BLUE APRON HOLDING, INC. SunTrust Internet and Digital Media Conference May 9, 2018

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): All right, so good morning everyone. My name is Youssef Squali. I am the Internet analyst here at SunTrust Robinson Humphrey. And it is my pleasure to welcome Brad Dickerson, President, CEO and CFO of Blue Apron this morning. As many of you know, Blue Apron is the largest delivery company in the U.S. with a mission to make incredible home cooking accessible to everyone.

Brad joined Blue Apron in 2016 as Chief Financial Officer and in November 2017 was appointed as President and Chief Executive Officer and elected to the Board of Directors. Before joining Blue Apron, Brad spent eleven years at Under Armour most recently serving as Chief Financial Officer for about eight years between 2008 and 2016, prior to that he served as Chief Financial Officer of Macquarie Aviation North America. So, Brad, welcome.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Thanks, Youssef.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): So no slides we’re just going to have – just going to be more conversational than usual presentation. So maybe speak to us about your title for first of all, President, CEO and CFO, never you – and that’s somewhat unusual …

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): We’re actively looking for CFO right now, so obviously my background was CFO. I was also CEO at Under Armor for a period of time too. So I have a very operational background …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): ​ So many business cards …

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Yeah, you got it, a lot of business cards, which one I need to apply with time. Yeah, we're actually looking for a CFO right now. We're seeing some good candidates and I think we're getting close to landing something there hopefully very soon.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Perfect, okay. We welcome that. So let's go back a little bit. At a high level what do you think differentiates the Blue Apron offering from other meal kits in the space we have seen just – of offerings in the last two years, truth be told as you guys were the pioneers in the space. Your brand is synonymous with the meal kit, but in the last again two years we've seen a number of very large brands target in this market either through acquisitions or through basically organic growth maybe you can just speak to the differentiations we feel your brand has.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Sure, and I think the first thing is the sheer interest in our space I think is a validation of the opportunity in our space. So grocery is a very, very large market, $800 billion in the United States market. So there's a lot of players in it. I think it just validates it. This is a very big space and a very interesting dynamic space more than anything and we're right in middle of it, which is great. From a from a differentiation, you mentioned brand and at the first place we always start and we talked about differentiation in our – for our brand in our space we've been doing this long than anybody else …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): True.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): And I think there's four components we kind of look at from a brand perspective, one is the culinary expertise we bring it to the table. We've been doing this longer than anybody else. We have a really strong culinary team that comes from a strong background. And their vision of how to make great home meal experiences comes through week in and week out and literally what ends up being unique different recipes every single week. That’s one aspect of our brand differentiation, so that team has been doing this long than anybody else. Discovery is a big part of our brand too.

So there's been a lot of players that have picked on different niches up around our space, but we look at our culinary team is being a little bit more broad and focused on meeting varying customer needs. So whether that would be a need of a person who wants something quick and easy to make because they're in a hurry or we would have obviously a strong core customer base that also is along the experiential side of things that it wants to take more time and have discovery around new ingredients and new cooking techniques and so forth. So discovery is also a really important part of our brand differentiation.

The third thing is connected to the source, so this is where we spent a lot of time in our company over the last nearly six years now. Key relationships across the source space and really focused on ingredient quality, the methods of sourcing whether it would be proteins or whether it would be produce or so forth and ingredient quality is one of the most important things in our portfolio of what we do. So connected to the source is also something that's a very important differentiation for us in the relationships we formed and had over the last six years.

And I think the last piece kind of wraps all three of those together and it goes back, so we've been doing this longer than anybody else. We’re the trusted authority. So when it comes to the idea of having a great meal at home, we do

view ourselves as the trusted authority, you know, this is the first brand people think of – if I'm going to do that Blue Apron is the most trusted authority to deliver to meet the best experience possible because they've been doing this longer than anybody else, they have a culinary talent and what they stand for. So brand is a big differentiator for us and it's going to be really big part as we look to multichannel expansion, which I'm sure we had to talk about a little bit.

The second piece of differentiation I'd say the operational side of our business and we've invested a lot into our fulfillment centers. We have three fulfillment centers: one in New Jersey, one in Texas and one here in California. And we can reach over 99% of the geographic U.S. efficiently through those three centers. And we put a lot of investment in those centers, a lot of know how, a lot of optimization – automation and equipment and we've had some challenges especially with our new center in New Jersey last year, but we're on the other side of that right now. And now we're looking at our operations and our fulfillment centers really has an opportunity in asset to drive forward.

