Blue Apron Holdings, Inc. [APRN] Filings

10-Q 1 aprn-20230331.htm 10-Q aprn-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


			x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023.


			o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38134

Blue Apron Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware			81-4777373
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

28 Liberty Street, New York, New York			10005
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code (347) 719-4312

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Trading Symbol

Name of Exchange on Which Registered

Class A Common Stock, $0.0001 par value per share

APRN

New York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Smaller reporting company

Emerging growth company

Non-accelerated filer

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each class of the issuer’s common stock as of the latest practicable date.


Class			Number of Shares Outstanding
Class A Common Stock, $0.0001 par value			72,669,092 shares outstanding as of April 30, 2023
Class B Common Stock, $0.0001 par value			0 shares outstanding as of April 30, 2023
Class C Capital Stock, $0.0001 par value			0 shares outstanding as of April 30, 2023

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BLUE APRON HOLDINGS, INC.

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PART I		FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements (unaudited)	4
		Consolidated Balance Sheets	4
		Consolidated Statements of Operations	5
		Consolidated Statements of Stockholders’ Equity	6
		Consolidated Statements of Cash Flows	7
		Notes to Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
	Item 4.	Controls and Procedures	36

PART II		OTHER INFORMATION
	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
	Item 3.	Defaults Upon Senior Securities	72
	Item 4.	Mine Safety Disclosures	72
	Item 5.	Other Information	72
	Item 6.	Exhibits	73

SIGNATURES			74

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

•the sufficiency of our cash resources and our ability to continue to operate as a going concern in the event that prior to the middle of June 2023, (i) we are unable to obtain sufficient additional funding or raise additional capital, including through our February 2023 ATM (as defined below) or otherwise, (ii) RJB Partners, LLC (“RJB”) and certain other affiliates of Joseph N. Sanberg do not fund their remaining respective obligations under the $56.5 million private placement and $12.7 million gift card transaction, (iii) we are unable to dispose of some or all of the pledged securities securing the RJB private placement obligation in a private or other sale and receive cash proceeds sufficient to meet our near-term obligations, and (iv) we are unable to realize the anticipated benefits from identified, and to be identified, expense reductions or incur unforeseen additional cash expenses;

•our ability to execute one or more financing opportunities and/or other strategic transactions, including significant commercial partnerships, prior to the middle of June 2023, if at all, and our ability to achieve the anticipated benefits of any such transactions for our shareholders;

•our ability, including the timing and extent, to successfully support the execution of our strategy; our ability to cost-effectively attract new customers and retain existing customers (including, on the one hand, our ability to execute our marketing strategy with a reduced marketing budget, or on the other hand, our ability to sustain any increase in demand we may experience); our ability to continue to expand our product offerings and distribution channels; our ability to sustain any increase in demand and/or ability to continue to execute operational efficiency practices announced in December 2022, including managing our corporate workforce reduction costs and the impact of our workforce reduction on executing our strategy;

•our expectations regarding, and the stability of, our supply chain, including potential shortages, interruptions or continued increased costs in the supply or delivery of ingredients, and parcel and freight carrier interruptions or delays and/or higher freight or fuel costs, as a result of inflation or otherwise;

•our ability to respond to changes in consumer behaviors, tastes, and preferences that could lead to changes in demand, including as a result of, among other things, the impact of inflation or other macroeconomic factors, and to some extent, long-term impacts on consumer behavior and spending habits;

•the company’s ability to attract and retain qualified employees and personnel in sufficient numbers; our ability to effectively compete;

•our ability to maintain and grow the value of our brand and reputation;

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•any material challenges in employee recruiting and retention; any prolonged closures, or series of temporary closures, of one or both of our fulfillment centers, supply chain or carrier interruptions or delays, and any resulting need to cancel or shift customer orders;

•our ability to achieve our environmental, social and corporate governance (“ESG”) goals on our anticipated timeframe, if at all;

•our ability to maintain food safety and prevent food-borne illness incidents and our susceptibility to supplier-initiated recalls;

•our ability to comply with modified or new laws and regulations applying to our business, or the impact that such compliance may have on our business;

•our vulnerability to adverse weather conditions, natural disasters, wars, and public health crises, including pandemics;

•our ability to protect the security and integrity of our data and protect against data security risks and breaches; and

•our ability to obtain and maintain intellectual property protection.

While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

BLUE APRON HOLDINGS, INC.

Consolidated Balance Sheets

(In thousands, except share and per-share data)

(Unaudited)


	March 31, 2023		December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	31,553	$	33,476
Accounts receivable, net	158		556
Inventories, net	26,327		25,023
Prepaid expenses and other current assets	14,417		17,657
Total current assets	72,455		76,712
Property and equipment, net	54,708		57,186
Operating lease right-of-use assets	30,756		32,340
Other noncurrent assets	1,778		4,904
TOTAL ASSETS	$	159,697	$	171,142
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	24,562	$	18,709
Current portion of related party payables	—		3,000
Accrued expenses and other current liabilities	21,131		27,077
Current portion of long-term debt	21,938		27,512
Operating lease liabilities, current	9,275		8,650
Deferred revenue	19,546		19,083
Total current liabilities	96,452		104,031
Operating lease liabilities, long-term	21,397		23,699
Related party payables	—		2,500
Other noncurrent liabilities	7,337		7,191
TOTAL LIABILITIES	125,186		137,421
Commitments and contingencies (Note 11)
STOCKHOLDERS’ EQUITY:
Class A common stock, par value of $0.0001 per share — 1,500,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 69,735,289 and 52,901,947 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	7		5
Class B common stock, par value of $0.0001 per share — 175,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022	—		—
Class C capital stock, par value of $0.0001 per share — 500,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022	—		—
Additional paid-in capital	828,332		810,508
Accumulated deficit	(793,828)		(776,792)
TOTAL STOCKHOLDERS’ EQUITY	34,511		33,721
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	159,697	$	171,142

The accompanying notes are an integral part of these Consolidated Financial Statements.

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BLUE APRON HOLDINGS, INC.

Consolidated Statements of Operations

(In thousands, except share and per-share data)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Net revenue	$	113,080	$	117,751
Operating expenses:
Cost of goods sold, excluding depreciation and amortization	72,613		79,490
Marketing	14,727		27,914
Product, technology, general and administrative	35,724		43,954
Depreciation and amortization	4,222		5,533
Total operating expenses	127,286		156,891
Income (loss) from operations	(14,206)		(39,140)
Gain (loss) on extinguishment of debt	(1,850)		—
Interest income (expense), net	(973)		(1,169)
Other income (expense), net	—		1,646
Income (loss) before income taxes	(17,029)		(38,663)
Benefit (provision) for income taxes	(7)		(11)
Net income (loss)	$	(17,036)	$	(38,674)

Net income (loss) per share attributable to Class A and Class B common stockholders:
Basic	$	(0.26)	$	(1.20)
Diluted	$	(0.26)	$	(1.20)
Weighted-average shares used to compute net income (loss) per share attributable to Class A and Class B common stockholders:
Basic	66,435,278		32,288,424
Diluted	66,435,278		32,288,424

The accompanying notes are an integral part of these Consolidated Financial Statements.

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BLUE APRON HOLDINGS, INC.

Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)


	Class A Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
2023
Balance — December 31, 2022	52,901,947	$	5	$	810,508	$	(776,792)	$	33,721
Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings	144,816	0		0		—		—
Issuance of common stock from public equity offerings, net of issuance costs	16,688,526	2		16,469		—		16,471
Share-based compensation	—	—		1,355		—		1,355
Net income (loss)	—	—		—		(17,036)		(17,036)
Balance — March 31, 2023	69,735,289	$	7	$	828,332	$	(793,828)	$	34,511

2022
Balance — December 31, 2021	31,694,400	$	3	$	746,564	$	(666,514)	$	80,053
Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings	120,981	0		—		—		—
Issuance of common stock upon exercise of warrants	488,055	0		4,096		—		4,096
Issuance of common stock from private placements, net of issuance costs	357,143	—		4,809		—		4,809
Share-based compensation	—	—		2,233		—		2,233
Cumulative effect adjustment related to the adoption of the leasing standard	—	—		—		(545)		(545)
Net income (loss)	—	—		—		(38,674)		(38,674)
Balance — March 31, 2022	32,660,579	$	3	$	757,702	$	(705,733)	$	51,972

The accompanying notes are an integral part of these Consolidated Financial Statements.

