Blue Apron Holdings Inc. Q1 2023 Earnings Call

At $8 7 million loss in Q1, 2022, and $21 $8 million loss in Q4 in the first quarter. Adjusted EBITDA was a loss of $8 7 million compared to $31 4 million from Q1 2020 to $13 5 million loss in Q4.

Our significant reductions in cash burn and adjusted EBITDA loss indications that our efforts to reduce costs and drive efficiencies are working as planned including our work to manage marketing expenses reduced PT G&A and improved variable margin as noted our first quarter cash burn included the impact of $7 $5 million debt Paydown as we.

The first of our four monthly installments in March.

We continue to make good progress against our operational goals.

This said, we will continue to evaluate ways to achieve further incremental cost efficiencies through the course of the year as we continue to actively pursue sufficient additional funding additional funds needed to fund our near term obligations. Overall, we believe the efforts to date provides a solid foundation for us to continue on our path to achieving profitability with that.

I'll turn things over to the operator to open up the call for questions.

Freighter.

Thank you.

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. If a teeny tiny question has been that Jason you would like 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> with Canaccord. Please go ahead.

Good morning, and thanks for taking my questions.

So you had very healthy net adds this.

This quarter, especially in the context of your lower marketing spend can you maybe expand a little bit on key drivers behind that maybe give us a little bit more color on what works for you this quarter and just talk about the sustainability of this dynamic as we head into sort of seasonally slower Q2 and Q3.

Thanks, so much for the question Maria.

So I can definitely give you a little bit more color first of all we played with a couple of different levers that we had established the technology for last year. So as you know last year was an investment into marketing technology and.

And some brand spend.

As we started to lean back into marketing after the reset that had happened in 2018.

So we are able to level leverage some of that technology that was put into place to be a lot more efficient on driving into.

Into performance spend in marketing and removing some of the top of funnel brand expense, that's not to say that we're moving away from branding. It all we're actually transitioning our branding into more performance based channels that take advantage of the 81% brand recognition that we now have after some of our branding activities and of course, the long history of Blue <unk>.

<unk> has a strong brand. So that's one thing that we were actually able to do another thing that we played with it we talked a little bit about in the script was the promotional spend versus media spend so we tested some some.

Some different promotional structures that actually did.

Proved to be Contra revenue. So you saw some of that come out of our <unk>, but we were also able to lower our marketing spend at the same time and still acquire those higher quality customers as part of that process. So we were able to trade off a bit between promotional spend and marketing spend that still resulted in better efficiency and better quality customers. We do think this is.

Something that is sustainable although you will still see seasonality throughout the quarters as you always do but we do think that this is something sustainable that we can lean into further investments in the future as we secure that funding that we discussed earlier.

Some of that is playing against each other in a really positive way, where we're seeing we're seeing both higher quality customers come in at a much greater efficiency than what we've had in the past and returning to some of those levels that we were talking about in 2019 of paybacks that are less than a year. A lot of this is result of performance based channels, which tend to be things.

Search and.

Tend to be affiliate, we changed our affiliate model as well to make that a lot more efficient and that's helping.

Right a bit as well and finally driving a lot more organic and reactivation again, we have a very strong email lists from years of of work in the industry and the combination of being able to drive that and driving more organic traffic through improvements in some of the technology that we have put in place are all working towards the same end.

Got it that's very helpful. And then secondly could you maybe talk about what sort of trends, you're seeing with underlying food prices and how much of a headwind would you say inflation still is gross margin.

Sure. So I think underlying prices were still seeing some inflationary pressure, particularly in food.

We are also continuing to see consumers be a little bit cautious about their spend that's why we're focusing so much on value I think everyone's dealing with the macro economic environments or an uncertainty that people continue to just feel emotionally about exactly what's happening in the macro climate.

But we are seeing strong continued spend with people and the product as you know with with meal kits people are more price sensitive when they're coming in to meal kits, but once they're in they tend to be far less price sensitive we're seeing that continue and where we are also seeing responses of people seeing value in the kits.

There is some pricing pressure continuing on food costs, but overall the efficiencies that we've been able to drive both at our procurement side and in our labor side are helping to offset that on the consumer side. We are just seeing people continuing to see value in the kits and being willing to spend on the value added products that we have added or.

