APRN - Earnings call transcript Q3 2017 | Blue Apron Holdings, Inc.

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Operator

Ladies and gentlemen, good morning and welcome to the Blue Apron Holdings' Third Quarter 2017 Earnings Conference Call and Webcast. All participants will be listen-only mode. [Operator Instructions] This call is being recorded.

Following the conclusion of today's remarks, the Blue Apron team will be taking your questions. With that, I would like to turn the call over to Miss Felise Kissell, Vice President of Investor Relations. ahead. go please Kissell, Miss

Felise Kissell

from Officer. Litigation Good plans, morning those the and this Harbor described by Executive joining various On may for provisions the Reform Chief you of during Securities Act we and release this the call Safe Private prospects and call, results we constitute of of thank about Financial our Dickerson, company's of morning's Brad Chief in statements future Apron purpose for remarks have that Blue make expectations, differ other us. forward-looking company's SEC the materially indicated these result those as and everyone filings. Actual XXXX. Various under and earnings the factors, a Matt Officer including risks statements Salzberg, forward-looking important

In of forward-looking to as any as any specifically our today relied views our disclaim and subsequent views addition, only upon statements be of these statements. as We representing not any represent date. update should obligation

During will with which accordance to not referring Principles. are we be non-GAAP in measures, Accepted financial prepared Accounting Generally call, this

Blue to You measures the review filings most more described to have where and CEO. and turn to these GAAP results. measures Apron's comparable Salzberg, are directly Matt? would release these SEC like we call refer I to the to non-GAAP of now the encouraged the reconciliation detail financial in earnings to Matt that With over

Matt Salzberg

we marketing the X%, we questions. a In XX%. grew reducing in update toward our percentage marketing top quarter will review results improvement net year-over-year Brad briefly reflecting you, performance Afterward, provide and financial Felise. you take financial I additional on Today, our provide XX% our as Thank before earnings the from call. to for progress thank third priorities. everyone an our XX% on costs revenue of third revenue And strategic detail will an while your to quarter, quarter's joining then

customers by deliberately X% monetization new driven acquisition year-over-year $XXX. back shift we as flexible increased in-full, continue This part year, of increase per that across to or customer important our customer per revenue rates strategy is tenured in customers. from our launching the activity, was as An center made more choices to throughout we partly optimizing and our mixed scaled assortment OTIF, improvements our a our in innovations improvements metric more network. by average Our well $XXX product as customer to on-time our to menu to our fulfillment revenue and through

some million Linden costs $XX driven launch Adjusted related expanded of is shipping heightened achieve us help program. improvement step executives. a These quarter, about innovations; top priority products taking the the infrastructure of consumer of pursuing we were you fulfillment align rates product centers; will the and To for improvements. creation of loss last the largely was actions our centric two, our division our priorities. better EBITDA EBITDA key summer details opportunities by adjusted EBITDA growth the that. adjusted OTIF in and to between we our on are actions and focus customer further strong shortly through around back, responsibility of I top include; priorities achieve company provide with priorities, one, our product more organization a maximizing our Our three, us fulfillment Taking and a announced team center, on spoke I offering to we to

in of announced was opening a breakdown and continue our area forward some fulfillment and quarter, approximately accountability. $XX to more streamlining will of company-wide decision-making corporate recently, most others realignment roles, result for total million realignment Brad reducing this of detail personnel, X% greater centers, net representing shortly. across reduction our the workforce a this annually. drive and approximately This savings our across we in a review company and offices implications we of The of

IT, Fairfield. We Resources positioned performed considerations and our Resources the invest in as such our to pleased of opportunities. recently as shortly. well consumer the new positions support actions Coast realignment, our review to our last eight up no believe invaluable Officer as California. strategy, XX provide California to Depot. specialty to sectors team time. plans has Specialty organization examples should resources our to leadership Based strengthen at in I'm operations are additional food our be companies step the Home facility At On of the across served The unexpected fulfillment Street that our facility as our our impact an previous and Linden opening as and Lainie's roll-out Chief and centralizing thousands operational and nationwide benefit that Lainie this retail, recently were processes, build-out our and few numerous, this will DPI offering. and the had we us that offering. build-out including real the XXX% costs areas in and existing a on our including distribution roll-out, people our pleased these Richmond, complete continue to West our areas food, team and Chief customers of certain made functions, guidance access half needs is in estate drive most third across with allocating As in we am Fairfield, menu to to Human this a did product Cooney centers. expanded distributor and realignment of Resources Foods, directly our included; review including A of decision the we culture, I announce center, as now, systems on She expanded about product its services growth and fulfillment such develop efficiencies. our will also to employees State resources subsequent associated longer will Human with we report purchasing years to new call, a nearly organization. and plan on financial this Officer, me. of on Human experience joined Lainie we reporting changes the over from our and to of as the has at spoke creative additional to our at of reported enable ramp-up financial well processes, our teams we and Brad new that, innovate we have pursuing faster facility access expanded reducing end future to of time, of customers quarter, of options. products

us, improvements and we customers who show had ongoing Product product received to to rate Jersey volume received when pleased those retention The all center plan Our and continue it. City of initial expansion fulfillment expansion indications, this complete. from product order recent both to although which is comparing the journey to the early, success. to who I'm build an on yet remaining in is completion expansion for also our was report, to transition of the Linden, tied now not

