Bark Inc.

11/05/2026 | Press release | Distributed by Public on 11/05/2026 15:35

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto for the year ended March 31, 2026 contained in the Annual Report on Form 10-K filed with the SEC on June 10, 2026. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section of this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to "we", "us", "our", "the Company" and "BARK" are intended to mean the business and operations of BARK, Inc. and its subsidiaries. The unaudited condensed consolidated financial statements for the three and six months ended September 30, 2026 and 2025, respectively, present the financial position and results of operations of BARK, Inc. and its wholly-owned subsidiaries.
Overview
We believe that dogs and humans are better together and we aspire to be the world's favorite dog brand. We are a team of dog-obsessed people committed to delivering personalization at scale by satisfying each dog's distinct personality, preferences, and needs with the best products and services. Since our founding in 2011, we have happily served millions of dogs and their people.
We are an omnichannel brand serving dogs across two key brands: BarkBox and Super Chewer. All of our products are designed, developed, and branded by BARK. We leverage an ever-growing collection of first-party data, customer insights, and artificial intelligence ("AI") to deliver personalized products and experiences tailored to the needs of each and every dog we serve. We sell our products in two segments: Direct To Consumer ("DTC") and Commerce through our network of retail partners, which currently spans over 50,000 doors nationwide and online marketplaces including Amazon, Chewy and TikTok.
Reverse Stock Split
On April 1, 2026, we effected a 1-for-20 reverse stock split of our common stock (the "Reverse Stock Split"), and our common stock began trading on a split-adjusted basis on April 1, 2026. Accordingly, all share and per share amounts presented in these consolidated financial statements and the accompanying notes have been retroactively adjusted, where applicable, to reflect the Reverse Stock Split.
As a result of the Reverse Stock Split, the number of shares of common stock outstanding and the number of shares underlying outstanding equity awards were proportionately reduced, and the corresponding exercise prices and per share amounts, as applicable, were proportionately increased. No fractional shares were issued in connection with the Reverse Stock Split.
Certain macroeconomic and global events, conditions and challenges
Certain market factors and international events create significant business uncertainty. Evolving trade policies, including the imposition of tariffs or changes in tariff rates as well as geopolitical friction, including rising tensions with China and conflicts in Iran and other global regions are key catalysts. These dynamics create business uncertainty and could exacerbate interest rates, increase fuel and energy costs and commodity prices. Reductions in net worth based on market declines, increases in housing costs, decreases in credit availability and rising consumer debt levels, impact levels of discretionary consumer spending on our products and services and our financial results.
IEEPA Tariffs
On February 20, 2026, the U.S. Supreme Court held that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were unlawful. As a result, importers, including the Company, became entitled to seek refunds of IEEPA tariffs they had previously paid. On April 20, 2026, U.S. Customs and Border Protection
("CBP") launched its Consolidated Administration and Processing of Entries ("CAPE") portal to process refund claims for unliquidated and recently liquidated entries, and on June 29, 2026, CBP expanded the portal to accept claims for certain reconciliation entries.
The Company recognized reductions to cost of revenue of $1.2 million and $10.1 million for the three and six months ended September 30, 2026, respectively. Of the six-month amount, $7.4 million relates to tariffs on products for which revenue was recognized in fiscal year 2026. As of September 30, 2026 and March 31, 2026, the Company had recorded a tariff refund receivable of $1.1 million and $3.3 million, respectively, which is included in Accounts Receivable. During the three and six months ended September 30, 2026, the Company received cash refunds of $11.0 million and $14.2 million, respectively, along with related interest of $0.5 million and $0.7 million, respectively, which is recorded in Interest Income.
The Company did not pass any of the IEEPA tariffs it paid to its customers, and none of the refunded amounts are owed to our vendors or suppliers. On October 6, 2026, CBP launched the third phase of CAPE, which allows importers that are plaintiffs in pending litigation before the U.S. Court of International Trade to obtain refunds on finally liquidated entries. The Company will pursue all actions necessary to recover the remaining IEEPA tariffs it has paid.
The timing and amount of any additional refunds the Company may receive are uncertain, and the Company cannot predict when or to what extent they will be realized. Please refer to "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in this Quarterly Report on Form 10-Q.
Key Performance Indicators
We use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. These key financial and operating metrics should be read in conjunction with the following discussion of our results of operations and financial condition together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. These measures may not be comparable to similarly titled performance indicators used by other companies.
