Good morning, everyone. I'm Michael Lasser, the Hardline, Broadline, and Food Retail Analyst from UBS. We could not be more excited to have the team from BarkBox with us this morning. It is a super interesting story. It's not every day that we get to hear from a founder of a business and walk through the story of how a business started from nothing to, you know, a really impressive operation today. With us is Matt Meeker, who's the Founder and CEO. Zahir Ibrahim is recently the CFO within 6 months. Mike Mougias is the company's head of investor relations. Where I do wanna start is because it's not every day that we get to hear from a founder of a business. We wanna hear about the story of how Bark was established.
What, where did you see the market opportunity? You had 2 co-founders. Walk us through from inception to, you know, and we'll get into, you know, some of the more recent events, but just give us a sense for what the story is.
Sure. The story is it came from my dog, who.
In 2011 .
In 2011, that's right. I had
You're serial entrepreneur-ish.
I am.
Yeah.
Prior to that time, way back in 2002. let's go back.
When you were 4. Go ahead.
When I.
Yeah.
Yes. 4.5. 4.5.
Yeah.
Let's go back even further. 2000, I started a company and ran that for about 18 months. We made every mistake that you can make when starting a company. It was an 18-month lesson of what not to do, and wrapped that up at the end of 2001. Roll into 2002, started Meetup.com and tried to do everything the opposite way of the previous venture. That turned out much better. We grew quite quickly. I worked on that for about 7 or 8 years, at which point I moved into a venture capital role and was working at I was running an incubator here in New York, hosting about 20 different 1 to 3-person companies, trying to make them successful as founders, which was very fun.
In that time, I brought this little Great Dane into my life.
Whose name is?
Hugo.
Hugo.
Yes. I became obsessed with Hugo. Believe it or not, New York City pet stores don't, they don't stock the shelves for Great Danes.
Yeah.
Not many come through them.
It's so big.
I thought, you know, I wanna spoil this guy, I wanna make him really happy, and I'm not finding it at the local pet stores here. What could I do? From that came BarkBox and the idea of we will serve your dog based on their size, small, medium, or large. We'll find them size-appropriate toys or treats, send it to you once a month. I thought it was a fun little side project, it took off, dragged us in, and here we are, as you said, now 12 years later, 11 and a half years later, and it's a completely different company. Still, that foundation of every dog is special and unique, and we're able, due to our technology and our data, to serve them in a very individual way.
Your journey has been interesting. You, like many founders, had taken a step back from the business, from the day to day, I should say, of the business. In the last couple of years, you've come back into the CEO role. Give us. So 2 things. Walk us through what that has been like. 2, what are your observations around now that you've reinserted yourself in more the day-to-day operations of the business?
It's a different business for sure.
Yeah.
Yes, I stepped away, as we were heading to becoming a public company.
You didn't wanna deal with knuckleheads like me. I gotcha. I gotcha.
That's exactly it. I. Like, none of the knuckleheads.
That's a technical term.
Okay. I stepped out and I got dragged back in.
Yeah.
That happened about 14 months ago, and I'm really thrilled that it did. Sadly, Hugo passed about 15 months ago.
Mm-hmm.
The thing that really brought me back was this responsibility to him and his legacy of it's gotta live, it's gotta outlive me.
Yeah.
The brand does because it's for him. A responsibility to make that happen. The public market part of it is just who we are. It's a new environment than a private one, but I learn a lot, and it's actually really fun talking to knuckleheads like you.
It's great.
I really enjoy it.
Now, with that being said, as Hugo as this inspiration for this business, it turns out you chose a good category, one that in the midst of BarkBox's growth, we saw the emergence of how relevant online can be in this category. How are you thinking about the growth in online pet even after there's been a pretty substantial increase in penetration? Is the addressable market maturing from here?
It doesn't appear to be.
Yeah.
