Coverage: Meal service Blue Apron files for IPO

Blue Apron Holdings Inc., which delivers ingredients to cook meals in your home and was among the companies whispered to go public this year, has now filed to go public.

Matthew Lynley of TechCrunch has the news:

Amidst an array of enterprise companies that have jumped on the IPO bandwagon following Snap’s successful IPO (aside from its more recent earnings report), Blue Apron appears to be the next major consumer IPO. That’s important because it continues the tone that both enterprise and consumer companies see an opportunity to go public, which may signal additional activity as we go further into the year.

There’s one unique twist to this consumer IPO, however: it was actually profitable in the first quarter last year. Blue Apron said it brought in $3 million in a profit in the first quarter last year, though it swung to a wildly larger loss in the first quarter this year. While younger companies are expected to burn a ton of money (especially Snap, the largest consumer IPO in many years), Blue Apron appears to have been able to control its costs for at least a hot second before going into growth mode.

The company is showing a rather incredible amount of growth. Blue Apron said it generated nearly $800 million in revenue in 2016, up from $341 million in 2015. For the first quarter this year, Blue Apron said it generated $245 million in revenue, up from $172 million in the first quarter last year. Despite all this, Blue Apron said it lost $55 million in 2016, though it said it lost $52 million in the first quarter this year.

Alex Barinka of Bloomberg News noted the IPO has been delayed until its performance improved:

Founded in 2012 in Long Island City, Queens, Blue Apron sends weekly boxes of pre-portioned ingredients with instructions for customers to cook meals at home. Its smaller box, which costs $59.94, feed two people for three meals, and includes recipes such as spicy Korean-style chicken and roasted onion miso ramen.

The company’s net loss widened to $54.9 million in 2016 from $46.9 million a year earlier, despite net revenue climbing to $795 million from $340.8 million in the same period, according to the prospectus. Among risk factors listed in the filing, Blue Apron warned that it may never make a profit.

Blue Apron began interviewing bankers for an IPO in September but delayed picking underwriters until this year, people familiar with the matter said in December. The company has struggled to improve profit margins as much as management wanted in the face of more competition, the people said at the time. A stronger performance was needed to support the $3 billion valuation that the company was targeting in an IPO at the time.

Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and Barclays Plc are leading the deal.

Jordan Novet of CNBC.com reported Blue Apron’s revenue grew tenfold in the past two years:

Typical of venture-backed start-ups filing to go public, Blue Apron is seeing rapidly expanding revenues: net revenue grew more than 10 times between 2014 ($77 million) and 2016 ($795 million). But its losses are also growing rapidly: It lost nearly as much money in the first quarter of 2017 ($52 million, on quarterly revenue of $244 million) as it did in all of 2016 (when it lost $55 million on $795 million in revenue).

Based in New York, Blue Apron had more than 5,200 employees at the end of March, according to the filing. The company also claims more than 1.03 million customers at the end of March, up from 879,000 at the end of last year.

The company faced competition from other food delivery companies. But one of those companies, Sprig, shut down earlier this week. Spoonrocket shut down last year. Other competitors include Hello Fresh and Plated.

Blue Apron’s app for iOS and the web lets end users customize the meals that are boxed up and delivered to them each week. But other than that, much of the company’s activity lies in food and logistics. Blue Apron has developed its own fulfillment center infrastructure, for instance.

The company cited FDA regulation, ingredient sourcing, perishable food storage, changes in food costs, public health issues and the potential for consumer tastes among its risk factors. Supermarkets themselves present competition to Blue Apron as well.