Q1 2022 Blue Apron Holdings Inc Earnings Call
Good morning, and welcome to the Blue apron first quarter 2022 earnings conference call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to tip Fleming head of Investor Relations at Blue Apron. Please go ahead.
Thank you operator, and thank you everyone for joining us today with me on the call is Linda Findley, President and Chief Executive Officer of Blue Apron, and Randy Rubin, Chief Financial Officer before I turn the call over to Linda a few remarks about this call a slide presentation that accompanies today's remarks can be accessed.
From our Investor Relations website.
In addition, various statements that we make during today's call about our future expectations plans and prospects constitute forward looking statements as defined in the safe Harbor provisions under six under the private Securities Litigation Reform Act of 1995 actual results may differ materially from those indicated by these forward looking statements as a result of <unk>.
Risks and other factors, including those described in the company's earnings release issued this morning, and the company's SEC filings.
In addition, any forward looking statements represent the company's views only as of today and should not be replied upon as representing its views as of any subsequent date. The company specifically disclaims any obligation to update these statements.
During this call we will be referring to certain non-GAAP measures, which are not prepared in accordance with generally accepted accounting principles. We encourage you to refer to the earnings release and SEC filings, where we have defined these measures and review the reconciliation of these non-GAAP financial measures most directly comparable GAAP measures.
I will point out that many of the comparisons we are making today will be comparing the first quarter of 2022 with the fourth quarter of 2021 or the first quarter of 2020.
We believe that using the first quarter of 2020 as a benchmark is an appropriate way to evaluate the company's first quarter 2022 performance.
The company believes that its financial results patterns of customer behavior in <unk> 'twenty the results of which despite a sharp increase in demand in the last few weeks of <unk> 'twenty were not materially impacted by the effects of the pandemic as.
As such the quarter reflects a higher correlation to more normalized periods first the creep the pandemic impacted periods in <unk> 'twenty through <unk> 'twenty one.
Lastly, please note that in order to help investors gain a better understanding of our business, we will be providing a substantial amount of color on our current operating metrics and longer term targets at our Investor day Tomorrow with that I'd like to turn the call over to our CEO Linda <unk>. Please continue.
Thank you and good morning, everyone. We're happy to be with you today and look forward to providing a review of our Q1 performance and operational highlights.
More importantly, I'm thrilled to have this opportunity to see many of you at our Investor Day Tomorrow.
A number of Blue apron senior leaders will join me as we unveil our strategy for the next three years.
We'll also provide an in depth look at the business and our outlook for the future, including our strategic priorities and our path to adjusted EBITDA profitability in 2023.
Until then let me dive into our Q1 results and provide a look at where the business stands today.
During the quarter, we continue to build on execute and make progress against the foundational work, we accelerated in the fourth quarter of last year.
As we emphasized on our Q4 call our focus in 2022 is on scaling the business and driving customer growth. This of course comes on top of the work we have done over the last few years that has helped to drive strong improvements in our customer engagement metrics.
We are seeing the results of our efforts show up clearly in our strategic Kpis.
Notably customers grew nine 2% from the fourth quarter of last year to 367000.
Beyond seasonality the sequential growth was also driven by greater brand awareness as a result of our new marketing initiatives.
Strong customer engagement also helped drive topline revenue growth at 10% from the prior quarter.
Average order value continued to be seasonally strong at $63, even during a period of high acquisition.
Orders per customer improved to 5.1 from five in Q4, and our average revenue per customer rose to $321 from $319 last quarter.
This marks the eighth straight quarter that we have recorded orders per customer about five and average revenue per car, perhaps somewhere about 310.
Well Randy will provide greater detail. We also successfully completed a refinancing of our debt last week. We view this as a smart strategic moves during a time of rising interest rates.
The refinancing with Allianz replaces blue aprons prior that this new debt comes with lower overall debt service obligations, including interest only payments in the first three years and no warrant coverage and also contains an ESG covenant that aligns with our strategy and brand.