Linden the in to volume third respectively. national Specifically, increased the and second XX%, quarter, facility total serviced X% from the by

Even which of is volume approximately Linden Linden, in stabilized XX% is increased significantly OTIF, product Now, our have with national volume. our we encouraging. servicing

certain and in fulfillment two centers We duplicative fourth be Coast concurrently quarter, are the no also East costs. starting longer to will taking we running eliminate steps

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early is value We action have Sustained is progress lifetime key in sustained already we the to that to to and is it achieved growth. results. this have we while some seek and help on conclude unlocking meaningful items, that fuel seen progress the improvements encouraging, plan too our

to priorities exciting improvements, immediate our initiatives we've share while product to and margin been building and the of roadmap rates some that on. OTIF Finally, on working brand I'd focus like are

been insights have customer First, how making merchandize on attitudes. preferences taste based in we recipes around improvements cooking and we

continued feature seeing our early increased new in XX-minute our meal we selections and are options, these to have in interest instance, results. For

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explores and Our We and people decisions can What Spotify. Eat the that found on unseen about podcast, Eat," and We make iTunes the influence "Why be forces food, called guide

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our further customer and meaningful including number flexibility Looking forward, projects we our a and offerings recipe both roadmap, to expansion new of existing better have in additional serve on segments.

long-term have our we're on focused items While margin network, right and for fulfillment the business our in our near-term challenges the center position to results impacted by OTIF success. been

deliver as Brad. the and create Thank by over against work for time mobilizing turn will order shareholders. your of is the team recent to call for encouraged how to top today, the incredibly proud I'm I progress not we have execute While immediate hard working our in I'm the our brand customers, our to diminishing made company of that, value passionate we've and with for you in community priorities. our well as ahead, built

Brad Dickerson

Matt, Thank good and you, everyone. morning,

revenue our expected City align as In we period the a our spend we we prior second year Linden, of in million the more call, volume our in from on quarter, that As third remained Marketing and on quarter current on net transition to X% after that of we to spend the reflect with focused to investments as business, than articulated in was in our managing facility. last revenue resulted performance the arose completing of XX.X% expenses quarter continued Matt the marketing to decreased challenges fulfillment to of roll-out, in a Jersey period expansion revenue compared our longer-term during customers year. as third to than operational net by that high growth outlined. transition fully the Growth our third the view volumes earnings the $XXX our new impacted transition year-over-year, focused planned opportunities with quarter a percentage largely the of in of XX.X%. center implementing doubling quarter focus decrease capitalize of to this increased year-over-year XX% quarter, of fewer to balanced Linden more third net our product marketing

our to and XX.X% obligations. to primarily As implemented of our points we a in a initiatives points support increase to and launch costs to is year. was last sold previously a amortization reduction the expansion centers. revenue wage depreciation increased from year our transition Linden, percentage committed of as the product across of third the offline due basis fulfilling Linden This through to increases planned quarter the in fulfillment we excluding impact worked XX.X% new Cost-to-good labor due earlier already including XXX to marketing as net while in basis guided, marketing compared XXX transition certain infrastructure

preferences. better food Additionally, with XXX and and align a in from from impact General of of and prior our rotations customer Administrative use costs recipe basis of recipes, personnel the to costs. product revenue or in in of costs packaging increased points Technology the our product attributable higher expansion year, and PTG&A premium largely ingredients increased facilities and quarter net XX.X% XX.X% net Product, to the revenue third costs offerings from increased

earnings As expenses. discussed were in our also call, separate last two there

we impairment center noncash third operations First to a $X the all of transition of charge million the related City quarter reported fulfillment to in Linden. primarily Jersey

of proceeds million. expenditures the From Linden. common capital of compared of As a Matt a accounts $XXX million Linden. to $XXX build of our are perspective, from Capital closing completed was now focused period IPO million the loss the from net Xth, and $XX the of last of quarter resource loss quarter Net Xth. and of end conversion third million the second, quarter. Class noncash have $XX compared liquidity million significantly the generating fully we EBITDA of substantially third loss And payable $XX at million, in a City July our in mentioned, cash other convertible prior notes and exclusively loss year's year. was in on the in Jersey down on transitioned of upon just the a performance shares $XX million, improving million XX in adjusted $XX.X of settlement amounts of were We $XX quarter volume we was and cash the earlier the as closed the third to expenses million of out IPO A related equivalents the to as third year the stock July net automatic on of including loss included as

towards hard Linden the we our we in look continue work year, and focused on As remainder performance. the operations of our improving stabilize to remained overall the

estimates speak second to updating morning, As reiterated the while stated our momentarily. reflect our realignment of actions for XXXX, company-wide in release loss the overall issued our financial I'll to recent earnings outlook we this half net that

back net second half year quarter the quarter natural pull result the remains increased net ability fourth the compared off of in to in quarter million. for This marketing a our fourth as primarily Specifically, of million $XXX as in to range cadence $XXX the the anticipating revenue million third. third to compared to lower Coming the revenue $XXX well business. commitments is quarter of the of of are revenue third the to we be our