With our investments and with the amount of automation we've had, we've seen our operational efficiency improved pretty dramatically in the last few quarters. Just announced in Q1 that we had our largest operational efficiency, largest margin since Q2 of 2016 and that is including going through a very, very new implementation of a new center of New Jersey. So operation is also the differentiator to us. The capability we have with the assets we have in our three fulfillment centers that are increasingly getting much, much more efficient give us the ability to have the best margins in the business, which means that we can put more into the product and more into the consumer offering longer term and continue to differentiate.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Makes a lot of sense. When you step back and look at the – what you've done – all the things that list in that you've done over the last nine months, is it – are we efficiently on the other side of that CASM. And if – what are the things that still need to be done? I think you’ve talked a little bit about efficiency. How much

higher can you get? And then it seems like Linden is still running at a lower efficiency as you know at two centers? But I think on the earnings call you said that you believe Linden should be even higher over time? Kind of walk us through that process.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Yeah, yeah, and all three of our centers are becoming more efficient and really it's through the four components of our efficiency related food, labor, packaging and shipping, those are the four big components in costs of how we fulfill our product. And across all four, we've been focused on a lot of efficiencies over time, but food and labor tend to be the biggest focus. Also the things that we can control the most relative to cost. And across all three of our centers, we’ve been very focused on reducing food waste in the system, so we look at the world of put as much of value into the consumer offering into the consumer – the package that’s going to consumer as possible and eliminate waste that never gets into the offering whether that would be food waste, sometimes packaging waste also.

There's a lot of opportunity across all of our centers to increase the efficiency in reducing food waste through better demand planning, better upstream planning and just better execution in the center. So that's been part of our efficiency gains. For last nine months, we still have plenty of opportunity in that area going forward. Labor, obviously, as we've invested in automation and equipment across all of our centers, but especially in Linden, New Jersey. The ability for us to learn how to optimize that equipment has been very important for us and that's been part of our efficiency gains the last few quarters and will contain to be part of our gains going forward.

As you have to plan for the utilization of this equipment, way upstream and making sure using the right balance of ingredients, you’re planning your labor and your equipment, optimization on a regular basis on a week by week basis to utilize that equipment and that’s get the benefit of it. So going forward those are

the two areas I think that will show the most improvement across all our centers. We have invested in automation in California and Texas also …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): But not to the extent …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): But not to the extent, Linden is a much bigger center, Linden is more than twice the size of the better two centers, gives us the ability to invest more in automation. So with that investment in automation in Linden, it should be our most efficient center. I did say that by the end of this year, early next year, it should surpass our other two centers and being that Linden services almost half of our volume that center improving faster than the other two centers, makes a big impact to our overall margins.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): How does that translate into improvement in gross margins?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): I mean it translates from the perspective of – right now, we talk about variable margin, so cost of good sold, the last is food packaging, shipping and labor. And if you take basically your revenue minus cost of goods sold that’s kind of your variable margin. We call cost of goods sold efficiency technically. It's a variable margin. It will show in that aspect. So as those components get more efficient, your cost of goods sold will get much more efficient. Now obviously investing in equipment, you have a lot more depreciation, but the gains in cost of goods sold will far outweigh the increase in depreciation expense.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): But the investment in equipment, it seems like at least for the Linden facility it’s already behind us. So all of that – or mostly that should already be reflected in the

numbers. And it doesn’t seem like you guys are about to double down in California …

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Yeah, yeah, the good news is there's a lot of businesses in the rearview mirror as far as investment goes. So we – to the extent we could retrofit our other two facilities, California and Texas, we've done that over the course of the last year and a half or so putting what we could fit in those centers in automation.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Right.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Linden is behind us. We have built Linden. The investments are there in equipment. Going forward the investments in capital expenditures will be more tailored and strategic around just specific equipment that we know we're going to put payback on. And we were doing a little bit of that right now. Obviously, our CapEx is a lot less and less historically with …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Sure …

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Building out Linden, but there are still some opportunities in some key areas to add pieces of equipment here and there that have a tremendous benefit on efficiency.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.):

Okay. Can you speak to the role of data from analytics and how that plays and one your offering and two your ability to maybe tailor your offering to particular groups.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Yeah, I put that in probably three areas of where we look at data and how we use data. First and probably the most important is the customer analytics we have. So, obviously, being a historically a direct to consumer business, e-commerce over almost six years we have all that data of customer behaviors. What recipes and ingredient types of customers tend to favor versus ones that maybe they don't. We have all that learning and encompassing in our customer analytics. And that plays a big part in a couple of things.