We also announced another round of equity private placements I'm, particularly pleased to have personally invested in this deal because I believe our company has such great potential both from a strategic and purpose driven perspective.
I'll, let Randy comment on these transactions in more detail, but we see both balance sheet moves as further evidence of our long term strategy is taking root.
In all it has been a busy few months and I'm excited about the team's execution.
Well, we've been delivering on our progress we did experience margin pressure as the first quarter unfolded.
Due in part to continued inflation.
Before moving on I did want to address rising food cost specifically.
As we've said before we are somewhat insulated from rising food costs due to the unique nature of our supply chain is almost 80% of our supplier relationships are direct with the producer. However, we are not entirely immune.
For this reason earlier this month, we recently started rolling out a small per serving price increase for a meal kit and wind products.
As the entire industry is seeing these pressures this price increase now puts us in line with our main competitors, while continuing to allow us to maintain a high bar of quality value and service for our customers.
Moreover, even with this pricing increase we believe that there is a real and growing argument to be made that meal kits can be more economically viable option and grocery shopping.
Taking into account, our new pricing, we compare the price of one of our recent recipes with a selection of other retailers and found that trying to recreate that recipe at a grocery store, but often cost cost much more if you chose a similar quality of ingredients.
The cost increase is even more if he decided to shop online and have to be delivered.
The savings are even greater when we considered the per serving price for our for serving offering will go into this further in detail it tomorrow at the Investor Day.
Overall, we are committed to proactively managing the impacts of inflation that leveraging data to stay close to changes in consumer sentiment and purchasing power all while maintaining the quality and value of our products.
Randy will share more details about the impact on Q1 margins.
We are also seeing improvements in our fulfillment centers since raising our minimum wage to $18 per hour in Q4, and implementing a number of other initiatives to improve our employee experience. We have seen retention in attendance improved significantly and our reliance on temporary workers declined substantially.
We look forward to seeing these improvements pass through to a greater efficiencies moving forward.
Our investments in both marketing and product innovation are making progress while Q1 is always a seasonally strong quarter in our industry in previous years, we've often started to see a seasonal drop in active customers by the end of the first quarter and into the start of the second.
However, this year is definitely different.
Today, our customer numbers are higher than they were at the end of Q1, and we continue to see growth in customer engagement.
At this point, we expect to grow our customer base sequentially in the second quarter bucking the typical seasonal trends of our business.
We're also seeing customers returned to our brand after trying other offerings. According to our data, we believe a little more than 5% of customers who reactivated their accounts in the fourth quarter of 2020, one and first quarter of 2022 actually Leslie way for them to try another meal kit and then decided to come back to US. We believe this is a clear sign of the improvements we've made to meet customer.
Over the past few years.
We also feel that the improvements we are making to our marketing infrastructure will help us build on this momentum as we anticipated marketing spend was up 40% year over year in Q1.
This spend was mainly due to our efforts to drive brand awareness on a larger scale.
While there are fairly high initial upfront costs to attract new customers to our business. Our internal data shows that our payback period over time as well under a year from a contribution margin perspective, and we have plans to continue to accelerate paybacks.
More importantly, we have found that their spending with us increases the longer they are a customer will take you through this in more detail at our Investor Day Tomorrow.
Based on the same data, we see that the new customers. We acquired in Q1 are already tracking well with respect to order frequency and average order value versus the prior quarter and prior year.
Similar to others in the industry our cost per acquisition has increased over the past few months. However, we are already starting to see improvements and we believe it will continue to come down in the coming quarters.
This dynamic did impact our cash usage is expected during the quarter and Randy will offer more insights on this in a moment.
As you will hear more about during our Investor Day Tomorrow, our marketing team is focused on rebuilding our marketing infrastructure with the aim of building a modern and robust foundation for long term and sustainable growth.
We are also committed to a holistic approach to our marketing the balance of spending through the entire customer journey.
During the quarter, we began implementing parts of our marketing strategy and selecting vendors that will help us execute our goals. For example, we're enhancing our existing customer data platform to more efficiently track every customer touch point to help improve conversion.