Three Months Ended
September 30, 		Six Months Ended
September 30,
2026 2025 2026 2025
Total Orders (in thousands) 1,858 2,544 3,889 5,363
Average Order Value $ 31.40 $ 30.87 $ 31.32 $ 30.83
Direct to Consumer Gross Profit (in thousands)(1)
$ 40,907 $ 51,538 $ 91,323 $ 111,722
Direct to Consumer Gross Margin (1)
70.1 % 65.6 % 75.0 % 67.6 %
Subscriber Retention 94% 92% 93% 92%
(1) Direct to Consumer Gross Profit and Direct to Consumer Gross Margin do not include the revenue or cost of revenue from BARK Air. Direct to Consumer gross margin for the six months ended September 30, 2026 includes a $5.2 million tariff refund related to fiscal year 2026.
Total Orders
We define Total Orders as the total number of Direct to Consumer orders shipped in a given period. These include all orders across all of our product categories, regardless of whether they are purchased on a subscription, auto-ship, or one-off basis. Total Orders excludes orders from BARK Air. We use Total Orders as an indicator of customer interest and demand.
Average Order Value
Average Order Value ("AOV") is Direct to Consumer revenue for the period divided by Total Orders for the same period. AOV excludes Direct to Consumer revenue from BARK Air. We use AOV to provide insight into customer spending patterns.
Subscriber Retention
We define Subscriber Retention as the number of active subscriptions during a particular month divided by the number of active subscriptions for the prior month. An active subscription excludes new subscriptions, i.e. subscriptions with an initial shipment in a particular month. To calculate the Subscriber Retention for any quarterly period, we average the monthly rates, weighted by each month's beginning subscription base. Subscriber Retention excludes BARK Air. We use Subscriber Retention to assess the durability of our subscription base.
Components of Our Results of Operations
We operate with two reportable segments: Direct to Consumer and Commerce, to reflect the way our Chief Executive Officer, who is our CODM, reviews and assesses the performance of the business.
Revenue
The Company generates revenue through its DTC and Commerce segments, through the sale of BarkBox and Super Chewer branded toys and BARK branded treats and chews.
While BarkBox and Super Chewer toys remain the primary driver of our DTC and Commerce segments and fundamental to our brand identity, we are also focused on maximizing the profitability of our complementary treats and chews categories. This includes a strategic rationalization-specifically the discontinuation of kibble and topper offerings-to concentrate resources and narrow our focus. We believe this streamlined approach allows us to better support our core toy and treat business while improving our overall profitability profile.
DTC
The majority of our revenue is derived from our subscription products that feature monthly themes of premium quality BarkBox and/or Super Chewer toys and BARK-branded treats and chews that are delivered directly to a dog's home. Customers have the option to subscribe to these products on a one-month, three-month, six-month, or twelve-month basis. During the life of their subscription, we offer our customers incremental products via Add-To-Box ("ATB"), which allows us to cross-sell customers across our full portfolio of products.
Commerce
We also sell our BarkBox and Super Chewer toys and BARK-branded treats and chews in retail stores and other e-tailers, significantly broadening our customer reach and raising awareness of the BARK brand. BARK products are currently sold in over 50,000 retail doors, including Costco, Target, TJX, and Walmart. Additionally, we sell our products on other online platforms including Amazon, Chewy and TikTok.
BARK Air
The Company is partnered with several charter companies offering premium flights for customers and their dogs. Our charter partners are responsible for all aircraft, pilots, maintenance, and insurance, allowing BARK to focus on creating a great travel experience for dogs and their people worldwide. Revenue generated by BARK Air is currently reflected in our DTC segment.
Cost of Revenue
Cost of revenue primarily consists of the purchase price of inventory sold, inbound freight and duties (including tariffs) associated with inventory, shipping supply costs, inventory shrinkage costs and charter costs for BARK Air.
Operating Expenses
Operating expenses consist of general and administrative and advertising and marketing expenses.
General and Administrative
General and administrative expenses consist primarily of compensation and benefits costs, including stock-based compensation expense, office expense, including rent, insurance, professional service fees, and other general overhead costs including depreciation and amortization of right-of-use, fixed and intangible assets, account management support teams, and commissions. General and administrative expenses also include fees charged by third parties that provide payment processing services, fulfillment costs, which represent costs incurred in operating and staffing fulfillment and customer service centers, including costs attributable to receiving, inspecting, picking, packaging and preparing customer orders for shipment, outbound freight costs associated with shipping orders to customers, and responding to inquiries from customers.
