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Blue Apron Holdings, Inc. Reports Second Quarter 2019 Results

NEW YORK--(BUSINESS WIRE)--

Key Highlights:

● Improved net loss 76% year-over-year to $7.7 million in the second quarter of 2019 from a loss of $32.8 million.

● Improved adjusted EBITDA $22.0 million year-over-year to a profit of $4.5 million in the second quarter of 2019 from an adjusted EBITDA loss of $17.5 million.

● Improved COGS 470 basis points year-over-year to 60.0% as a percentage of net revenue in the second quarter of 2019, resulting from operational efficiencies created through enhanced fulfillment center processes.

● Subsequent to the second quarter, announced strategic growth plan to return the business to year-over-year quarterly customer and revenue growth in the second half of 2020.

Blue Apron Holdings, Inc. (APRN) announced today financial results for the quarter ended June 30, 2019.

“Blue Apron’s next phase will be defined by focusing on our customers and our core business in order to return the business to growth in 2020,” said Linda Findley Kozlowski, Blue Apron Chief Executive Officer. “We’ve clearly and thoroughly demonstrated results in operational optimization and fiscal discipline throughout the organization. Now, we need to prove we can grow our customer base and revenue through both better execution and new initiatives that enable our core business to reach its full potential. Our market opportunity is large and we believe that it is growing, leading to significant unrealized opportunity within our core business once we execute our strategy."

Second Quarter 2019 Financial Results

● Net revenue decreased 34% year-over-year to $119.2 million in the second quarter of 2019, compared to the second quarter of 2018 as the company deliberately reduced marketing spend while focusing on marketing efficiency and targeting high affinity consumers. Net revenue decreased 16% quarter-over-quarter largely reflecting seasonal trends in the business.

● Cost of goods sold, excluding depreciation and amortization (COGS), as a percentage of net revenue improved 470 basis points year-over-year from 64.7% to 60.0% in the second quarter of 2019. This improvement, led by the company’s Linden facility, was primarily driven by efficiencies gained in food, labor and fulfillment packaging costs as a result of improved planning and process-driven strategies. COGS increased by 170 basis points as a percentage of net revenue quarter-over-quarter largely from expected seasonal increases in fulfillment packaging, partially offset by efficiencies in food and labor costs.

● Marketing expense was $9.7 million, or 8.2% as a percentage of net revenue, in the second quarter of 2019, compared to $34.6 million, or 19.3% as a percentage of net revenue, in the second quarter of 2018. This decrease is consistent with the company's strategy to focus on marketing channels it believes to be the most efficient and consumers with high affinity and retention within its direct-to-consumer platform.

● Product, technology, general, and administrative (PTG&A) costs decreased 31% year-over-year from $51.1 million in the second quarter of 2018 to $35.1 million in the second quarter of 2019, as the company remained focused on expense management and optimization of its cost structure.

● Net loss was $7.7 million, and diluted loss per share was $0.59 in the second quarter of 2019 based on 13.0 million weighted average common shares outstanding. Net loss in the second quarter of 2018 was $32.8 million and diluted loss per share was $2.56 based on 12.8 million weighted average common shares outstanding. Sequentially, net loss increased $2.4 million quarter-over-quarter from a net loss of $5.3 million in the first quarter of 2019. All periods presented have been adjusted to reflect the company’s one-for-fifteen reverse stock split that became effective on June 14, 2019.

● Adjusted EBITDA improved $22.0 million year-over-year to a profit of $4.5 million in the second quarter of 2019, compared to a loss of $17.5 million in the second quarter of 2018, reflecting the company’s continued focus on expense management and operational efficiencies. Sequentially, adjusted EBITDA decreased by $4.1 million quarter-over-quarter from $8.6 million in the first quarter of 2019 reflecting the seasonal cadence in the business.

Key Customer Metrics

● Key customer metrics included in the chart below reflect the company’s deliberate marketing investments while executing on strategic priorities, as well as trends of the business and seasonality.

 

Three Months Ended,

 

June 30,

March 31,

June 30,

 

2018

2019

2019

Orders (in thousands)

3,122

2,482

2,048

Customers (in thousands)

717

550

449

Average Order Value

$57.34

$57.15

$58.16

Orders per Customer

4.4

4.5

4.6

Average Revenue per Customer

$250

$258

$265

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 $95.6 million as of June 30, 2019.

● Cash used in operating activities totaled $2.6 million for the second quarter of 2019 compared to cash used of $18.1 million in the prior year. The improvement in operating cash flow is driven by expense management, operational efficiencies and working capital management.

● Capital expenditures totaled $1.1 million for the second quarter of 2019. This represents a reduction of $3.5 million in capital expenditures from the second quarter of 2018.

● Free cash flow totaled cash used of $3.7 million for the second quarter of 2019 compared to cash used of $22.7 million in the prior year driven by improved operating cash flow and reduced capital expenditures.

