Earnings call transcript Q2 2023

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Operator

Good morning. And welcome to the Blue Apron Holdings Second Quarter 2023 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode.

As a reminder, this call is being recorded today, Wednesday, August 9, 2023, for replay purposes. A slide presentation has been created to accompany today’s remarks and can be accessed on the Blue Apron Investor Relations website. Instructions] [Operator

call, Blue Findley, Interim Apron; Officer. morning’s Executive and Chief have of Officer and we this President Linda Chief Financial On Mitch Cohen,

of handing and company the under makes we today’s call purpose the XXXX. harbor Before of future Safe Various forward-looking during over the expectations, statements its Litigation the the plans statement. the provisions review Reform constitute Private safe company, that statements about call the prospects Harbor Act will Securities to for

differ factors, may indicated company’s those described results morning those Actual materially of by filings. this the forward-looking from result in a risks in SEC the earnings issued statements including as release and company’s other those

not forward-looking addition, representing statements of subsequent views update as represent any any as and its statements. as to The any In obligation should disclaims relied company be these specifically date. views upon company’s only the of today

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

You refer to and release GAAP has reconciliation where directly earnings are measures the encouraged filings, of most defined measures the review to to comparable to non-GAAP and it financial these measures. SEC these the

Blue turn With like I now Linda Linda? call CEO, to would to over Findley, that, Apron’s the

Linda Findley

thank Good us. morning, everyone, you and joining for

importantly, Mitch On to excited walk We is call it busy the with Interim for and me work, means going I am forward. you more Cohen, CFO. second and Apron’s Blue what today Blue had our quarter a Apron very through

open with two me important Let comments.

of for growth. to and increase strategic starting in efficiency profitability, position costs, path XXXX. achieve quarter EBITDA reach we established marketing the which expect clear a profitability, second several reduce to sustainable business actions This follows had long-term to we First, taken the adjusted

This asset-light our liquidity, EBITDA forward. goal internal to move an cost the profitability to adjusted achieve our sufficient to model. the reflects continue business based reductions from and is on shift to Second, and capital operations aggressive our model

into transaction our To the dive We the the me FreshRealm a month let strong XXXX the share I in improvements results. before of quarter, closed were delivered last second Now the transaction. quarter benefits of set the while will quarter. stage, the

Let the reduction. with me cash burn start

work implemented first the additional efficiencies quarter in continuing the we we accomplished This quarter.

XXth, burn June improvement. impressive in year-over-year $XX.X quarterly we improvement as team’s XX% is second and timeframe million by of of that the our want recognize incredible XX% quarterly I As results. activities This a quarter XXst. cash to these March improved follows year-over-year burn to operating XXXX, cash compared reflecting deliver to reported The approximately of the to reduce exceptional efforts the

While of we to it in second with burn the manage third half will plan slightly the the seasonality. year, typical fourth aggressively to in increase line in cash our quarters and we anticipate quarters, continue

touch get seasonality, in are are year. this more plan the next Even level year bit. lowest a slightly to with the we expected payback below taking that to this will to actions We do adjusted are and quarters. on in us in EBITDA profitability marketing we eight well now a of I more periods seeing in invest QX

to no the eliminated We all covenant. we provides greater associated our have repaid full. Staying company. remaining in of debt-free senior the have with notes a are debt. with the all sheet, the transaction, with minimum of flexibility now proceeds are balance liquidity and a to now This our as of we With costs subject secured cash we the longer portion a us access unrestricted

profitability, of ahead goal our to plan. adjusted we of Moving are EBITDA

million. a quarter XX% loss of significantly XX% This reduced and we adjusted our year-over-year loss to by $X.X EBITDA sequentially

and increase drove QX Variable since XXXX notable QX our from margin strongest also was XX.X% across in in strong XXXX margin efficiency and QX, the XXXX. increases a margin improvement. Our XX.X% in performance XX.X% in business