We are also implementing a content management system to better manage our marketing content across multiple platforms for both organic traffic and conversion improvements. We plan to continue work on a number of initiatives related to this in the second quarter.
We also brought all of our paid social media programs and health and are implementing additional technology to allow us to simplify integration with a larger number of partners at scale.
Our Chief Marketing Officer, Danny Simpson will provide greater detail on our partnerships tomorrow at our Investor day.
We are particularly excited about a new national brand campaign that we launched in April . The campaign is aimed at building our brand and raising broader awareness for the meal kit category. The brand videos highlight the benefits of cooking with blue apron from creating incredible recipes with high quality ingredients to easing the burden of menu and recipe planet.
This is an exciting moment for us as this is our first major national brand campaign for 2018.
These advertisements kicked off our 2020 to your marketing strategy, where we are focused on creating a holistic and fully connected experience for our customers from the first marketing touch point through sign up and recipe selection.
We're seeing positive initial results from our campaign and Danny will dive into more details tomorrow.
To complement our marketing efforts, we continue to meaningfully enhance our menu selection to offer more innovative recipes as well as add even more choice and variety.
Late in the first quarter, we launched a new breakfast offering.
All of the recipes are designed to be ready in 15 minutes or less and feature classic breakfast ingredients with an elevated twist. This is just the start our culinary team plans to continue to iterate and expand on the options based on customer feedback. So far the early feedback is extremely positive in our breakfast options within our most popular add on since we introduced them in April .
Beyond breakfast, we plan to roll out new add ons and increase the weekly selection from three to nine for families. We expect it to.
Excuse me three to nine for families. We expect two or four serving plan to go to 12 recipes per week available starting in June .
We believe one of the keys to unlocking greater efficiencies when it comes to acquiring new customers and driving engagement with existing customers is through strategic partnerships and collaborations.
We continue to build on the success of our existing work by partnering and collaborating with World class companies, such as Disney Studios' content, Amazon Alexa Ww and American Express.
For example, following the successful collaboration last year with Disney and Pixar and the release of Luca and so we are again teaming up with to celebrate their all new movie light year with especially designed menu.
We are also expanding to new channels through distribution partnerships, while maintaining the efficiencies of the DTC model. We continue to work with Amazon Alexa and today I'm very excited to announce that we will be launching a storefront on Walmart dot com later this month.
Consumers will be able to buy blue apron boxes without a subscription this direct to consumer offering is an excellent way for us to introduce blue apron to new groups of customers, who may not have considered a meal kit before.
We are excited for this initiative to get off the ground and look forward to adding similar partnerships in the coming months.
In order to provide customers with a seamless delivery experience with the best service. We recently signed an agreement with vivo to support last mile delivery in select markets.
With the volatility of global supply chain rising gas prices and labor and truck shortages, we continue to regionally diversify and optimize our mix of last mile delivery partners to get the best service and value possible for our customers.
Do you have a servicing blue apron and select mid Atlantic markets.
To start and then will provide customers with real time delivery messaging as well as the ability to rate their driver in the overall service.
We are looking to offer similar features nationwide in the future as we constantly search for and invest in ways to improve the customer experience.
We are also taking advantage of increased predict production capabilities and network capacity.
To expand Monday delivery to regions outside of the northeast and California.
We are doing so by actively identifying additional ways to ship longer distances, while mitigating increases in fuel and transportation cost we.
We have plans to rapidly increase our Monday footprint to include Florida, The upper Midwest and the lower Great Lakes by the end of Q3, we intend to offer seven days a week delivery to over 75% of the continental United States.
Turning to ESG, we successfully met our commitment to become carbon neutral by March 31st offsetting estimated scope one two and three emissions. We achieved this goal by purchasing carbon offsets cover upstream and downstream the missions that range from sourcing packaging and transporting our products.
We are now working on implementing systematic reductions as we look to achieve our longer term goal of being net zero.
Okay.
Becoming carbon neutral is an integral part of our better living roadmap.