As we look at the whole value chain of what we do using all of that customer data all the way along the value chain of when we're deciding what ingredients to source that we're going to have in kind of our portfolio going forward obviously we use the customer data to play into that, which ingredients have done well for us, which ingredients maybe the customers haven’t had an affinity towards in the past that comes into play and what ingredients we source and we always going to bring some uniqueness to the ingredients we source to that part of our discovery of our brand.

All the way to when we're creating recipes usually ten weeks out for selling cycle, we start to lock down the idea of what our recipe is going to be ten weeks from now, customer data plays a big part in that. Again what's the balance of the twelve unique recipes we're going to have week by week, what ingredients are we going to put into those? What are the types of recipes? Where we've seen a lot of success and customer ratings in the past?

That plays a big part in that kind of recipe decision making at ten weeks out of what a customer's like. That's a key also a key decision point from a fulfillment perspective and this is where we've seen a lot of ability to drive more efficiency

too is balancing the customer tastes and preferences and all the information we have there with also all the information we have around fulfilling those customer needs for the last six years and which ingredients are pretty simple to get through a fulfillment center and which ingredients are a little bit more challenging.

So learning all of that that decision making time of recipe creation is really important for us to say listen we want to make sure that we have a balance on a week by week basis of not too many ingredients that really are complicated to get through a fulfillment center and make sure we don't have too many of those. That also has helped our efficiency and that we're just optimizing better to flow of the ingredients that goes through week by week. So that that data point also important in that time. Obviously balancing supply and demand. We have a lot of customer data. We have a lot of demand planning, features there of trying to narrowing and guest demand – most optimum possible.

And the benefit we have is you know customers do start to see our recipes about five, six weeks out, so they start to actually interact with us, five or six weeks out from delivery. They start to give us demand feeds plus we have all the six years of history now. So we have some indication of what the demand is going to be. We don't really start locking in our supply needs until about two weeks out. So we do have the ability to match supply and demand much more closely because of that, so utilizing those data points in that timeframe is really important.

Labor planning is another big mechanism for us, data points of what demand is going to be, how we’re going to optimize and use equipment on a facility by facility basis. What ingredients are coming through every week and matching labor needs on a facility by facility basis really important. So all that data and upstream planning is really important. It’s been a big part of our actually our efficiency gains. It’s being much more deliberate and methodical about how to use that data upstream.

And then obviously you get into the fulfillment centers and data plays a big part on our WMS system. We have a lot more automation and equipment there. It

plays a big part, just the execution of it, but I will say that probably 80% of the battle is what happens upstream before that product ever touches a doc in our fulfillment center. The ability for us to plan accordingly upstream is the biggest benefit we've seen so far and we’re seeing continuing going forward.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): What about on the consumer taste and preference? Do you feel that you guys have enough products to kind of satisfy the vast majority of tastes out there? Or do you feel that there are some obvious large enough niches that you’re not addressing that you feel that over next couple of years with increased capacity, increased efficiency et cetera, you will be able to serve and hence increasing the potential to them …

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Yeah, this is probably the most exciting part of where we are right now coming off of the last nine months and as you know and many other people know we are very focused in the back half of 2017, getting Linda New Jersey up and running was more challenging than we thought. We pull a lot of focus in getting that facility back on track as far as customer service and margins in the back half of last year. We pulled back on marketing. We became pretty quiet company in the back half of 2017 from a product expansion and brand perspective and now coming into Q1 here with the margins that we're starting to post and showing that this is kind of in our rearview mirror of a challenge, the exciting part of where we are in-house.