Advertising and Marketing
Advertising and marketing expense consists primarily of internet advertising, promotional items, agency fees, other marketing costs and compensation and benefits expenses, including stock-based compensation expense, for employees engaged in advertising and marketing.
Interest Income
Interest income primarily consists of income earned on our interest-bearing deposit accounts as well as interest paid in relation to IEEPA tariff refunds.
Interest Expense
Interest expense consisted of interest incurred under our 2025 Convertible Notes (as defined below), and amortization of related debt issuance costs. The 2025 Convertible Notes were repaid in November 2025 and we have no outstanding indebtedness during the three and six months ended September 30, 2026.
Other Income, Net
Other income net, primarily consists of sublease income, and the change in fair value of the Company's warrants.
Results of Operations
We operate in two reportable segments to reflect the way our CODM reviews and assesses the performance of the business. See Note 2, "Summary of Significant Accounting Policies," in our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Three Months Ended
September 30, 		Six Months Ended September 30,
2026 2025 % Change 2026 2025 % Change
(in thousands)
(in thousands)
Condensed Consolidated Statements of Operation and Comprehensive Loss Data:
Net revenue
Direct to Consumer $ 61,848 $ 82,148 (24.7) % $ 128,557 $ 171,324 (25.0) %
Commerce 25,715 24,822 3.6 % 37,819 38,507 (1.8) %
Total net revenue 87,563 106,970 (18.1) % 166,376 209,831 (20.7) %
Cost of revenue
Direct to Consumer 20,637 30,175 (31.6) % 37,169 59,606 (37.6) %
Commerce 15,364 14,835 3.6 % 20,315 24,188 (16.0) %
Total cost of revenue 36,001 45,010 (20.0) % 57,484 83,794 (31.4) %
Gross profit 51,562 61,960 (16.8) % 108,892 126,037 (13.6) %
Operating expenses:
General and administrative 46,351 57,221 (19.0) % 94,121 114,473 (17.8) %
Advertising and marketing 10,386 15,398 (32.5) % 19,882 30,575 (35.0) %
Total operating expenses 56,737 72,619 (21.9) % 114,003 145,048 (21.4) %
Loss from operations (5,175) (10,659) (51.4) % (5,111) (19,011) (73.1) %
Interest income 573 678 (15.5) % 835 1,486 (43.8) %
Interest expense (8) (711) (98.9) % (9) (1,420) (99.4) %
Other income, net
765 20 N/M 1,184 1,243 (4.7) %
Net loss before income taxes (3,845) (10,672) (64.0) % (3,101) (17,702) (82.5) %
Net loss and comprehensive loss $ (3,845) $ (10,672) (64.0) % $ (3,101) $ (17,702) (82.5) %
N/M means not meaningful.
Comparison of the Three Months Ended September 30, 2026 and September 30, 2025
Revenue
Three Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Net revenue
Direct to Consumer(1)
$ 61,848 $ 82,148 $ (20,300) (24.7) %
Commerce 25,715 24,822 893 3.6 %
Total net revenue $ 87,563 $ 106,970 $ (19,407) (18.1) %
Percentage of net revenue
Direct to Consumer 70.6 % 76.8 %
Commerce 29.4 % 23.2 %
(1) Direct to Consumer includes revenue from BARK Air.
Direct to Consumer net revenue decreased by $20.3 million, or 24.7%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. This decrease in revenue was primarily driven by a decrease of 0.7 million in Total Orders, or 27.0%, offset by Average Order Value increasing $0.53 and subscriber retention improving approximately 200 basis points to 94%. Total BARK Air net revenue was $3.5 million, or 5.7% of Direct to Consumer net revenue, compared to 4.4% in the three months ended September 30, 2025.
Commerce net revenue increased by $0.9 million, or 3.6% for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. This increase was primarily driven by higher sales volume to existing retail customers.
Gross Profit
Three Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Gross profit
Direct to Consumer (1)
$ 41,211 $ 51,973 $ (10,762) (20.7) %
Commerce 10,351 9,987 364 3.6 %
Total gross profit $ 51,562 $ 61,960 $ (10,398) (16.8) %
Percentage of net revenue 58.9 % 57.9 %
(1) Direct to Consumer includes revenue and cost of revenue from BARK Air.