The driven prior how plan to rigorous in a the Mitch transfer and our moving operations to bit. cost forward we will management implemented FreshRealm. strong performance improvements was to of discuss look by productivity at margins

operational customer hit initiatives, another financial engagement versus significantly we to management order with record over approximately see another value QX. revenue Average record per continue metrics. parallel high up $XXX $XX, and to customer Average improved In X% at high.

of a marketing and strong our and implemented engagement of that customers. from importantly, were we drivers May Key increase and tenured promotional more price in spend, XXXX, repeat optimization

orders customers customer, our quarter. was consistent which The for evidenced is value the X.X% per we provide by

their tend shared have they I longer us, spend the over tenure. before, customer to a the more As is with

in XXXX, prior equivalent to customers customers compared to compared quarter XXXX. in XXX,XXX, XXX,XXX was XXXX in months XX, XXX,XXX the quarter ended first in June second second year period. Total the XXX,XXX, of the XXX,XXX was the and of quarter Total XX in the

sequentially as spend. We marketing the spend reduction XX% overall anticipated in this have In decline and was year-over-year. customers a XX% quarter, reduced our of we deliberately million, $X.X second marketing

effectively six right belt, and testing all the target this under the our the invest leadership under our is start the over is on Officer, believe period, we months The we formula Chief move testing attracting right what we an paying payback every year, that At dollar also to the our of the targeted marketing to of of next of we With have off. customer. delivers identified is implemented more new dollar program. improved Revenue goal while

saw far QX, rates while also improved XX%, and second In acquisition than significant Cost by QX. XX% we payback better less by periods efficiencies in year-over-year the our than conversion improved per target improvement levels during one-year quarter. at

quarters, price it’s implemented been is recently retention increase. In even our addition, weekly in five strongest average the with the

continuing to and able while leverage consistent our to repeatable make improvements strong were brand. We

model, second as year. to fruition we far investments within capitalize on our stay our marketing in our are the asset-light to one-year and new Given we period plan so We XXXX. our and of success payback to the targeted increasing slightly expect in half come

meet burn sheet, significantly debt balance the our second of cash in a now quarter of goal have profitability stronger adjusted and EBITDA to the second no lower summarize XXXX. To us positions quarter, we that

Now a strategic our to moment take I to path want discuss forward.

aimed our growth out and Investor the at During Day, strategy sustainable core three-year next laid profitability. reaching long-term our we achieving XXXX

this key now of our FreshRealm on relationships of building through which focuses living partners A better and an food, of furthers our fulfillment vision that component as strategy includes ecosystem better partner.

our our aspects to growth. with operational all to value full strategy recipes Transferring direct-to-consumer the creating balancing efficiency infrastructure retained execute business, data and our allows and asset-light while our along work. support for to enhance including shareholder that marketing technology delicious of We

and be removed this fulfillment The and our on Under role our allowing more meal product our of innovation. focused are new clear. we agile of direct shift kit, benefits asset-light us model, to

First, costs this and on model efficiency. further has both impact variable a drive significant fixed to

we is fixed our costs cost run infrastructure, partnership, the PTG&A. This lower decrease unburden we beginning In current selling production our fee. new base are rate taking and on than Under the PTG&A and fee our within at XXXX. further a fulfillment will fixed of

our to we costs associated business, efficient, a we more depreciation removal expect As be this amortization with especially and growth. personnel direct costs, of or the scale structure continue such large with see fulfillment of as to overhead portion

to reductions Last match month, annualized XX% positions. headcount in in additional corporate These business our executed will we our reduction approximately streamline announced approximately savings. an previously resulting in $X actions our drive in also asset-light model, million to

we financial on to fourth work In transaction the an from we believe the done, receive achieve addition FreshRealm to savings million cost quarter. that we are track additional starting in have to payable the to and $X us funding other milestones in

of the a variable result costs, as anticipate asset-light improvements we at Looking model.

