Has the client considered running some billboard ads?

Has the client considered running some billboard ads?


Steve’s breakdown: Have you ever listened to a end-of-year financial conference call for a client for their investors? They often give away a lot of clues to what the plan to do with advertising. Here a link to the one Blue Apron did this morning.

BTW: Here’s the Wall Street Journal’s take on the company “Troubled DTC company Blue Apron said it’s evaluating a range of “strategic alternatives” for the future of the company, including a sale. Have they considered running some billboard ads?”

NEW YORK, NY: Blue Apron Holdings, Inc. (NYSE: APRN) announced today financial results for the quarter and full year ended December 31, 2019. The company also announced new initiatives it is undertaking to maximize value for its shareholders. Blue Apron will hold its scheduled earnings call tomorrow, February 19, at 8:30 a.m. Eastern Time to discuss these initiatives in addition to its fourth quarter and full year 2019 results and business outlook.

“In the fourth quarter our teams remained focused on pursuing our previously announced three-pronged strategy in order to drive revenue and customer growth by engaging more consumers that have our best customer characteristics; offering greater menu choices and flexibility in our products and services; and scaling our marketing efficiently,” said Linda Findley Kozlowski, Blue Apron Chief Executive Officer. “We are proud of the actions we’ve taken in recent months to evolve our product and service to position Blue Apron as the trusted solution for home cooks seeking quality, discovery and variety in their culinary experiences.”

Continuing Optimization of Operations

Following a review of its fulfillment center network structure and improvements in sourcing, production and logistics, Blue Apron announced the planned closure of its Arlington, Texas facility and consolidation of production volume into its New Jersey and California facilities. Through this action, the company believes it can more efficiently continue to service its national footprint while also enabling it to redirect financial resources into other parts of the business, including growth initiatives. Blue Apron will continue to operate in Texas with members of its customer experience, engineering, operations, finance and product teams remaining based there. As a result of this planned closure, Blue Apron expects to incur approximately $1.5 million in cash restructuring charges, including approximately $0.8 million of employee-related costs and approximately $0.7 million of other exit costs. In addition, the Company expects to incur non-cash asset-related charges in the range of $5.0 million to $8.0 million. The majority of the charges will be incurred in the first half of 2020. Blue Apron expects this action to generate annual savings in fixed costs of approximately $8.0 million beginning in the second quarter of 2020. Additional information on the Arlington facility closure is available in the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission today.

“We’ve always said that continuing to optimize our operations and maintain fiscal discipline are ongoing priorities as we pursue our growth strategy. As a result, we made the decision to close our fulfillment center in Arlington and consolidate the volume to our two larger fulfillment centers,” said Kozlowski. “We are grateful to our Arlington associates for their hard work and contributions to the company.”

Evaluating a Range of Strategic Alternatives

Blue Apron also announced that its Board of Directors, supported by its management team, is evaluating a broad range of strategic alternatives to maximize shareholder value, including to support the execution of its growth strategy. These alternatives could include, among other things, a strategic business combination, a capital raise through the public or private markets, a transaction that results in private ownership or sale of the company or its assets, or some combination of these.

“We continue to believe that we have the right strategy to drive our resumption of growth as we work to launch additional new capabilities and test new product offerings,” said Kozlowski. “Our strategic alternatives process, together with our cost optimization initiatives, is intended to best position the company for the future, including to support our growth strategy. These efforts reflect the commitment of the Board, management and myself to doing what’s in the best interest of the business, Blue Apron’s shareholders and other stakeholders.”

There can be no assurance that the review of strategic alternatives will result in a transaction on a timely basis, or at all, or that any transaction will produce the intended benefits for Blue Apron stakeholders. Blue Apron does not intend to comment further on this unless and until its Board of Directors determines that further disclosure is appropriate.

