Blue Apron Holdings Inc (APRN) 2020 Q3 法說會逐字稿

Good morning, and welcome to the Blue Apron Holdings Third Quarter 2020 Earnings Conference Call and Webcast. (Operator Instructions) As a reminder, this call is being recorded today, Thursday, October 29, 2020, for replay purposes. A slide presentation has been created to accompany today's remarks, and can be accessed on the Blue Apron Investor Relations website. (Operator Instructions) On this morning's call, we have Linda Findley Kozlowski, Chief Executive Officer of Blue Apron; and Tim Bensley, Chief Financial Officer.

Before handing the call over to the company, we will review the safe harbor statement. Various statements that the company makes during today's call about its future expectations, plans and prospects constitute forward-looking statements for the purpose of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements, as a result of risks and other factors, including those described in the company's earnings release and SEC filings, including the third quarter 10-Q filed this morning. In addition, any forward-looking statements represent the company's views only as of today and should not be relied upon as representing its views as of any subsequent date. The company specifically disclaims any obligation to update these statements.

During this call, the company will be referring to non-GAAP measures, which are not prepared in accordance with generally accepted accounting principles. You are encouraged to refer to the earnings release and SEC filings, where it has defined these measures, and to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. In addition, reconciliations of certain forward-looking non-GAAP measures referred to during this call is included in our earnings release which is available on the company's Investor Relations Web site, located at investors.blueapron.com under Events & Presentations.

With that, I would now like to turn the call over to Linda Findley Kozlowski, Blue Apron's CEO. Linda, please go ahead.

Thank you, Izzie. Good morning, everyone, and thank you for joining us today. Before diving into our third quarter results, I want to acknowledge the ongoing impact the pandemic has on daily life and the health of our employees, customers and the communities where we operate. Their safety remains our top priority. Since we spoke with you last July, our second quarter conference call, things have been very active for Blue Apron. We’ve continued to see strong demand for our meal kits as third quarter revenue grew 13% year-over-year.

As Tim will discuss in a few minutes, top line growth was adversely impacted by approximately $2 million of customer credits for boxes related to a voluntary supplier recall of onions. Given that the third and fourth quarters have historically been our seasonally slowest quarters and that we have continued to face certain challenges with labor availability, it's notable that our year-over-year net revenue growth in Q3 was at a higher rate compared to year-over-year net revenue growth in Q2.

We also expect an improvement of year-over-year net revenue growth at similar rate for the fourth quarter as we saw in the third quarter. The top line year-over-year growth combined with our continued focus on cost and cash management led to adjusted EBITDA loss and net loss coming in significantly better than our guidance target. In addition, while we generally face seasonal influences in the third quarter of each year, which drives higher packaging and shipping costs, our variable margins improved compared to the same period last year, even as we added operational complexities by introducing new product offerings and made investments in incremental hourly wages and attendance bonuses for our fulfillment center workforce.

Since the end of the second quarter, we have strengthened our balance sheet and provided financial flexibility with the underwritten public offering of 4 million shares of our Class A common stock in August, resulting in approximately $32.9 million of net proceeds and a new $35 million senior secured term loan, funded 2 weeks ago, which effectively extends our debt maturity until March of 2023. Reflecting this financial flexibility as well as the benefits from our growth initiatives and the positive impact on demand from COVID-19 pandemic, the Board recently concluded our strategic review process that had been undertaken earlier this year.

We believe we are now in a better position to continue to execute on our growth plan. The year-over-year improvements that we've seen generated since our growth strategy has begun to take hold in late 2019, coupled with the continued heightened consumer demand stemming from the pandemic, measured on a year-over-year basis has been notable.

I'll add that our operating plans have also helped us address the increased demand, so there is still more operational efficiencies to be gained. Against this backdrop, consumers have continued to show an increasing preference for quality recipes and food, as they cook at home more frequently. We continue to believe that these changes in consumer behaviors will carry on to some extent, even after the pandemic ends. In addition, we believe that our strengthened balance sheet will enable us to further improve our competitive position in the marketplace as we look to attract, engage, and retain more customers.

Turning now to some highlights from the third quarter. Despite a decline in customers this quarter partially due to labor constraints, the progress we have made against our growth plan can be seen in the year-over-year improvements in other key customer metrics. These metrics include orders per customer, average order value, and average revenue per customer, which for the second quarter in a row, was above $300 representing only the second time since 2015 we've achieved this level. The year-over-year growth we achieved in the third quarter of 2020 as well as our expectations for continued year-over-year growth this quarter, is a reflection of the significant improvements we continue to make against customer engagement and retention as well as the result of the changes we have seen in consumer behavior related to the pandemic.

We continue to evolve our products with quicker prep times and menu options that can adapt to more lifestyles. We also continue to benefit from our premium offerings, which expanded to include new proteins like duck, which was the most purchased premium recipe in the third quarter. Our premium offering features advanced cooking techniques and more ingredient variety. These opt-in only recipes continue to be popular with our customers. On average, 70% of premium orders each week are repeat premium orders.

In addition, these recipes contributed to approximately 29.5% of the year-over-year increase in average order value in Q3. Continuing to provide more product variety, flexibility and choice is another critical part of our growth strategy. We recently launched a number of new product expansions that make it more convenient for customers to receive additional meals every week. Now all of our customers on our 2P Signature menu can order a fourth meal to help remove stress around menu prep or added trips to the grocery store.