The plan is structured to sustained preserve and build on our existing sustainability commitments with a focus on people products and progress. We've included more detail on this roadmap at our proxy statement, we filed at the end of April .
And our head of sustainability and social impact Kelly Burton, who will provide a deeper dive into our ESG strategy during Tomorrow's Investor day.
We remain confident in the business and feel strongly that we are on the right path to creating long term sustainable growth we.
We have more work ahead of us and we hope you'll join us on this journey.
And finally, we look forward to seeing many of you tomorrow in London are joining us virtually for the Investor day.
That let me turn things over to Randy for a review of the number of Randy.
Thank you Linda and good morning, everyone as Linda highlighted we are very excited about Tomorrow's Investor day.
We have a lot we want to share on our strategy the progress on the investments, we've been making as well as our overall path to profitability.
The biggest development for us this quarter actually happened just last week as Linda mentioned, we successfully refinanced our debt and announced an additional $45 million capital raised through two private placements I'll talk about this in a moment.
I'll also save commentary about some longer term strategic topics for Tomorrow's event, where we'll be able to spend more time diving into those links.
Turning to our results as Linda pointed out in her opening remarks. This quarter, we continued to build on and execute against the foundational work. We started in the fourth quarter of 2021.
We are seeing some key signs that our investments are working and are also getting a better sense of where we may need to pivot. This along with the continued strength of our most important customer metrics give us confidence that we're on the right track.
On today's call I'd like to walk through the quarter's results and then contextualize them within our broader strategy to demonstrate how we are continuing to invest in our future by methodically prioritizing expenditures through smart data driven decisions.
In my discussion I will be comparing our results to the previous quarter into Q1 2020.
The first quarter of last year was what we view as having been the final quarter of truly pandemic driven customer behavior. Meanwhile, in the first quarter of 2020.
We're largely a normal quarter as lockdowns imposed in the last couple of weeks of the quarter didn't materially impact the business until Q2 of that year.
Net revenue, which includes our meal, one end market businesses increased 10% from last quarter and almost 16% from Q1 2000 $20 million to $118 million.
Average order value this quarter was $63 a kpis that we're particularly proud of in light of the fact that we maintained a it'll be even in an environment, where he provided the highest level of promotional incentives towards the acquisition and our recent history.
Average revenue per customer increased quarter over quarter to $321 from $319 and was even bigger bump up 19% over Q1 2020.
Orders per customer ticked up slightly to $5, one versus the previous quarter and increased eight 5% versus the first quarter of 2020.
Customers increased 9% sequentially to 367000, but decreased two 4% versus Q1 2020 levels.
As Linda mentioned, we grew customers by nine 2% from the fourth quarter of 2021.
While we did grow customers at a similar rate to the prior year period. There are few key differences to note.
First in the early months of 2021, we're still being impacted by the pandemic as vaccines were not widely available until later in the year as the quarter came to a close we started to see customers declined from the Q1 high beginning in the month of April .
Fast forward to today and through the first five weeks of the second quarter, we have more customers now than we did when we ended Q1 and expect to continue to grow over the first quarter. It's an encouraging start with solid proof point of the growing strength of our strategic initiatives.
Turning to the rest of the P&L in Q1, our variable margin was 32, 5%, which was impacted by staffing dynamics and ongoing inflationary pressure.
Let me take a moment to offer a bit of context that there were a number of different variables month to month. Some of these issues were temporary while others, such as food cost and logistics inflation are likely to persist.
In late 2021, we significantly increased our fulfillment center staffing levels to prepare for the impending rush seasonally high Q1 demand.
We then had to augment our staffing levels due to higher absenteeism is driven by the omicron bearing it resulted in much higher than expenses expected labor costs as we've had to bring in more expensive temporary employees.
Had an adverse impact on our variable margin at the beginning of the quarter.
As the omicron waves subsided in February our reliance on temporary workers began to win at the same time typical levels of absenteeism dropped precipitously. We attribute this favorable attendance rates following the <unk> directly to the enhanced wage rates and other benefits we began to provide in the fourth quarter.