FreshRealm While Blue Apron quality control standards, packaging in should can logistics. in food, drive term. of longer leverage variable the supplier and believe retains and scale we the cost This efficiencies labor, we

and without was we new previously capabilities compromising on products through fulfillment to centers. to of quickly have its Second, limited efficiently Apron quality. ability partnership, this own the introduce the Blue

scale to are able Now product our grow portfolio. expertise to FreshRealm own leverage we and

of we time the on in us while allowing new will prep our introducing current of These to the more menu. target are offerings set half enhance also starved meal even health consumers. convenient conscious options meals Starting a new XXXX, first

so our focus advantage identify now revenue economies their scale. our products, brand, have continue capacity to do taking of our we the opportunities. of authority, leveraging strength as enhancing Third, to of by culinary we new We while plan on to the

more work the share as will progresses. details We

summary, realize the savings, Apron improving deal transition to future, an team’s efficiency in strategic and significant complex to cost business ability Blue a In model my remarkable. marketing asset-light for and to the close view, poised is

is it I that have right for the is As my be we asset-light as opportunistic. and can fragmented and business, consolidation, an before, stated more industry is belief

we to opportunities and As look make its that shareholders. strategic for company at sense plan to such, the continue

and transaction Mitch to touch past shortly. for stabilize the work forward position conferences speaking am we allows I time of with second growth the to business, for of first and will two at quarter quarters reissue have look the since including which FreshRealm this to We XXXX, energized upcoming many The over it you the guidance the fall. on optimistic. us done

our that, With through me run over to financials. Mitch things to let turn

Mitch Cohen

and update liquidity the on sheet performance. morning, first an Thank and our quarter’s you, good with into Linda, will I everyone. balance position begin diving before

million, the as of we at are at XXXX $XX $XX.X QX a debt-free was the second end the of balance company. approximately compared cash Our now to quarter end and million

of number factors. a reflects This

from cash -- the part of million as inclusive approximate upfront it’s the proceeds of -- First, approximately $XX.X received cash of transaction. net

us remaining our secured notes annual expense. the it million and cash postpaid of in $XX.X two quarter. balance Second, $X.X beneficial in one, covenants restricted reasons; over it the inflow, which with for previously allows of were senior second more which of interest the it moving our is reflects forward; This flexible repayment million two, the place, eliminates be to removes

February of million Our million available aftermarket launched XXth. number the of sold the with of cash impacted still by as We QX of of offering not $XX shares XXXX. at June the beginning materially in minimal a almost was balance $XX

noted, profitability XXXX adjusted the access Linda as QX in our to without reaching need ATM. plan EBITDA the has However,

you changes addition the to our balance transaction. the from pay In of will as and following cash to debt accelerated transaction notice part the down, the a sheet the proceeds

we closing transaction, to meal inventory items. the and in and million remaining Blue sold our wine Apron marketplace all First, $X.X transferred The of inventories related at to kits. FreshRealm the reflect

$X.X issued FreshRealm. discounts, a us receivable note Second, net sellers of we million to have by

payable the to cash consideration starting and by to reflected our the financial quarter us savings FreshRealm million sheet the achieved in cost Not in fourth if milestones. in balance we up is cow $X

have reduction. the corporate in process from meeting reach $X are July -- the Linda the annualized savings progress quarter balance significant these sheet expected financial cost goals made resulting reflected As towards workforce million, to milestones. not second Also mentioned, we of approximately the

significant and forward EBITDA adjusted to with reflects our from to achieve business. goal plan operations sufficient move profitability capital continue capital Our its operations to can

in optionality our to maintain However, capital to all believe access we also at it’s important times.

In funds the able removal reference independent and his of in our we the closing the to with Salzberg FreshRealm debt to business the of behind operate those transaction to now obligation, are Mr. our achieve near-term plans. of us,

Salzberg collateral in $XX.X pledged the on Mr. million or all to an intentional optimize monetizing are some remains value. the However, refocused obligated to and of fund we manner

continue time might line to available the to pursue private shares. us it these public similar that to and than We are all monetize of. receive them longer to the company options shares, take would amount with company Recall therefore,