We're starting to talk about new products. We're starting to be more vocal and a lot around our brand and to talk about the differentiation of our brands is a fun time for us right now. The employees are very, very excited. We’re talking about fun things and exciting things to drive our business forward and product is a big part of that. So we've announced recently kind of a first big major product expansion efforts because we were so focused. Last year, we kind of put on hold new products, but in the earnings call recently we talked about a dinner party box

that’s going to come out at the end of May, which the customers have been talking to us and saying I love your brand, I love your product, but it would be nice if you guys give me something where I could have bigger, broader offering for having friends over and multiple couples over whatever, give me an opportunity to interact with your brand in that …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): But that will be – that will puts us in what – so what’s the dinner party box?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Dinner party box is just a bigger broader offering for more people, so it's about special occasions basically like I'm going to have a dinner party with multiple couples, six people, eight people and it's an opportunity for me to utilize Blue Apron to help me make that event go off much easier.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Whether it's similar recipes, similar ingredients there’s lot more.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Right, right got it.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Similar ideas, similar ideas. So that comes out at the end of May, which again is something customers are asking for. We’re getting much more focused on the summer months. Summer months historically have been lower ordering periods for us as you imagine people start to cook outside more in the summer, they travel more in the summer, we have always kind of seen order rates dip a little bit in the summer months where customers basically put up some pause because they're traveling, or they're cooking outside. So we're going to do a lot more offerings of summer friendly menus that are friendly to cook on the grill.

We've talked about a grill box also that we're going to meet coming up this summer giving that customer an opportunity to have a meal specifically designed to grill, versus cooking indoors, which people like in the summer, to go outdoors obviously.

Then probably the most exciting product we talked about in the last few months and in the earnings call too was this on-demand product. And this is a really important part of our evolution and in the inflection point where we’re at is the realization for six years the product we've been delivering to our customers has been this weekly planning mechanism, where you have to plan a week in advance. This is about the person who is looking to say, I want to have two, three, or four meals a week, put in my refrigerator, lockdown, I don't have to get the stress and anxiety of what's for dinner, and you guys can have great ingredients, great recipes, a great experience, and I can lot bet down for a portion of my week.

And as we built our core nucleus around six years, right and this is a consumer that interacts with us a lot, follows on a regular basis and has this planning mechanism in their mind if that fits my lifestyle. The reality is many consumers have never tried us they probably heard great things about our brand, but have never tried us because of whatever of like I don't want to join subscription …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Commitment.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Commitment, it’s a little more hectic, little more crazy ordering food online is something you've never done and that's just absolutely don't interact with our brand, or even some folks that have come in and started as a subscriber and maybe left pretty early because they realize this is a commitment. And you know what my life isn't that predictable or for whatever reason this just isn't a good fit for me and it has left us. And so we’ve come up with on-demand product trying to solve this issue of how do we leverage the strength of our brand, which is we have

the highest brand awareness in our space and how do we say – our job is to take this brand and get access points to our customers, so they can interact with our brands beyond the core. And we believe there’s always going to be a strong part for those who don’t want to keep interacting with us the way they've been interacting with us. And we want to keep focusing on them and growing that strong core base.

But there's also going to be a lot of consumers that just say, you know what, I want to interact with your brand on my terms, where and when I want to have. And that was the excess on-demand product which is one recipe and it could be we talked about a pilot with . But the whole idea of this on demand product is that it is how do we take advantage of our brand leverage, our brand into our platform and other platforms. So there's a consumer out there that wants to make that choice much more closer to the event than a weekly planning mechanism. And we believe probably a lot more consumers might want to interact with us that way, truthfully longer term.

So this on-demand product really unlocks and opens up we think a wide variety of customers and probably could never really interact with the four. And we’re really excited about that launching and we're putting a Costco right now in a select few stores in the northwest. It's one recipe versus a box of multiple recipes, will be different types of recipes obviously and the turnover of those recipes will be a lot less frequent.

So our core offering we have 12 unique recipes every week. The idea through third-party platforms is probably it’s going to turn over maybe once every three, or four weeks, there’s a little more consistency. But we're really excited about that. This has really been the inflection point. We sold our first product outside of our own e-commerce platform about 10 days ago at Costco. So it's exciting.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): It is exciting and it makes total sense because you're obviously opening up yourself to whole new market to you – that would been harder to get into. The

only issue though is the model is going from direct-to-consumer to obviously now Costco is an intermediary between you and the consumer, which means you're going to have less and less data on those customers. Is there – well one, I think you said on the call that Costco is just the first of many partnerships that you plan on doing between now and the end of the year, and hopefully next year.