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BLUE APRON HOLDINGS, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(17,036)	$	(38,674)
Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:
Depreciation and amortization of property and equipment	4,222		5,533
Loss (gain) on disposal of property and equipment	—		135
Loss (gain) on extinguishment of debt	1,850		—
Changes in fair value of warrant obligation	—		(1,646)
Changes in reserves and allowances	(58)		20
Share-based compensation	1,293		2,173
Non-cash interest expense	308		260
Changes in operating assets and liabilities:
Accounts receivable	398		122
Related party receivables	—		(9,000)
Inventories	(1,308)		(107)
Prepaid expenses and other current assets	3,183		(1,433)
Operating lease right-of-use assets	1,959		1,740
Accounts payable	5,724		11,722
Related party payables	(5,500)		3,000
Accrued expenses and other current liabilities	(6,073)		(6,492)
Operating lease liabilities	(2,051)		(1,941)
Deferred revenue	463		6,479
Other noncurrent assets and liabilities	3,107		(716)
Net cash from (used in) operating activities	(9,519)		(28,825)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(1,278)		(1,321)
Proceeds from sale of property and equipment	57		55
Net cash from (used in) investing activities	(1,221)		(1,266)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from equity and warrant issuances	16,712		5,000
Repayments of debt	(7,500)		(875)
Payments of debt and equity issuance costs	(363)		(191)
Principal payments on financing lease obligations	(32)		(11)
Net cash from (used in) financing activities	8,817		3,923
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(1,923)		(26,168)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period	34,656		83,597
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$	32,733	$	57,429

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	585	$	840
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Acquisition (disposal) of property and equipment financed under finance lease obligations	$	275	$	—
Non-cash additions to property and equipment	$	338	$	67
Purchases of property and equipment in Accounts payable and Accrued expenses and other current liabilities	$	197	$	429

The accompanying notes are an integral part of these Consolidated Financial Statements.

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BLUE APRON HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

When used in these notes, Blue Apron Holdings, Inc. and its subsidiaries are collectively referred to as the “Company.”

The Company designs original recipes with fresh, seasonally-inspired produce and high-quality ingredients, which are sent directly to customers for them to prepare, cook, and enjoy. The Company creates meal experiences around original recipes every week based on what’s in-season with farming partners and other suppliers. Customers can choose which recipes they would like to receive in a given week, and the Company delivers those recipes to their doorsteps along with the pre-portioned ingredients required to cook or prepare those recipes.

In addition to meals, the Company sells wine through Blue Apron Wine, a direct-to-consumer wine delivery service. The Company also sells a curated selection of cooking tools, utensils, pantry items, and add-on products for different culinary occasions, as well as non-subscription meal kits and wine products, through Blue Apron Market, its e-commerce market.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The unaudited interim Consolidated Financial Statements (the “Consolidated Financial Statements”) have been prepared on the same basis as the audited Consolidated Financial Statements, and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2023 and December 31, 2022, results of operations for the three months ended March 31, 2023 and 2022, and cash flows for the three months ended March 31, 2023 and 2022. These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2023 (the “Annual Report”). There have been no material changes in the Company's significant accounting policies from those that were disclosed in Note 2, Summary of Significant Accounting Policies, included in the Annual Report, except those additional significant policies as described within the accompanying notes to the Consolidated Financial Statements.

The accompanying Consolidated Financial Statements include the accounts of Blue Apron Holdings, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company prepares its Consolidated Financial Statements and related disclosures in conformity with accounting principles generally accepted in the United States (“GAAP”).

Within the issuance of the Annual Report, the Company adopted Accounting Standards Update No. 2016-02, “Leases” ("ASC 842") using the modified retrospective approach, resulting in an adoption effective date of January 1, 2022. As such, the adoption of this standard within the annual period of the twelve months ended December 31, 2022, resulted in the following adjustments to amounts previously presented in the Consolidated Financial Statements within quarterly filings under the prior lease standard ("ASC 840"):


	ASC 840 Amount		ASC 842 Adjustment		Three Months Ended March 31, 2022
	(In thousands)
Consolidated Statement of Operations:
Product, technology, general & administrative	$	43,257	$	697	$	43,954
Depreciation & amortization	$	5,404	$	129	$	5,533
Interest income (expense), net	$	(1,770)	$	601	$	(1,169)

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	ASC 840 Amount		ASC 842 Adjustment		Three Months Ended March 31, 2022
	(In thousands)
Cash Flows From Operating Activities:
Net income (loss)	$	(38,449)	$	(225)	$	(38,674)
Depreciation and amortization of property and equipment	$	5,404	$	129	$	5,533
Prepaid expenses and other current assets	$	(1,348)	$	(85)	$	(1,433)
Operating lease right-of-use assets	$	—	$	1,740	$	1,740
Accrued expenses and other current liabilities	$	(7,169)	$	677	$	(6,492)
Operating lease liabilities	$	—	$	(1,941)	$	(1,941)
Other noncurrent assets and liabilities	$	(394)	$	(322)	$	(716)
Cash Flows From Financing Activities:
Principal payments on financing lease obligations	$	(38)	$	27	$	(11)

Liquidity and Going Concern Evaluation

Under Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company is required to evaluate whether there is substantial doubt regarding its ability to continue as a going concern each reporting period, including interim periods.

In this evaluation, management considered the conditions and events that could raise substantial doubt about the Company's ability to continue as a going concern within twelve months of the issuance date of this Quarterly Report on Form 10-Q, and considered the Company's current financial condition and liquidity sources, including current funds available, forecasted future cash flows, and the Company's conditional and unconditional obligations before such date.

The Company has a history of significant net losses, including $17.0 million and $38.7 million for the three months ended March 31, 2023, and 2022, respectively, and operating cash flows of $(9.5) million and $(28.8) million for the three months ended March 31, 2023, and 2022, respectively. The Company's current operating plan indicates it will continue to incur net losses and generate negative cash flows from operating activities, and as of March 31, 2023, the Company had cash and cash equivalents of $31.6 million.

On March 15, 2023, the Company amended its note purchase agreement to accelerate the repayment of the $30.0 million in aggregate principal amount of the senior secured notes due originally in May 2027 to an effective maturity of June 2023, agreeing to pay the full outstanding principal balance on the senior secured notes in four equal amortization installments of $7.5 million, with the first installment paid in connection with the signing of the note purchase agreement amendment, and with the final installment due on June 15, 2023, including any accrued and unpaid interest. Under the note purchase agreement amendment, the noteholder also agreed to reduce the minimum liquidity covenant amount, which was previously set at $25.0 million, to $17.5 million following the first amortization payment, and to $10.0 million following the first and second amortization payments until the senior secured notes are repaid in full.

As of the date of this Quarterly Report on Form 10-Q, the remaining $55.5 million owed under the RJB Purchase Agreement (as defined in Note 12) due from an affiliate of Joseph N. Sanberg, an existing stockholder of the Company, remains unfunded, as well as the remaining $12.7 million owed from a Sanberg affiliate under the Sponsorship Gift Cards Agreement (as defined in Note 14). While a Sanberg affiliate has granted the Company a security interest in equity shares of certain privately-held issuers (the "Pledged Shares") as collateral for the RJB Purchase Agreement, which it has the right to foreclose on and take ownership, options to monetize the Pledged Shares are currently being evaluated. The timing and proceeds from any such monetization are unknown and the proceeds, if and when realized, may not be sufficient to satisfy the entire outstanding amount under the RJB Purchase Agreement.

Although the Company has been reviewing a number of potential alternatives regarding its liquidity, including identified and to be identified cost reduction initiatives, monetizing the Pledged Shares, and/or securing alternative sources for additional financing, including raising additional capital through the “at-the-market” equity offering launched on February 10, 2023, the Company's current forecast of future cash flows indicates that such cash flows would not be sufficient for the Company to meet its current obligations as early as the middle of June 2023. As such, these conditions and events in the aggregate raise substantial doubt regarding the Company's ability to continue as a going concern. The

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Company's Consolidated Financial Statements do not include any adjustments that may result from the outcome of this uncertainty and have been prepared assuming the Company will continue as a going concern.

See Notes 10, 12, and 14 for further discussion regarding the above transactions.

Use of Estimates

In preparing its Consolidated Financial Statements in accordance with GAAP, the Company is required to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs, and expenses, and disclosure of contingent assets and liabilities which are reported in the Consolidated Financial Statements and accompanying disclosures. The accounting estimates that require the most difficult and subjective judgments include revenue recognition, inventory valuation, leases, the fair value of share-based awards, the fair value of the Blue Torch warrant obligation (as defined in Note 10), recoverability of long-lived assets, and the recognition and measurement of contingencies. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from the Company’s estimates and assumptions.

Smaller Reporting Company Status

The Company is a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and therefore qualifies for reduced disclosure requirements for smaller reporting companies.

3. Inventories, Net

Inventories, net consist of the following:


	March 31, 2023		December 31, 2022
	(In thousands)
Fulfillment	$	2,389	$	2,315
Product	23,938		22,708
Inventories, net	$	26,327	$	25,023

Product inventory primarily consists of bulk and prepped food, containers, pre-made meals, products available for resale, and wine products. Fulfillment inventory consists of packaging used for shipping and handling. Product and fulfillment inventories are recognized as components of Cost of goods sold, excluding depreciation and amortization in the accompanying Consolidated Statements of Operations when sold.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:


	March 31, 2023		December 31, 2022
	(In thousands)
Prepaid insurance	$	7,570	$	8,241
Other current assets	6,847		9,416
Prepaid expenses and other current assets	$	14,417	$	17,657

5. Restricted Cash

Restricted cash reflects pledged cash deposited into savings accounts that is used as security primarily for fulfillment centers and office space leases.