Direct to Consumer gross profit decreased by $10.8 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease in Direct to Consumer gross profit is primarily attributable to a decrease in net revenue due to a decrease in Total Orders. Commerce gross profit increased by $0.4 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase in Commerce gross profit is attributable to higher net revenue in the quarter to existing retail customers.
Gross profit as a percentage of net revenue increased 100 basis points for the three months ended September 30, 2026 compared to the three months ended September 30, 2025.
The table below presents gross profit normalized to reflect IEEPA tariff refunds in the period in which the related sales occurred. Refunds received in the three months ended September 30, 2026 that relate to sales recognized in fiscal year 2026 have been removed from the current period and applied to the prior year period (in thousands):
Three Months Ended
September 30, 2026 		Three Months Ended
September 30, 2025
( in thousands)
Segment Tariff Refund
for FY26 Sales 		Gross Profit Normalized Gross Profit Normalized % FY26 Tariff Refund Gross Profit Normalized Gross Profit Normalized %
DTC (1)
$ - $ 40,907 70.1% $ 2,196 $ 53,735 68.4%
Commerce - 10,351 40.3% 962 10,949 44.1%
Total $ - $ 51,258 61.0% $ 3,158 $ 64,684 62.6%
(1) Direct to Consumer excludes revenue and cost of revenue from BARK Air.
On this normalized basis, Direct to Consumer gross margin increased 170 basis points compared to the three months ended September 30, 2025, primarily due to product cost improvements and changes in product mix. Commerce gross margin decreased 380 basis points compared to the three months ended September 30, 2025, primarily due to changes in customer mix and higher royalty costs associated with new product launches.
General and Administrative Expense
Three Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Other general and administrative $ 21,859 $ 25,727 $ (3,868) (15.0)%
Shipping and fulfillment 24,492 31,494 (7,002) (22.2)%
Total general and administrative $ 46,351 $ 57,221 $ (10,870) (19.0)%
Percentage of net revenue 52.9 % 53.5 %
Total general and administrative expense decreased by $10.9 million, or 19.0%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily driven by lower shipping and fulfillment costs of $7.0 million, in line with reduced Direct to Consumer volumes; lower payroll, taxes and benefits of $2.4 million and lower stock compensation of $1.5 million, both due to lower headcount; and $0.8 million of impairment charges recorded in the prior year with none recorded in the current quarter. These decreases were partially offset by a $1.8 million increase in legal fees.
Advertising and Marketing
Three Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Advertising and marketing $ 10,386 $ 15,398 $ (5,012) (32.5)%
Percentage of net revenue 11.9 % 14.4 %
Advertising and marketing expense decreased by $5.0 million, or 32.5%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease is primarily attributable to decreased Direct to Consumer marketing spend.
Interest Income
Three Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Interest income $ 573 $ 678 $ (105) (15.5)%
Percentage of net revenue 0.7 % 0.6 %
Interest income decreased by $0.1 million, or 15.5%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily due to a $0.6 million decline in interest earned on our cash and cash equivalents due to an overall decrease in cash in interest-bearing deposit accounts, partially offset by $0.5 million of interest income recognized on IEEPA tariff refunds receivable.
Interest Expense
Three Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Interest expense $ (8) $ (711) $ 703 (98.9)%
Percentage of net revenue - % (0.7) %
Interest expense decreased $0.7 million for three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease is attributable to the timing of the 2025 Convertible Note repurchase which occurred on in the prior year.
Other Income, Net
Three Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Other income, net
$ 765 $ 20 $ 745 N/M
Percentage of net revenue 0.9 % - %
NM means not meaningful
Other income, net increased by $0.7 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was primarily driven by sublease income received on office space.
Comparison of the Six Months Ended September 30, 2026 and September 30, 2025
Revenue
Six Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Net revenue
Direct to Consumer(1)
$ 128,557 $ 171,324 $ (42,767) (25.0) %
Commerce 37,819 38,507 (688) (1.8) %
Total net revenue $ 166,376 $ 209,831 $ (43,455) (20.7) %
Percentage of net revenue
Direct to Consumer 77.3 % 81.6 %
Commerce 22.7 % 18.4 %
(1) Direct to Consumer includes revenue from BARK Air.