XXXX, the that Turning sequential volume. the deliberate in decline of X.X% and the one-time year-over-year. million, led count revenue second well decline spend bulk in marketing order Net quarter was by second to $XX The was primarily reduction in driven XX.X% million reduction a quarter we of customer as $XXX.X results. the year-over-year to sale fulfilled as and sequentially and

customer $XXX, order Our up a average an X.X% in credits and reduction continue spend. customer strengthen while per reached part engagement orders XX.X% since metrics price $XX.XX, value historic customer to and of revenue to along Average our per level with a a year-over-year QX promotional high X.X%, due sequentially highest XXXX. increase was in meaningful to climbed

was driven drive efficiencies year-over-year sequential over points. expenses, XXX to in to operational variable second efforts improvement increase increase QX improvements. basis through and and quarter, a productivity continued by basis a -- op variable our XXX management XX.X% to ongoing margin Turning The of was in cost margin the

and XX.X% In costs sequentially the quarter, period. the over million, decrease second were PTG&A $XX.X decrease prior X.X% a

employee-related severance in recent reduction, consisting in primarily second part of the one-time As $XXX,XXX we the corporate of workforce quarter. payments recorded expenses,

result similar million of third the expect $X.X XXXX, expenses expenses incur will quarter substantially in We expenditures. of in all to cash one-time these in

result As a expect $X we to reductions result, cost additional annualized in of these million. savings headcount approximately

our transaction approximately the flow from cash senior million the outstanding balance in the and XX% the sequential cash improvement second net -- the was Free $X.X $X.X million, repayment of quarter. a decreased negative net an -- year-over-year. our of secured funds received Factoring notes,

million we million net Looking second QX $XX and million of loss a reported QX to the in $XX.X $XX.X the quarter XXXX XXXX. bottomline, to in compared for of

the transaction’s $XX.X of net one-time Excluding of the the loss quarter million, non-cash million. $XX.X was loss impact for

of In in loss of the a was loss second and $X.X $X.X of second XXXX first the quarter, million, quarter quarter compared loss $XX.X adjusted million EBITDA the to in million XXXX.

continued the cost consecutive through Our efficiencies three loss. in quarters structure streamlining helped operational on of driving EBITDA focus reductions has adjusted drive

The improve from from fixed a an our decrease variable asset-light variety help move in to a and model -- will profile overall cost margin and cost perspective.

our you touch the changes Let P&L going forward. on some of to see briefly me that will

costs sold ingredients will fulfillment by such of labor; costs; production which packaging the costs benefit will of the and costs fulfillment inclusive be retain the which and at market the and items. an sourcing inputs fulfillment the reduction assuming and we charge wine directly of our product a labor to initiative we other and product variable majority components; meal goods and fulfillment to economies as per cost would following some products margin charged labor; drive forward. going of of contents fulfillment by and include FreshRealm; FreshRealm recipe We margin of believe cost in fee which shipping of include improved inclusive on include will us a FreshRealm items costs, FreshRealm from will scale and with costs, new variable For

improvement the in targets us. beginning is margin COGS eligible financial FreshRealm of of volumes. receive future earned, to Apron on Certain transaction, variable in product rebates to If in these volume-based initiatives meal and $XX.X of XXXX Blue rebates an XXXX million to part a from reduction XXXX. based by and could new and up achievements As contribute in kit

cost. fixed our to Moving

fee annual our overhead our line from subject fixed One, we Starting FreshRealm. representing $XX run fees areas. costs the passed will to -- of to rates on to adjustments by -- be the of with reduction operating were our baseline most sizable will approximately We material changes previous incurring maintain specific own two us XXXX, facilities. previous in million items in operating PTG&A

to Two, depreciation minimal going developed as assets be instead software. internally and and amortization forward primarily own no longer will heavy we will be expensed would

foreseeable a support -- us has lean that operating Blue cost leverage. can allow drive Apron now fore can fixed to that growth and

investments Our forward. going plan minimal capital assumes

cost will We of our benefits Linda to believe line. infrastructure impact as FreshRealm model. accommodate executed to our center production workforce that to will an to fulfillment focus our operational planned corporate asset-light will and model optimizing our ship new a And yield significant to The sale reduction business the our continue positively we PTG&A product and on mentioned, structure. and we