This trend of the humanization of pets has been going on since probably the early 1990s, if you look at the spend and how it's picked up and how the audience has evolved in terms of who has pets in their home and how they treat them, and that's U.S.-based. The rest of the world might be a generation behind us and sort of accelerating. In the U.S., you've got that humanization trend, and it seems to continue and accelerate. This isn't. Certainly, there was a surge in the pandemic, but you have 3 decades of very steady growth through any recession, through any downturn, keeps going, and going, and going.
Certainly depends on the source you look at, but what I've seen is over the next 5-10 years, we expect 8% compounded annual growth to continue just year-over-year-over-year. The category itself, there's a lot of passion for and a lot of potential. You look at that, I believe last year it was $124 billion of spending on our pets in the U.S. We had just over a half a billion of that, so that means there's $123 billion available for us. There's a big opportunity. We've scratched the surface in one or 2 categories. We've grown a lot in the toy category, and we've captured a lot of that market.
We've grown a lot in the treat category, but it's a big one, and we have great products, great permission to play, and we've grown so far without selling one thing on a retail shelf, so big opportunity there. Then you get into the behemoths of healthcare and food, again, those are early days for us, so huge growth potential for us across all that.
For those who are a little newer to the BarkBox story, what is a typical profile of a consumer who at least has been the legacy of the business, and how has that changed over time?
Yeah, well, they've always had 4 legs, usually a tail.
Yeah. Yeah.
No, it's very much a BARK thing, of we think of the dog as the customer.
Yeah.
That's who we're trying to serve, and if we could arm them all with a credit card, we'd love that and get the people out of the way. No, the consumer for BarkBox found us, we didn't go in search of a demographic. Initially, you found a younger Millennial or Gen Z audience, more coastal, more urban, heavily skewed to female, so about 80%. Over time, as our product line has evolved, we've had more diversity there as well. Then certainly the distribution through 40,000 retail channels has brought us into new markets and brought new people into the fold.
It is one of those categories where the demographic data like that is, I'd say, a little less relevant because at the core, who we're serving is someone who loves their dog.
Yeah
... and wants to make their dog happy. Maybe a subscription toy and treat box isn't right for you. We all feed our dogs. We all care about their health, and we wanna take care of their teeth, and we want them to be happy and healthy. As we continue to expand our product line and our ways of distributing those, we can meet just about any customer who loves their dog.
This is probably a good opportunity to just share a little bit about how the business has evolved originally as a traditional subscription model, and while that still represents a good portion of the total, what BarkBox has really developed is this engine of product development. Now you've been able to leverage that product development engine in a way that you're distributing, to your point, through 40,000 doors. While the, still the core of the financial performance comes from the subscription business, this evolution has occurred over the last several years. Is that?
That's very well said. That's very accurate. If you go back again to 2011 or '12 when we first started, a BarkBox was assembled with third-party products, toys and treats that we went out and curated and put together. At some point, we started to know our customer very, very well. We'd send it out, and we'd ask them what they thought of it, and they'd tell us, "I love this toy for this reason, but this one didn't make the cut for whatever reason." We collected enough information to find out it's not as simple as this toy good, this one bad, but this one is good for these types of dogs. This one is not a great fit for that type of dog.
We found that we could take that, all that information, put it into product development, and serve those dogs more individually and faster and better and more efficiently than outsourcing it. BARK started as a subscription company in 2011. We started our product development in about 2015, and today I'll put our product development team up against anyone. It's the best product development you've ever seen, certainly in the toy side, on the treat side, and newer we're into dental and food. BARK has evolved from a subscription company to a product company.
Yes.
Now it's just where are we selling that, and what's our advantage in making better products than everyone else? It's 2 million+ relationships where they tell us what they think every single day, and we take that right over to our designers, and we say, "Here's what we're learning. Make better stuff with that information.
The degree to which Matt can tell you about some of the complexities of these products is amazing. For example, a lot of dogs will chew on bones that help that are supposedly dental related. Matt will make the point that truly to be clean-cleaning, a our 4-legged friend's teeth, you need enzymes.
Right
in the product.
You remember that.
Whereas most of these products don't have enzymes, BARK created a product that has enzymes, there's a health and wellness element to it. Is that a good example of-?