Direct to Consumer net revenue decreased by $42.8 million, or 25.0%, for the six months ended September 30, 2026 compared to the six months ended September 30, 2025. This decrease was primarily driven by a 27.48%, or 1 million decrease in Total Orders. The decrease was partially offset by an increase in revenue from BARK Air of $0.8 million. Total BARK Air revenue was $6.7 million or 5.2% of Direct to Consumer net revenue.
Commerce net revenue decreased by $0.7 million, or 1.8% for the six months ended September 30, 2026 compared to the six months ended September 30, 2025. The decrease was primarily driven by the timing of holiday shipments, which shifted from the second quarter in the prior year to the third quarter in the current year.
Gross Profit
Six Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Gross profit
Direct to Consumer (1)
$ 91,388 $ 111,718 $ (20,330) (18.2) %
Commerce 17,504 14,319 3,185 22.2 %
Total gross profit $ 108,892 $ 126,037 $ (17,145) (13.6) %
Percentage of net revenue 65.4 % 60.1 %
(1) Direct to Consumer includes revenue and cost of revenue from BARK Air.
Direct to Consumer gross profit decreased by $20.3 million for the six months ended September 30, 2026 compared to the six months ended September 30, 2025. The decrease in Direct to Consumer gross profit is primarily attributable to a decrease in net revenue due to a decrease in Total Orders of 27.5% partially offset by an increase in the Average Order Value of $0.49 and subscriber retention improving approximately 100 basis points to 93%. Commerce gross profit increased by $3.2 million September 30, 2026 compared to the six months ended September 30, 2025. The increase in Commerce gross profit is attributable to the opportunistic sell-through of surplus inventory in the prior period.
Gross profit as a percentage of net revenue increased 5.3% for the six months ended September 30, 2026 compared to the six months ended September 30, 2025.The increase was primarily due to the recognition of $10.1
million of IEEPA tariff refunds as a reduction of cost of revenue, which benefited gross profit as a percentage of net revenue.
The table below presents gross profit normalized to reflect IEEPA tariff refunds in the period in which the related sales occurred. Refunds received in the six months ended September 30, 2026 that relate to sales recognized in fiscal year 2026 have been removed from the current period and applied to the prior year period (in thousands):
Six Months Ended
September 30, 2026 		Six Months Ended
September 30, 2025
( in thousands)
Segment Tariffs Refund in FY27 for FY26 Sales Gross Profit Normalized Gross Margin Normalized % FY26 Tariff Refund Gross Profit Normalized Gross Margin Normalized %
DTC (1)
$ 5,176 $ 86,147 70.7% $ 3,536 $ 115,259 69.7%
Commerce 2,187 15,317 40.5% 1,216 15,535 40.3%
Total $ 7,363 $ 101,464 63.6% $ 4,752 $ 130,794 64.2%
(1) Direct to Consumer excludes revenue and cost of revenue from BARK Air.
On this normalized basis, Direct to Consumer and Commerce gross margins increased 100 and 20 basis points, respectively, compared to the six months ended September 30, 2025, both primarily driven by product cost improvements and changes in product mix. Total normalized gross margin decreased 60 basis points, as the increase in Commerce as a percentage of net revenue, which carries a lower gross margin than Direct to Consumer, more than offset the margin improvements within each segment.
General and Administrative Expense
Six Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Other general and administrative $ 45,803 $ 51,226 $ (5,423) (10.6)%
Shipping and fulfillment 48,318 63,247 (14,929) (23.6)%
Total general and administrative $ 94,121 $ 114,473 $ (20,352) (17.8)%
Percentage of revenue 56.6 % 54.6 %
Total general and administrative expense decreased by $20.4 million, or 17.8%, for the six months ended September 30, 2026 compared to the six months ended September 30, 2025. The decrease was primarily driven by lower shipping and fulfillment costs of $14.9 million, in line with reduced Direct to Consumer volumes; lower payroll, taxes and benefits of $5.2 million and lower stock compensation expense of $2.0 million, both due to lower headcount; and $0.8 million of impairment charges recorded in the prior year with none recorded in the current year. These decreases were partially offset by a $4.0 million increase in legal fees.
Advertising and Marketing
Six Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Advertising and marketing $ 19,882 $ 30,575 $ (10,693) (35.0)%
Percentage of net revenue 12.0 % 14.6 %
Advertising and marketing expense decreased by $10.7 million, or 35.0%, for the six months ended September 30, 2026 compared to the six months ended September 30, 2025. The decrease is primarily attributable to decreased Direct to Consumer marketing spend.
