Morning Report: The Key Numbers From The Blue Apron S-1

Morning Report: Admit it, you didn’t read the Blue Apron S-1. Don’t worry, we won’t tell your friends. Here’s what you need to know.

Blue Apron made the week better by revealing its IPO filing, a long-rumored document that came as a surprise.

The company, a tech-enabled food startup, is a member of the vaunted unicorn cohort. Before its IPO, Blue Apron raised a total of $193.8 million, including $135 million in 2015 at a $2 billion valuation, and $50 million in 2014 while worth $500 million.

(The company has picked up over $100 million in debt along the way as well.)

But forget what we already knew. What can the company’s S-1 tell us?

Once Profitable, Now Not

Blue Apron strung together two profitable quarters back in 2016. In the first half of that year, Blue Apron turned in GAAP profits. After a history of losses, to see the company stack impressive revenue gains while making real money was encouraging.

Since then, the company has returned to losses. And it has done so on an accelerating basis. The firm’s 2016 GAAP loss — $54.89 million — is nearly matched by its first quarter 2017 loss, which totaled $52.15 million.

Rising Costs Relative To Revenue

In the first quarter of 2016, the first of two in which Blue Apron recorded real (GAAP) profit, it spent 14.8 percent of its revenue on marketing (which includes retention expenses), and 17.3 percent on “Product, technology, general and administrative.”

In its most recent quarter, one that was deeply unprofitable, the firm spent 24.8 percent of its revenue on marketing, and 25.8 percent on “product, technology, general and administrative.”

And with the company’s gross margins worsening in the first quarter of this year compared to the year-ago period, and with its prior modest profitability, the increases in spend sent the company deeply into the red. To its credit, Blue Apron has proven that it can make money. The question is can it get back to it.

Big Revenue, Solid Growth

Blue Apron is big. The company booked nearly a quarter billion in first quarter revenue, making it far larger than many software companies we have recently seen go public. Of course, the firm’s gross margins are something akin to the reverse than modern software firms: Instead of having gross margins of 70 percent and higher, Blue Apron has COGS as a percent of revenue around that range.

Still, Blue Apron grew from $172.1 million to $244.8 million in the first quarter of this year, compared to the year-ago quarter. That’s over 40 percent.

Debt

And finally, Blue Apron has taken on quite a piece of debt over the past few quarters. Here’s the key verbiage (emphasis added]:

As of December 31, 2016, we had $45.0 million in outstanding borrowings and $0.3 million in issued letters of credit under the revolving credit facility. As of March 31, 2017, we had $100.0 million in outstanding borrowings and $0.3 million in issued letters of credit under the revolving credit facility. In April 2017, we drew an additional $25.0 million, increasing the total outstanding borrowings to $125.0 million. In May 2017, we amended our revolving credit facility to permit the issuance of our convertible notes and to increase the amount available to borrow by $25.0 million to an aggregate maximum amount of $175.0 million.

If you don’t want to reprice and take on more capital that way, debt is a great way to go. But Blue Apron has a bit more than we might have expected.

All told, this is going to be a super fun IPO to watch. The company must want to best its prior, $2 billion private valuation. That makes it an up IPO, perhaps. How public investors will value the partially-prepared food startup remains to be seen.

From the Crunchbase Daily:

Blue Apron files for IPO

• Meal kit provider Blue Apron is the latest technology unicorn to take its shares to the public market. On Thursday, the five-year-old company filed an IPO prospectus complete with photo spread of seared steak, bok choy and fresh ramen. The offering follows a period of rapid growth for New York-based Blue Apron, with revenue reaching nearly $800 million in revenue in 2016, up from $341 million the year before.

Unicorns are doing well this year

• Private investors are minting about one new unicorn a week in 2017, according to a Crunchbase News analysis. That’s about on par with last year. IPOs, however, are up, with more unicorns going public and raising larger sums to boot.

Tintri also tapping public market

• Speaking of going public, another highly valued tech company, Tintri, also threw its hat in the IPO ring. The Silicon Valley-based provider of technology for cloud-based storage and data management is seeking to raise up to $100 million.

Tech leaders blast climate decision

• Technology industry leaders had harsh words for President Trump following his decision to exit the Paris climate agreement. Elon Musk said he will step down from two of the administration’s business advisory councils, while Mark Zuckerberg said the move “puts our children’s future at risk.” Executives of Google, Apple, Uber and other tech giants criticized the decision.