That's a great example, yes. You know, there are very successful, commercially successful products called, what I would call dental treats on the market.
Mints.
Yeah. They smell good. They're shaped like a toothbrush.
Yeah.
They do provide. Think of it as like us brushing our teeth with a toothbrush with nothing on it.
Yeah.
You get some benefit there. You're scraping some stuff off your teeth, but if you really want the oral hygiene, you need the right mixture put together.
Mm-hmm
... or the right components, as you said, the enzymes. We created that gel. You apply it to a chew stick that also helps scrape the teeth. You hand it to your dog. In tens of thousands of households now, that's a daily routine, and the dogs love it, the people love it. It's providing a great health benefit.
Coincidentally, Jessica Lasser was searching for some dental products. She came across the BarkBox dental products and said these would be good for Brody Lasser, who is considered to be a good dental customer. I was able to drop my enzyme knowledge on her, and she was very impressed.
Thank you.
With that being said, it seems like one of the more interesting elements of the BarkBox investment case is that the heritage of the business was in toys and treats, but there has been a rollout and an expansion of a variety of different product categories.
Mm-hmm.
Give us a sense for what the assortment looks like right now, where the development for each of these categories are, and how BarkBox going to market to try and cross-sell the different products to its existing customer base and attract new customers with this expanded assortment. I know there's a lot in there.
There's a lot in there.
Yeah.
At the highest level, the big categories that we serve are toys, treats, dental, as we just talked about, and food, and within food, toppers.
Toppers, yeah.
Those are the big categories. Toys, again, I think we're the top of the game. There's big distribution directly and through retailers. There's room for growth, but it's the smallest of those markets. It's the one where we've had the most growth, and it's the smallest overall market opportunity. Next would be treats, where we have tremendous distribution. Depending on what you throw in the treat category or don't, we would be a considered, on a revenue basis, a top 5 treat seller.
Mm-hmm
... in the U.S., which probably would surprise a lot of people.
Yes.
On a revenue volume, about a year ago, Blue Buffalo bought a treat business from Tyson Foods that had similar revenue, similar profile, and they bought it for $1.2 billion. This is us just selling treats directly to our customer. Not one has hit a retail shelf, so that's a big opportunity in a $10 billion plus category. We've scratched the surface, but we have a lot of permission, a lot of knowledge, a lot of history. Huge growth potential for us. That's probably the next big opportunity for us to seize. You move to dental. We have good momentum. We've learned a lot. Again, it's all direct so far, and we have a very unique product. Next thing is on to retail, get that distribution.
The big advantage we have there is we've spent the last year getting our supply chain in shape. It, what that'll allow us to do is bring that product to market much more efficiently and probably save the customer some money while also helping the dog. Then last but not least is food, which is the biggest of the big categories in pet. We relaunched our food offering in August, and we've taken a breed-based approach to that, which means if you have a German Shepherd, we have a food that is...
That is Sean.
We haven't reached every breed yet.
Opportunity. Opportunity.
We haven't reached a Great Dane.
Brody Lasser is one hungry little puppy. That's big market opportunity.
It's a very unique positioning, and we've had a really strong reception to it. Since relaunching that in August, it's grown very quickly. What we've seen just this quarter that's not quite done, the where we're going to end up this quarter is we're gonna see about twice as many orders from that effort than we saw last quarter.
Yeah.
Sequentially, we're doubling. It's moving very quickly. Great customer feedback. I think we've unlocked something pretty big there. If that continues through the year, then we'll probably go to retailers the year after.
Yeah
We keep growing.
A lot of interesting elements to the story so far. I want to unpack a little bit of the heritage of the business, which is a subscription box.
Yeah.
There's 2 interesting questions here. Number one, is there some fatigue from the consumer just about whether it's subscriptions overall or subscription boxes? As part of the heritage, the foundation was on toys, and toys are a discretionary category in an uncertain economic environment.
Mm-hmm.
How are you thinking about the outlook for toy consumption in the pet category in general over the next several months?