Interest Income
Six Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Interest income $ 835 $ 1,486 $ (651) (43.8)%
Percentage of net revenue 0.5 % 0.7 %
Interest income decreased by $0.7 million, or 43.8%, for the six months ended September 30, 2026 compared to the six months ended September 30, 2025. The decrease was primarily due to a $1.4 million decline in interest earned on our cash and cash equivalents due to an overall decrease in cash in interest-bearing deposit accounts, partially offset by $0.7 million of interest income recognized on IEEPA tariff refunds.
Interest Expense
Six Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Interest expense $ (9) $ (1,420) $ 1,411 (99.4)%
Percentage of net revenue - % (0.7) %
Interest expense decreased $1.4 million for six months ended September 30, 2026 compared to the six months ended September 30, 2025. The decrease is attributable to the timing of the 2025 Convertible Note repurchase which occurred on in the prior year.
Other Income, Net
Six Months Ended
September 30,
2026 2025 $ Change % Change
( in thousands)
Other income, net
$ 1,184 $ 1,243 $ (59) (4.7)%
Percentage of net revenue 0.7 % 0.6 %
Other income, net remained relatively flat for the six months ended September 30, 2026 compared to the six months ended September 30, 2025.
Non-GAAP Financial Measures
We report our financial results in accordance with U.S. GAAP. However, management believes that Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow, all non-GAAP financial measures (together the "Non-GAAP Measures"), provide investors with additional useful information in evaluating our performance.
We calculate Adjusted EBITDA as net loss, adjusted to exclude: (1) interest income, (2) interest expense, (3) depreciation and amortization expense, (4) stock-based compensation expense, (5) change in fair value of warrants and derivatives, (6) capitalized cloud computing amortization, (7) sales and use tax income, (8) restructuring charges related to reduction in force payments, (9) litigation expenses (consisting of legal and related fees for a specific proceeding that is outside of our ordinary course of business), (10) warehouse restructuring costs, (11) non-cash impairment of previously capitalized software and cloud computing implementation costs, (12) technology modernization costs, (13) IEEPA tariffs, and (14) other items (as defined below).
We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA for the period by revenue for the period.
We calculate Free Cash Flow as net cash (used in) provided by operating activities less capital expenditures.
The Non-GAAP Measures are financial measures that are not required by, or presented in accordance with U.S. GAAP. We believe that the Non-GAAP Measures, when taken together with our financial results presented in accordance with U.S. GAAP, provide meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of the Non-GAAP Measures are helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.
The Non-GAAP Measures are presented for supplemental informational purposes only, have limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. Some of the limitations of the Non-GAAP Measures include that (1) the measures do not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect these capital expenditures, (3) Adjusted EBITDA and Adjusted EBITDA Margin do not consider the impact of stock-based compensation expense, which is an ongoing expense for our company, (4) Adjusted EBITDA and Adjusted EBITDA Margin do not reflect other non-operating expenses, including interest expense and (5) Free cash flow does not represent the total residual cash flow available for discretionary purposes and does not reflect our future contractual commitments. In addition, our use of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies because they may not calculate the Non-GAAP Measures in the same manner, limiting their usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider the Non-GAAP Measures alongside other financial measures, including our net loss and other results stated in accordance with U.S. GAAP.
The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with U.S. GAAP, and the calculation of net loss margin and Adjusted EBITDA margin for the periods presented:
Adjusted EBITDA
Three Months Ended
September 30, 		Six Months Ended
September 30,
2026 2025 2026 2025
(in thousands) (in thousands)
Net loss $ (3,845) $ (10,672) $ (3,101) $ (17,702)
Interest income (573) (678) (835) (1,486)
Interest expense 8 711 9 1,420
Depreciation and amortization expense 1,648 2,585 3,462 5,104
Stock compensation expense 2,112 3,716 4,907 7,310
Change in fair value of warrants and derivatives - 130 - (652)
Cloud computing amortization (1) 829 493 1,631 914
Sales and use tax income (2) - (87) - (327)
Restructuring (3) 157 - 157 423
Litigation expenses (4) 1,110 111 2,423 287
Warehouse restructuring costs (5) 421 942 954 1,668
Impairment of assets - 769 - 769
Technology modernization (6) - 399 - 723
IEEPA tariffs (7) - - (7,363) -
Other items (8) 139 143 358 200
Adjusted EBITDA $ 2,006 $ (1,438) $ 2,602 $ (1,349)
Net loss margin (4.39) % (9.98) % (1.86) % (8.44) %
Adjusted EBITDA margin 2.29 % (1.34) % 1.56 % (0.64) %
(1)Amortization of capitalized software implementation costs that is not included in depreciation and amortization.