As we moved into March the staffing challenges, we experienced in January and February abated, and we exited the quarter with a more normalized margin rate in the month of March we continue to drive efficiencies to returned to target margin levels going forward.
Linda referenced our unique sourcing model and the insulation. It provides us against a portion of inflationary pressures, while it's clear that we are somewhat insulated we are not immune and it is for that reason that we began increasing prices on a meal plans and one subscriptions this quarter on a per meal, serving and per one bottle basis. This is expected to get the business back on track with a short term variable margin.
Percentage targeted in the upper thirties.
Shifting gears marketing spend increased 40% year over year to $27 9 million.
Similar to last quarter. The increase was primarily related to planned targeted marketing investments aimed at improving overall brand awareness and reach these investments are paying off our ability to convert a visitor to our registrants on the blue apron site in Q1 improved to almost 4% and the number of actual paying customers also increased.
These are the trends that we like and that we hope to see continue as we rollout more marketing initiatives in the coming months.
That being said I have to acknowledge something as Linda mentioned earlier.
The rising cost of media and marketing dollars, which we expect it to a degree have proven to be greater than we modeled our cost per acquisition reached near record high levels in Q1, and while we expect efficiencies that will reduce CPA is going forward. The elevated cost of marketing did result in the business using more cash in Q1 than originally anticipated.
We remain committed to customer and revenue growth and we're also excited to share more details about this and our path to profitability tomorrow.
As we've shared previously a key component of our strategy is the retooling of our marketing infrastructure. We accelerated this process beginning in Q4, and we plan for cost to normalize as we move towards the second half of the year as the programs. We've put in place and those we are working to put in place are expected to begin to bear fruit because of that marketing spend in Q1.
Will likely represent the high watermark of our quarterly spend this year of course marketing optimization like so many parts of our business is never really done and continuous improvement is a key tenant of our operating philosophy.
Product technology, and general and administrative costs were $43 3 million for the first quarter, which was in line with the previous quarter as a percent of sales and higher than Q1, 2020, $34 2 million included.
Included in PT G&A, our professional fees incurred to help us manage our business and operations.
G&A in Q1 also included a $3 million expense related to the purchases purchase of carbon offsets.
That expenditure, while offsetting blue apron for a full year of C. O. Two emissions was recognized in full in March.
Further we completed a critical short term operations improvement consulting engagement in the quarter.
Leveraging this part of our P&L is also a key component of our path to profitability and will be another area area of emphasis during tomorrow's presentations.
Other income net was $1 6 million, which was driven by a noncash fair value adjustment to the May 2021 amendment to our financing agreement.
Since the amendment, we have been obligated to issue warrants to our lender on a quarterly basis, which began on July one 2021.
This obligation terminated last week, when we when we repaid and terminated that loan facility.
Turning to profitability, we reported a net loss of $38 4 million, which includes the aforementioned $1 6 million of other income adjusted EBITDA loss was $30 7 million.
We ended the quarter with cash and cash equivalents of $56 million, we used $29 million in cash from operations.
Subsequent to the end of the quarter, we announced a $45 million equity raise of which 20 $25 million has closed and the successful refinancing of our debt, which includes $30 million of new senior secured notes that mature in May 2027.
We utilize the proceeds from the senior secured notes and cash on hand to repay our prior term loan.
We expect to close the remaining $20 million private placement by the end of this month and immediately following that closing we expect to have approximately $80 million of cash on hand further as of May 1st all Blue aprons debt is classified as long term.
The successful refinancing of our term loan term loan should be seen as another encouraging sign of the progress against our turnaround.
Our new debt comes with a significantly lower cost of capital we've reduced our coupon rate by more than 160 basis points per annum, assuming we meet the specified bond ratings for the debt and earn an interest only environment for the next three years.
In addition, we no longer have to provide our lender with a warrant coverage that was present with the prior term loan.
It also includes an ESG covenant that aligns nicely with our packaging sustainability goals.
