BARK, Inc. (BARK) Q2 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to BARK’s Second Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised, that today’s conference maybe recorded. Thank you. I would now like to hand the conference over to your first speaker today, Mr. Mike Mougias, Vice President, Investor Relations. Sir, the floor is yours.

Good afternoon, everyone. And welcome to BARK’s second quarter fiscal 2022 earnings call. Joining me today are Manish Joneja, CEO, and John Toth, CFO. Today’s conference call is being webcast and its entirety on our website, and a replay of the webcast will be made available shortly after the call. 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. With that, let me now turn the call over to Manish.

Thanks, Mike, and good afternoon, everyone. Thank you for joining our fiscal second quarter earnings call. I am please report we delivered another strong quarter underscored by sizeable growth in active subscriptions, a robust increase in subscription shipments and record high average order value. I’d like to begin today’s call with some highlights from the most recent quarter, followed by an update on a progress across our key categories and some of our strategic priorities for the year. John will then walk you through our financial results from the quarter and provide guidance for the remainder of fiscal year. Beginning with last quarter’s results, we continue to benefit from sector and channel tailwinds, including growing dog ownership, increasing spending on pets and an expanding share of pet sales occurring online. I’m pleased to report we delivered strong results across several key metrics last quarter. We added 271,000 active subscriptions, bringing our total to 2.1 million as of quarter end, a 39% increase compared to the same quarter last year. We delivered 3.6 million shipments in the quarter, a 34% increase year-over-year. Furthermore, we achieved a record average order value of $29.73, $1.55 increase compared to the same period last year and a $0.52 increase compared to our fiscal first quarter. This drove total revenue of $120.2 million, up 39% year-over-year and resulted in a very healthy gross margin of 58%. These figures are impressive, especially considering how strongly the company performed during the COVID-19 period last year, which highlights the resiliency of our business model. I would also like to provide some perspective on a couple of topics very important to our business that have been top of mind and on the front pages for what seems like months, namely how we are navigating inventory levels, the global supply chain congestion, the rising costs of digital advertising. As many of you are aware the cost of media advertising has increased significantly this year and many companies are reporting material increases in customer acquisition costs as a result. At BARK we have effectively managed these challenges to-date through highly engaging content, a significant social media following and a tactical approach to marketing, which leverages our unique customer relationships, strong word of mouth and a growing data set. Last quarter, a customer acquisition cost was up just 7% compared to the previous quarter, which resulted in a very healthy LTV to CAC of 4.9 times. In other words, for every dollar we spent in marketing, we generated roughly $5 of gross profit, a highly attractive return. Internally we target an annual LTV to CAC of 4x, as LTV grows, we are well positioned to spend more in marketing to correct those high value customers. In our view, our efficiency at profitably acquiring new customers is a key differentiator for our business and something that sets us apart from not only other companies in the dog space, but the broader DTC and retail segments as a whole. From an inventory perspective, we believe that we are well positioned to meet the strong demand we expect this holiday season. While global freight congestion and increase shipping costs are likely to impact many retail company’s ability to meet demand during the holidays, a team identified this challenge early on and accelerated the shipping of our DTC product for the back half of the year. As a result, our warehouses in the U.S. are already stocked with the holiday inventory that we anticipate needing, with significantly derisks the potential impact that future freight congestion could have on our DTC business this holiday season. Nonetheless, we are experiencing rising costs on our shipping and fulfillment line, as rates continue to increase and we are often paying for premium shipping to ensure our customers receive their shipments in a timely manner. We do not expect these headwinds to subside for the foreseeable future. However, we are encouraged by the continued growth in new subscriptions and AOV, as well as our healthy LTV to CAC metric, which in our view, are most important indicators of the health of our business long term. Looking ahead, we’re optimistic about our ability to meet customer demand going into what is traditionally our strongest two months of the year. While it is still early days, we are encouraged by our stocks to the current quarter and early signs are indicating healthy consumer demand this holiday season. I’d like to now spend some time discussing some of our