But the question I have is around maybe kind of using this as phase two and then phase three at the end back directly to the consumer through maybe having partnerships with the likes of , , or delivery.com you go straight and leverage their distribution. Because as long as you the data, as long as you can obviously go direct to consumer.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Correct, and I think that's that’s our job to balance all this out and say consumers are going to want to interact with our brand in multiple ways. And there's going to be a consumer that is going to continue to want to interact the way they've been interacting with us the last couple six years, is I want to preplan, I want you guys to help me plan my recipes in a week by week basis, I want to be able to lock down a certain number of meals, put in my refrigerator and use them when I want to. That will continue to be a strong – that’s going to be our strong core centric through.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): May be at the core.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Our platform also we think we have the ability to on the on-demand world that same consumer or other consumers might want to interact directly with us in on-demand feature of give me the ability to order through your platform and they’ll print same day at 3:00 o’clock I’m thinking about what's for dinner tonight and I don't want to cook, I want to take out, I want to cook something nice and

healthy. The ability to have something at your door later on when you want to interact with that is something we think is a possibility for us to. And obviously delivery partners would be people who we would talk to around how do we kind of fill that offering out so that we can actually deliver our product to the end consumer through our platform.

Let alone, let's also leverage our brand the strength of our brand through the strength of other third-party platforms, cost currently $92 million cardholder. We know there's a lot of great partners out there that have a great platform and great access to customers, that want to interact with our products. So it is going to balance of the fact that we want customers to access our brand and we want to be very close to them and get data from them when we can. And there's a there's a lot of different ways we probably can do through loyalty programs and things like that and working with our partners will be to make sure we are sharing the data, because the fact of the matter is we have a lot of data that can help our partners also relative to where the recipes that we should have in your shelf, and so forth.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): And so just to be clear the Costco relationship and these other relationships that you're planning on striking blue-e from brand will still be there, I mean at Costco it's not going to be a Costco white box.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): No it’s a brand we have. We believe that’s the strength of the offerings. And listen I would assume that we're going to be going so to tell with competition on some of the shelves for sure. Bringing it goes back to the Blue Apron brand is the differentiator.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Exactly.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): We believe that that is going to be differentiator as far as how it performs event next to competition.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): And in terms of the consumer chasing preferences that I was referring to before, I was also thinking in terms of just products offering or a menu offerings like vegetarians, or vegan, et cetera where are you in that diversification strategy as of now?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Yes I think the ability now that we have this great operational platform, we have a consumer products team focused on what new product offerings we need out there. I think this is the great also inflection point of how do we look at a continuous adding of new products going forward. So the fact of the matter is, is that we've been very focused in a kind of a more simple view of the of the world of gaining skill very quickly and not necessarily playing in the niches of dietary preference. But absolutely that is a possibility we can do down the road and we're looking into.

How do we also start to add on certain dietary preferences? Again our culinary team, the experience of our culinary team, the discovery of our culinary team, our connection to the source gives us the ability to leverage that and also start to fulfill other dietary needs. And there's a lot of ways we can do that that reduces complexity in our facilities. And whether it can be through third-party partners or our own fulfillment, so that is something that as we start to look at adding new products, I think, you'll see more from us going forward of how do we start to fill out our portfolio, so that our direct-to-consumer, our e-commerce connection to the customer will be the most unique and most broad array of choice the customer we have with us, hopefully that is when entices customers interact

directly with us. But if they feel like they want to be in more on demand world, they can interact through their partner [indiscernible] (0:26:05).

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): And so all of these great ideas to funnel back into top-line growth?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Yes.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): So we've spoke to the fact that by the end of the year we're going to be back to fully double-digit growth and sustain next year. Speak to maybe the – what's embedded in that assumption? Is primarily – I'm assuming it's order growth rather than pricing. And how much of these new relationships are kind of baked into that prediction?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): We're being careful on the assumption of some of the new relationships right now, because it’s worth literally 10 days into a Costco pilot. So it's pretty small right now because we're just starting. So we're being very careful on any assumptions there relative to our goal and our focus in our company of double-digit year-over-year revenue growth as we get to Q4 and also in 2019 full year. And we’ll be very, very focused on that right now from a target perspective.