sold as sold percentage improvement expectations improvement in to half continue quarter. of the to year. in Jersey from expectation the to is in We of naturally third driven is due of will XX% from City in expect shift modest compared back the cost completion revenue to by costs labor in goods to facility. season favorable our of transfer the summer also of a goods as reflects occurs our than the and of packaging particularly a half the to we fourth the volume that produce XX% in This Greater seasonal There our quarter efficiency fall. significant into of improvements this operational cost the that business the have we Linden, a

previously in year XXXX. half on As to anticipated our realignment back compared of be our the expected of our back begin half way percentage from spend of represents year. to ability XX%. the be of the quarter as back quarter, is a from through to revenue the benefit we marketing the The third PTG&A as to expected in range a actions to financial the work in is year back full similar of organizational the front year. is the fourth guided, XX% reflects to which pull reduction half in increased the marketing in the marketing of This half

expect million Fairfield, non-cash of to to We leased approximately in of fourth our million not $X decision our the in $X in October related out charge build to quarter the a California. property pursue

be adjusted expense are added our We and centers, financial optimizing focused rigor. operating expected in EBITDA. will be current also to This will other on recorded exerting charge back exclusively while fulfillment

our of expected year still net earnings quarter. guidance fourth non-cash charge million of loss is of to relating loss in quarter discussed net with to to earlier; adjusted Note to that except following. quarter in $X our result the million EBITDA $X and in A for items taken, we Fairfield I $XX amortization mentioned million be call EBITDA at the property third in last includes $XXX actions a $XX second million. the million reconciling $XXX consistent and As to to half this this approximately adjusted between the the million fourth that amounts depreciation similar projected loss

provided to higher shares of weighted anticipate the previously range the fourth end quarter million million. also of average We our in XXX XXX towards

we current decisions our of business of while resulted organizational across offices structure are to performance our you opportunities. easy growth in never These fulfillment to maintaining of the ability the pursue the realigned corporate As reflect strongest recently centers. and more reduction X% know, total and company's our appropriately our the workforce, net approximately

incur of result employee-related fourth to We substantially added These consisting the severance will will $X.X cash approximately additionally primarily expect of in payments, payments million which be quarter. expenses, back expenditures EBITDA. adjusted to occur in to all in

simultaneously determination and greatly long-term financial our drive that, on drive team's to now Thank we and these initiatives to improvements minimize of a I XXXX, In annual results. $XX the sold approximately of near-term total growth. questions. $X focus, and you of we determined continue million on in on realignment, resilience savings. to operational with impact be including of to savings the focused executing take $XX cost goods million of have issues reinforce business, PTG&A beginning and while to the strategic our extremely your result that respect summary, will project savings I million we want As

Operator

first ahead. go Instructions] Please Matthew question the DiFrisco from Guggenheim. will now of begin question-and-answer session. comes We Our [Operator

Matthew DiFrisco

question Thank sort now you as that of more I if and of you. talk have roll-out on they that? us the that? -- bit I the a products sort new the and about could give about, two-fold. the was out coming My is early meals expansion of little breakdown the curious of of the as past, that mix is meals percentage in of mean quarter in that early the on or far the products sales can us intel as to it too metrics XX-minute how is much somewhat you Can around know some or penetration how you that give looked I in of of particular? us of meals velocity the four. two the represent, newer the mix given you and of or is families the during the that tell

Matt Salzberg

Yes.

after I terms So share and rollout But of complete of didn't in we with I rollout the can't the end as call, on of it's we specific data can of customers good question mentioned on until say quarter. third ton that. to the a you the what our XXX% full the

The to shifting from And slowly so the completion the we Linden. out remaining of the City been rolling Jersey rollout of the across have was year, throughout volume to it completion tied the country.

of who that choose still as choosing days ability talking are between just how flexibility and a saw about on or observing terms more having meals said, are the in will say, done menus, the the I we the the customer's does of have experiments full expanded we performance customer's economics. profit rolled the so more in the country constructing that, customer, product seeing did what separate And the not recipes customer in to what our and like. I'm across that offerings. and monetization, total than as did what XX-minute favorites. to differences is I with in per And and about, early That on it We more revenue order customers we've controlled behavior say out good things implications it customer recipes rates, to being topic more what results menu. like of recipes, we less our can talking does that some customer and

for that by do build we encouraged were and an and is in more are those results, to that we future. we on that. that expansion flexibly early that, so ongoing watching the to now continue we place journey we'll to us have on Product and infrastructure continue build still the but capabilities And in

to customer what specific As analyzing it numbers metric gotten optimizations on that our menu is those those, average a metric well. at track I we made part of in customer mix the meals that and we in key on focused very say to revenue relates see very encourage We've that recipes contribution given every And on have see can still construct we quarter. favorites, or there as look per week hard made having the to give focus it's did would to how to those and that we'll we're in by in average on as increased XX-minute XX quarter-to-quarter customer that. as to interest a But in actually some we've of ourselves we as recipes feedback improvements and create and do quarter-over-quarter per been we driven some our good the week. continue I the improvements revenue the