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The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts reported in the Consolidated Statements of Cash Flows:


	March 31, 2023		December 31, 2022
	(in thousands)
Cash and cash equivalents	$	31,553	$	33,476
Restricted cash included in Prepaid expenses and other current assets	111		111
Restricted cash included in Other noncurrent assets	1,069		1,069
Total cash, cash equivalents, and restricted cash	$	32,733	$	34,656

	March 31, 2022		December 31, 2021
	(in thousands)
Cash and cash equivalents	$	55,991	$	82,160
Restricted cash included in Prepaid expenses and other current assets	330		608
Restricted cash included in Other noncurrent assets	1,108		829
Total cash, cash equivalents, and restricted cash	$	57,429	$	83,597

6. Leases

The Company leases fulfillment centers and office space under non‑cancelable operating lease arrangements that expire on various dates through 2027. These arrangements require the Company to pay certain operating expenses, such as taxes, repairs, and insurance, and contain renewal and escalation clauses. While certain leases contain renewal options, the Company has determined that its options to renew would not be reasonably certain in determining the expected lease terms, and therefore are not included as part of its right-of-use assets and lease liabilities. In addition, the Company leases certain equipment under finance lease arrangements that expire at various dates through 2027. The Company has also entered into agreements to sublease portions of its corporate office and fulfillment centers.

The following table summarizes the weighted-average remaining lease terms and weighted average discount rates:

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	March 31, 2023		December 31, 2022
Weighted average remaining lease term:
Operating leases	3.34 years		3.55 years
Finance leases	3.59 years		4.61 years
Weighted average discount rate:
Operating leases	16.20	%	16.20	%
Finance leases	16.15	%	16.23	%

Lease cost consists of the following:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease cost	$	3,207	$	3,291
Finance lease cost:
Amortization of right-of-use assets	37		—
Interest on lease liabilities	21		1
Total lease cost
Sublease income	(633)		(1,066)
Net lease cost	$	2,632	$	2,226

The following table presents the lease-related assets and liabilities recorded on the Consolidated Balance Sheets:


	March 31, 2023		December 31, 2022
	(In thousands)
Operating leases:
Operating lease right-of use assets	$	30,756	$	32,340
Operating lease right-of use liabilities, current	$	9,275	$	8,650
Operating lease right-of use liabilities, non-current	$	21,397	$	23,699
Finance leases:
Property and equipment, net	$	498	$	260
Accrued expenses and other current liabilities	$	124	$	45
Other noncurrent liabilities	$	389	$	225

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	3,299	$	3,490
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	650	$	39,405

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7. Property and Equipment, Net

Property and equipment, net consists of the following:


	March 31, 2023		December 31, 2022
	(in thousands)
Computer equipment	$	12,653	$	12,308
Capitalized software	29,540		28,831
Fulfillment equipment	51,913		51,639
Furniture and fixtures	2,757		2,757
Leasehold improvements	113,729		113,703
Construction in process(1)	2,857		2,466
Property and equipment, gross	213,449		211,704
Less: accumulated depreciation and amortization	(158,741)		(154,518)
Property and equipment, net	$	54,708	$	57,186

________________________

(1)Construction in process includes all costs capitalized related to projects that have not yet been placed in service.

8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	March 31, 2023		December 31, 2022
	(in thousands)
Accrued compensation	$	4,319	$	9,653
Accrued credits and refunds reserve	991		1,053
Accrued marketing expenses	4,963		3,968
Accrued shipping expenses	1,678		2,132
Accrued workers' compensation reserve	3,592		4,260
Other current liabilities	5,588		6,011
Accrued expenses and other current liabilities	$	21,131	$	27,077

9. Deferred Revenue

Deferred revenue consists of the following:


	March 31, 2023		December 31, 2022
	(in thousands)
Cash received prior to fulfillment	$	6,397	$	4,940
Gift cards, prepaid orders, and other	13,149		14,143
Deferred revenue	$	19,546	$	19,083

Under ASC 606, Revenue from Contracts with Customers, the Company has two types of contractual liabilities: (i) cash collections from its customers prior to delivery of products purchased, which are included in Deferred revenue on the Consolidated Balance Sheets, and are recognized as revenue upon transfer of control of its products, and (ii) unredeemed gift cards and other prepaid orders, which are included in Deferred revenue on the Consolidated Balance Sheets, and are recognized as revenue when gift cards are redeemed and the products are delivered. Certain gift cards are not expected to be redeemed, also known as breakage, and are recognized as revenue over the expected redemption period, subject to requirements to remit balances to governmental agencies.

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Contractual liabilities included in Deferred revenue on the Consolidated Balance Sheets were $19.5 million and $19.1 million as of March 31, 2023 and December 31, 2022, respectively. During the three months ended March 31, 2023, the Company recognized $6.2 million to Net revenue from the Deferred revenue as of December 31, 2022.

See Notes 2 and 14 for further information regarding the March and May Sponsorship Gift Cards (as defined below).

10. Debt

2020 Term Loan and Amendment

On October 16, 2020, the Company entered into a financing agreement which provided for a senior secured term loan in the aggregate principal amount of $35.0 million (the “2020 Term Loan”). The 2020 Term Loan bore interest at a rate equal to LIBOR (subject to a 1.50% floor) plus 8.00% per annum, with the principal amount repayable in equal quarterly installments of $875,000 through December 31, 2022, and the remaining unpaid principal amount of the 2020 Term Loan due on March 31, 2023.

On May 5, 2021 (the “closing date”), the Company amended the financing agreement (the “May 2021 Amendment”), which modified certain provisions of the financing agreement, such as increasing the interest rate margin on the 2020 Term Loan by 1.00% per annum, resulting in the 2020 Term Loan bearing interest, from and after the closing date, at a rate equal to LIBOR (subject to a 1.50% floor) plus 9.00% per annum.

The 2020 Term Loan was repaid in full on May 5, 2022 with the proceeds of the senior secured notes issued under the note purchase agreement described below.

Blue Torch Warrant Obligation

In connection with the May 2021 Amendment, the Company agreed to prospectively grant warrants (the “Blue Torch warrant obligation”) to the lenders. Under the terms of the Blue Torch warrant obligation, so long as the 2020 Term Loan remained outstanding, on the first day of each quarter beginning on July 1, 2021, the Company issued a warrant to the lenders to purchase at an exercise price of $0.01 per share such number of shares of Class A common stock of the Company as equaled 0.50% of the then outstanding shares of common stock of the Company, on a fully-diluted basis.

The Blue Torch warrant obligation was accounted for in accordance with ASC 815-40, Contracts in an Entity’s Own Equity, as a liability recognized at fair value as of the closing date, due to certain settlement provisions within the corresponding warrant obligation provisions under the financing agreement that did not meet the criteria to be classified in stockholders’ equity.

The Blue Torch warrant obligation was remeasured to fair value at each balance sheet date, with changes in fair value recorded in Other income (expense), net in the Consolidated Statements of Operations. The Blue Torch warrant obligation was terminated within the termination of the Company’s financing agreement with Blue Torch Finance LLC ("Blue Torch"), as discussed below.

Senior Secured Notes and March 2023 Extinguishment

On May 5, 2022 (the “issue date”), the Company entered into a note purchase and guarantee agreement (the “note purchase agreement”), which provides for, among other things, the issuance of $30.0 million in aggregate principal amount of senior secured notes due May 5, 2027 (the “senior secured notes”) at a purchase price equal to 94.00% thereof. The proceeds of the senior secured notes were used, together with cash on hand, to repay in full the outstanding amount under the 2020 Term Loan and pay fees and expenses in connection with the transactions contemplated by the note purchase agreement. The Company subsequently terminated its financing agreement, effective as of the issue date, which also resulted in the termination of the Blue Torch warrant obligation.

Note Purchase Agreement Amendment

On March 15, 2023, the Company entered into the note purchase agreement amendment which, among other things, accelerates the repayment of the senior secured notes due originally in May 2027 to an effective maturity of June 2023. The Company agreed to pay the full outstanding principal balance on the senior secured notes in four equal amortization installments of $7.5 million, with the first installment paid in connection with the signing of the note purchase agreement amendment, and with the final installment due on June 15, 2023, including any accrued and unpaid interest. Under the note purchase agreement amendment, the noteholder also agreed to reduce the minimum liquidity covenant

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amount, which was previously set at $25.0 million, to $17.5 million following the first amortization payment, and to $10.0 million following the first and second amortization payments, until the senior secured notes are repaid in full. Furthermore, conditioned upon the timely payment of all the amortization payments, the noteholder agreed to waive all prepayment premiums and the ESG KPI Fee (as defined below) that would otherwise have been owed by the Company at maturity in May 2027.

In connection with the note purchase agreement amendment, the noteholder consented to the surrender of ownership to the Company, by the Pledgor, of certain of the Pledged Shares in satisfaction of certain obligations of the Pledgor under the Pledge Agreement, should a surrender of the collateral be agreed by the Company and the Pledgor. The note purchase agreement amendment also clarified that such surrendered Pledged Shares would become collateral for the Company for the obligation under the note purchase agreement.