key categories, beginning with our Play business, which includes our themed toys and treat subscription, BarkBox and Super Chewer. We continue to see robust growth in new subscriptions, subscription shipments and average order value. While the Play business is currently our largest category, we believe we still have a significant runway for growth in this category. We ended the quarter with over 2 million active subscriptions and the total addressable market, the roughly 70 million households in the U.S. have the dog continues to grow. Our mission is to be in all of them, be through a single dog toy, but through multi-line subscriptions. The market opportunity therefore remains significant. Furthermore, we continue to see a rising share of pet sales occur online. In 2015, e-commerce sales represented as 3% of total pet sales. By 2020, that number jumped to 25% and that trend is expected to continue with 35% of sales expected to occur online by 2024 according to third-party sources. This shift will serve as a long-term channel tailwind for our business, especially given we offer one of the best online experiences for dog owners and we plan to continue to invest and win this category. Put simply, we are still in the early innings of our Play business and BARK as a whole. The extent of these tailwinds and our ability to execute on this runway is underscored by a recent revenue growth. In the fourth half of fiscal 2022, our topline is up nearly 50% compared to last year and we believe we are only just beginning to materially benefit from a cross-selling and add-to-box functionality. Add-to-box is a significant driver of revenue that is bolstered by our innovative data analytics and machine learning tools that enable us to recommend highly tailored items that customers can quickly add to their existing subscriptions each month. Last quarter, our add-to-box feature drove roughly $6 million of DTC revenue, a 75% increase compared to the same period last year. Through the first half of fiscal 2022, ATB revenue was up over 117% compared to the first half of fiscal 2021. Moreover, we expect our newer categories like Food and Health to serve as additional opportunities to cross-sell and attach new products to existing subscriptions. Again, we have made important investments in this area, which we feel will continue to drive topline growth and strong margins. Moving on, we continue to ramp up our BARK Eats operation, a growth initiative we are very excited about. For those newer to BARK story. BARK Eats is a highly personalized subscription based meal plan that we think has a capability to disrupt the premium pet food market by completely tailoring your dog’s food by breed, size, age and lifestyle. Our offering evolves as the dog matures and their dietary needs change. In essence, we have a highly innovative product offering that affords customers the same high touch relationship that they experience in our Play category at a similar price point to higher end kibble purchase at a pet retailer. We remain on target to launch this product nationwide in 2022 and we have executed several important initiatives to enable us to achieve that objective. First, we have enhanced our user experience to better appeal to a wider range of customers. Customers now have the ability to quickly purchase a predetermined meal plan based on data we have collected from other dogs in a similar demographic. This shortens the funnel for our customers that don’t want to speak to a nutritionist upfront and prefer quicker checkout experience. And for customers that do prefer a higher touch or more customer experience, our nutritionists and wellness advisors are on hand. We are also launching an affiliate and referral program for Eats, which will serve as an additional customer acquisition funnel. Second, recently expanded our Ohio based BARK Eats fulfillment center from 12,000 square feet to 100,000 square feet. This expansion significantly augments our ability to ship to customers throughout the Lower 48 in a timely and cost effective manner. We have also introduced certain operational efficiencies, such as automated packaging. Third, we have bolstered the team supporting Eats. Mike Novotny, who served as Chief Operating Officer since 2019 and has been instrumental in expanding BARK’s key businesses since joining the company in 2015, is now President of Eats and works alongside Carly Strife, one of BARK’s Co-Founder. Together, they help grow BARK to a $500 million revenue business and I’m excited to have them leading the Eats opportunity. The addressable market for Eats is massive. To put it in perspective, the dog toy market in the U.S. is roughly $3 billion to $4 billion, while the dog food market is between $30 billion to 40 billion. The food category is also less discretionary, resulting in higher customer retention and lifetime value. Based on our data thus far, the average order value for BARK Eats is also roughly 2 times higher than that of the Play category. Turning to BARK Bright, which is a dental hygiene offering and the first product we launched in our health vertical. I’m pleased to report that we began selling our Bright product in PetSmart last quarter. This product is an exciting opportunity for BARK, as you’re able to sell it through multiple