Before I turn things over for Q&A, Let me touch briefly on our outlook.
Our guidance and targets assume the anticipated consistent benefit to our business from the acceleration in execution of our strategic growth initiatives. It also reflects the impact of the planned use of proceeds from the equity capital raises we completed last November February and April and the expected proceeds from the additional $20 million equity commitment as well as the positive cash impact of <unk>.
Certain marketing contracts.
These assumptions include our expectations that we will continue to make significant investments in our marketing technology infrastructure as well as continued operational improvements.
Lastly, our guidance assumes we will not have any unforeseen disruptions in our fulfillment center operations or supply chain.
We have used a significant amount of capital over the last six months.
We view the investments we've made in marketing marketing technology infrastructure operations wages and sustainability as crucial components of our go forward business strategy.
We believe we are now entering a phase where our cash burn should subside materially.
We expect positive operating cash flow this quarter and while we will use cash in the second half of the year. We expect that this past quarter will represent our largest quarterly usage for the foreseeable future.
We now look to leverage the investments we've been making and we continue to expect to return to positive year over year revenue growth starting in the second quarter of 2022.
We also continue to expect full year 2022 revenue growth in the mid teens.
And we are targeting to achieve full year adjusted EBITDA profitability next year.
Again, I should emphasize we do not think it is correct or appropriate to take our cash burn from the fourth quarter of last year and first quarter of this year and assume that it will continue on a straight line basis. It should not we look forward to sharing many more details tomorrow and we hope to see many of you in London and with that I will turn things back over to the operator to open things up for Q&A.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from.
Maria <unk> from Canaccord. Please go ahead.
Good morning, and thanks, so much for taking my questions.
Firstly can you maybe talk about some of the trends to Q1.
Whether you saw any changes in customer behavior or sort of mid quarter, given all the macro headwinds and uncertainties.
You mentioned that customer trends that sort of strong so far in Q2 wishes March is there anything sort of around engagement or level of customer growth. So far this quarter that you can share with us.
Sure I'll start Maria Thanks, so much for the question. So we're actually seeing really strong customer trends in Q1, so what we saw as evidenced in our key engagement metrics is that we are seeing the same or elevated levels of engagement based on seasonality from customers. When it comes to how many meals their purge.
Just saying, how they're actually engaging with the service et cetera.
We actually see that those cohorts are behaving and trending quite well from Q1, which is very positive considering we were actually increasing our acquisition.
So that's that's a very good sign from an engagement perspective, what we're noting in transitioning into Q2 as again, usually seasonally you see a drop off in customer acquisition as you come into season into the seasonally lower season too.
But we actually have not seen that this year as we've seen on the acquisition continued to remain strong. We are also seeing traffic coming from our paid channel is actually performing quite well.
At a very high level and so that's encouraging when it comes to thinking about those top of funnel initiatives that we introduced late last year and beginning of this year to drive significant traffic at the top of the funnel. So they can continue to work on conversion further down into the funnel.
Got it that's very helpful. And then I also wanted to ask about.
Gross margin compression this quarter is there any way to separate that I think 460 basis point impact in Q, maybe temporary wishes what could be a little bit more permanent and I understand there are so many moving parts right now and that Randy I think you mentioned, you're targeting sort of higher duties for gross margins and any color around sort of the timeframe for that target.
Absolutely the quarter was really a tale of three very different distinct months.
January was significantly impacted by.
<unk>, we had a lot of absenteeism in our FCS and we had to then bring in temporary employees, who are more expensive than obviously, we of course provided benefits to our employees that they were out.
That changed in February and in February we experienced a very different phenomenon is what we've experienced in the past where our absenteeism levels dropped very significantly.
Typical up typically a level of absenteeism that we expect in our hourly workforce and that pattern trend changed materially we attributed very very directly to the wage rates that we put in the impact of food cost and logistics inflation was present throughout the entire quarter.
To give you a better sense of where I think we are.
The variable margin in the month of March on a pro forma basis. It looked like about 36% that's adjusting for some one offs.
That is.