Yeah. I don't know about the first part of the consumer's attitude towards subscription-
Yeah
... or subscription box. There's kind of both sides to it, where people say, they don't like the subscription relationship for a variety of reasons. We all have Verizon in our pocket and Netflix on our screen and Spotify. What we see in terms of the customer interaction, the thing I hear the most from every customer is that we've ruined packages coming into their homes because the dog now believes every package is for them.
Yeah. It's true.
Amazon arrives, and the dog has their nose right in it.
You can't be on a Zolom call in the Lasser household when the FedEx pulls up because Brody gets very excited.
It's a very positive category. To your point, it is discretionary or more discretionary than food. It's the smallest of the market opportunities we serve. You know, a subscription box of toys is not the right product for everyone.
Mm.
We get that. That's fine. if that
Yeah
... our only business and our only opportunity, then things would be slow-going here. We have, again, treats, toppers, food, dental at 40,000 retail doors, and then a whole world to serve and more ideas beyond those categories. The toy business itself and the subscription business is very important to us. What that represents is, you know, this year through 3-quarters of the year, 740,000 new customers coming into BARK. What we've become very good at is serving them really well with that subscription box and then saying, "By the way, did you know we have all this other stuff?" Today, that's very difficult. It means opening an email and engaging with it, that's not something we all like. Like, people don't interact with that.
Yeah. No one reads emails anymore.
Right. They drop over here in this folder. You take your small percentage, and you introduce them to new things, but we still have a pretty good outcome. The real opportunity is where we're right on the edge of it, is on a very new consolidated platform where all of our products live together. Those 740,000 new customers through 3 quarters, not for a full year, come into that consolidated platform in weeks, not months. They'll come in there. They came for a BarkBox. They'll say, "That's good. I'll check out." They'll see there's a whole world of products within BARK, and we'll cross-sell those more aggressively and let them know why they're important for their dog.
This is a consumer conference, so, and we've been asking all companies what they're seeing from the consumer. It's a very, we'll call it fluid economic environment.
Yeah.
Have you noticed any changes in consumer behavior in response to some of the economic dynamics? In addition, what are you looking for to gauge the outlook and recovery and demand in the toy category in general? 'Cause it is relatively discretionary.
Yeah. In that category, a flight to quality, that a customer would rather pay a bigger dollar amount for certainty around the quality of the product and that it's going to last. We've seen our Super Chewer or more durable toys selling much, much better, both directly and through retailers, than our plush toys that could be torn apart in a day or 2. We've seen that trend. Certainly more, I'd say like more towards the let's see, to the less discretionary product. I had to say that right. That's where we see that acceleration in our food business and in our dental business, which we love because those, again, are the newer categories for us, the more nascent categories with the biggest growth potential.
Through it all, what you see overall is certainly that customer saying, "My dollar for everything, but certainly for my pet, just doesn't go as far as it once did, so I still need to feed them," and that's where most of it goes. The one very, very interesting trend that has persisted through all of our changes and all the market changes is our retention, and it has been steady and steadily improving in recent months. What that tells me is, if you become a subscriber of our product, and you've experienced it, you have a more and more difficult time taking that away from your dog.
Mm.
You've had that experience of bringing it into your home, opening the box, the excitement from the dog, your excitement. You can't take it away.
Yeah, absolutely. It's the most resounding measure of the customer satisfaction if someone's gonna continue to.
Yeah
Be a customer. Revenue growth has slowed. Is it right to think that, hey, some of the legacy of the business is a little bit more economically sensitive, it has matured, a touch? At some point it will enter stabilization phase, and then you have all of these other categories that are in nascent stages that should lead to an acceleration in the business at some point. Is that the right way to think about it?
Yeah, that's definitely the right way, and we're contending with a couple of different factors in this. Remember I came back into it 14 months ago. Last year on $507 million of revenue, our EBITDA line was negative $57 million. Job one was we can't do that. The year before, my last year running it, we were at $378 million at a negative $8 million. In a year, you tacked on another $50 million of loss on the bottom line. That's just unit economics are all over the place.
Mm-hmm.