the and the to second guidance quarter With the for together with continue closing of financial a time efforts, first of position the an streamlining to XXXX. will additional and previously transaction, implement, are plant now in identified we provide we since

the business, expected create the million realizing ability benefit our million the to well to shift our benefit ability saving about of $XX.X $X milestones to earn certain model, as benefits in an the $X.X to management as and needed seller asset-light the guidance expense of to our targets product the million consideration up of reflect anticipated of achievement volume initiatives, note. cash including new Our earn FreshRealm financial the additional initiatives, cost assumptions and to of the generate rebates, the of the

meal kits experience fulfillment impact not -- and unforeseen FreshRealm cost products production effectively ability increased macroeconomic and the we and impacts trends. any that of from to price other our will

be customer taken acts count to expect By to deliberate due have year-over-year manage lower we the we our year-end and revenue efficiency. to spend net marketing and XXXX,

million, we for in in Specifically, $XX to range expect million the EBITDA net of to of revenue the $XX $XXX $XXX be year to the loss million range adjusted million.

quarter profitability the in we Looking as expects of Blue Apron adjusted announced EBITDA XXXX. second ahead, in June,

XXXX We next at to to more year-over-year and growth. revenue achieve We with year-end forward call. EBITDA our adjusted you to profitable expect earnings look on be sharing

over the to up turn will And with to Operator I for open the call that, questions. things

Operator

Kurnos question ahead. Thank from Instructions] Dan you. Please Our Benchmark. with [Operator first comes go

Dan Kurnos

just to Good leaning about know quarter probably the were making, morning. second -- all little spend. noise we of around first due bit Linda, the progress. Thanks. changes versus some can of AOV customer term I comments Great. toggle bit of sort we but kind there’s that the am shorter that talked have Nice I of little just promotional talk things the and between in the on your hear QX. into in to marketing in going talked kind the about a you the spend you acquisition you have assuming on, had strategic a in and

a we or want now just that should balance ramped the until to I target, to again, or at about with trying new new smaller sort think for we base kind that AOV of more understand, just are how get So initiatives core of customer? spends kind of some versus of least adding

Linda Findley

Yeah. so question. the much, Thanks for Dan,

are you absolutely So right.

the on to making we We focus profitability to sure best and forward, who that continuing -- right going promotion are customers for customers versus on that value that spend. are on the for the us means planning focusing on those means and balance creating focusing going be are customers of and profitability driving marketing

slight us why by improvements the to basically prepare in confident encouraged a is lean of the spend, we fact feel at to year marketing the those in XXXX. are marketing continue that for our we see We in which end

promotional evened actually out know, fruition. takes of on we to some a those while a you for it reasonable pretty have But level. As to come

able business a perspective. from the been still on being positive return to that’s customer while So drive

and that our customers, pushes, going marketing are months. we to last based sure the not guided focused reason along, are we in the making that be in that part the So because we on customers to are through be on efficiency with large we lean we sure and over of six are can forward, higher we acquisition but all make on the to profitability -- that we we focused have necessarily have done focusing said do wanting on testing we learning that’s significant going or as going

Dan Kurnos

for you way of closed the like of kind of customer How that got here, here? -- of -- AOV Does just And the what’s think just XXXX? and talk we count and about kind initiatives. have in you new just got from do revenue kind base like, piggyback like, mean And do grow it new That’s we just we of growth, in it. just year. helpful. kind the Mitch terms I from puts to off the it the balance of setup is bottom next growth takes as the about think can lines, trajectory grows through revenue XXXX of for

Linda Findley

Yeah.