The note purchase agreement amendment also contains additional and modified reporting and information requirements, including amending the requirement to deliver an audit report of the Company's independent registered public accounting firm, which report shall not include a “going concern” explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern to exclude the audit opinion relating to the financial statements for the year ended December 31, 2022. In addition, the note purchase agreement amendment clarifies that, to the extent, if any, that prior events related to the Pledge Agreement or amendments to the RJB Purchase Agreement (as defined below) constituted defaults under the note purchase agreement, such defaults are waived, although it is the Company's position that no such defaults existed at any time.

Note Purchase Agreement Amendment Debt Extinguishment

The Company evaluated the note purchase agreement amendment under ASC 470-50 regarding the modification of an existing debt instrument, which states that if the modification of the terms of an existing debt agreement is considered substantial, the transaction shall be accounted for as an extinguishment, with the net carrying value of the existing debt derecognized and the amended debt instrument then initially recorded at fair value. The Company concluded that the modification was considered substantial and thus recorded a $1.9 million extinguishment loss in the Consolidated Statement of Operations.

Senior Secured Notes Terms and Covenants

After receiving a minimum specified bond rating after the issue date, as specified within the terms of the note purchase agreement, the senior secured notes bear interest at a rate equal to 8.875% per annum, which, prior to the note purchase agreement amendment, were payable in arrears on June 30 and December 31 of each calendar year. Prior to the note purchase agreement amendment, the senior secured notes amortized semi-annually in equal installments of $1.5 million beginning on December 31, 2025, with the remaining unpaid principal amount of the senior secured notes due on May 5, 2027.

The note purchase agreement contains two financial maintenance covenants:

•a minimum liquidity covenant of:

i.for any date ending prior to or ending on June 30, 2022, including those within required cash flow forecasts provided to the noteholders, $15.0 million;

ii.for any date thereafter, including those within required 13-week cash flow forecasts provided to the noteholders:

•$15.0 million if the most recent Asset Valuation (as defined in the note purchase agreement) is greater than $25.0 million;

•prior to the note purchase agreement amendment, $20.0 million if the most recent Asset Valuation is greater than $20.0 million but less than $25.0 million; or

•$25.0 million if the most recent Asset Valuation is less than or equal to $20.0 million, or is as of yet uncompleted; and

•a covenant requiring a minimum Asset Coverage Ratio (as discussed below) of at least 1.25 to 1.00.

As a result of the initial Asset Valuation completed on August 31, 2022, and the most recent Asset Valuation completed on January 30, 2023, the minimum liquidity covenant was set at $25.0 million. Subsequent to the initial report,

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the Asset Valuation was required to be provided to the noteholders no later than 30 days after June 30 and December 31 of each fiscal year.

Following the payment of the first $7.5 million amortization payment in connection with the signing of the note purchase agreement amendment, the minimum liquidity covenant was reduced to $17.5 million as of March 31, 2023. As of the date of this Quarterly Report on Form 10-Q, and following the second $7.5 million amortization payment on April 15, 2023, the minimum liquidity covenant is set at $10.0 million until the senior secured notes are repaid in full.

The Asset Coverage Ratio was measured as of each quarter-end, and represents the ratio of (a) the aggregate amount of Adjusted Eligible Collateral (as defined in the note purchase agreement) to (b) the aggregate outstanding principal amount of the senior secured notes at such time.

The Company had also agreed to use commercially reasonable efforts to cause 90% of the packaging for its meal kit boxes to be recyclable, reusable, or compostable (the “ESG KPI Goal”). If the Company had failed to achieve the ESG KPI Goal prior to the date on which the senior secured notes are due, the Company would have been required to pay a fee equal to 1% of the principal amount of the senior secured notes (the "ESG KPI Fee"). Conditioned upon the timely payment of all amortization payments the noteholder has agreed to waive such fee.

The borrower under the note purchase agreement is the Company’s wholly-owned subsidiary, Blue Apron, LLC. The obligations under the note purchase agreement are guaranteed by Blue Apron Holdings, Inc. and its subsidiaries other than the borrower, and secured by substantially all of the assets of the borrower and the guarantors. The note purchase agreement contains additional restrictive covenants and affirmative and financial reporting covenants restricting the Company and the Company’s subsidiaries’ activities. Restrictive covenants include limitations on the incurrence of indebtedness and liens, restrictions on affiliate transactions, restrictions on the sale or other disposition of collateral, and limitations on dividends and stock repurchases.

As of March 31, 2023, the Company was in compliance with all of the covenants under the note purchase agreement.

The Company amortizes deferred financing costs using the effective interest method over the life of the debt, in accordance with ASC 835-30, Imputation of Interest. The following table summarizes the presentation of the Company’s debt balances in the Consolidated Balance Sheets as of the dates indicated below:


	Senior secured notes		Debt issuance costs, net		Net
	(In thousands)
March 31, 2023
Current portion of long-term debt	$	22,500	$	(562)	$	21,938
Long-term debt	—		—		—
Total	$	22,500	$	(562)	$	21,938

December 31, 2022
Current portion of long-term debt	$	30,000	$	(2,488)	$	27,512
Long-term debt	—		—		—
Total	$	30,000	$	(2,488)	$	27,512

11. Commitments and Contingencies

The Company records accruals for loss contingencies associated with legal matters when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss is reasonably possible, the Company discloses the matter, and, if estimable, the amount or range of the possible loss in the notes to the Consolidated Financial Statements.

In addition, from time to time the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. Although the results of such litigation and claims cannot be predicted with certainty, the Company currently believes that there are no ordinary course matters that will have a material adverse effect on its business, operating results, financial conditions, or cash flows.

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12. Stockholders’ Equity (Deficit)

Public Equity Offerings

During the three months ended March 31, 2023, the Company issued and sold 16,688,526 shares of its Class A common stock via “at-the-market” equity offerings, resulting in $16.6 million of proceeds, net of commissions and offering costs.

RJB Private Placements

February 2022 Private Placement

On February 14, 2022, the Company entered into a purchase agreement with RJB Partners LLC (“RJB”), an affiliate of Joseph N. Sanberg, an existing stockholder of the Company, under which the Company agreed to issue and sell to RJB units consisting of Class A common stock and warrants to purchase shares of Class A common stock in a private placement (the “February 2022 Private Placement”) which closed concurrently with the execution of the purchase agreement for an aggregate purchase price of $5.0 million (or $14.00 per unit). In the aggregate, RJB received (i) 357,143 shares of Class A common stock, and (ii) warrants to purchase 500,000 shares of Class A common stock at exercise prices of $15.00 per share, $18.00 per share, and $20.00 per share, resulting in $4.8 million of proceeds, net of issuance costs.

The shares of Class A common stock and warrants were issued separately and constitute separate securities. The Company conducted an assessment of the classification of the warrants issued in the February 2022 Private Placement and, based on their terms, concluded the warrants were equity-classified. Accordingly, the net proceeds were recorded within Additional paid-in capital.

RJB Purchase Agreement

On April 29, 2022, the Company entered into a purchase agreement with RJB (the “RJB Purchase Agreement”). Under the agreement, the Company agreed to issue and sell 3,333,333 shares of Class A common stock for an aggregate purchase price of $40.0 million (or $12.00 per share), of which 1,666,666 shares of Class A common stock were issued and sold to an affiliate of Joseph N. Sanberg for an aggregate purchase price of $20.0 million concurrently with the execution of the agreement, and with the remainder to be issued and sold under a second closing (the "RJB Second Closing"), initially expected to close by May 30, 2022 or such other date as agreed to by the parties.

On August 7, 2022, the Company amended the RJB Purchase Agreement, pursuant to which RJB agreed to purchase from the Company at the RJB Second Closing (i) the 1,666,667 shares of Class A common stock remaining to be issued and sold under the initial RJB Purchase Agreement at a $5.00 price per share, instead of a price of $12.00 per share, and (ii) an additional 8,333,333 shares of Class A common stock at a price of $5.00 per share. Upon execution of the amendment, the RJB Second Closing comprised in the aggregate a purchase price of $50.0 million and 10,000,000 shares of Class A common stock to be issued and sold, as well as agreeing to extend the date of the second closing to on or before August 31, 2022. In addition, pursuant to the amendment, Joseph N. Sanberg agreed to personally guarantee the payment of the aggregate purchase price.

On September 7, 2022, the Company further amended the RJB Purchase Agreement to extend the RJB Second Closing date to September 30, 2022 or such earlier date as may be agreed to by the Company and RJB, and to change the price per share to $5.65 for the purchase of the 10,000,000 shares of Class A common stock remaining to be sold and issued, for an aggregate purchase price of $56.5 million.

On November 6, 2022, the Company entered into an agreement with an affiliate of Joseph N. Sanberg, pursuant to which the affiliate (i) guaranteed the remaining amount to be funded under the RJB Second Closing and (ii) to secure its obligation to pay the remaining amount to be funded under the RJB Second Closing, granted the Company security interests of certain privately-held issuers, the certificates (if any) representing the Pledged Shares, and all dividends, distributions, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares.