Conference Call and Webcast

Blue Apron will hold a conference call and webcast today at 8:30 a.m., Eastern Time to discuss its second quarter 2019 results and business outlook. To access the live webcast and accompanying slide deck, please visit the Blue Apron Investor Relations website, investors.blueapron.com and go to the Events and Presentations section. Alternatively, to join the call by phone, please dial (877) 883-0383 or (412) 902-6506 and utilize the conference ID 6948949.

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 Tuesday, August 13, 2019 by dialing (877) 344-7529 or (412) 317-0088, utilizing the conference ID 10132470.

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. Blue Apron 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, including its decision to prioritize its core direct-to-consumer business and certain customer segments within the direct-to-consumer business; the company’s ability to achieve year-over-year quarterly customer and revenue growth in the second half of 2020; the company’s ability to execute on its strategic growth plan; its expectations regarding competition and its ability to effectively compete; its ability to expand or innovate on its product offerings, strategic partnerships and distribution channels; its ability to cost-effectively attract new customers, retain existing customers and increase the number of customers it serves; its amount of indebtedness and ability to fulfill its debt-related obligations; its ability to comply with the covenants in its revolving credit facility; its ability to maintain sufficient capital to continue to make investments and to fund its operations, including its strategic growth plan; risks resulting from the company’s recent management transition, including but not limited to, loss of institutional knowledge and expertise; the company’s ability to achieve the benefits associated with, and mitigate the risks resulting from, the company’s past reorganization activities; 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 more fully described in the company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed with the U.S. Securities and Exchange Commission (“SEC”) on April 30, 2019, the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 to be filed with the SEC, and in other filings that the company may make with the SEC in the future. The company 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 non-GAAP financial measures, adjusted EBITDA and free cash flow, that are not prepared in accordance with, nor an alternative to, financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In addition, these non-GAAP financial measures are 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 the company excludes. Accordingly, Blue Apron believes that adjusted EBITDA provides 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 operating expense, as other operating expense represents restructuring costs;

● 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.

The company defines free cash flow as net cash from (used in) operating activities less purchases of property and equipment. The company presents free cash flow because it is used by the company’s management and board of directors as an indicator of the amount of cash the company generates or uses and to evaluate the company’s ability to satisfy current and future obligations and to fund future business opportunities. Accordingly, Blue Apron believes that free cash flow provides useful information to investors and others in understanding and evaluating its operating results, enhancing the overall understanding of the company’s ability to satisfy its financial obligations and pursue business opportunities, and allowing for greater transparency with respect to a key financial metric used by its management in its financial and operational decision making.

There are a number of limitations related to the use of free cash flow rather than net cash from (used in) operating activities, which is the most directly comparable GAAP equivalent. Some of these limitations are:

● free cash flow is not a measure of cash available for discretionary expenditures since the company has certain non-discretionary obligations such as debt repayments or capital lease obligations that are not deducted from the measure; and

● other companies, including companies in the company’s industry, may calculate free cash flow differently, which reduces its usefulness as a comparative measure.

Because of these limitations, adjusted EBITDA and free cash flow should be considered together with other financial information presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable measures 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, to the extent available without unreasonable efforts, 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,

 

 

2019

 

2018

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

95,644

 

$

95,615

Accounts receivable

 

 

491

 

 

494

Inventories, net

 

 

33,704

 

 

33,634

Prepaid expenses and other current assets

 

 

9,048

 

 

12,259

Total current assets

 

 

138,887

 

 

142,002

Restricted cash

 

 

1,130

 

 

1,692

Property and equipment, net

 

 

194,916

 

 

209,515

Other noncurrent assets

 

 

3,609

 

 

1,690

TOTAL ASSETS

 

$

338,542

 

$

354,899

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

24,827

 

$

22,573

Accrued expenses and other current liabilities

 

 

26,249

 

 

32,594

Deferred revenue

 

 

8,624

 

 

12,372

Total current liabilities

 

 

59,700

 

 

67,539

Long-term debt

 

 

82,808

 

 

82,603

Facility financing obligation

 

 

71,700

 

 

71,696

Other noncurrent liabilities

 

 

12,923

 

 

13,759

TOTAL LIABILITIES

 

 

227,131

 

 

235,597

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

111,411

 

 

119,302

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

$

338,542

 

$

354,899

 

 

 

 

 

 

 

 

 

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,

 

 

 

2019

 

2018

 

2019

 

2018

Net revenue

 

$

 

119,166

 

 

$

 

179,556

 

 

$

 

261,056

 

 

$

 

376,246

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold, excluding depreciation and amortization

 

 

71,473

 

 

 

116,156

 

 

 

154,177

 

 

 

245,488

 

Marketing

 

 

9,713

 

 

 

34,581

 

 

 

23,947

 

 

 

73,910

 

Product, technology, general, and administrative

 

 

35,118

 

 

 

51,100

 

 

 