channels. We sell it on a DTC subscription basis as a one-off add-to-box item, as well as in retail stores. We believe Bright also serves as an additional tool to grow average order value and extend customer attention. Health is another exciting opportunity and we expect to broaden our Health offering with unique and innovative products over time. The last yet meaningful strategic initiative that I would like to touch on is called One BARK. One BARK is an opportunity to create a unified customer experience across our various product categories, enabling customers to easily attach different products to their current subscriptions, and offering multi-line subscribers and even more premium experience. Currently, the customer experience across a various vertical field standalone. Subscribing to BARK Eats is a different experience, for example, on a different website than BarkBox. We are in the process of evolving this to create a unified experience that not only makes it easier to purchase across our various product categories, but also rewards customers that have multi-line subscriptions and remain BARK customers for extended periods of time. One BARK will deepen our relationship with our customers, positioning us as a company that understand the full demands of living with your dog, and easily and effectively, so this is all of your needs as a dog parent. This will be an ongoing and evolving initiative. But we expect to offer this unified experience live in the first half of calendar 2022. Meghan Knoll who joined BARK in 2015 and has been overseeing a Super Chewer business is currently leading this effort and I am highly confident in her ability to execute this key strategic initiative. The power of a brand is not only evidenced by our recent performance, but also by the other world class brands that lean into BARK. To-date, we have partnered with Universal Studios, Warner Brothers, The NBA, NCAA College Football, The WWE, Dunkin Donuts and Subaru to name a few. And as you mentioned in the last call, we have partnerships with Netflix and many others to come. During the current quarter, we continue to invest in new talent to help support the continued growth of BARK ecosystem. Anil Nair, who I worked closely with at Amazon is now our Chief Supply Chain Officer and he is leading all of our global supply chain operations effort. Supporting him in these efforts are two seasoned operational leaders, James O’Leary and Tyler Bronson. James also comes from Amazon. While Tyler Bronson spent the previous 12 years at Dick’s Sporting Goods. I’m also excited note that Olly Downs recently joined the team as VP of Data and Machine Learning. Olly is an accomplished machine learning scientists and will lead BARK’s machine learning and data capabilities with the ultimate goal of expanding our existing personalization and user experience efforts. All-in-all, there are a lot of exciting things happening at BARK. We have a world class team in place, our Play vertical continues to grow at a healthy clip. We are making a notable progress on our new categories like Food and Health, and we’re improving the overall customer experience across the BARK ecosystem. Collectively, we believe these efforts will have a meaningful impact on customer retention and will help drive cross-selling revenue across the categories. I am also pleased with our team’s ability to navigate the challenging macro environment of increasing shipping costs, freight congestion and rising media rates. While we are not immune to these challenges, our anticipated DTC product inventory for the holiday season is already stateside. Our gross margins remain strong and we maintained a healthy customer acquisition cost, underscoring our marketing teams continued effectiveness, our strong customer engagement and a powerful brand. In conclusion, BARK remains one of the largest digitally native dog brands in the world today. We are benefiting from both secular and channel tailwinds, which we believe enable us to grow at scale. Furthermore, our technology stack allows us to foster meaningful customer relationships that result in strong customer retention in some of the highest NPS scores in the broader consumer space. And before I turn it over to John, I’d like to provide an update on our CFO search. Over the past couple of months, we have interviewed a number of high quality candidates and believe that we will bring this process to a close in near-term. In the meantime, we have appointed Howard Yeaton to serve as Interim CFO and assist in managing the company’s day-to-day finance responsibilities. Howard worked closely with our -- during our merger with Northern Star and he is very familiar with BARK and the team. He has over 25 years of senior financial and strategic business experience, including a CFO for other public companies and will be steady hand as you conduct our ongoing search. To that end, this will be John’s last week as a full-time employee at BARK. John will remain an advisor to the company as we onboard a permanent replacement and I want to personally thank him for his valuable contributions to the company. He was crucial in building a strong financial and reporting infrastructure for BARK and helping us get to where we are today. With that, I will turn the call over to John.