On December 14, 2022, a Sanberg affiliate funded $1.0 million under the RJB Purchase Agreement, in exchange for which the Company issued and sold 176,991 shares of its Class A common stock, resulting in $0.6 million of proceeds, net of issuance costs. As of the date of this Quarterly Report on Form 10-Q, the remaining $55.5 million of the RJB Purchase Agreement remains unfunded. As such, the Company is permitted to exercise remedies in respect to the Pledged Shares, including foreclosing on the Pledged Shares.

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Warrant Terms

Each equity-classified warrant issued by the Company has a term of seven years from the date of issuance. Each such warrant may only be exercised for cash, except in connection with certain fundamental transactions, and no fractional shares will be issued upon exercise of the warrants. The warrants are non-transferable, except in limited circumstances, and have not been and will not be listed or otherwise trade on any stock exchange. The number of shares issuable upon exercise of the warrants and the applicable exercise prices is subject to adjustment upon the occurrence of certain events.

As of March 31, 2023, the equity-classified warrants issued by the Company were as follows:


Exercise Price		Issued	Exercised	Outstanding as of March 31, 2023
$	15.00	6,525,714	—	6,525,714
$	18.00	3,262,857	—	3,262,857
$	20.00	1,631,429	—	1,631,429

13. Share-based Compensation

The Company recognized share-based compensation for share-based awards in Cost of goods sold, excluding depreciation and amortization, and Product, technology, general and administrative expenses as follows:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Cost of goods sold, excluding depreciation and amortization	$	—	$	2
Product, technology, general and administrative	1,293		2,171
Total share-based compensation	$	1,293	$	2,173

14. Related Party Transactions

Due to their status as beneficial owners of more than 10 percent (10%) of the voting power of the outstanding capital stock of the Company as of March 31, 2023, Joseph N. Sanberg and his affiliates meet the definition of “related parties” per ASC 850, Related Party Disclosures.

Gift Card Sponsorship Agreements

March and May Sponsorship Gift Cards

On March 11, 2022, the Company entered into a gift card sponsorship agreement with an affiliate of Joseph N. Sanberg, pursuant to which such affiliate agreed to pay the Company a $9.0 million net sponsorship fee to support a marketing program through which the Company would distribute gift cards (the “March Sponsorship Gift Cards”), at the Company’s sole discretion, in order to support its previous growth strategy.

On May 5, 2022, the Company entered into an additional gift card sponsorship agreement with an affiliate of Joseph N. Sanberg (the “Sponsorship Gift Cards Agreement”), pursuant to which such affiliate agreed to pay the Company a $20.0 million net sponsorship fee to support a marketing program through which the Company will distribute gift cards (the “May Sponsorship Gift Cards”), at its sole discretion, in order to support its previous growth strategy. On August 7, 2022, the Company amended the Sponsorship Gift Cards Agreement to extend the funding date to on or before August 31, 2022, and pursuant to which, Joseph N. Sanberg personally guaranteed his affiliate’s obligation.

On September 7, 2022, the Sponsorship Gift Cards Agreement was further amended to reduce the net sponsorship fee to $18.5 million and extend its due date to September 19, 2022. As of the date of this Quarterly Report on Form 10-Q, the Sanberg affiliate has paid $5.8 million of its commitment under said agreement, with $12.7 million remaining to be paid.

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Sustainability and Carbon Credit Agreement

On March 31, 2022, the Company entered into an agreement (the “Sustainability Agreement”) with an affiliate of Joseph N. Sanberg. Under the terms of the agreement, the Company purchased and subsequently retired $3.0 million of carbon offsets, which were recognized in Product, technology, general and administrative expenses during the three months ended March 31, 2022.

Such affiliate also performed the assessment of the Company’s 2021 annual carbon footprint that provided it with the basis for determining the amount of carbon offsets the Company needed to purchase. The fee for these services was waived as a condition of entering into the Sustainability Agreement.

On June 30, 2022, the Company entered into a statement of work under the Sustainability Agreement, through which the affiliate transferred to the Company a sufficient amount of carbon offsets for its estimated 2023 and 2024 Scope 1, Scope 2, and Scope 3 emissions based upon its 2021 annual carbon footprint, for a purchase price of $6.0 million, which was to be paid in twenty-four equal monthly installments beginning on July 31, 2022.

On February 2, 2023, the Company and the affiliate terminated the Sustainability Agreement, which released the Company of its remaining payment obligation of $5.5 million. Under the terms of the termination agreement, the Company retained a number of carbon credits purchased for $0.5 million and paid to the Sanberg affiliate as of December 31, 2022. Such retained carbon credits are expected to offset the Company's estimated 2023 and 2024 Scope 1 and Scope 2 emissions. During the three months ended March 31, 2023, the Company retired $0.2 million of carbon offsets, which were recognized in Product, technology, general and administrative expenses.

RJB Private Placements

See Note 12 for information regarding the February 2022 Private Placement and the RJB Purchase Agreement.

The following table summarizes the composition and amounts of the transactions in the Company’s Consolidated Statements of Operations involving its related parties:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Net revenue:
March Sponsorship Gift Cards	$	166	$	—
Cost of goods sold, excluding depreciation and amortization	108		—
Product, technology, general and administrative	$	208	$	3,000

15. Earnings per Share

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted-average number of common shares, including potential dilutive common shares assuming the dilutive effect of outstanding common stock options, restricted stock units, and warrants. For periods in which the Company has reported net loss, diluted net loss per share attributable to common

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stockholders is the same as basic net loss per share attributable to common stockholders, because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.


	Three Months Ended March 31,
	2023		2022
	Class A		Class A
(In thousands, except share and per-share data)
Numerator:
Net income (loss) attributable to common stockholders	$	(17,036)	$	(38,674)
Denominator:
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—basic	66,435,278		32,288,424
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—diluted	66,435,278		32,288,424

Net income (loss) per share attributable to common stockholders—basic (1)	$	(0.26)	$	(1.20)
Net income (loss) per share attributable to common stockholders—diluted (1)	$	(0.26)	$	(1.20)

________________________

(1)Net income (loss) per share attributable to common stockholders — basic and net income (loss) per share attributable to common stockholders — diluted may not recalculate due to rounding.

The following have been excluded from the computation of diluted net income (loss) per share attributable to common stockholders as their effect would have been antidilutive:


	Three Months Ended March 31,
	2023	2022
	Class A	Class A
Stock options	26,160	35,970
Restricted stock units	2,544,630	2,216,920
Warrants	11,420,000	11,420,000
Total anti-dilutive securities	13,990,790	13,672,890

16. Fair Value Measurements

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use when pricing the asset or liability. Unobservable inputs are inputs for which market data is not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability.

The fair value hierarchy consists of the following three levels:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 — Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

The Company uses observable market data when available, and minimizes the use of unobservable inputs when determining fair value. The Company did not measure any assets or liabilities at fair value as of March 31, 2023 and December 31, 2022.

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Warrant Obligation

The Blue Torch warrant obligation issued in conjunction with the May 2021 Amendment, as discussed in Note 10, was accounted for in accordance with ASC 815-40, Contracts in an Entity’s Own Equity, as a liability recognized at fair value (Level 3 within the fair value hierarchy), and was remeasured as of each balance sheet date with changes in fair value recorded in Other income (expense), net in the Consolidated Statements of Operations. The amount of each warrant to be issued under the obligation set forth in the financing agreement was based upon 0.50% of the then-outstanding shares of the Company’s common stock on a fully-diluted basis on the first day of each quarter, beginning on July 1, 2021, so long as the 2020 Term Loan remained outstanding. As such, the fair value of the Blue Torch warrant obligation was calculated using the estimated amount of warrants to be issued over the life of the financing agreement multiplied by the price of the Company’s stock as of the closing date, less $0.01 per share to represent each warrant’s exercise price. The estimated amount of shares to be issued was derived from the Company’s estimate of shares of the Company’s common stock on a fully-diluted basis over the life of the financing agreement.

On May 5, 2022, the Company fully repaid the 2020 Term Loan with the proceeds of its senior secured notes and cash on hand and terminated its financing agreement effective as of the same date, which also resulted in the termination of the warrant obligation. As of May 5, 2022, all warrants that had been issued under the Blue Torch warrant obligation had been exercised in full, resulting in no liability-classified warrants outstanding. See Note 10 for further discussion.

The following table summarizes the changes of the Blue Torch warrant obligation as of March 31, 2022 and December 31, 2021:


	Balance as of December 31, 2021		Loss (gain) on changes in stock price	Loss (gain) on changes in estimated common stock on a fully-diluted basis	Exercise of warrants	Balance as of March 31, 2022
	(In thousands)
Warrant obligation	$	9,589	(1,755)	110	(4,096)	$	3,848

17. Restructuring Costs

In December 2022, the Company implemented a reduction in corporate personnel to better align internal resources with strategic priorities, which resulted in a reduction of approximately 10% of the Company’s total corporate workforce, inclusive of both current and vacant roles. As a result, during the three months ended December 31, 2022, the Company recorded $1.5 million in employee-related expenses in Other operating expense, primarily consisting of severance payments, substantially all of which will result in cash expenditures in the first half of 2023.