We're not clear on what our strategy is. We're building products left, right, and center. What we first needed to do was shore it up and make sure that as we grow, we're growing profitably, and we're growing together as a company with a shared outlook. We've been on that journey for the last year. You see it in our gross margin, you see it in our bottom line, massive year-over-year improvement with another easily year or 2 of results that will keep going up across all those key unit economic indicators. That was job 1, I don't wanna call it a win yet, but huge progress. The second part of that is when you pull everything back together, you pull the brakes on a lot of stuff.
You say, "Stop on the product development here and here and here, and let's get a strategy together, and let's start to work together." We started to develop products for the future. I'll use treats because, again, we have great data and great permission from the customer to play there. We said we need a treat product that we can now take into retail. We need a point of view there. We need something that'll sell. We spent a good 6 to 9 months developing that. It's awesome. I can't wait for everyone to see it. We're right there selling that to our retail partners today, and that'll show up, if we're successful with that shows up in Q4, about a year from now.
That means we go through a little bit of a dry spell here for the next couple quarters because that's the cycle we're on.
Yeah.
The way you're describing it is of like you're kind of stabilizing right now. The unit economics are better. The profitability profile is better. You'll see us running in that area where our profitability profile is much, much better. Our growth is sort of flattish.
Mm-hmm.
As we start to emerge in the back half of our FY and going into next year, that's where you start to see the surge as new products from our product development efforts start to come out.
In addition to building this broader suite of products, you also have the opportunity to expand your frame of distribution. You've got-
Yeah.
Like you mentioned earlier, you're in 40,000 retail stores. What are you seeing on the expansion, you know, horizon? How is that going building new relationships with retailers? Is there a goal? What's the right level of distribution?
It's getting to the point where in the U.S. it's hard to build new relationships.
Yeah.
'Cause 40,000 doors is a lot. We do take a bit of an unconventional approach there. The conventional approach is the retail partners like Walmart, Target, Costco, Petco, PetSmart, who are all partners. We've checked that box, and those are great partners for us. The unconventional is we have retail partners like Dunkin', and we sell toys through Dunkin'. We sell toys through Subaru and their dealerships. You wouldn't always think of 650 Subaru dealerships as retail doors, but they are. There's still through those unconventional ways, more expansion for us. What they all see from us is, first, that we're great at toys, and when we're in the department, the whole pet department lifts up and sells better.
Second part is and why the whole department does better is because we bring fun to it. We bring an attitude and a reverence to that aisle. They've said, "You're big in treats. What can you do there?" Our opportunity is more horizontal across those 40,000.
Sell the entire suite of products.
Yes.
Can you give a sense for how penetrated that is? You know, you led with toys. What's the conversation line been about selling into these other product categories as well?
It's been a pull more than a push.
Yeah.
They've asked us for it.
Yeah.
They've certainly asked us for treats. I'd say the next category that we're really excited about bringing into retail is toppers, and then dental after that. Probably, like I said, a year from now, then we start to talk about food.
You touched on, I wanna pivot the conversation a little bit, moving down the P&L to the profitability of the business. You touched on how this has become increasing focus. Last quarter was the first quarter of generating positive free cash flow as a publicly traded company. Congratulations.
Thank you.
What is the outlook from here? How do you see this playing out?
I view that as the first of many quarters. The expectation from here is that wasn't a blip. That is the way forward. We fully expect to be to generate free cash flow, be cash flow positive for all of next year. Our FY starts April first. That's what we expect for next year and on and on from there.
Yeah.
We've reset the foundation. Again, if I go back, the... When we went public, I'm sorry, I don't have the exact number, but we went public with around $355 million of cash in the bank. By the time we got to the end of our fiscal 2022, we had $199 million of cash. That's a lot of cash burn. Since then, we've gone from $199 million to $164 million. Really slowed it down, and, as you said, last quarter it started to tick up. That's where it's gonna go from there, which we're thrilled by.
Yeah.
Yeah.
It's, you know, a key element of the cash production will be on the margin side. You know, what are gonna be the puts and takes on the profitability? You've renegotiated some contracts recently. How will that contribute to the outlook for margins from here?
