warrant value and non cash loss on extinguishment of debt. Finally, adjusted EBITDA was negative $7,600,000 which is in line with our expectations. For our guidance provided back in December of last year, this is an investment year for us.
Investment in people, investment in new products, Investment in technology and investment in fulfillment. It is worth noting that last year, with disciplined marketing spend And less expense in growing new businesses, ARK was net income positive, which demonstrates the strength of our business model. One additional point I would like to make is that our play subscription vertical was adjusted EBITDA positive last year. In my view, this demonstrates our ability to scale new businesses quickly and profitably. This is encouraging as we scale and invest in our newer initiatives, which we believe will exceed the size of the Play segment over time.
Turning quickly to the balance sheet, we ended the quarter with $321,000,000 in cash, which affords us the ability to strategically invest in high ROI opportunities. We intend to maintain a very disciplined ROI For the Q2 of 2022, we expect total revenue of approximately $122,000,000 For the full year, we're reiterating Previously provided revenue and EBITDA guidance. In summary, we are well on our way to executing the plan we laid out in December of 2020. Growing our subscriptions, maintaining solid margins and unit economics and have a healthy balance sheet that enables us intelligently invest in exciting growth initiatives. I'm very proud to be working with this team and reporting on the great work We are doing.
The team is excited to be a public company and eager to deliver long term shareholder value. And we are the only brand for the market with over 9,000,000 social followers and nearly 2,000,000 active subscribers. We have the opportunity to leverage those deep customer relationships into new and sticky products that introduce us to enormous market segments like food. And we have a strong business model, high margin, strong unit economics that will scale our profitability over time and a visible forecastable horizon. With that, I'll turn the call over for question and answer.
Your first question comes from the line of Steph Wissink from Jefferies. Your line is open.
Thank you. Good afternoon, everyone. And John, thank you for going through that detail on churn. I think it's really important to just, be compartmentalize the way you're reporting it versus Thank you for that. My first question actually relates to CAC.
I'm just curious if you can talk a little bit about the benefits you're seeing Some of your initiatives to acquire customers and how we should be thinking about CAC going forward to the balance of this fiscal year.
Thanks, Jeff. Good to hear from you. We're very fortunate. Our CAC this quarter over the prior quarter was actually down 6%. So we have a really good team that's very nimble at managing across channels.
We continue to pursue our operating goal of breaking even in 4 months and for the past 4 quarters we've been breaking even in 3 and even 2. So We're sort of on track for CAC. Don't expect it to move up terribly much In our fiscal Q3 calendar Q4, which is the gift giving season, you always see it go up a little bit, but average for the year, we feel like we're in a good place right now.
Okay, great. That's very helpful. And then
the second thing I wanted to just unpack was the Eats business. Can you talk a little about
some of the early learnings and apologize my dog Betty wanted to make herself known on your conference call. So I wanted to just talk about a little bit about Eats, if you could.
Hey, Seth. This is Anish. It's a little bit premature for us to share any breakdown for Eats right now. What we can share is that July was a very strong month. It's turning out to be even stronger.
And all this is basically with almost 0 cat. We are doing it through word-of-mouth. We are scaling faster. Our plan is to launch nationwide by end of the fiscal year. So we are able to do that right now.
We can ship nationwide. We are not actively marketing nationwide. That's part of the plan for rest of the fiscal year.
Okay, great. Last really quick one, Jonathan, for you as well just on the G and A. If you could just help us think through Any changes to your assumptions for the balance of the year as we kind of use the Q1 run rate as a good and reasonable run rate?
Yes. We We'll be following up with some more detail in the queue on adjustments related to the transaction. So speaking operationally, because we have some lingering Transaction costs running through the P and L. But from an operational perspective, we're affirming Our guidance for EBITDA, adjusted EBITDA for the balance of the year, this is an investment year for We're growing the teams for Bright and Eats. We're growing the technology for machine learning.
So, this quarter is in line with where we wanted to be. And we this quarter is in line with where we want it to be and we think we're going to End up where our guidance had suggested.
Okay, John, just for clarification, the shipping cost that you're calling out is Inflationary, that would be in your SG and A, is that correct?
That's right. Shipping and fulfillment is in SG and A, But I wouldn't characterize it as inflation. The real reason it's up is volume. We just ship more packages. So we are seeing rate increase As everybody in the U.
S. Is on shipping and fulfillment, but the driver for the increase in SG and A was we grew shipments over 50% quarter over this quarter last year. So that just moves the number up as we ship more packages. It's revenue related, if that makes sense.