You adjusted bottom and adjusted are that profitability as reach QX It profitability is revenue year and is to are we what XXXX. starting we we sure that’s intent growth in correct. EBITDA towards planning XXXX profitability all important and -- full to drive the most does is that’s make and to along that out do in the in goal think that EBITDA

really our is that primary focus. So

existing up able and profitable marketing So new indicates, product gained next lean strength while year it that into product year with stay again, in that guidance gear will our this kind you launches for we be efficiency will our growth continue see actually combine XXXX. have to muted to we as of, to

Dan Kurnos

either product like on to in that or ability capabilities, can like think point maybe launch that, next just your given new initiatives, a and kind product do as new And the margin lean support year. you launches how we of profile about you FreshRealm leverage housekeeping

Linda Findley

look have in on you the they that continue as drive products that improvement the compared of that margin we I can laser to leverage year cash from we you mean, new launched, more the have we tell ability include can and sure meet produce the significant you Absolutely. the year, to and the to significant were made to we making are reduction our the -- tell has own. profile that profitability, burn adjusted and to products able and will margin progress comments infrastructure than and focused this our on ability made last that that types when produce EBITDA we the that FreshRealm year-over-year those in have at is

Dan Kurnos

All Super Nice right. team. you. Thank Thanks. helpful. and Linda progress

Linda Findley

so Thanks Dan. much,

Operator

with Our next Instructions] ahead. Canaccord. go [Operator question Ripps Maria comes from Please

Unidentified Analyst

Hi. on Matt morning. Good [ph] is my for Thanks taking for Maria. questions. This

given macro what seeing and could But So the just for spend heavier I for marketing activity, then travel the you in maybe quick QX follow-up. quarter kits. the And on on one-time some revenue you of consumer understandably was soft just are terms bulk provide have lower a color comp. demand meal impact

Linda Findley

Yeah.

we mean, our seeing in our we efficiencies, and have made are business look at purchases. but repeat we I in actually it’s So, still macro cautiousness some is the interesting are marketing we seeing environment, very as progress strong the

quite orders concert strong, a normally especially see quarter per is to change. dip So of in that per for bit X.X a pricing QX, and you where with start particularly the seasonal customer

consumer very that of it purchase within spending. we we are that on is So of to fact when really a order made the At the still have comes happy average seeing willingness is are little the we which we AOV, seeing increased the what based value some business our business retention. -- muted and seeing customer bit least though you X.X are acquisition quarter, per seeing changes great per even overall actually to with are in and orders high so

we still are positive being that are it conversions when that really of XX% by all said, a us, the comment acquisition. muting are we those of seeing a even and indicators positive macro though comes improved did to for year-over-year. future, also see bit seeing overall little those we So we as All

us that So is for well. also positive as quite

Unidentified Analyst

like the it curious increases, was wasn’t customer recent I offering anything. price just -- helpful your very of my second future priced and in increases feel just churn uptick you That’s Thanks. this the the it about about didn’t maybe could reaction major for sounds see question, but it. price just industry a was or point? which kind at you Got to is to you how But capacity talk relative also answered and

Linda Findley

absolutely. -- So

We competitors extremely quality the in are still with our industry the high priced products. same lower than or

maintained our quality, have stance We on recipe and quality food quality. also

we So that. are very with happy

What softness we increase is change after a And year-over-year. the are pricing still in with of again, conversion but we little did see better-than-expected acquisition, bit pricing the retention seeing change. we did XX% in see that

So that is an indicator.

tend sure about staying in for terms We price always of increases We sure make the that to product from they value. are for correct to the within We want value going that think future to make we feel want customer. that forward. point priced value

given we eye changes either we than lower we make and the are or for priced making any we not. that sense sort based on But well. that quite or our of keep inflationary And we customers, in fact sure on value that that pricing an biggest competitors, will pressures drive do focus so might line our is feel

Unidentified Analyst

for color. will in make back sense. jump a lot I Thanks That queue. the

Linda Findley

Thank you.

Operator

no As I’d ladies conclude like Linda to conference closing this over further session. comments. turn back the question-and-answer call will to and any for we have questions, today’s gentlemen,

Linda Findley

hesitate on to us soon, out an to Thank if please for meantime, to additional any all Thank providing look We you update don’t forward the and of reach your questions, efforts you. in really everyone you our time directly. today. have

Operator

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

now You disconnect. may all

Blue Apron (APRN) 9 Aug 232023 Q2 Earnings call transcript