Thanks, Manish, and good afternoon, everyone. We are very pleased to report our strong fiscal second quarter results, which are all the more impressive considering the surge in growth we experienced during the same period last year. Our recent results were underscored by continued growth in new subs, robust subscriptions and shipment figures, growing revenue per order and a very healthy LTV to CAC. In our view, our recent results demonstrate the strength of our brand, our strong customer retention and the powerful secular and channel tailwinds that we benefit from as one of the largest digitally native dog brands in the world today. Beginning at the top of the P&L, total revenue came in at $120.2 million, a 39% increase compared to the same period last year. On a segment basis, direct-to-consumer revenue was $106.8 million, up 42%. This growth was largely driven by a 34% increase in subscription shipments, as well as $1.55 increase in average order value. Our performance in this segment largely reflects the continued growth of our BarkBox and Super Chewer businesses. However, as we scale Bright and launch our Food business, BARK Eats, we expect these high TAM categories to provide meaningful tailwinds to our business. Revenue from our Commerce segment, which reflects our selling of BARK products in retail stores such as Target and Costco was $13.3 million, up 21% year-over-year. This was slightly lower than expected, as we experienced a shift in certain Commerce revenue between our fiscal second and our fiscal third quarters, due to delays in our retail partners’ ability to get shipping containers into the U.S. on time. Roughly 75% of that shifted revenue has already been realized in the first month of this fiscal quarter. So this appears to be a true shift as opposed to a loss of revenue. Once again, our strong topline results were accompanied by healthy gross margins, underscoring the value of our vertically integrated direct-to-consumer business model. Gross profit was $69.9 million, resulting in a gross margin of 58%. On a segment basis, our DTC gross margin was 60%, while the Commerce segment came in at 42%. Note that we accept a lower gross margin in our Commerce segment, because that segment requires significantly less marketing expense, thus resulting in a comparable contribution margin. These gross margin results are particularly impressive considering they are in line with previous quarters, notwithstanding the rising freight rates that we and the rest of the world are experiencing. As I mentioned on our fiscal Q1 call, the team has done an excellent job addressing these macro headwinds by optimizing the timing of certain shipments, investing in additional self-fulfillment assets and improving the focus of our network of freight partners. Moving on, we added roughly 271,000 new subscriptions in the quarter, our customer acquisition cost came in at $51.71, up only 7% compared to the prior quarter. We’ve been impressed with our recent CAC figures considering that media rates are also significantly above even pre-COVID levels. We continue to believe that our efficiency in acquiring new customer speaks to the power of our brand, our high social media engagement with over 9 million followers and our marketing team’s tactical approach to channel and promotion management. Total advertising and marketing expenses associated with these new subscriptions was $17.1 million in the quarter. Our marketing efficiency, coupled with our strong gross margins, resulted in a very healthy LTV to CAC of approximately 5 times. On that note, our marketing team’s budget is driven by the lifetime value of customers we are acquiring. As Manish mentioned, we target an LTV to CAC of 4x or a minimum return of $4 of gross profit for every $1 of marketing dollars we deploy. Nonetheless, we are highly disciplined in this approach and if we see this ratio varying from our target, we will adjust our marketing investment. We believe that the relationships we foster with our customers and the data we are able to leverage as a result is a key differentiator for BARK. The strength of these relationships is illustrated by our above average NPS scores, high customer retention and growing lifetime value. Last quarter, the average subscription shipment churn was 7.1%, roughly 30 basis points below the previous quarter. Nonetheless, this figure remained above our 6% historical level as a result of shipping delays, as well as the surge in customers that we acquired during COVID last year. We see these as relatively short term influences and longer term as categories like Food and Health become more meaningful contributors to the business, we expect our average shipment churn to improve relative to historic levels, given the stickier nature of these categories. Also, remember that shipment churn does not equal customer churn. For example, if a customer chooses to get a BarkBox every other month, they would count as shipping churn every other month. We think shipping churn is the most meaningful way to look at churn as we can tie the metric directly to revenue and therefore the P&L. If we look at active subscription churn, which is defined as, if a customer received the product in the previous 364-day period, our