	Employee-Related Costs
	(in thousands)
Balance - December 31, 2022	$	1,295
Cash payments	(911)
Balance - March 31, 2023	$	384

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and certainty of cash flows from operations and from outside resources, so as to allow investors to better view our company from management’s perspective. You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 16, 2023. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the section titled “Risk Factors” under Part II, Item 1A, below. In this discussion, we use certain financial measures that are considered non-GAAP financial measures under Securities and Exchange Commission rules. These rules require supplemental explanation and reconciliation, which is included elsewhere in this Quarterly Report on Form 10-Q. Investors should not consider non-GAAP financial measures in isolation from or in substitution for financial information presented in compliance with U.S. generally accepted accounting principles (“GAAP”). In the below discussion, we use the term basis points to refer to units of one-hundredth of one percent.

Overview

Blue Apron’s vision is Better Living Through Better Food™. Founded in 2012, we are on a mission to spark discovery, connection, and joy through cooking. We offer fresh, chef-designed recipes that empower our customers to embrace their culinary curiosity and challenge their abilities to see what a difference cooking quality food can make in their lives.

Our core product is the meal experience we help our customers create. These experiences extend from discovering new recipes, ingredients, and cooking techniques to preparing meals with families and loved ones to sharing photos and stories of culinary triumphs. Central to these experiences are the original recipes we design with fresh, seasonally-inspired produce and high-quality ingredients sent directly to our customers.

Central to our operations, we have developed an integrated network that employs technology and expertise across many disciplines. Our supply-demand coordination activities – demand planning, recipe creation, procurement, recipe merchandising, fulfillment operations, distribution, customer service, and marketing – drive our end-to-end value chain.

We currently offer our customers four weekly meal plans—a Two-Serving Signature Plan, a Two-Serving Vegetarian Plan, a Two-Serving Wellness Plan, and a Four-Serving Signature Plan. In addition, each week, customers can add unlimited Add-ons recipes to each order, which includes breakfast, appetizers, side dishes, desserts, à la carte proteins, and/or Heat & Eat meals, which are microwaveable meals that are ready in minutes.

We also sell wine, which can be paired with our meals or can be purchased à la carte, through Blue Apron Wine, our direct-to-consumer wine delivery service. Through Blue Apron Market, our e-commerce market, we sell a curated selection of cooking tools, utensils, pantry items, and add-on products for different culinary occasions, which are tested in our test kitchen and recommended by our culinary team. Our products are available to purchase through our website, mobile app, and beginning in the second quarter of 2022, third-party sales platforms for our meal kit products.

Key Financial and Operating Metrics

We use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. You should read the key financial and operating metrics in conjunction with the following discussion of our results of

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operations and financial condition together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q.


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Net revenue	$	113,080	$	117,751
Net income (loss)	$	(17,036)	$	(38,674)
Adjusted EBITDA	$	(8,691)	$	(31,434)
Net cash from (used in) operating activities	$	(9,519)	$	(28,825)
Free cash flow	$	(10,797)	$	(30,146)


	Three Months Ended
	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Orders (in thousands)	1,608		1,460		1,548		1,701		1,869
Customers (in thousands)	326		298		323		349		367
Average Order Value	$	70.27	$	73.15	$	70.83	$	67.14	$	62.99
Orders per Customer	4.9		4.9		4.8		4.9		5.1
Average Revenue per Customer	$	346	$	358	$	340	$	328	$	321

Orders

We define Orders as the number of paid orders by our Customers across our meal, wine, and market products sold on our e-commerce platforms and, beginning in the second quarter of 2022, through third-party sales platforms in any reporting period, inclusive of orders that may have eventually been refunded or credited to customers. Orders, together with Average Order Value, is an indicator of the net revenue we expect to recognize in a given period. We view Orders delivered as a key indicator of our scale and financial performance, however Orders has limitations as a financial and operating metric as it does not reflect the product mix chosen by our Customers or the purchasing behavior of our customers. Because of these and other limitations, we consider, and you should consider, Orders in conjunction with our other metrics, including net revenue, net income (loss), adjusted EBITDA, net cash from (used in) operating activities, free cash flow, Average Order Value, and Orders per Customer.

Customers

We determine our number of Customers by counting the total number of individual customers who have paid for at least one Order from Blue Apron across our meal, wine, or market products sold on our e-commerce platforms and, beginning in the second quarter of 2022, through third-party sales platforms in a given reporting period. For example, the number of Customers in the three months ended March 31, 2023 was determined based on the total number of individual customers who paid for at least one Order across our meal, wine, or market products in the quarter ended March 31, 2023, including sales made on third-party sales platforms. We view the number of Customers as a key indicator of our scale and financial performance, however Customers has limitations as a financial and operating metric as it does not reflect the product mix chosen by our customers, Order frequency, or the purchasing behavior of our Customers. Because of these and other limitations, we consider, and you should consider, Customers in conjunction with our other metrics, including net revenue, net income (loss), adjusted EBITDA, net cash from (used in) operating activities, free cash flow, Orders per Customer, and Average Revenue per Customer.

Average Order Value

We define Average Order Value as our net revenue from our meal, wine, and market products sold on our e-commerce platforms and, beginning in the second quarter of 2022, through third-party sales platforms, in a given reporting period divided by the number of Orders in that period. We view Average Order Value as a key indicator of the mix of our product offerings chosen by our customers, the mix of promotional discounts, and the purchasing behavior of our customers.

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Orders per Customer

We define Orders per Customer as the number of Orders in a given reporting period divided by the number of Customers in that period. We view Orders per Customer as a key indicator of our customers’ purchasing patterns, including their repeat purchase behavior.

Average Revenue per Customer

We define Average Revenue per Customer as our net revenue from our meal, wine, and market products sold on our e-commerce platforms and, beginning in the second quarter of 2022, through third-party sales platforms in a given reporting period divided by the number of Customers in that period. We view Average Revenue per Customer as a key indicator of our customers’ purchasing patterns, including their repeat purchase behavior.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure defined by us as net income (loss) before interest income (expense), net, other operating expense, gain (loss) on extinguishment of debt, other income (expense), net, benefit (provision) for income taxes, depreciation and amortization, and share-based compensation expense. We have presented adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business. Accordingly, we believe that adjusted EBITDA provides useful information in understanding and evaluating our operating results. Please see “Non-GAAP Financial Measures” for a discussion of the use of non-GAAP financial measures and for a reconciliation of adjusted EBITDA to net income (loss), the most directly comparable measure calculated in accordance with GAAP.

Free Cash Flow

Free cash flow is a non-GAAP financial measure defined by us as net cash from (used in) operating activities less purchases of property and equipment. We have presented free cash flow in this Quarterly Report on Form 10-Q because it is used by our management and board of directors as an indicator of the amount of cash we generate or use and to evaluate our ability to satisfy current and future obligations and to fund future business opportunities. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our ability to satisfy our financial obligations and pursue business opportunities, and allowing for greater transparency with respect to a key financial metric used by our management in their financial and operational decision-making. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt repayments or finance lease obligations that are not deducted from the measure. Additionally, other companies, including companies in our industry, may calculate free cash flow differently, which reduces its usefulness as a comparative measure. Please see “Non-GAAP Financial Measures” for a discussion of the use of non-GAAP financial measures and for a reconciliation of free cash flow to net cash from (used in) operating activities, the most directly comparable measure calculated in accordance with GAAP.

Impact of COVID-19 on our Business

Beginning in late March 2020, we experienced an increase in demand due in part to changes in consumer behaviors resulting from the various restrictions that had been enacted throughout much of the United States in response to the COVID-19 pandemic. As restrictions were lifted and as vaccines became more widely available in the United States starting in the first half of 2021, and as people have resumed pre-pandemic activities, such as travel and dining out, the increased demand due to the pandemic began to decline after the first quarter of 2021. At times during the COVID-19 pandemic, we also faced disruptions in our supply chain. We believe there is no continuing material impact on our business, if any, from the COVID-19 pandemic.

The COVID-19 pandemic or any future pandemics may have other adverse effects on our business, operations, and financial results and condition, including, among other things, as a result of adverse impacts on labor availability, our fulfillment center operations, supply chain and logistics disruptions, consumer behaviors, and on the overall economy, including recent high inflation levels impacting consumer spending.

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Components of Our Results of Operations

Net Revenue

We generate net revenue primarily from the sale of meals to customers through our Two‑Serving and Four-Serving Plans, as well as our Add-On, premium, customization, and other up-sell offerings. We also generate net revenue through sales of Blue Apron Wine, sales on Blue Apron Market, sales of meal kits on third-party sales platforms, and to a more limited extent, through enterprise bulk sales on an ad hoc basis. We generally derive substantially all of our net revenue from sales of our meal kit boxes through our direct-to-consumer platform. We deduct promotional discounts, actual customer credits and refunds as well as customer credits and refunds expected to be issued to determine net revenue. Customers who receive a damaged meal or wine order or are dissatisfied with a meal or wine order and contact us within seven days of receipt of the order may receive a full or partial refund, full or partial credit against future purchase, or replacement, at our sole discretion. Credits only remain available for customers who maintain a valid account with us. Customers who return an unused, undamaged Blue Apron Market product within 30 days of receipt receive a full refund.