That's right. It's all the way through the P&L, but you mentioned renegotiating contracts with some of our vendors. That's been done for a while, and now we're just waiting for that inventory to cycle in, and it should fairly soon here. That's only on our toy side. We're in the middle of... or I'd say near the end of a negotiation like that on our consumable side, so our treats, our toppers, our food, and that'll give us another boost in terms of some margin points. Same thing with our inbound freight. Those, as you've seen, the spot rates have come way down, and we've renegotiated that. Outbound freight, we're setting up our fulfillment network to be more efficient and to accommodate all of our products in all of our warehouses.
instead of if you order from us, I'm sorry, if Brody orders.
Yeah
...from us, his BarkBox, his dental product, and some food, today that's coming from 3 different warehouses in 3 different packages. That's wildly inefficient when we can put it all together. We can pick up points there. Sadly, our team, and we're not alone in this, but sadly, our team was overbuilt as we were running up, and we did a cost reduction layoff about 1 month ago. We see that saving us about $12 million annually. All the way through that... Last but not least, now that the cash is stabilized and growing, and the interest rate environment is what it is, we're generating probably about $5 million of cash just in interest-
Yeah
... in the year ahead.
Are there offsets? You know, it's a very inflationary environment. Wages are growing. What are you seeing from a customer acquisition perspective? How... I'll stop. By throwing 4 questions at you.
Okay.
Yeah.
Customer acquisition we see as an opportunity.
Yeah.
It's been for probably 5 or 6 years, our customer acquisition cost has been steady at about $50. A holiday quarter is gonna be more, because we get more aggressive and the market gets more aggressive, but about $50 for years. We carried that through, that attitude and that approach through last quarter and frankly a little bit into this one. As we got our results, that we published in February and we were looking at it, the thing that's jumped out at us is the average spend of the customer, the average order value continues to climb. It's right now year-over-year about $2 more per unit going out, and it's been climbing for a couple of years, just walking its way up. The customer is spending more with us.
Our margin profile is improving because of all these renegotiations we're doing and bringing our scale to bear with our partners. Yet we've kept our customer acquisition cost steady. In hindsight, that's a mistake. We can spend more to acquire a customer, not foolishly, but the customer is just worth a lot more.
Mm-hmm.
We not because of any market forces, but, because we see an opportunity there, we intend to spend more, and be more aggressive.
Yeah. This is probably a good opportunity to introduce LTV to CAC, which is quite healthy for BarkBox.
Yes. Yes. It's been running around 5 to 1, and we're happy with that. Again, it's probably a little too healthy.
Yeah.
there's with LTV to CAC, there's always that balance of is it too good, and could you grow faster if you move that CAC up? We feel it is. If we were landing in that 4 to 4.5 times, that'd probably be a great spot for us and accelerate the growth opportunity and bring more people into the BARK ecosystem.
That is something that no one has ever said about Michael Lasser being too good. That is good to hear about having such a strong LTV to CAC. Oh, you know.
I'm sure Brody feels that way.
Brody does, he does. That is why I said people.
Okay.
There, you know, we've been in this heightened inflationary environment. What has been BarkBox's approach to, you know, how it's been pricing its product? Has there been elasticity, aside from what you mentioned previously, where folks have been seeking out value, and quality, to make sure that they get the quality for their products?
Yeah. We've raised our prices in the past year, done so through a charge for shipping.
Mm.
The little bonus that we give to the customer is we can charge you for shipping if what you want is a BarkBox and nothing else. If you're open to trying a dental product or a topper or a food product, we'll give you free shipping across everything. Obviously, when you introduce a monthly shipping fee, that's gonna depress your conversion rate. And it's a moment in time. We do all the testing, and the math works out, but the world's changed. The world changes all the time.
We have to revisit that testing and our pricing and revisit our margin profile and weigh all those together and then say, "How much of that, marketing opportunity do we want to put into media spending, and how much of that do we wanna give back to the customer in a different way?" Pull those different levers. We'll be going through all of that pretty much every month for the next year.