Fourth Quarter 2019 Financial Results

  • Net revenue decreased 33% year-over-year to $94.3 million in the fourth quarter of 2019, compared to the fourth quarter of 2018, reflecting the company’s deliberate reduction in marketing spend while focusing on marketing efficiency and targeting high affinity consumers. Sequentially, net revenue decreased 5% 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 increased 20 basis points year-over-year from 60.8% to 61.0% primarily driven by increases in shipping, fulfillment packaging, and labor costs, partially offset by a decrease in food costs. COGS decreased by 670 basis points as a percentage of net revenue quarter-over-quarter largely due to decreases across all categories reflecting the expected seasonal trends in the business.
  • Marketing expense was $12.1 million, or 12.8% as a percentage of net revenue, in the fourth quarter of 2019, compared to $20.3 million, or 14.4% as a percentage of net revenue, in the fourth quarter of 2018 consistent with the company’s strategy to focus on marketing efficiency and targeting high affinity consumers within its direct-to-consumer platform.
  • Product, technology, general, and administrative (PTG&A) costs decreased 22% year-over-year from $45.4 million in the fourth quarter of 2018 to $35.3 million in the fourth quarter of 2019, reflecting in part the workforce reduction implemented in November 2018 as well as the company’s continued focus on expense management and optimization of its cost structure.
  • Other operating expense was $2.1 million in the fourth quarter of 2019, representing an estimated charge for a non-recurring legal settlement. Other operating expense for the fourth quarter of 2018 was $2.2 million, representing restructuring costs, including primarily employee-related expenses and other costs associated with the reduction in personnel in November 2018.
  • Net loss was $21.9 million, and diluted loss per share was $1.66, in the fourth quarter of 2019 based on 13.2 million weighted average common shares outstanding, compared to a net loss of $23.7 million, and diluted loss per share of $1.83, in the fourth quarter of 2018 based on 12.9 million weighted average common shares outstanding. Sequentially, net loss decreased $4.3 million quarter-over-quarter from a net loss of $26.2 million in the third 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 decreased 7% year-over-year to a loss of $8.3 million in the fourth quarter of 2019, compared to a loss of $7.8 million in the fourth quarter of 2018. Sequentially, adjusted EBITDA loss improved by $4.9 million quarter-over-quarter from a loss of $13.2 million in the third quarter of 2019.

Full Year 2019 Financial Results

  • Net revenue for full year 2019 decreased 32% to $454.9 million from $667.6 million for full year 2018, driven primarily by a decrease in Customers as the company remained focused on efficient marketing channels and consumers with high affinity and retention within its direct-to-consumer platform.
  • Net loss for full year 2019 was $61.1 million, and diluted loss per share was $4.67, based on 13.1 million weighted average common shares outstanding, compared to net loss of $122.1 million, and diluted loss per share of $9.51, based on 12.8 million weighted average shares outstanding for full year 2018. 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 for full year 2019 was a loss of $8.4 million, compared to a loss of $61.4 million for full year 2018, reflecting improved expense management and operational efficiencies.

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,

December 31,

September 30,

December 31,

2019

2019

2018

Orders (in thousands)

1,622

1,726

2,418

Customers (in thousands)

351

386

557

Average Order Value

$58.14

$57.60

$58.12

Orders per Customer

4.6

4.5

4.3

Average Revenue per Customer

$269

$258

$252

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 $43.5 million as of December 31, 2019.
  • Cash used in operating activities totaled $10.9 million for the fourth quarter of 2019 compared to cash used of $22.9 million in the fourth quarter of the prior year. The improvement in operating cash flow was driven by expense management, operational efficiencies and working capital management. Cash used in operating activities totaled $16.5 million for the full year of 2019, representing an improvement of $60.4 million from the prior year.
  • Capital expenditures totaled $1.3 million for the fourth quarter of 2019. This represents a reduction of $0.8 million in capital expenditures from the fourth quarter of 2018. Full year 2019 capital expenditures totaled $5.2 million, representing a reduction of $9.8 million from the prior year.
  • Free cash flow totaled cash used of $12.2 million for the fourth quarter of 2019 compared to cash used of $25.0 million in the fourth quarter of the prior year driven by improved operating cash flow and reduced capital expenditures. Full year 2019 free cash flow totaled cash used of $21.7 million, representing an improvement of $70.2 million from the prior year.
  • In the fourth quarter of 2019, the company amended and refinanced its existing revolving credit facility to, among other things, extend the final maturity date of the facility from February 2021 to August 2021, reduce the aggregate lender commitments to $55.0 million, and increase the applicable interest rate spread paid by the company by 25 basis points. In connection with the refinancing, the company repaid $28.9 million of indebtedness.
  • As noted above, Blue Apron is evaluating a range of strategic alternatives to maximize shareholder value, which together with initiatives to effectively manage expenses and cash flows, is being undertaken to provide additional liquidity to support the execution of the company’s growth strategy and continued investments in the business.

Conference Call and Webcast

Blue Apron will held a conference call and webcast Wednesday morning to discuss its fourth quarter and full year 2019 results and business outlook.

A recording of the webcast will also be available on Blue Apron’s Investor Relations website at investors.blueapron.com. Additionally, a replay of the conference call can be accessed until Wednesday, February 26, 2020 by dialing (877) 344-7529 or (412) 317-0088, utilizing the conference ID 10137332.

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.

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