Okay, very clear. Thank you very much.
Your next question comes from the line of Maria Ripps from Canaccord. Your line is
open. Great. And congrats on your Q1 as a public company and great results. I just wanted to follow-up on Eats. Can you maybe share with us where you are in the logistics investment cycle there?
And can you talk about sort of what kind of
Hey, Maria, this is Manish. So for Eats, As mentioned, still in early days, but given our success in the play category and the data and the relationships, we can leverage from that. We are optimistic about each being successful as a much larger TAM compared to play. From a nationwide perspective, we do ship from the East Coast right now. Unit of economics allow us to be able to serve the country, Although we are still investing basically across East and West hubs to serve the country, we have made it available.
So if you discover East, we will But we are not actively marketing into the entire 48 states. That's the answer to your first question. And the second about in terms of investment. In terms of breaking Part Eats, we're not ready to do that right now. We believe we'll be doing it next year.
Got it. That's very helpful. And maybe just a quick follow-up. Can you talk about some of your retail partnerships? How important are those in your sort of brand building effort?
And Have you seen any sort of or have you done any studies that would suggest sort of stronger brand recognition in regions where you have sort of broader retail presence?
Yes. So from retail or commerce segment perspective, I see it all we all deserve a background mission of making all dogs Copy. Which means that we'll serve you even if you're not a direct to consumer customer. It's a profitable business. It helps us raise awareness.
We and multiple partners, we announced the partner with Lowe's and there's more coming. And all those partners, we work backwards from that partner's So we don't I don't have the data right now to break down in terms of conversion. I think your question is basically what percent would convert Over into direct to consumer subscription, right? So we don't have a breakdown, but we're seeing basically brand awareness raise across these partnerships and different Cohorts around the country where we do not serve to that scale yet.
Got it. That's very helpful. Thank you very much.
Our final question comes from the line of Nick Jones from Citi. Your line is open.
Great. Thanks for taking the questions. Maybe a follow-up on the Commerce segment. Could you maybe frame what the remaining opportunity is in terms Retailers you can partner with, and then maybe once you do partner, what does the ramp look like until you start seeing material sales? And then I have a second question.
Hey, Nick. Good to hear from you. It's John.
We see a lot of
room to run-in retail, but We always see it as baseline about 15% of our total revenue. We want to make sure that retail is as profitable as the DTC And we're just in the early days of rolling out to all the locations and some of the big names we have like PetSmart, Petco, Target, Etcetera, Lowe's. So a lot of room to run. The problem is it has to keep up with the fast growing DTC business. So we expect it to be always be in about that 15 Is that helpful?
Yes, that's helpful. Let me add one more thing to that, Nick. So another advantage of aside from awareness and profitable businesses, Retail, the way I view it is allows us for asset light expansion in serving international consumers. That can inform our strategy for internationals down the road when we are ready. So that's something that we think about is in terms of retail partnerships like Costco and other partners, how can we actually expand from an asset light fashion.
Got it. Thanks. And then maybe taking a step back and Your category is a little unique. I think some of the other e commerce players are they're really lapping tough comps Because people are kind of stepping out of the house, spending less time on the screen, maybe that's going back with the Delta variant, but in the dog category, a lot of people can bring their dogs outside
of the home. So I guess
any thoughts on the current COVID landscape and how you guys are looking at the back half as kind of uncertainty builds? Do you see any pullback on, I guess, people bringing dogs into the home? Or are things
So there are a few points around that. One is that there are 63,000,000 in household withdrawals right now. We're in less than $2,000,000 And of those less than $2,000,000 our primary injection point had been in play. Now to think about Injecting into different categories about home, food and health, which has higher TAM, higher EOB, cross selloffel opportunities, Those are very critical. So we've seen industry being agnostic of the cycles that are hitting us.
Now the results that you've seen that we shared today is that we are Actually, out of CAC that's low in 2019, we are basically adding the CAC of 5. We are acquiring customers that are more valuable through ApptoBox So those are the good tailwinds that we're seeing. And the quarter that last COVID was actually one of our really strong quarter and cross quarter as well. We're pretty bullish on how this is kind of unraveling. And delta or not these Dogs in Our Life, if you look at the net addition of Dogs in Our Life, That's actually much positive and it's not just a COVID tailwind.
It's been happening for years, COVID get activated to a large extent.
This concludes today's conference call. Thank you for your participation. You may now disconnect.