74,266

 

 

 

100,588

 

Depreciation and amortization

 

 

8,372

 

 

 

8,685

 

 

 

16,976

 

 

 

17,089

 

Other operating expense

 

 

 

 

 

 

230

 

 

 

Total operating expenses

 

 

124,676

 

 

 

210,522

 

 

 

269,596

 

 

 

437,075

 

Income (loss) from operations

 

 

(5,510

)

 

 

(30,966

)

 

 

(8,540

)

 

 

(60,829

)

Interest income (expense), net

 

 

(2,226

)

 

 

(1,848

)

 

 

(4,458

)

 

 

(3,625

)

Income (loss) before income taxes

 

 

(7,736

)

 

 

(32,814

)

 

 

(12,998

)

 

 

(64,454

)

Benefit (provision) for income taxes

 

 

(12

)

 

 

(22

)

 

 

(25

)

 

 

(47

)

Net income (loss)

 

$

 

(7,748

)

 

$

 

(32,836

)

 

$

 

(13,023

)

 

$

 

(64,501

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share – basic*

 

$

 

(0.59

)

 

$

 

(2.56

)

 

$

 

(1.00

)

 

$

 

(5.05

)

Net income (loss) per share – diluted*

 

$

 

(0.59

)

 

$

 

(2.56

)

 

$

 

(1.00

)

 

$

 

(5.05

)

Weighted average shares outstanding – basic*

 

13,034,913

 

 

12,802,620

 

 

13,007,558

 

 

12,784,545

 

Weighted average shares outstanding – diluted*

 

 

13,034,913

 

 

 

12,802,620

 

 

 

13,007,558

 

 

 

12,784,545

 

*

Reflects the 1-for-15 reverse stock split that became effective on June 14, 2019.

 

BLUE APRON HOLDINGS, INC.

Condensed Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

June 30,

 

 

2019

 

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$

 

(13,023

)

 

$

 

(64,501

)

Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

16,976

 

 

 

17,089

 

Loss (gain) on disposal of property and equipment

 

 

252

 

 

 

775

 

Changes in reserves and allowances

 

 

(1,035

)

 

 

(132

)

Share-based compensation

 

 

4,457

 

 

 

8,986

 

Non-cash interest expense

 

 

250

 

 

 

1,300

 

Changes in operating assets and liabilities

 

 

(5,381

)

 

 

(2,120

)

Net cash from (used in) operating activities

 

 

2,496

 

 

 

(38,603

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Cash paid for acquisition

 

 

 

 

(250

)

Decrease (increase) in restricted cash

 

 

284

 

 

 

125

 

Purchases of property and equipment

 

 

(2,824

)

 

 

(9,652

)

Proceeds from sale of property and equipment

 

 

123

 

 

 

684

 

Net cash from (used in) investing activities

 

 

(2,417

)

 

 

(9,093

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Payments of debt issuance costs

 

 

(24

)

 

 

Proceeds from exercise of stock options

 

 

94

 

 

 

152

 

Principal payments on capital lease obligations

 

 

(120

)

 

 

(148

)

Net cash from (used in) financing activities

 

 

(50

)

 

 

4

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

29

 

 

 

(47,692

)

CASH AND CASH EQUIVALENTS — Beginning of period

 

 

95,615

 

 

 

228,514

 

CASH AND CASH EQUIVALENTS — End of period

 

$

 

95,644

 

 

$

 

180,822

 

 

BLUE APRON HOLDINGS, INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands)
(Unaudited)

 

Three Months Ended

 

June 30,

 

March 31,

 

June 30,

 

2019

 

2019

 

2018

Reconciliation of net income (loss) to adjusted EBITDA

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

 

(7,748

)

 

$

 

(5,275

)

 

$

 

(32,836

)

Share-based compensation

 

 

1,622

 

 

 

2,835

 

 

 

4,771

 

Depreciation and amortization

 

 

8,372

 

 

 

8,604

 

 

 

8,685

 

Other operating expense

 

 

 

 

230

 

 

 

Interest (income) expense, net

 

 

2,226

 

 

 

2,232

 

 

 

1,848

 

Provision (benefit) for income taxes

 

 

12

 

 

 

13

 

 

 

22

 

Adjusted EBITDA

 

$

 

4,484

 

 

$

 

8,639

 

 

$

 

(17,510

)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

Reconciliation of net cash from (used in) operating activities to free cash flow

 

 

 

 

 

 

 

 

 

 

 

 

Net cash from (used in) operating activities

 

$

 

(2,642

)

 

$

 

(18,143

)

 

$

 

2,496

 

 

$

 

(38,603

)

Purchases of property and equipment

 

 

(1,090

)

 

 

(4,575

)

 

 

(2,824

)

 

 

(9,652

)

Free cash flow

 

$

 

(3,732

)

 

$

 

(22,718

)

 

$

 

(328

)

 

$

 

(48,255

)

 

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