Lower than we normally target, we expect our business to be in the in the high <unk>.
And we think that the delta from sort of that high 30 to 36 is likely the impact of what we're seeing from our food inflation perspective, and a logistics perspective, we do expect to be back into the mid thirty's or greater later. This month. We of course are answering their entering the period of our business may be aware, we see seasonal pressures from a margin perspective.
Due to weather.
We believe that with the benefit of the pricing actions that we are currently rolling out and the continued efficiency gains we should be back on track to our margin in the 36% or above range really starting this quarter.
Got it that's very helpful and maybe one more question if I could.
Can you maybe share a little bit more call around.
Around your advertising spend you mentioned improving brand awareness.
Just talk about what portion of the incremental spend is going towards brand wishes direct response and what are some channels that are sort of most protective for ya and I guess, what's sort of the level of organic traffic on the platform at this point.
Sure I can give you some color on that some more of which will actually be discussing in the investor day Tomorrow, but basically we started from a top top of funnel perspective, with a lot of out of home and particularly streaming digital.
Programs, and that's where a lot of the overall brand programs started and then we moved more directly into TV, which launched at the beginning of Q2.
And those have been some of the primary top of funnel drivers for us I don't have the actual breakdown on percentages I will talk a little bit more about that tomorrow, but what I can tell you is we would actually balance the portfolio quite nicely to drive that traffic spikes that we'd been seeing in Q1 end of Q4 beginning of Q1.
That we're able to continue to move through the funnel and convert so that's worked quite well and we have seen.
A shift in a higher percentage of paid traffic coming in from.
From organic which is something that we actually expected based on the COVID-19 quarter year over year comparisons to Q1 of last year, which was a high organic traffic quarter because of the Covid comparison, but again, we'll give a little bit more detail on that tomorrow, it's performing quite well in being able to drive that traffic I think some of our more successful mid and.
Lower funnel channels include things like our search conversion is still working well and we are moving very aggressively on social as we brought that in house. This quarter. So we're able to optimize very quickly on social as well.
Got it. Thank you both looking forward to your analyst day tomorrow. Thank.
Thank you Maria Thanks, so much.
And as a reminder, if you have a question. Please press Star then one.
Again, if you have a question. Please press Star then one.
There are no more questions in the queue. This concludes our question and answer session I'd like to turn the conference back over to tip Fleming for any closing remarks.
Yeah.
I'm sorry.
Looks like we have one more question.
We have a question from Andrew Lee from Citron. Please go ahead Sir.
Hi regarding the Walmart partnership we're offering the one offs is this exclusive to Walmart will you be able in the future to offer at the same things, possibly to our other e-commerce platforms.
Thanks, So much for the question Andrew I'm actually it is something that we're planning on scaling out and again, we will talk about this a little bit more in analyst day Tomorrow, we have in the past talked a lot about a couple of different partnership strategies, which is acquisition partnership strategies I'm very focused on sort of things like affiliates and things will bring direct.
Traffic into the business. We've also talked about strategic partnerships, where we've done product integrations and more and those have been very successful for us. This is actually an expansion of a new product type partnership type for us, which is a distribution partnership structure. So distribution and licensing is something we'll be talking about more tomorrow.
We started that actually with the Amazon show integration that we did in December and Walmart is not an exclusive arrangement. It is one we're extremely excited about because it does represent a significant opportunity for broader distribution channels in the future, but importantly ones. Unlike some of the past distributions that we've done around.
Distributions. This one had significantly better direct to consumer margins and profiles to it. So it is the first.
Something that we think can be very exciting and something that doesn't limit us in the future. In fact actually provides a great platform to leapfrog.
Alright, thank you.
Okay.
Again, if you have a question. Please press Star then one.
This concludes our question and answer session I would like to turn the conference back over to tip Fleming for any closing remarks.
Thank you very much everyone for your time today, we are excited about what's in store for Blue apron, and we're very much looking forward to talking to you again tomorrow at our inaugural Investor day from our Linden fulfillment Center, we will see you then thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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