(2)Sales and use tax income relates to recording a liability for sales and use tax we did not collect from our customers. Historically, we had collected state or local sales, use, or other similar taxes in certain jurisdictions in which we only had physical presence. On June 21, 2018, the U.S. Supreme Court decided, in South Dakota v. Wayfair, Inc., that state and local jurisdictions may, at least in certain circumstances, enforce a sales and use tax collection obligation on remote vendors that have no physical presence in such jurisdiction. A number of states have positioned themselves to require sales and use tax collection by remote vendors and/or by online marketplaces. The details and effective dates of these collection requirements vary from state to state and accordingly, we recorded a liability in those periods in which we created economic nexus based on each state's requirements. We now collect, remit, and report sales tax in all states that impose a sales tax. Subsequently, as certain of these liabilities are waived by tax authorities or the applicable statute of limitations expires, the related accrued liability is reversed.
(3)Related to reductions in force, including severance paid and retention bonuses tied to those separations.
(4)Litigation expenses related to a shareholder class action complaint, see Part II, Item 1. Legal Proceedings.
(5)Consists of costs associated with redesigning certain warehouses to support the Company's current business model.
(6)Includes consulting fees related to technology transformation activities, and payroll costs for employees that dedicate significant time to this project. We believe that these costs are discrete and non-recurring in nature, as they mainly relate to a one-time unification of our product offerings on our new commerce platform. As such, they are not normal, recurring operating expenses and are not reflective of ongoing trends in the cost of doing business.
(7)Refunds of previously paid tariffs under the International Emergency Economic Powers Act, see "Global Events, Conditions and Challenges" in Part I, Item 2, Management's Discussion and Analysis.
(8)Other items consisted primarily of executive transition costs, including recruiting costs, of $0.1 million for each of the three months ended September 30, 2026 and 2025, and $0.4 million and $0.1 million for the six months ended September 30, 2026 and 2025, respectively, as well as less than $0.1 million of share repurchase program costs in the six months ended September 30, 2025.
The following table presents a reconciliation of Free Cash Flow to Net cash provided by (used in) operating activities, the most directly comparable financial measure prepared in accordance with GAAP, for each of the periods indicated:
Free Cash Flow
Three Months Ended
September 30, 		Six Months Ended
September 30,
2026 2025 2026 2025
Free cash flow reconciliation:
Net cash provided by (used in) operating activities $ 4,766 $ (18,074) $ 1,151 $ (23,514)
Capital expenditures (147) (1,852) (184) (2,560)
Free cash flow $ 4,619 $ (19,926) $ 967 $ (26,074)
Liquidity and Capital Resources
We fund our operations with cash generated by our businesses. As of September 30, 2026, we had cash and cash equivalents of approximately $19.0 million. We expect that our cash and cash equivalents, together with cash provided by our operating activities and proceeds from borrowings, will be sufficient to fund our operations for at least the next 12 months. We are required to comply with certain financial and non-financial covenants related to our borrowing agreements, which we expect to be in compliance with during the next 12 months. Our future capital requirements will depend on many factors, including our pace of new and existing customer growth and our investments in partnerships and unexplored channels. We may be required to seek additional equity or debt financing.
Western Alliance Bank-Revolving Line of Credit
In October 2017, the Company entered into a loan and security agreement with and issued a warrant to purchase preferred stock ("Initial Western Alliance Warrant") to Western Alliance Bank ("Western Alliance"), which provide for a revolving line of credit (as amended, the "Credit Facility") in an aggregate principal amount of up to $35.0 million, subject to borrowing base limitations derived from advance rates derived from the Company's eligible subscription revenues and eligible accounts receivable. The Credit Facility has been amended several times, most recently in August 2026. After giving effect to this most recent amendment, the maturity date of the Credit Facility is February 25, 2027. Certain of the Company's obligations to Western Alliance and under the Credit Facility are guaranteed by certain of its subsidiaries and secured by substantially all of their assets. The Company intends to enter into a longer term renewal of the Credit Facility.