Our business is seasonal in nature and, as a result, our revenue and expenses and associated revenue trends fluctuate from quarter to quarter. We anticipate that the first quarter of each year will generally represent our strongest quarter in terms of customer engagement. Conversely, during the summer months and the end of year holidays, when people are vacationing more often or have less predictable weekly routines, we generally anticipate lower customer engagement. However, seasonal trends may be masked and impacted by marketing investments. We also anticipate that our net revenue will be impacted by the execution of strategic priorities, including our ability to develop and execute product expansion initiatives, pricing updates, as well as the timing and extent of the sale and issuance of gift cards and the associated revenue upon the redemption of those gift cards, which generally occurs within one year of gift card issuance. Net revenue will also be impacted by gift card breakage revenue, which is our estimate of the portion of our gift card balance not expected to be redeemed. During 2022, we entered into various agreements and amendments to such agreements with related parties under which we ultimately agreed to issue $27.5 million (net of promotional discounts) of gift cards, which may result in higher levels of gift card breakage revenue and which may inflate net revenue or mask seasonal trends in future periods. As of the date of this Quarterly Report on Form 10-Q, $12.7 million of gift card proceeds from the related party have not been funded, and no gift cards have yet been issued against those funds. See Note 14 to the consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.

In addition, our net revenue is impacted by our marketing strategies, including the timing and amount of paid advertising and promotional activity. As part of the execution of our strategic priorities, we significantly increased marketing expenses toward the end of the fourth quarter of 2021 and throughout most of 2022. However, in December 2022, we announced that we were focused on driving towards profitability in the future and plan to significantly reduce marketing expenses in 2023, which is expected to negatively impact customers and net revenue in 2023. Our ability to grow net revenue and increase marketing expenses in the future are dependent upon our ability to receive all or a sufficient portion of the remaining $68.2 million pursuant to the liquidity transactions (as defined below) with related parties, our ability to obtain additional funding from other sources or raise additional capital, or receive any cash proceeds from the disposition of the Pledged Collateral (as defined below).

Credit card charges are recorded in deferred revenue until the criteria for revenue recognition have been met. Because we generally charge credit cards in advance of shipment and, historically, customers have most frequently requested delivery of their meals earlier in the week, our deferred revenue balance at the end of a financial reporting period may fluctuate significantly based on the day of the week on which that period ends. Consequently, large changes in deferred revenue at any particular time are not meaningful indicators of our financial results or future net revenue trends.

Cost of Goods Sold, excluding Depreciation and Amortization

Cost of goods sold, excluding depreciation and amortization, consists of product and fulfillment costs. Product costs include the cost of food, packaging for food that is portioned prior to delivery to customers, labor and related personnel costs incurred to portion food for our meals, inbound shipping costs, and cost of products sold through Blue Apron Wine and Blue Apron Market. Fulfillment costs consist of costs incurred in the shipping and handling of inventory including the shipping costs to our customers, labor and related personnel costs related to receiving, inspecting, warehousing, picking inventory, and preparing customer orders for shipment, and the cost of packaging materials and shipping supplies. As noted above, our business is seasonal in nature and, as a result we anticipate that the third quarter of each year will generally reflect higher levels of cost of goods sold, excluding depreciation and amortization, due to higher packaging and shipping costs due to warmer temperatures. Over time, we expect such expenses to decrease as a percentage of net revenue as we continue to focus on operational improvements and optimizing our fulfillment center operations.

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Marketing

Our marketing expenses consist primarily of costs incurred to acquire new customers, retain existing customers, and build our brand awareness through various online and offline paid channels, including digital and social media, television, direct mail, radio and podcasts, email, brand activations, and certain variable and fixed payments to strategic brand partnerships. Also included in marketing expenses are the costs of orders through our customer referral program, in which certain existing customers may invite others to receive a complimentary meal kit, as well as costs paid to third parties to market our products. The cost of the customer referral program is based on our costs incurred for fulfilling a complimentary meal delivery, including product and fulfillment costs.

As part of the execution of our strategic priorities in prior periods, we increased marketing expenses toward the end of the fourth quarter of 2021 and throughout most of 2022. However, in December 2022, we determined to significantly reduce marketing expenditures, and we expect marketing expenses to decrease meaningfully, both in absolute dollars and as a percentage of net revenue in 2023 compared to 2022, as we prioritize profitability and marketing efficiency. Our ability to continue to have higher marketing expenses in the future is dependent upon our ability to receive all or a sufficient portion of the remaining $68.2 million pursuant to the liquidity transactions (as defined below) with related parties, our ability to obtain additional funding from other sources or raise additional capital, or receive any cash proceeds from the disposition of the Pledged Collateral (as defined below). We anticipate that our marketing strategies, including the timing and extent of our marketing investments, will be informed by the sufficiency of our cash resources, our strategic priorities, our ability to execute on our strategic priorities, the seasonal trends in our business, our marketing technology capabilities, and the competitive landscape of our market, and will fluctuate from quarter-to-quarter and have a significant impact on our quarterly results of operations. We also anticipate that our future marketing strategies and investments may continue to be impacted by macroeconomic and other factors. For example, we may further reduce marketing expenditures in future periods if we experience heightened demand in a short period of time to help us manage unforeseen demand to alleviate any future capacity constraints.

Product, Technology, General and Administrative

Product, technology, general and administrative expenses consist of costs related to the development of our products and technology, general and administrative expenses, and overhead expenses, which include: payroll and related expenses for employees involved in the application, production, and maintenance of our platform and other technology infrastructure costs; payroll and related expenses for employees performing corporate and other managerial functions; facilities’ costs such as occupancy and rent costs for our corporate offices and fulfillment centers; professional fees; payment processing fees; the retirement of carbon offsets; and other general corporate and administrative costs. We expect these expenses to decrease in absolute dollars in 2023 compared to 2022, as we realize savings from the corporate workforce reduction announced in December 2022 and continue to focus on expense management.

Depreciation and Amortization

Depreciation and amortization consists of depreciation expense for our property and equipment and amortization expense for capitalized software development costs and finance leases.

Gain (Loss) on Extinguishment of Debt

Gain (loss) on extinguishment of debt relates to the extinguishment gains or losses recorded upon the amendment of our financing arrangements.

Interest Income (Expense), Net

Interest income (expense), net consists primarily of interest expense on our outstanding borrowings and finance leases.

Other Income (Expense), Net

Other income (expense), net consisted of the change in fair value of the Blue Torch warrant obligation upon remeasurement as of each reporting period.

Benefit (Provision) for Income Taxes

Our benefit (provision) for income taxes and our effective tax rates are affected by permanent differences between GAAP and statutory tax laws, certain one-time items, and the impact of valuation allowances. Our tax provision results

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from state taxes in a jurisdiction in which net operating losses are not available to offset our tax obligation. We continue to maintain a valuation allowance for all of our deferred tax assets in federal and state tax jurisdictions, as we have concluded it is more likely than not the deferred tax assets will not be utilized.

Results of Operations

The following sets forth our consolidated statements of operations data for each of the periods indicated:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Net revenue	$	113,080	$	117,751
Operating expenses:
Cost of goods sold, excluding depreciation and amortization	72,613		79,490
Marketing	14,727		27,914
Product, technology, general and administrative	35,724		43,954
Depreciation and amortization	4,222		5,533
Total operating expenses	127,286		156,891
Income (loss) from operations	(14,206)		(39,140)
Gain (loss) on extinguishment of debt	(1,850)		—
Interest income (expense), net	(973)		(1,169)
Other income (expense), net	—		1,646
Income (loss) before income taxes	(17,029)		(38,663)
Benefit (provision) for income taxes	(7)		(11)
Net income (loss)	$	(17,036)	$	(38,674)

The following table sets forth our consolidated statements of operations data as a percentage of net revenue for each of the periods indicated:


	Three Months Ended March 31,
	2023		2022
Net revenue	100.0	%	100.0	%
Operating expenses:
Cost of goods sold, excluding depreciation and amortization	64.2	%	67.5	%
Marketing	13.0	%	23.7	%
Product, technology, general and administrative	31.6	%	37.3	%
Depreciation and amortization	3.7	%	4.7	%
Total operating expenses	112.6	%	133.2	%
Income (loss) from operations	(12.6)	%	(33.2)	%
Gain (loss) on extinguishment of debt	(1.6)	%	—	%
Interest income (expense), net	(0.9)	%	(1.0)	%
Other income (expense), net	—	%	1.4	%
Income (loss) before income taxes	(15.1)	%	(32.8)	%
Benefit (provision) for income taxes	—	%	—	%
Net income (loss)	(15.1)	%	(32.8)	%

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Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Net Revenue


	Three Months Ended March 31,				% Change
	2023		2022
	(In thousands)
Net revenue	$	113,080	$	117,751	(4)	%

Net revenue decreased by $4.7 million, or 4%, to $113.1 million for the three months ended March 31, 2023 from $117.8 million for the three months ended March 31, 2022. The decrease in net revenue was primarily due to decreases in Customers and Orders, driven by a deliberate reduction in marketing, partially offset by an increase in Average Order Value due to pricing increases and advances in product innovation and variety.

