Market Overview

Blue Apron Holdings, Inc. Reports Second Quarter 2018 Results

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Key Highlights:

  • Operational efficiencies created through enhanced fulfillment center
    processes resulted in 400 basis points COGS improvement year-over-year.
  • Net loss increased $1.2 million or 4% year-over-year; adjusted EBITDA
    improved $6.4 million or 27% year-over-year driven by strong focus on
    expense management and operational efficiencies.
  • Launched multi-product, multi-channel strategy to serve a variety of
    consumer behaviors.
  • Strengthened executive team with appointments of Chief Financial
    Officer and Chief Supply Chain Officer.

Blue Apron Holdings, Inc. (NYSE:APRN) announced today financial results
for the quarter ended June 30, 2018.

"As we previously articulated, 2018 is a year of transition and building
for the future," said Brad Dickerson, Chief Executive Officer, Blue
Apron Holdings, Inc. "With fulfillment center operations strengthening,
we are increasing focus on the priorities we expect will propel revenue
performance and return the business to a growth trajectory, including
evolving and expanding our product portfolio, enhancing our overall
customer experience, and launching our retail and on-demand offerings."

"We are pleased with our bottom-line performance as we gain additional
operational efficiencies and exert financial discipline across the
business," Dickerson continued. "We have an exceptional team in place,
which has been further solidified by the recent hires of Tim Bensley as
Chief Financial Officer and Alan Blake as Chief Supply Chain Officer,
and we are confident that the approach we are taking will build a strong
and sustainable business."

Second Quarter 2018 Financial Results

  • Net revenue decreased 25% year-over-year to $179.6 million in the
    second quarter of 2018, compared to the second quarter of 2017, driven
    primarily by a decrease in Customers. Revenue performance was impacted
    by the Company's decision late last year to deliberately prioritize
    operational stability to build the foundation for future growth. The
    Company is currently in a transition period as it continues to
    implement its multi-product, multi-channel strategy. Net revenue
    decreased 9% quarter-over-quarter primarily reflecting seasonal trends
    in the business.
  • Cost of goods sold, excluding depreciation and amortization (COGS), as
    a percentage of net revenue, improved 400 basis points year-over-year
    from 68.7% to 64.7% and improved 110 basis points from the first
    quarter of 2018. This progress was primarily driven by efficiencies
    gained in food costs as a result of improved planning and
    process-driven strategies in fulfillment center operations.
  • Marketing expense was $34.6 million, or 19.3% as a percentage of net
    revenue, in the second quarter of 2018, compared to $34.5 million, or
    14.5% as a percentage of net revenue, in the second quarter of 2017,
    with an emphasis on online advertising and brand activation
    investments.
  • Product, technology, general, and administrative (PTG&A) costs
    decreased 22% year-over-year from $65.7 million in the second quarter
    of 2017 to $51.1 million in the second quarter of 2018 as the Company
    focused on expense management and optimization of cost structure.
  • Net loss was $(32.8) million and diluted loss per share was $(0.17) in
    the second quarter of 2018 based on 192.0 million weighted average
    common shares outstanding, compared to net loss of $(31.6) million and
    diluted loss per share of $(0.47) in the second quarter of 2017 based
    on 67.4 million weighted average common shares outstanding.
    Sequentially, net loss increased $1.2 million quarter-over-quarter
    from a net loss of $(31.7) million in the first quarter of 2018.
  • Adjusted EBITDA improved 27% year-over-year to a loss of $(17.5)
    million in the second quarter of 2018, compared to a loss of $(23.9)
    million in the second quarter of 2017 reflecting improved expense
    management and operational efficiencies. Sequentially, adjusted EBITDA
    loss increased $0.3 million quarter-over-quarter from a loss of
    $(17.2) million in the first quarter of 2018 reflecting the seasonal
    cadence in the business.

Key Customer Metrics

  • Customers decreased 24% year-over-year and decreased 9%
    quarter-over-quarter as the Company progresses through the
    aforementioned transition period.
  • Average Revenue per Customer was $250 in the second quarter of 2018
    compared to $251 in the second quarter of 2017, and $250 in the first
    quarter of 2018.
  • Key customer metrics included in the chart below reflect trends of the
    business and seasonality as well as strategic actions by the Company.
     