Matthew DiFrisco

say conclude were greater XX-minute or the skew of flip these and traditionally the mean quickly. better When your that mix customers all customer. going sort favorites become is Okay. percent that towards and margin direction. overall profit just really the to the is through I probably, of -- meals have the the better -- you getting cooking than [it], this to a what more lifestyle Obviously you've rid a guess financials to customer back then does generate this of you how And prior? not better seen a tenured this business guys to and towards of were and the also sale mentioned will done the per meal, if sort -- of and this I if tie and

Matt Salzberg

customer every business, wouldn't one single every is other all XX-minute versus a about not different with customer And or monolithic the week week. on it's think product And comment if recipe. our margins line, of favorites the you are XX-minute vary even recipes I our they historical frequently. favorites, different recipes meals, they meals because only

make we construct cost product that think from a cost going on basis the use. margins that we're we aggregate margin some looking And mix weekly profit achieve portfolio cycle recipes make based sales on, basis given cost we sales a And In in food on. margins targets, lower use mix so to drive aggregate performance to on we and we are that recipes to hit bigger that to our we some the week. and labor and that

Matthew DiFrisco

Excellent.

Just one last follow-up West Fairfield, of unleash your question Was bit not they and another correlated? then I'll forward pass to of or going it the to off. not are change is California with the this capability, any Linden plans sort or Does -- of that level expand the not in going that product? Coast this does was

Brad Dickerson

Brad. that, this is I'll take

and of with Linden, is So from the before are truth where our coming the capabilities we raising we Linden. country matter pretty online holistically the Linden substantially were across of capacity the

term and around near onboard us more needs our plenty future is at for us. foreseeable capacity gives overall Fairfield on the decision now with looking Linden the So capacity Linden for coming of

too, in we we the so footage automated highly additional were an us from of to onboard throughput in If plus that matter compared more the capacity beyond plus Linden about much give the that. putting you growth which had of would just before, even square it's think XX% it's increase where is roughly fact capacity

that of some capacity country plenty to and the degree. can So holistically use us help reality plenty, the use us across we Linden gives is

Matthew DiFrisco

you. Thank

Operator

of Michael comes Canaccord. question ahead. Please next Graham go from Our

Michael Graham

about Hey, information can in I quarter. on any good the sort of wanted morning. give just you the us metric ask customer to qualitative

understanding dormant those, trying You've to with know you I come just And into got back deactivate mix. and want adds, Linden gross then marketing to to I'm spend. don't the disclose you on of I going your how kind sort your marketing the the what's back pulled keeping base it get turns to the people on know to completion -- customer go and -- trying things map but of who the spend is or in sluggishness coming be back be your of reserved to competition year. much But then and of be an the versus beginning QX churn? related of other temper and you're like to going decisions at marketing customer

Matt Salzberg

to Yeah, say we way there. you and it's question. disclose I in a in terms that point us period, think don't spend. marketing the you point heavy of would And good to in I mentioned. detailed our customers about of Obviously drives business is can what numbers for about a I extent to you would thinking marketing the given that metrics a driver or more customers.

mentioned, decline in we much XX% a as that year-over-year, customers. than our marketing reduced costs so And lower with we

that the and margins the center generate activities how And of fulfillment are how marketing the around launch by so the Linden in driver strategies have to stage like we we from our quarter. performance think primary chose customer marketing, of we we impacts to Certainly, our impacted our marketing, with we because the returns that customer that and was the our performance marketing. drive order

so customer would mentioned see this per in but increase you some did And and challenges impact we did as see of on on call, of we from revenue revenue year-over-year per some that the net, that, we Linden, on as was the part -- last customer quarter. customer

you and I future the budget where to, the a track that's in at watch. key patterns and how quarter-over-quarter, would to looking I think So our that you terms thing for marketing point evolve of is customer in

Brad Dickerson

our is pretty this a kind Brad, so all to on of and little Michael, marketing Obviously new customer bit. add average customers impacts of changes a metrics which orders drives lot And those and substantially of forth. just that relative and to the metrics spend I'll revenue per

marketing important giving to we lot this and on of said, so we're relative I that kind new the numbers what very start quarter a past tenured comment past know are forth. important like those quarter we left we're that -- that quarters going XXXX new of kind business. the end the to a impact that obviously not in versus So, then obviously quarters customers Matt we growing an has add margins our added to of customers just -- part to I'm very, and obviously around and today, back it's guidance And think -- of that customers quarter and your pulled but forward just trying on

very focused lot investments very give that right we're part we expansion the the of Linden we obviously margins rolled And now point at So have on places, have attractive. now. out. fully OTIF ability as marketing a the right getting some to are and in focused future healthier will We're in the into us transition margins on more

margins margins very So we're but not outlook. important of XXXX, our of health part the are on financial and a giving guidance very,

Michael Graham

Okay. Thank you.

