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 meal kit 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.