Three Months Ended,
June 30,       March 31,       June 30,
2017       2018       2018
Orders (in thousands) 4,033 3,474 3,122
Customers (in thousands) 943 786 717
Average Order Value $58.81 $56.58 $57.34
Orders per Customer 4.3 4.4 4.4
Average Revenue per Customer $251 $250 $250
 

For a description of how Blue Apron defines and uses these key customer
metrics, please see "Use of Key Customer Metrics" below.

Liquidity and Capital Resources

  • Cash and cash equivalents was $180.8 million as of June 30, 2018.
  • Capital expenditures, including amounts in accounts payable, totaled
    $3.9 million for the second quarter of 2018, largely from investments
    in automation equipment as Blue Apron continued to strategically
    invest to further drive operational efficiencies. This represents a
    reduction of $29.7 million in capital expenditures from the second
    quarter of 2017 following the substantial completion of the Linden
    fulfillment center.

Conference Call and Webcast

Blue Apron will hold a call and webcast today at 8:30 a.m., Eastern Time
to discuss its second quarter 2018 results and business outlook. The
conference call can be accessed by dialing (877) 883-0383 or (412)
902-6506, utilizing the conference ID 7940466. Alternatively,
participants may access the live webcast on Blue Apron's Investor
Relations website at investors.blueapron.com.

A recording of the webcast will also be available on Blue Apron's
Investor Relations website at investors.blueapron.com
following the conference call. Additionally, a replay of the conference
call can be accessed until Thursday, August 9, 2018 by dialing (877)
344-7529 or (412) 317-0088, utilizing the conference ID 10121661.

About Blue Apron

Blue Apron's mission is to make incredible home cooking accessible to
everyone. Launched in 2012, Blue Apron is reimagining the way that food
is produced, distributed, and consumed, and as a result, building a
better food system that benefits consumers, food producers, and the
planet. The Company has developed an integrated ecosystem that enables
the Company to work in a direct, coordinated manner with farmers and
artisans to deliver high-quality products to customers nationwide at
compelling values.

Forward Looking Statements

This press release includes statements concerning Blue Apron Holdings,
Inc. and its future expectations, plans and prospects that constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. For this purpose, any
statements contained herein that are not statements of historical fact
may be deemed to be forward-looking statements. In some cases, you can
identify forward-looking statements by terms such as "may," "should,"
"expects," "plans," "anticipates," "could," "intends," "target,"
"projects," "contemplates," "believes," "estimates," "predicts,"
"potential," or "continue," or the negative of these terms or other
similar expressions. Blue Apron has based these forward-looking
statements largely on its current expectations and projections about
future events and financial trends that it believes may affect its
business, financial condition and results of operations. These
forward-looking statements speak only as of the date of this press
release and are subject to a number of risks, uncertainties and
assumptions including, without limitation, the Company's anticipated
growth strategies; risks associated with its ability to achieve the
benefits of the realignment; its ability to achieve future revenue
growth and manage future growth effectively; its expectations regarding
competition and its ability to effectively compete; its ability to
successfully build out and operate its fulfillment centers; its ability
to expand its product offerings and distribution channels; its ability
to cost-effectively attract new customers, retain existing customers and
increase the number of customers it serves; seasonal trends in customer
behavior; its expectations regarding, and the stability of, its supply
chain; the size and growth of the markets for its product offerings and
its ability to serve those markets; federal and state legal and
regulatory developments; other anticipated trends and challenges in its
business; and other risks described in the Company's public reports
filed with the U.S. Securities and Exchange Commission (the "SEC"),
including under the caption "Risk Factors" in the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2018 to be
filed with the SEC and in other filings that Blue Apron may make with
the SEC in the future. Blue Apron assumes no obligation to update any
forward-looking statements contained in this press release as a result
of new information, future events or otherwise.

Use of Non-GAAP Financial Information

This press release includes adjusted EBITDA, a non-GAAP financial
measure, that is not prepared in accordance with, nor an alternative to,
financial measures prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"). In addition, adjusted EBITDA is not
based on any standardized methodology prescribed by GAAP and is not
necessarily comparable to similarly-titled measures presented by other
companies.