Operator

Our comes Needham. go Kerry next Rice of from Please ahead. question

Kerry Rice

with know talked If Ranch Linden housekeeping, flexibility one OTIF any you Thanks. earlier if of consumers? acquisition segment it's Thanks obviously about barbecue are lovers questions. maybe doing previously One, the talk the facility least automation anything Couple a is was. around this highly BN Linden you you meat bit facility in -- your about menus, more started or automated or related whether most to at on Can then the give the Richmond you targeting to product -- then going it. have I the a facilities, the is and the on little to to did, have summer, did like in process? forth, you that? Are call? so you and you that embark was started started new I second or that insights And And vegetarian missed with the on mention for what question Arlington you a can process? lot. you've

Matt Salzberg

Great.

try of all to those. I'll get So three

actually expansion I'll the more centers, structure to on have on order support in automation are is last other our and cost perspective. in our course the plans for generate of in other in what this, both automated than question first a technologies the What did of to them over Linden. our a older install we year say the from centers ROI investments product number order So,

so. And year do as the some an in so on of we that those different There are forward, other our But expectations the expenditure have looking we we technologies today. mentioned, last in fundamentally some have modest that are capital been across technologies landing they over Brad ongoing centers additional had centers, already than are or our Linden basis.

equipment like and on installed capabilities of quite incremental time still for that there technology most like the of some we and [pick-the-way] technologies kinks the Linden some the have up new through on installation in finishing are the of has food like. efficiency Linden those working and we turning some and frankly so and technologies And the manufacturing

And there of is in it more but historically. size come there, done to the not is so and scale aggregate we've that nearly

believe recognize product of from some reason more more benefits one the of around seen expansion we because we've is And that was we that and expansion monolithic part Second began serve to customers. the we I of on offering segment just benefit the -- I and choice. that see had mentioned product we see one flexibility question, don't

taste cooking with people a have of difference cook segment and diverse attitudes us. different We with that preferences

favorites XX-minute segments different achieving skews and generally ingredients we about of so and meals differently. is the optimizing proteins what part we kind And with and with on serving with are just those the work customer with thinking and of menu

which of customer, things of who of likes cooking segment segment one try enthusiast customer have we to we another discover a ingredients. new major imagine And likes might cooking more little who you as who is functional. a instance new to have things, for So

trying the just their they're a healthy, table affordable, family. for Something dinner on high quality to get

that's a are we respect So diverse were are in flexibility the better. but of we us a it results that as by mentioned, not to OTIF what elsewhere. indicators by obviously measure choices that are we With mentioned, encouraged progress to we doing, the that's to of metric as tracking serve more and I one and part specifically highlighting there. key more offering we Linden allowing segments that leading that seeing we're And

color on try will number give disclosing the to continue don't calls. But to how OTIF be And as impacting we future specific we'll so you a expect around business. I it's

Brad Dickerson

most that automation last forward over Richmond being we we look been product I impact with the to OTIF volume new and margin, and And itself in I'd there, out like improvement more about margin. but has a though, OTIF too. have a centers most not and course obviously our the rolled largest the Linden and Kerry, the center-by-center both transition to center with for Arlington and think say we case, expansion are in metric year, specifically has that talking complex even just in That with the being the

versus option the to in recipes from three person of per X-meals recipes X some week So also just given two plan going X-meals and complexity adds the too.

the So is we opportunity see also do expansion product we but Arlington and greatest Linden also. again far as us, for way by opportunity in Richmond work our through

Kerry Rice

Thanks for the insight.

Operator

question of Goldman Heath go Terry comes Sachs. next from Our ahead. Please

Heath Terry

performance view give seeing impacting guys how sense you now? competitive is on your relates trying you're marketing, that your as could making channels of bit decisions obviously a some sort about update of Just on own your your are you if sort acquisition? budgets, what customer to of kind of it and particularly us environment the get but a wondering, idiosyncratic spend an understanding in to I'm Matt,

Matt Salzberg

question. It's a Yes. good

price. it's It's our in know a category. very business we're recent of in competitors I category landscape interest as a in from after it quarters. so really, the and changed So going of not competition fundamentally the and is broadly because dynamic our our lot had really big launched There business you terms we day think really of both in lot big highly consumers since nothing obvious, competitive the and a a in has first We've speaking. a category is we are such and

and you I want strategically spend marketing to impacting think stage know want budget internal our largely marketing expansions. and how our by to our product how stage been as driven factors we growth and has we

only States factor history things the are United fact the on obviously in market thinking And focused are company. mentioned market proud as We're and isn't I for when the about leader market at been marketing we we're very the think share growth. the our our we look we that And of that budget. we of very closely profitable But share and like driving so growth things look have at.

in growth so margin time drive term had reduced returns. look growth also that focused obviously can growth. over at marketing And we And we a important that margin attractive the so profitable cost long quarter. And a at having and We so why drive we're horizon. gets we to strong spend on back don't to order this any us generating to a and strong balance strong sheet. equation It's

And so we And very launched we ago, how could first as the about we to over a to competition continue now. have the the we innovation since that it. is be we're perspective stay best be on five product business just done day will years thinking ahead the of

Heath Terry

Thank Great. you.