churn rate is in the 2.5% range. Moving on, total G&A in the quarter was $68.2 million versus $39.3 million in the fiscal second quarter of last year. The year-over-year increase is a function of several factors. First, roughly $16 million of this $29 million increase is due to the year-over-year increase in volume shipped, as well as higher shipping rates. Another approximately $8.4 million is due to an increase in compensation, including $3.7 million of stock-based compensation, as we continue to invest in people and technology to launch and scale or new business lines. And the remaining roughly $5 million is a combination of demurrage fees, additional insurance, professional and legal costs associated with being a newly public company, and other general and administrative expenses. Interest expense, which is associated with our outstanding convertible note was $1.3 million in the quarter. Other income came in at $23.2 million, which reflects the $23.4 million change in the fair value of our outstanding warrants during the period. As a result, GAAP net income for the quarter was positive $6.5 million, compared to a loss of $1.4 million in the same period last year. On an adjusted basis net loss, which excludes stock-based compensation, the impact of outstanding warrants and other one-time items was $11 million, compared to adjusted net income of $1.4 million in the second quarter last year. And lastly, adjusted EBITDA was negative $8.8 million in the quarter. As I mentioned on a previous call, fiscal 2022 and 2023, our investment years for BARK, we’re investing in people, products, technology and other operational assets that we expect will enable BARK to grow at scale. As I’ve mentioned before our Play categories already profitable and help subsidize these investments. Given our strong margins and our opportunity to take market share in the Food and Health verticals, we are confident in our ability to profitably scale our business in the medium- to long-term. Turning to the balance sheet, we ended the quarter with $273 million of cash. As Manish mentioned, we made certain working capital investments in the fiscal second quarter, including securing additional inventory ahead of the holiday season. We ended the fiscal second quarter with a total inventory of $130 million, up 68% year-over-year. This investment is intended to significantly reduce the effects of potential holiday season freight congestion and to enable us to meet the growing demand of our DTC subscription base. I’d like to now provide guidance for the remainder of the year. We continue to monitor the macro environment of ongoing freight congestion, rising shipping and fulfillment costs, and higher public company costs and the impact that those factors could have on our top and bottomlines. While we remain optimistic, we see roughly 2% risk to the $516 million revenue guidance for the full year given back in December, again due to the volatility of the macro environment. For the third quarter of fiscal 2022, we expect total revenue to be between $137 million and $139 million. On an adjusted EBITDA basis, we currently expect a loss between $38 million and $40 million for the full fiscal year 2022. The delta versus our previous guidance of negative $30.5 million is largely the result of increased shipping and fulfillment costs, which include higher shipping rates, demurrage ports fees and our decision to upgrade certain customer shipments to offset potential delays associated with broader shipping congestion. We expect these factors to represent roughly net $5 million to $7 million of incremental expense to our contribution profit. Secondly, we are seeing increased expenses associated with being a newly public company. These include higher than expected D&O insurance as a result of rising demand from insurers, additional audit fees associated with the timing of our merger with Northern Star and costs associated with preparing to comply as a large accelerated filer with the requirements of Section 404(b) of the Sarbanes-Oxley Act. Collectively, these fees represent roughly $3 million of incremental expenses. In summary, the change in guidance is largely the result of macro headwinds in shipping and fulfillment costs. And secondarily, certain increased expenses associated with being a newly public company. Expenses we expect not to reoccur next year. To conclude, it is an exciting time to be at BARC. We continue to grow our topline in the 35% to 40% per year range. Notwithstanding the challenging year-over-year comparisons we face coming into the fiscal year. Our gross margin is strong. We are developing larger TAM opportunities like Food and Health to afford the company with an attractive runway, to significantly grow our business over time. We believe our unique position is one of the largest digitally native dog brands affords us highly attractive economics and unparalleled customer relationships. In our view, these factors, coupled with our healthy balance sheet, strongly position BARK to capitalize on the exciting opportunities ahead, and for my part, I’m very excited for Howard to be joining the team. He is excellent and a terrific addition. With that, I will turn the call over to the Operator for Q&A.