Over the last several years within the kits themselves.

Got it that's very helpful. Thank you so much lineup.

Thank you Maria.

Our next question comes from Dan Cargos.

<unk> company. Please go ahead.

Great. Thanks, Good morning, Linda.

On that topic, you gave a lot of good color around there.

<unk>.

What percent of new ad.

Or at least Directionally are.

Our reactivation because I think it is.

If you're working on reducing effectively AMB and our emotions.

Specifies value or highlight value.

In the market a few years, obviously a longer tailed stickiness to it if the bulk of those are coming from known commodities that have been in the pipeline before rather than from new customers and the new customers that youre, bringing in I'm curious if you have any early learnings of those cohorts are behaving similarly to.

Either reactivation or what you're seeing from historical perspective.

Sure I'll try to answer your question, but definitely remind me if I Miss any part of it. So we don't currently talk about the percentage of those customers that are coming from reactivation, but what I can tell you is we did launch a new reactivation program this year.

Very early in Q1, where we're testing against a lot of that email list and and a lot of the data that we have on our current customers and former customers again as we said before first party data is going to become extremely powerful as we continue to go deeper into the cookie lifts environment and we're taking advantage of that with the technology that we've put into place.

I will still say a majority of those net adds were coming from new customers, even though reactivation was extremely healthy for us those experiments are proving true of what we've seen in the past that reactivated customers tend to perform extremely well and tend to be very sticky compared to new customers because of the known entity.

Aspect that you were talking about so we are seeing really good progress there and but we still have a lot of opportunity to go given the size of our database.

So that's a very positive aspect of it.

The other thing that I will note is while we were doing a lot of different tests and experiments overall, the new customer cohorts that were bringing in in the beginning of 2022 are performing the same or better than previous cohorts coming in on average again theres always tests, so youll see a little bit of.

While doing this I guess this is a for lack of a better term when you're testing.

But on the whole and on average they are performing the same or better.

Yes, that's super helpful and to that point.

Kind of alluded to the concepts that perhaps <unk> continues to trickle downwards as you cross more on the promo front, which everybody loves the lower upfront price right. So I guess is do you still see substantial opportunity to balance as you put it sort of your contract versus your media spend where even if a L. B.

You should come down margin.

Crew as you pulled back on sort of broader marketing expense.

So there's a couple of things to unpack in that question I will say that while we do continue to test our promotional structures.

You might see going forward is more testing of the structure rather than the dollar amount, which should roughly stabilize our <unk>, so you're not necessarily going.

See a consistent trickled down there that being said, we still think that above $70 on an a O V is incredibly healthy and one of the higher than the industry.

Our core driver right now is profitability. So we're always going to make sure that we're evaluating everything we do not just each partnership based on profitability to bring the most return into the business in the long term success.

Okay, great. Thanks, very much lend I appreciate it.

Thanks, so much Dan.

Again as a reminder, if you have a question. Please press star then one to be joined into the queue.

The next question comes from Ryan Nash with Lake Street Capital markets. Please go ahead.

First one for me. So you always had a couple of quarters now of this sort of cost reduction effort. If you will.

You did see that we are we announced in about and have ended the year. So it was actually in December that we implemented the $50 million cost reduction across the business.

We saw better than expected results on seeing those cost reductions impact is quite early in Q1 for Q1 was really the first quarter, where you saw that impact come together, but I will say that I think overall, we've seen a lot of those cost reductions impact us throughout the year, So youll see.

More of that $50 million coming throughout the year. It wasn't just necessarily all showing up in Q1. So youll see continued impact we always see additional opportunities and we're continuing to look at other opportunities for cost reduction I do think that we've proven that we are very good at focusing on fighting those and moving on them very quickly.

And so anything we find in the in the future quarters, we will definitely implement but we still see positive impact yet to come from the reduction that we did in December and right. It's always a constant evaluation of PT G&A. So we'll.

Well, so I'll cover some more things and can continue to keep looking.

Talked about it on our last call, possibly subletting part of our latest spacing and things of that nature.

Got it and then in the press release and I missed your prepared remarks, you guys talked about sort of a commercial partnership as an option.

To bring in more funding or financing what would something like that look like.

We can't give any more details at this time, but it is.

Got it thanks for taking my questions.

Absolutely.

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

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