Operator

go Mahaney comes ahead. Markets. Mark Capital from RBC of Our question Please next

Mark Mahaney

Thanks, please. questions two

that can customer to any next X on much you something what sort condition of at to help A, base, and X for purely you picking your as know or you about spend some is totally that months on and customer of going marketing customers be already trough terms of the or like you to now give do the base percentage provide with Linden improvements number reaccelerate to like or color the be is it or still operational of on tenured sense percentage How that base base? think and what's suggests customer when X on And conditional or have the X -- then is B you marketing other already could that line base in or you customer Do and track or or still over could about it any spend the decline of months or X On in could do your us level further us color you're that that facilities? been that that levels what metrics C? want those XX the is is like sight base conditional up, the customers? when have or

Brad Dickerson

Mark. Yeah,

and the it this same margin question there, of of your end those driver kind is just of both that questions think going I mentioned a the forward. kind you at key answer of to of is point

for the our So and future. transition attractiveness to work really way to work work expansion growth us ability to product spend relative through of is way us for the Linden marketing important really, in specifically the our through continue and the

reinvest getting focused in our the grow ability to in getting on OTIF the marketing be new going margin place, a really So going and of focused place key driver right in on customer is forward. our to base right

give right be obviously I zone can't a we them getting but tell back getting too. OTIF be margins to into leading you can indicator to I timeline So like would our will that you and where the healthy now,

as That's now a expansion We go the optimize about that to year kind marketing pedal to for both excited in how to we're we start looks of rest we have the things our this press us great this Linden. really through fact fully opportunity we've of XXXX year. what investment start just when rest way So work transitioned see on product to to determine and based those metrics. of down on the and can again the like to

base it question As around customer go forth, does marketing and again. to kind far as back your tenured of so and

when back on new more that biggest marketing. to you marketing, tenured the customers, skew customers which automatically you will So, we will of be obviously, pull impact when pull back on

remarks that so be pulling So my we as on about continue and OTIF QX marketing going to see on we improvements. to in prepared back we QX, also QX, in we as QX, talked in than in obviously, more focus we'll that that saw are even operational

we and again when OTIF us that would other in swing would expect at your in do reinvest and marketing swing that towards when grow margins for that ability will the again point new be more new, customers future. the again to right the tenured base and way and customer place start some So, are I in to versus the

Mark Mahaney

Okay. Thanks, Brad.

Brad Dickerson

Yes.

Operator

of ahead. go question from Barclays. Sandler next Ross comes Please Our

Ross Sandler

at us, ramped you XX% this ironed automation, days path with the can have And and out? what national -- or back stepping was didn't order last selection in it to have have kind mostly guys you just innovation until second once Two been Linden of you issues in products, increased transition on future said for per is business, of for I rolled in done? how Brad, terms of XQ, unlocked think What in of the remind customer to the the up Can Great. kinks learnings much question new XX%. questions new XQ. the then XX back volume I me. to all in you frequency like from question about you are the recipe, think the in end product And is get the going the talk very earlier, orders changes,

the on order less in a and as that looking frequency forward, forward? we should volume that just third comment Thanks. the function was So we customer go to on just that improve new quarter to any see of side continue

Brad Dickerson

it so to pass forth. Let learnings last that take to from I'll and Matt and question then about over first, Linden me talk

On more marketing, whole new customer quarter. so, obviously, are with through order less you customers in pull are right, the tenured back growth, that you means frequency, the a

And some So on degree. That's impact year. of the last some a probably of a lot of that is growing of this of to those year-over-year does metrics, money we're change. metrics biggest obviously marketing driver year lot new this those and kind customers spending versus

we're we more this than anything, had on it's of probably some that more because fact pulled year that So impact on back just biggest metrics those tenured the marketing. the

customer on are point us per to revenue far That marketing the that to -- numbers. customers to impact important forward, lot As our that when focus do going really we Matt's impact natural case new being that in on. marketing, on can thing pulled back before, to continue and a have some same a that will those average for of of as things like we the again will on what means spending

kind we to from, a ability the on so spend. we that week, XX and fully in again, some another those in meals, or benefit see choose early play into revenue early part more metrics OTIF things customer right marketing But to basis, have we get more ordering much future, regular and will signs, seeing recipes less more, really to we exactly things getting roll expect our that anticipate can -- so what more place of talked to and obviously very of into all around early So, and future important per the Matt too that the the to although that minute and the normal have come a back cadence of and kind how margins of too, so forth. out recipes of will that are per about, tell

Matt Salzberg

Linden, respect Linden lot are from obviously. learnings With of to there a

of is one center our we up transitioned consider understanding Linden from much that. quickly how Linden and to things think in volume and the I to City we the of ramp Jersey our performance how center the did

two perhaps centers. a was we how think little bandwidth terms the of too that between spread ambitiously ambitiously and those that did that ramped in I management center and we

our so that I we And think but was that looking powered are all happy attention management forward. Coast now East one of center and is that learning, something focused through on one

of the as focus trainings we processes we includes to changed and that more about and employee new complex I are and I think and management centers that learnings employees the from new part acquaint think new fulfillment through extensive equipment training and sure processes onboard some employee good they there, we learnings that. that working onboarding with of we really to have so make employees through going are hundreds in hundreds that new our

to performing takes with management with up we them terms during new did when As associated technology, changed new time uptime well and manufacturing and food the running And installations support challenges considerations the the that. and have and to of get and as the it some installed equipment in and equipment quarter, we installed expectations.

time figure none ambitious in pretty things of to was think of in we be a and complex a period we these themselves that of things are did it And it's plan. super able out, short crazy just so, shouldn't I a and lot

of think we really time. the that coming I have the getting those learned focus things those right the from so investments and to see on Linden, benefit of capabilities that from all in we've and over made we are in hope And period