Operating Expenses

Cost of Goods Sold, excluding Depreciation and Amortization


	Three Months Ended March 31,						% Change
	2023			2022
	(In thousands)
Cost of goods sold, excluding depreciation and amortization	$	72,613		$	79,490		(9)	%
% of net revenue	64.2		%	67.5		%

Cost of goods sold, excluding depreciation and amortization, decreased by $6.9 million, or 9%, to $72.6 million for the three months ended March 31, 2023 from $79.5 million for the three months ended March 31, 2022. The decrease was primarily due to the decrease in Orders. As a percentage of net revenue, cost of goods sold, excluding depreciation and amortization, decreased to 64.2% for the three months ended March 31, 2023 from 67.5% for the three months ended March 31, 2022. The decrease in cost of goods sold, excluding depreciation and amortization, as a percentage of net revenue, was primarily due to:

•a decrease of 170 basis points in labor costs, due to increased productivity in the fulfillment centers and less reliance on higher priced temporary labor;

•a decrease of 130 basis points in food and product packaging costs, due to less yield losses; and

•a decrease of 30 basis points in shipping and fulfillment packaging due to less express shipping and better truck utilization, resulting in shipping cost efficiencies.

In addition to the operational efficiencies described above, pricing increases driving improved Average Order Value also contributed to the decrease in cost of goods sold, excluding depreciation and amortization, as a percentage of net revenue.

Marketing


	Three Months Ended March 31,						% Change
	2023			2022
	(In thousands)
Marketing	$	14,727		$	27,914		(47)	%
% of net revenue	13.0		%	23.7		%

Marketing expenses decreased by $13.2 million, or 47%, to $14.7 million for the three months ended March 31, 2023 from $27.9 million for the three months ended March 31, 2022. The decrease was seen across online paid channels, offline paid channels, and our customer referral program. As a percentage of net revenue, marketing expenses decreased to 13.0% for the three months ended March 31, 2023 from 23.7% for the three months ended March 31, 2022. This decrease

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as a percentage of net revenue included decreases of 780 basis points in online paid channels, 240 basis points in offline paid channels, and 50 basis points in our customer referral program. The decrease in marketing expenses was primarily driven by our expense management and marketing efficiency initiatives.

Product, Technology, General and Administrative


	Three Months Ended March 31,						% Change
	2023			2022
	(In thousands)
Product, technology, general and administrative	$	35,724		$	43,954		(19)	%
% of net revenue	31.6		%	37.3		%

Product, technology, general and administrative expenses decreased by $8.3 million, or 19%, to $35.7 million for the three months ended March 31, 2023 from $44.0 million for the three months ended March 31, 2022. This decrease was primarily driven by our expense management initiatives, including:

•a decrease of $3.9 million in facilities costs for our corporate offices and fulfillment centers, primarily driven by the $3.0 million retirement of carbon offsets during the three months ended March 31, 2022, compared to the $0.2 million of carbon offsets retired during the three months ended March 31, 2023;

•a decrease of $2.6 million in personnel costs, primarily driven by a decrease in salaries, bonus expense and share-based compensation expense following the corporate headcount reduction in December 2022; and

•a decrease of $1.8 million in corporate overhead and administrative costs, driven by a decrease in external consulting spend.

As a percentage of net revenue, product, technology, general and administrative expenses decreased 570 basis points to 31.6% for the three months ended March 31, 2023 from 37.3% for the three months ended March 31, 2022, primarily due to our expense management initiatives.

Depreciation and Amortization


	Three Months Ended March 31,						% Change
	2023			2022
	(In thousands)
Depreciation and amortization	$	4,222		$	5,533		(24)	%
% of net revenue	3.7		%	4.7		%

Depreciation and amortization decreased by $1.3 million, or 24%, to $4.2 million for the three months ended March 31, 2023 from $5.5 million for the three months ended March 31, 2022. This decrease was primarily due to changes in composition of the estimated useful lives of the property and equipment, net, being depreciated. As a percentage of net revenue, depreciation and amortization decreased to 3.7% for the three months ended March 31, 2023 from 4.7% for the three months ended March 31, 2022.

Income (Loss) from Operations


	Three Months Ended March 31,						% Change
	2023			2022
	(In thousands)
Income (loss) from operations	$	(14,206)		$	(39,140)		(64)	%
% of net revenue	(12.6)		%	(33.2)		%

Income (loss) from operations for the three months ended March 31, 2023 and 2022 was $(14.2) million and $(39.1) million, respectively. This change was primarily driven by a decrease in operating expenses of $(29.6) million,

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partially offset by a decrease in net revenue of $4.7 million. As a percentage of net revenue, income (loss) from operations was (12.6)% and (33.2)% for the three months ended March 31, 2023 and 2022, respectively. This change was primarily driven by decreases as a percentage of net revenue in marketing expenses, product, technology, general and administrative expenses, cost of goods sold, excluding depreciation and amortization, and depreciation and amortization, for the reasons set forth above.

Gain (Loss) on Extinguishment of Debt

Gain (loss) on extinguishment of debt for the three months ended March 31, 2023 and 2022 was $(1.9) million and $0.0 million, respectively. This change was due to the extinguishment loss recorded upon the amendment of the notes purchase agreement in March 2023.

Interest Income (Expense), Net

Interest income (expense), net for the three months ended March 31, 2023 and 2022 was $(1.0) million and $(1.2) million, respectively. This change was primarily due to decreased interest expense incurred on outstanding borrowings.

Other Income (Expense), net

Other income (expense), net for the three months ended March 31, 2023 and 2022 was $0.0 million and $1.6 million, respectively. This change consists of the change in fair value of the Blue Torch warrant obligation upon remeasurement during the three months ended March 31, 2022.

Benefit (Provision) for Income Taxes

The provision for income taxes recorded in the three months ended March 31, 2023 and 2022 reflects state income taxes in a jurisdiction for which net operating losses were not available to offset our tax obligation.

Non-GAAP Financial Measures

To provide additional information regarding our financial results, we monitor and have presented within this Quarterly Report on Form 10-Q adjusted EBITDA and free cash flow, which are non-GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

We define adjusted EBITDA as net income (loss) before interest income (expense), net, other operating expense, gain (loss) on extinguishment of debt, other income (expense), net, benefit (provision) for income taxes, depreciation and amortization, and share-based compensation expense. We have presented adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business.

We use adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. We believe adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the items that we exclude. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.

Our adjusted EBITDA is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the most directly comparable GAAP equivalent. Some of these limitations are:

•adjusted EBITDA excludes share-based compensation expense, as share-based compensation expense has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy;

•adjusted EBITDA excludes depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future;

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•adjusted EBITDA excludes gains and losses on extinguishments of debt, as these primarily represent non-cash accounting adjustments;

•adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest, which reduces cash available to us;

•adjusted EBITDA does not reflect other (income) expense, net as this represented changes in the fair value of the Blue Torch warrant obligation as of each reporting period, which were required to be settled either in cash, which would have harmed our liquidity, or our Class A common shares, which would have resulted in dilution to our stockholders;

•adjusted EBITDA does not reflect income tax payments that reduce cash available to us; and

•other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

We define free cash flow as net cash from (used in) operating activities less purchases of property and equipment. We have presented free cash flow in this Quarterly Report on Form 10-Q because it is used by our management and board of directors as an indicator of the amount of cash we generate or use and to evaluate our ability to satisfy current and future obligations and to fund future business opportunities. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our ability to satisfy our financial obligations and pursue business opportunities, and allowing for greater transparency with respect to a key financial metric used by our management in their financial and operational decision-making.

Our free cash flow is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of free cash flow rather than net cash from (used in) operating activities, which is the most directly comparable GAAP equivalent. Some of these limitations are:

•free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations, such as debt repayments or finance lease obligations, that are not deducted from the measure; and

•other companies, including companies in our industry, may calculate free cash flow differently, which reduces its usefulness as a comparative measure.

Because of these limitations, we consider, and you should consider, adjusted EBITDA and free cash flow together with other financial information presented in accordance with GAAP.

The following tables present a reconciliation of these non-GAAP measures to the most directly comparable measure calculated in accordance with GAAP, for each of the periods presented:

Blue Apron Holdings, Inc. [APRN] Filings
10-Q	[2023-05-04]
10-K	[2023-03-16]
10-Q	[2022-11-07]
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-02-25]
10-Q	[2021-11-09]
10-Q	[2021-08-03]
10-Q	[2021-05-06]
10-K	[2021-02-23]
10-Q	[2020-10-29]
10-Q	[2020-07-29]
10-Q	[2020-04-29]
10-K	[2020-02-18]
10-Q	[2019-10-31]
10-Q	[2019-08-06]
10-Q	[2019-04-30]
10-K	[2019-02-25]
10-Q	[2018-11-14]
10-Q	[2018-08-02]
10-Q	[2018-05-03]
10-K	[2018-02-22]
10-Q	[2017-11-03]
10-Q	[2017-08-10]
S-1	[2017-06-01]