Thank you very much. [Operator Instructions] Your first question is from the line of Steph Wissink from Jeffries. Your line is open.

Thank you, everyone, and John best wishes to you. It’s been a pleasure working with you. My question is for either of you actually is on the CAC costs and what your assumptions are go-forward, what’s embedded in the back half guidance for your LTV to CAC, any sort of change off of that 4.9 times that we saw in the first half? Thank you.

Thanks. Thanks so much, Steph. Back at you. We continue to target somewhere between 4 times and 5 times LTV to CAC as the ratio, so you can see CAC go up as LTV goes up with AOV in addition to new products. We continue to try and stay real nimble. You’re going to see seasonal adjustment. Q3 is going to be higher, because as with every year everybody’s in the market. Layered onto that is the more secular increase, everybody’s seeing the media rates go up. We’ve been able to fend off that more secular increase not going, because Meghan and Will are really great at managing our business. So if you’re sort of suggesting we see a seasonal kind of 10% increase in CAC. That sounds about right for me. I don’t expect to see it much more than that and then returning to a non-seasonal level in Q4. Does that speak to your question?

It does. That’s very helpful. I mean, if I could ask a quick question on the out-of-box, you talked a bit more about it on this call versus prior calls. And I wanted to just give you a chance to share with us some of the data or statistics behind that piece of business. It is quite small still, but it seems like it’s quite powerful as well. Could you just share with us a little bit of how you look at that business as a complement to the core business and how does that business fare in terms of profitability when you start driving incremental value through your existing customer relationships?

Hey, Steph. Yeah. Sure. So add-to-box the way it works right now, think about it as especially upselling and cross-selling. What we do is we have machine learning engines that work on the data that we have collected for you and your dog. So that surfaces curated selection of toys and now we have added Bright, as well as Eats to that that leads to higher gross margins. For example, if you think about shipping a BarkBox or Super Chewer box, you’re able to add two or three toys or treats or chews to it. That’s significantly higher margin since it shipped in the same box. So that’s the way we think about add-to-box. And if you’ve seen our AOV that continue to increase quarter-over-quarter, we’re a $55 over the last year same quarter. So we are pretty bullish on in optimizing and improving further.

Thank you.

[Operator Instructions] Your next question is from the line of Maria Ripps of Canaccord. Your line is open.

Great. Thank you for taking my questions. Can we maybe just talk about your thoughts around passing some of these elevated expenses here in the near-term to your subscribers versus absorbing them to drive higher volumes? And do you see a lot of price sensitivity among your customer base?

Hi, Maria. This is Manish. I’ll start and John can add. So, there are variety of ways to offset rising costs and I believe that raising bass prices is the simplest of choices, which we continue to test. We look at the overall ecosystem starting from CAC to cross-selling and retention. This ties back to add-to-box conversation we just had. Now we found focusing on average order value is a really good lever. So if we continue to improve our ability to recommend ATB product that resonate well with you and cross-sell via smarter machine learning engines, which Olly Downs, the gentleman I mentioned, who has joined as team is focused on, it drives higher AOV and in fact driving stronger revenue and margin. As you seen, our AOV continues to grow and that’s the way we are optimizing our AOV and ATB which leads to higher margins and offsetting those rising costs.

Got it. Thank you, Manish.

Yeah. I’m not sure I have much…

Yeah.

… to add to that. We really pervert -- prefer to add value to the box and make that a net price increase and a net margin expansion, so that custom -- consumers get value-add and not just a price increase pass-through. We’re always looking at the optimum relationship between price and LTV and we’re -- we feel pretty good about where we are right now. We’ve feel like we’re managing some of the input cost increases and so don’t anticipate just a flat list price increase at this time, but we’re constantly evaluating that.

Got it. That’s very helpful. And John, you shared with us that your Play subscription vertical was adjusted EBITDA positive last year. So if you are rolling out is how long do you think it may take for that segment to achieve profitability? And is it fair to assume that sort of your path to profitability for this segment could be accelerated, given that there is a lot of sort of cross-sell opportunity here? So I would be great to hear your thoughts on that?

Yeah. We really like the structure of the product, if you will, the personalization, the product offering enable a higher gross margin than what other food companies are used to and that affords us the opportunity to be profitable at operating income level faster. The question becomes growth and how much marketing do you pour into it to grow it. And for your point, because we have the opportunity to cross-sell to our existing 2 million customers, we have 9 million social followers, our marketing and we expect our marketing in this line to be more efficient and so allow us to get profitable faster. It’s such a big TAM. We’re moving to scale fast. So we want this to be hundreds of millions of dollars business as quick as we can. So even with a more efficient marketing, I expect us to have a healthy absolute dollar marketing budget against the business. On a unit economic basis, it should be profitable much faster than our core Play business.

Got it. Thanks a lot and John, best of luck.

Thanks, Maria.

Thank you. Speakers, I am no longer seeing any other questions on the queue.

Great. Thank you.

Thank you so much. This concludes today’s conference call. Thank you all for joining. You may now disconnect.