Operator

Our ahead. next question Please go comes Oppenheimer. from of Rupesh Parikh

Rupesh Parikh

Thanks my for question. taking

the competitive So I will question on start environment. a

saw Albertsons' acquisition we recent equated. So

about meal-kits just of based sense, you partnering developments, versus was you. of I in out just your curious a guys to retailers? get So wanted surveys, delivered? Thank And terms having competitive how think them the potentially there consumers a your is taking on from also potentially desire just given some with

Matt Salzberg

store. What are just question. Thank different an grocery grocery stock want think Yes. believe out a about they other every think, store want grocery convenient ways shift for who the some go meal their and them. to that's going the them. them of to different they will are the There not for food, their good them that we feeling the think it. that in want customers and more customers going the to don't experiences I've say that, are happen the of more awful grocer. to what's touching, like been It's the are But there serving horizon is on little to are this included with serve They overnight. going transition And ones in fact, depending different in time There to think I store. going one and don't bit and I get is groceries, about and of someone customers certainly over great online the It's abstract for product. decades They relationship we who that's things consumers I to consumers. love They a to long there we we segments their ever just dollars from offline their They offer hate a have And experience group you. have fridge spoken grocery want store. wide week are for love a grocery.

for opportunity And do think in kind different that has and for products has a that's like. channels our serves, is a different business and direct-to-consumer structure, potentially something expansion so opportunity other the like but that certainly delivered And an it segments kind different than inventory we see has I ours e-commerce. an of business other of model, interesting product design cost and

done expand we customers improve in brand the our partnerships we've some and the customers. routinely certainly and past. our and think reach We opportunities the expand way always serve at new to I So that look way reach

are partnerships look things at a so basis. on And that we case-by-case

Rupesh Parikh

Thank you. Great.

Operator

Please question from ahead. Brian of Our Stanley. comes next Morgan Nowak go

John Lane

is on This John Lane for Brian. coming guys. Hi,

line item search, are expense this the you are Where you back what in referrals, thinking spend? here? about finding fair radio? year, what amount are order going working? Thanks. it a Specifically spend discounts, fluctuated you What maybe marketing, guys past And and effective? best, on sales on question TV, guys then has another works isn't how is Just

Matt Salzberg

I there how direct Obviously account. Well, customer a looking we at and lifetime mentioned we marketing of staging we relates quarterly as is impact marketing we've that are been to on spend considerations budget, the components it our think driving in into returns value to take the well. and as seasonality that margin there as of couple on stage fluctuations

more recent mix online shifting is our total budget. as that offline of channels the And we're that the some versus spend percentage where speaking generally channels, total. offline our in a As budget, in where quarters of and efficient opportunities in the with marketing we're we working scaling our as we've budget a thought more that see spend incrementally decreased staging channels periods total to we mix towards about on

increasing of see do at opportunity continue have do revenue marketing product That's opportunities monetization not and with marketing We and been continue profit through oriented. acquisition are ours. So focus unlock been about kind we we thinking there. that. that looking an marketing And that just opportunities plan like And well. we how of to to as things incremental

John Lane

Thanks.

Operator

next Citi. May comes of go question Mark Our ahead. from Please

Mark May

perspective? appears pretty spend rethinking aggressively. to have mix is seasonal as spend I I understand you you a year what these been how taking is And have meaningfully sort thinking guess and change a kind marketing that's what into role quarter? the your [tap]. -- you're on if trying of case the asked allocation guys you're last going lean bit you basically another revenue it year But and -- to what's customer we seasonally think little question if any decided going forward I I competitive fairly per if last a should year in marketing did if of different from spend Thank that be about already. and and apologize a here that's or in and know you on plan that This average period, your of in QX,

Brad Dickerson

Yes, Mark.

place that's we relatively in the the since the our and last So first put the over mix on X family mix the family been in of plan stable person question plan few consistent plan years between plan.

-- significant Obviously that changes so It's we've now person sort two seen. any versus mix across factor which and early is in from would change there three there that really very, completing there with of been a recipes relatively impact to there. out choose we could be forward pretty the of product this roll no is there our going tell quarters, we So for recently the X have rolling very out consistent that that again if plan expansions that recipes anything.

kind So two early the of plan. mix for seeing look those the X and we'll year as choices of a go of much metrics through we QX shift between person next those how

spend not Focused on things. as talked been not far difference customer in right our in service pretty on has this improvements, if One spend, big couple place. us. impact remember, we our and The it call strategic in we this goes year been too, also the so also. year that's of -- change that really earnings product it's being more for about last relative previous the talking expansion very operational and last is yes, in levels really about really getting than earlier back really this we've a were is about you is the -- conversations focused or OTIF to more seasonal part As year marketing aggressive of promotional QX also to then a

new a Again We it's we the which expansion. lot of facility. operations side. is challenging our Linden facilities work times older out So the been rolled on to of size in are in the a alone three product brand fully do across facility that's let had

to and next a continue our we We Linden line improvements ability returns to the it great in year, back margin on marketing. invest get good us for us it's in to have that with focus are to fully roll QX on into gives and structure opportunity as transitioned and there, marketing

this internal it point. in in at structure So marketing our seasonal focus reflection kind of line getting really operations any is the us strategic line, year-over-year getting of in is than the of more strategy change the margin about