The interest rate for borrowings under the Credit Facility is equal to (a) the greater of (i) the prime rate that is published in the Money Rates section of The Wall Street Journal from time to time and (ii) five and one quarter percent (5.25%) per annum, plus (b) half of one percent (0.50%), per annum.
The Credit Facility has a borrowing base subject to an amount equal to eighty percent (80.00%) of the Company's trailing three months of subscription revenue and an amount equal to eighty percent (80.00%) of certain of the Company's customer accounts receivable when a collateral audit is performed and sixty percent (60.00%) when no such collateral audit is performed. Western Alliance has first perfected security in substantially all of the Company's assets, including its rights to its intellectual property.
The Credit Facility requires the Company to comply with certain financial and performance covenants, including, among other things, minimum cash deposits with Western Alliance. The Credit Facility also contains affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, declaring and paying dividends and other distributions, making
payments in respect of subordinated debt, incurring indebtedness, making loans and investments, incurring liens, or entering into mergers, asset sales and transactions with affiliates.
As of September 30, 2026 and March 31, 2026, there were no outstanding borrowings under the Credit Facility. As of September 30, 2026 and March 31, 2026, the Company was in compliance with its financial covenants.
Cash Flows
Comparison of the Six Months Ended September 30, 2026 and 2025.
The following table summarizes our cash flows for the six months ended September 30, 2026 and 2025:
Six Months Ended September 30,
2026 2025
(in thousands)
Net cash provided by (used in) operating activities $ 1,151 $ (23,514)
Net cash used in investing activities (141) (2,560)
Net cash used in financing activities (1,605) (2,764)
Effect of exchange rate changes on cash (125) (14)
Net decrease in cash and restricted cash $ (720) $ (28,852)
Cash flows provided by (used in) Operating Activities
Net cash flows provided by (used in) operating activities represent the cash receipts and disbursements related to our activities other than investing and financing activities.
Net cash flows provided by (used in) operating activities is derived by adjusting our net loss for:
•non-cash operating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses; and
•changes in operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions.
For the six months ended September 30, 2026, net cash provided by operating activities was $1.2 million. The $1.2 million of net cash provided by operating activities consisted of a net loss of $3.1 million adjusted for non-cash charges totaling $10.0 million and a net increase of $5.7 million in our net operating assets and liabilities. The non-cash charges primarily consisted of $4.9 million for stock-based compensation and depreciation and amortization of $3.5 million. The increase in our net operating assets and liabilities was primarily driven by an increase in accounts receivable of $8.0 million and a decrease in deferred revenue of $4.6 million, partially offset by a decrease in inventory of $4.0 million and a net increase in accounts payable and accrued expenses of $4.1 million.
For the six months ended September 30, 2025, net cash used in operating activities was $23.5 million. The $23.5 million of net cash used in operating activities consisted of a net loss of $17.7 million adjusted for non-cash charges totaling $15.8 million and a net increase of $21.6 million in our net operating assets and liabilities. The non-cash charges primarily consisted of $7.3 million for stock-based compensation and depreciation and amortization of $5.1 million. The increase in our net operating assets and liabilities was primarily driven by an increase in inventory of $13.8 million and an increase in accounts receivable of $7.5 million, partially offset by a net increase in accounts payable and accrued expenses of $4.3 million.
Cash flows used in Investing Activities
For the six months ended September 30, 2026 and September 30, 2025, net cash used in investing activities was $0.1 million and $2.6 million, respectively, primarily due to capital expenditures.
Cash flows used in Financing Activities
For the six months ended September 30, 2026, net cash used in financing activities was $1.6 million, primarily due to repurchases of common stock of $2.3 million and tax payments related to the issuance of common stock of $1.3 million, partially offset by proceeds from the issuance of common stock of $2.0 million.
For the six months ended September 30, 2025, net cash used in financing activities was $2.8 million, primarily due to repurchases of common stock of $1.8 million and tax payments related to the issuance of common stock of $1.1 million.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Except as described in Note 2, "Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements," to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our audited consolidated financial statements and notes thereto for the year ended March 31, 2026 contained in the Annual Report on Form 10-K filed with the SEC on June 10, 2026.
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