The Company defines adjusted EBITDA as net earnings (loss) before
interest income (expense), net, other operating expense, other income
(expense), net, benefit (provision) for income taxes and depreciation
and amortization, adjusted to eliminate share-based compensation
expense. The Company presents adjusted EBITDA because it is a key
measure used by the Company's management and board of directors to
understand and evaluate the Company's operating performance, generate
future operating plans and make strategic decisions regarding the
allocation of capital. In particular, the Company believes that the
exclusion of certain items in calculating adjusted EBITDA can produce a
useful measure for period-to-period comparisons of the Company's
business. Further, Blue Apron uses adjusted EBITDA to evaluate its
operating performance and trends and make planning decisions, and it
believes that adjusted EBITDA helps identify underlying trends in its
business that could otherwise be masked by the effect of the items that
Company excludes. Accordingly, Blue Apron believes that adjusted EBITDA
provide useful information to investors and others in understanding and
evaluating its operating results, enhancing the overall understanding of
the Company's past performance and future prospects, and allowing for
greater transparency with respect to key financial metrics used by its
management in its financial and operational decision-making.

There are a number of limitations related to the use of adjusted EBITDA
rather than net income (loss), which is the most directly comparable
GAAP equivalent. Some of these limitations are:

  • adjusted EBITDA excludes share-based compensation expense, as
    share-based compensation expense has recently been, and will continue
    to be for the foreseeable future, a significant recurring expense for
    the Company's business and an important part of its compensation
    strategy;
  • adjusted EBITDA excludes depreciation and amortization expense and,
    although these are non-cash expenses, the assets being depreciated may
    have to be replaced in the future;
  • adjusted EBITDA excludes other income, as other income represents a
    non-cash fair market value adjustment relating to convertible notes;
  • adjusted EBITDA does not reflect interest expense, or the cash
    requirements necessary to service interest, which reduces cash
    available to us;
  • adjusted EBITDA does not reflect income tax payments that reduce cash
    available to us; and
  • other companies, including companies in the Company's industry, may
    calculate adjusted EBITDA differently, which reduces its usefulness as
    a comparative measure.

Because of these limitations, adjusted EBITDA should be considered
together with other operating and financial performance measures
presented in accordance with GAAP. A reconciliation of adjusted EBITDA
to net income (loss), the most directly comparable measure calculated in
accordance with GAAP, is set forth below under the heading
"Reconciliation of Non-GAAP Financial Measures".

In addition, the Company will be presenting certain guidance regarding
future operating results, including forward-looking non-GAAP measures,
on today's call and webcast. Reconciliations of these forward-looking
non-GAAP measures to the most directly comparable measures calculated in
accordance with GAAP will be posted on the Company's investor relations
section of its website, located at investors.blueapron.com under "Events
and Presentations".

Use of Key Customer Metrics

This press release includes various key customer metrics that we use to
evaluate our business and operations, measure our performance, identify
trends affecting our business, project our future performance, and make
strategic decisions. You should read these metrics in conjunction with
our financial statements. We define and determine our key customer
metrics as follows:

Orders

We define Orders as the number of paid orders by our Customers across
our meal, wine and market products sold on our e-commerce platforms in
any reporting period, inclusive of orders that may have eventually been
refunded or credited to customers.

Customers

We determine our number of Customers by counting the total number of
individual customers who have paid for at least one Order from Blue
Apron across our meal, wine or market products sold on our e-commerce
platforms in a given reporting period.

Average Order Value

We define Average Order Value as our net revenue from our meal, wine and
market products sold on our e-commerce platforms in a given reporting
period divided by the number of Orders in that period.

Orders per Customer

We define Orders per Customer as the number of Orders in a given
reporting period divided by the number of Customers in that period.

Average Revenue per Customer

We define Average Revenue per Customer as our net revenue from our meal,
wine and market products sold on our e-commerce platforms in a given
reporting period divided by the number of Customers in that period.