Mark May

revenue compares to I repeat orders from you the If a average? follow-up, how orders repeat the comment could and percent ask on can really that of came

Brad Dickerson

don't probably on basis. as really basis talk a we on we going and versus now, of back change on more on through are customers, things these are we the those we when really through tough a things of to are Yes. half it's lot that's about of, together, impact marketing, your to We and a of don't shift really these discuss we annual challenging, as say, all of some do that metrics an focused a tends again, alone go when pullback tenured of a fact metrics little pulling because say quarterly kind basis. little on marketing. this of operational With maybe the right it's what forward which would much the year this customers quarterly a back And of go new the bit to on on the I let

Operator

next of SunTrust. Our comes ahead. Please question go from Squali Youssef

Youssef Squali

to beat horse you. marketing but crucial a Thank it is think dead on this a spend, question. Not I

to reaccelerate the basically margins depends So that marketing spend on OTIF. and

you mentioned, at that I think that Brad, right the I three metrics you do four won't those now think place. to times until are

you have. are margins OTIF disclosing, not we do So

hopefully margins XXX decline you'd before marketing can [indiscernible] is that much reaccelerate understand kind or in to just spend? there of help right get quick a margins, gross will be how of I i.e., you and a have that at basically of long much costs follow-up. to is of Maybe, [condition] hanging how margins the margins disappear that level fruit, where basis And how the take place? that us will threshold or low you So want back they points to those and

Brad Dickerson

Okay.

margin not couple -- seasonal one in things we components there, we margin is have a also. what structure to line. a there's So of point specific margin to number Obviously

basis, exact the there's marketing in return because between would number a more They all so of other taken margin at on about. metrics not be looking much have consideration balance. connectivity kind and a we're holistically is towards, margin we that and in an annual point So that to talking a

that. note to important that's So

lead and to of less around we the see input spend forth. components engaged that and obviously much the growth. about want around customers and improvement to and seasonal it's to margin we Although, how a decisions historically not are where need of marketing, year is to engaged more reinvest There our only in into lot talked we've so parts

very, are very So obviously important. there speaking increase to of being lot margin and are that the input is margin today that. a But here as a in case lot improvements we

summer QX. our to from some the we we into to are that like packaging only in also not obviously important to weight. natural of improvement but increases have packaging there in packaging, keep summer as because see going the seasonal cool. of boxes more Now put costs That components absolutely product look months costs, just shipping into QX Things QX, should margins we -- seasonal

start costs the as is head into there natural to go some months. we away So fall that

cost. higher and to that, In summer also into a tend at specialty more months a addition we comes the and bit produce of little to in produce seasonal that lean

remarks see this just Again, margin. of continue kind And specific would we transitioned. some QX are bit going that in that that you more we see a and year give the roll continue we into of and across probably QX, future a that So are lot our half we we that we in really into [beyond] we in probably and are margin, the to anticipating that margin just I we I as forward as where optimize can't improve as XXXX in said our year, where marketing Again what modest Obviously, in going in you we tremendous really fully flavor looking little that in of is in forward to of go and forward. earnings a around improvements are opportunities to improvement anticipate in a we going how see margins year, probably from we rest we cadence and that more things operational things. shooting next as seasonal spend to can moving my than to that give QX is the have quarters. naturally that more this now would roll facilities again next margins We anticipate for. of specifically increase have to Linden I QX natural at a little number call. from talk we prepared detail about impact want growth our on go

Youssef Squali

you've particularly considering that spend lastly still already guiding are the on not decision to I do XXXX. have cadence, Okay. where where should course you XXXX? know you maintenance XXXX heightened California But now CapEx to instances about showing or in of And made are be should what then in Thanks. in of start we

Brad Dickerson

Yes.

the additional So number CapEx gave on previous $XX XXXX. I XXXX if guidance in half a million million call range million basically of I to throughout to you in CapEx, an the go through just the guided earlier and in back August, of $XX back $XX all of

our $XX million to back half guidance sticking for the are We of XXXX.

So we million QX. $XX.X here about again, spent in

XXXX with are with built foreseeable equipment capacity plenty mostly the of half going what automation that in back Linden you CapEx that point more spent So range. probably somewhat. we million talk really around you that QX. that back and perspective with in that, detail XXXX, of I But enough to your XXXX, more going half from into of range XXXX. time of place we we'll in pretty to haven't bit to the front maybe us $XX analyzing $XX in you yet would out, I The future when and a also kind have million a XXXX have a normalized little CapEx XXXX in from saw we'll expect, to it's half a wide of I February here expect versus the would and range number XXXX in in think and narrow

Youssef Squali

you. Okay. That's helpful. Thank

Operator

like to the Mr. conference concludes back This over our session. to would any Salzberg question-and-answer closing I remarks. for turn

Matt Salzberg

for you we're continuing time. time today your looking next the everyone to forward conversation and Thank the

Operator

concluded. now Thank has you attending for presentation. conference today's The

now disconnect. You may

Blue Apron (APRN) 2 Nov 172017 Q3 Earnings call transcript