You know, you will be entering a new FY in a matter of weeks. I know this team's gotten busy. As a result, I think the takeaway for folks who are listening are, as you enter a new year, the priorities will be to, you know, continue the product development, cross-sell to both your existing subscription members as well as the through the retail ne network, continue to focus on profitability and moderate cash burn. Have the right marketing mix. Are there other priorities that as you look out that, you know, that are top of mind for you? If the economy gets into a tougher spot, how would you react?
Okay. The first is, we've got to finish the job on profitability. We have to be bottom-line profitable. Then we have to increase that profitability over time. We need to generate cash from this point forward, and we fully expect to. Now you've got that foundation of you've got a very healthy model. You're generating cash. You have $164 million of cash and growing in the bank. In our category and in a world that maybe is gonna have some stronger headwinds, that presents opportunity. 'Cause we've got millions of customers on a profile. We've got a strong brand. We've got big distribution, and we have a lot of cash.
That's attractive to someone who's got great products but maybe hasn't reached scale to be profitable or sustainable or can't raise that next round. There is M&A potential for us in the right scenario. At this stock price, we will not use our equity to do that, but we have a lot of attractive assets for that. First, gotta be profitable. Second, we need to leverage the products that we've built and get more productivity or leverage out of them. Like, simple as can be, that means treats go from direct to consumer into the retail stores, and we grow from there, or into partners, and we grow from there. Same with dental, same with food, same with toppers. Then it's building for the future.
It's just, I wanna finish the job on getting the foundation really solid and then growing off of that foundation.
Your point is, look, if the economy enters a tougher spot, there'll be more dislocation, more disruption, could be an opportunity for consolidation. From an operational perspective, is there anything else that you would do to batten down the hatches or change the approach?
I hope not. There's a lot in our model where we have, again, these very good relationships with our vendors and we're a meaningful part of their business.
Yeah.
We enjoy great margins as a result of that. A lot of our model is variable. Now those unit economics are in place. You know, you never wanna go through a layoff as we did, but we think we did so responsibly. If the headwinds pick up, Again, most of it is variable, so I think.
It's all variable.
I think we're in a really good spot for that to weather it and then be a lifeboat to some really good companies that we can. We've got the platform. If we bring something on, we can add it to the platform and grow through those means as well.
I wanna conclude our discussion talking about the stock a little.
Yeah.
It has been quite an interesting journey. You made the very interesting and vivid point that you have a business the size of just solely in treats that is the size of another company that was taken out for $1.2 billion.
Right.
It would suggest that there is some misunderstanding in the marketplace. Why do you think that there is this misunderstanding? What does the market have wrong about the BarkBox story?
It's a great question. I think first off, the stock price is lau ghably low, or the value of the company is just crazy low. We are almost trading at cash, which suggests that the market is telling us, "You will run out of cash before you get there.
Yes
... before you get to profitability." Given everything we've just talked about, that's not happening. We generated cash last quarter, we will again, next year. That is off the table. That misunderstanding, let's just clear that up.
Mm-hmm.
We're in a good spot there, and we made it with $164 million in the bank. The second part is, you bring up the part about treats and that business that was sold to Blue Buffalo and the value of that. That's our fault. We haven't told people that story. We haven't said, "Did you know that we have one of the top 5 treat businesses in the U.S., and it was bought for 6 times revenue just a year ago? Did you know that our progress in food is this, that our progress in dental is that?" Those businesses like a food business trades for, say Freshpet, 8 or 9 times revenue. We haven't told that story. That's on us, and we need to tell a better story.
Underneath it all, you have a business doing $535 million of revenue this year with now gross margins at 60% or better, a history of really efficient marketing, generating free cash flow. If you're gonna value that at $200 million, I'm a huge buyer. I continue to call out to the world for loans so I can buy more and more and more of this company. I'd buy every bit of it if I could.
Well, you did a great job of telling the story today. Please join me in thanking Matt and the team for the time today. Thank you.
Thank you, Michael.
Please come out.
Thank you.
All right.
Yeah.