           

BLUE APRON HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

June 30, December 31,
2018 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 180,822 $ 228,514
Accounts receivable, net 1,619 1,945
Inventories, net 37,194 41,927
Prepaid expenses and other current assets 10,322 7,824
Other receivables   1,516   2,539
Total current assets 231,473 282,749
Restricted cash 1,689 2,371
Property and equipment, net 222,249 230,828
Other noncurrent assets   1,623   1,761
TOTAL ASSETS $ 457,034 $ 517,709
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 27,077 $ 30,448
Accrued expenses and other current liabilities 38,074 32,615
Deferred revenue   19,333   27,646
Total current liabilities 84,484 90,709
Long-term debt 124,781 124,687
Facility financing obligation 71,553 70,347
Other noncurrent liabilities   7,098   8,116
TOTAL LIABILITIES   287,916   293,859
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)   169,118   223,850
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 457,034 $ 517,709
 

BLUE APRON HOLDINGS, INC.

Condensed Consolidated Statement of Operations

(In thousands, except share and per-share data)

(Unaudited)

         
Three Months Ended Six Months Ended
June 30, June 30,
2018     2017 2018     2017
Net revenue $ 179,556 $ 238,057 $ 376,246 $ 482,900
Operating expenses:
Cost of goods sold, excluding depreciation and amortization 116,156 163,520 245,488 332,051
Marketing 34,581 34,519 73,910 95,124
Product, technology, general, and administrative 51,100 65,673 100,588 128,883
Depreciation and amortization   8,685   5,383   17,089   9,563
Total operating expenses   210,522   269,095   437,075   565,621
Income (loss) from operations (30,966) (31,038) (60,829) (82,721)
Interest income (expense), net (1,848) (3,052) (3,625) (3,522)
Other income (expense), net     2,567     2,567
Income (loss) before income taxes (32,814) (31,523) (64,454) (83,676)
Benefit (provision) for income taxes   (22)   (105)   (47)   (146)
Net income (loss) $ (32,836) $ (31,628) $ (64,501) $ (83,822)
 
Net income (loss) per share – basic $ (0.17) $ (0.47) $ (0.34) $ (1.25)
Net income (loss) per share – diluted $ (0.17) $ (0.47) $ (0.34) $ (1.25)
Weighted average shares outstanding – basic 192,039,300 67,387,634 191,768,174 67,239,640
Weighted average shares outstanding – diluted 192,039,300 67,387,634 191,768,174 67,239,640
 

BLUE APRON HOLDINGS, INC.

Condensed Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)

       
Six Months Ended
June 30,
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (64,501) $ (83,822)
Adjustments to reconcile net income (loss) to net cash from (used
in) operating activities:
Depreciation and amortization of property and equipment 17,089 9,563
Loss (gain) on disposal of property and equipment 775 23
Changes in reserves and allowances (132) 552
Share-based compensation 8,986 2,992
Non-cash interest expense 1,300 2,234
Loss (gain) on convertible notes (2,567)
Changes in operating assets and liabilities   (2,120)   334
Net cash from (used in) operating activities   (38,603)   (70,691)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition (250) (1,177)
Decrease (increase) in restricted cash 125 1,595
Purchases of property and equipment (9,652) (91,754)
Proceeds from sale of property and equipment   684  
Net cash from (used in) investing activities   (9,093)   (91,336)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from debt issuances 144,410
Proceeds from exercise of stock options 152 781
Principal payments on capital lease obligations (148) (95)
Payments of public offering costs     (2,909)
Net cash from (used in) financing activities   4   142,187
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (47,692) (19,840)
CASH AND CASH EQUIVALENTS — Beginning of period   228,514   81,468
CASH AND CASH EQUIVALENTS — End of period $ 180,822 $ 61,628
 

BLUE APRON HOLDINGS, INC.

Reconciliation of Non-GAAP Financial Measures

(In thousands)

(Unaudited)

     
Three Months Ended
June 30,     March 31,     June 30,
2018 2018 2017
Reconciliation of net income (loss) to adjusted EBITDA  
Net income (loss) $ (32,836) $ (31,665) $ (31,628)
Share-based compensation 4,771 4,215 1,754
Depreciation and amortization 8,685 8,404 5,383
Interest (income) expense, net 1,848 1,777 3,052
Other (income) expense, net (2,567)
Provision (benefit) for income taxes   22   25   105
Adjusted EBITDA $ (17,510) $ (17,244) $ (23,901)
 

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