So the assumption is in those goals is that – getting back on the engine of spending marketing dollars and getting more vocal out in the marketplace we’re literally in the back half of 2017 Q4 of 2017 was our lowest marketing spend in the last nine quarters. So …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): And competitors spending …

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Competitors spending up. The ability for us to turn the corner and start to spend more money, become more vocal, again it takes a little bit of time to get that engine going again. So that's one part of it is brand noise piece and being vocal on the brand.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Right.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Versus now, starting to offer new products and get new product offerings out there, which will only enhance our ability to engage with the customer going forward. So there is a little bit of – as we get to the next few quarters seasonal patterns do come in. June, July and August are just more challenging months relative to getting new customers and order rates. But we’re really focused in on Q4 and 2019 getting kind of back in that double-digit growth and also at least EBITDA breakeven, which should be great, we’re focused on EBITDA break even. We know the timeframes too.

But it's going to be really through brands, and products, and more and more unique products. The assumption on third-party platforms right now is very much muted in those numbers because we just don't know right now.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): And so the assumption on the bottom line is you may – if everything goes right, you think you can even get to double breakeven in the fourth quarter?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): That's what we're floating [ph] (0:28:23) the teams on that.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Okay.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): We are probably thinking anybody in the Street is assuming that. Well operational performance is the key to that. So Q1 is a great example where we guided a loss that was in the $30 million range and we came in at $17 million, a lot of that was because our operational performance or operational efficiencies exceeded even our expectations in Q1. The teams have done such a great job really focusing on this that they're moving at a quicker pace in these efficiencies than we thought.

So if they can continue to get these efficiencies kind of across the finish line in the next few quarters, that Q4 for breakeven is a real possibility, mostly being driven by operational efficiencies.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Awesome. What about the good news is that you're going to start growing double-digit, the bad news is at some point you're going to have to double down on investments both. Well maybe a nice journey you drew in the other two facilities. When does that happen?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): The good news here is, I think, first of all New Jersey got funding capacity. Half of the volume of the country, we have the ability to expanding pretty efficiently. Adding varying pieces of equipment we're talking about hundreds of thousands of dollars for equipment not millions of dollars. So it's …

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): In New Jersey or in the others?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): In any of them. So we’re adding a line in, or adding a track line in, or adding more automation in is as you're scaling up isn't that really capital intensive a couple of 100 gram per machine, or something like that. And usually the payback is pretty quick on that. Where the cost come into play is putting a new center up or infrastructure in. I think the fact of the matter now is we have three centers that are operating in a very efficient pace and getting much better. If we ran out of space and capacity in places like California, instead of saying that we're going to build a brand center somewhere that's bigger than our existing center, our perspective and view right now is take advantage of the efficiencies and processes you built in that center and supplement it. And don't mess with that. And don't uproot that and put it somewhere else.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): So we're not going to look for another New Jersey out?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): We would basically say we want to supplement square footage and the infrastructure where we needed to if we ran out of capacity in our existing centers and basically add on to them, or open up a smaller center somewhere else that could just get some more volume going through it. So it would be a much less disruptive way to do it.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Right.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): And definitely less capital intensive.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.):

No step up in CapEx.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): No maybe, I mean, right now our CapEx guidance is $20 million to $25 million this year. And I think that is like this year and next year is probably right range.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): And so as a percentage of revenue if anything you could just stay relatively stable or you can come down …

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Intellectual there yes.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Excellent. Alright I think we're running out of time. But my last question is around debt, I think, you have some debt coming due in 2019. How are you thinking about handling that?

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Yes so we have a revolver that comes due in August of 2019, it’s a $200 million revolver that we've drawn $125 million on. And our first focus here has been building a better business and building a stronger P&L. So focusing on bettering EBITDA performance obviously is the first step in building a stronger balance sheet, it’s your P&L to be strong. And we're making great strides in EBITDA performance.

If we can get the EBITDA breakeven in Q4 2019 cash burn is going to get even better than it is today, which is already much better than last year. We're not going to spend a lot more money CapEx as you mentioned compared to historical amounts. So the cash burn is a lot less and getting better. All of those things just

make it much easier to start having conversations on how do we refinance this $125 million by August of 2019. And we’ll work towards that. But the first step is a better business is going to make those conversations much easier and we’ll look to do that between now and August of 2019.

Youssef Squali (Analyst, SunTrust Robinson Humphrey, Inc.): Okay. Brad thank you so much. Thank you everybody.

Brad Dickerson, (President, Chief Executive Officer and Chief Financial Officer, Blue Apron): Great, thanks.