Customers can also order multiple boxes per week, providing for greater flexibility in weekly menu planning. This offering allows our customers to get 2 boxes per week by selecting up to 8 different recipes per week at stagger times, doubling recipes to serve up to 8 people per meal on the 4P Signature menu, or even balancing out their cooking by getting a meal-prep box for lunches and quick dinners alongside a signature box for more elevated and premium meals.

Multiple boxes per cycle offering also applies to our wine subscription service, which has continued to see strength this year. We also launched a staggered rollout of customization for select recipes on our 2P and 4P signature menus. Customization options include things such as the ability to upgrade the protein for a more premium protein, replace the meat with the plant protein, swap the vegetables for starch, or increase portion size by adding more proteins, carbs or vegetables. This feature is being rolled out by percentage of audiences and we expect it to be available to all customers by the end of the year.

Our chef partnerships remain a key contributor to our customer engagement strategy, as we continue to focus adding flexibility and discovery to our menus. These recipes have proven to be popular and our customers seek them as another way to get more of what they know and love from Blue Apron, unique recipes that feature seasonal and premium ingredient. We recently concluded a successful 6-week partnership with chef and TV personality Amanda Freitag, and earlier this week, we announced our newest partnership with Chef Edouardo Jordan. Through this recent collaboration, we also created our first ever full Thanksgiving meal offering, to help home cooks easily navigate their holiday menu, as we know they may be playing a different role in their kitchen this season. While adding variety to our menus has helped drive customer engagement and average order value, we've had to continue to balance adding variety and options as well as more marketing with our ability to adequately staff our fulfillment centers.

As it does for other companies, adequately staffing our facilities remains a challenge and, as such, we did not lean into marketing in the third quarter to drive higher growth, as much as we otherwise would have. To be clear, while we believe we have the infrastructure in place to support significantly higher levels of demand, we have experienced labor shortages throughout the pandemic. Because of this, in the third quarter we continued to implement actions first introduced in the second quarter, including canceling or delaying some orders, closing some weekly offering cycles, and discontinuing a subset of menu offerings, in addition to managing our marketing programs.

To address some of the labor challenges, we are implementing several new operating practices, using Six Sigma to improve productivity across our facilities. We are adjusting key factor that, in effect, increased line speed and overall labor utilization. These practices include ensuring a better packing process across lines, adjusting distribution of labor, and better use of our equipment. As a result, where we have implemented improvements over the last 2 months, we have effectively decreased the labor required pack per line by approximately 18% and labor minutes per box was lowered by nearly 22%. We are planning to use the fourth quarter to continue implementing additional optimizations across both of our fulfillment centers, which we believe will position the company to more effectively address demand, enabling us to continue to maintain the strength in our underlying customer metrics and drive increases in customers and revenues forecasted for the first quarter.

With regard to our supply chain availability and safety, we have not experienced any significant disruption over the last 7 months relating to the pandemic. In fact, we've been able to leverage our robust supply chain and strong supplier network to expand the diversity of ingredients available to create our weekly menus. This has allowed us to include exciting new items for our premium offering, including duck and lamb and support our new customization option.

As I wrap up, I think it's important to note that our 3-part return-to-growth plan has continued to deliver. While it's true that the year-over-year improvement in our key customer metrics the last 2 quarters reflect increased demand, we believe that without the benefit from our growth initiatives, cost discipline and return focused marketing programs, we would not have been in a position to turn that demand into improved operating results at the level we delivered.

In addition, as we implement the next phase of our growth strategy, we also appointed 4 new Board Directors at the end of the third quarter, with proven expertise in e-commerce, marketing, direct to consumer, digital media, operations and finance. We expect to benefit from the refreshed Board’s skill mix and record of success, as we continue to execute on our strategic priorities. With the financial flexibility afforded to us from our recent equity offering and debt refinancing as well as our ongoing execution of our growth strategies, we believe that Blue Apron is positioned to drive and continued improved operational performance. As always, we appreciate our long-standing customers as well as those who have recently turned to Blue Apron.

We take seriously our commitment to provide every customer that invites us into their homes with a quality meal experience and a world-class service. Every day we seek to improve that so we can retain our customers and attract new ones. Finally, I'd like to thank our dedicated employees who have continued to step up to deliver more food to more people. We're taking heightened precautions to ensure their wellbeing, particularly inside our fulfillment centers, by continuing to enhance personal hygiene employee safety and sanitation standards.

I will now turn it over to Tim to talk about our financials in more detail.

Thank you, Linda, and good morning, everyone. Our comments this morning will include a review of our third quarter performance as well as the color on the equity raise and debt refinancing that we completed over the last few months. These actions have strengthened our balance sheet by providing us with financial flexibility and help us continue to execute our growth strategy. Before that, I also want to express my highest level of appreciation for all of our team members who continue to step up and execute each day. As highlighted in this morning's press release and in Linda's opening comments, our results for the third quarter were ahead of the guidance we provided in late July.

As many of you are aware, the third quarter has historically been our seasonally weakest quarter, as we typically see fewer meals being ordered during the summer months and also see an impact from higher cost for packaging and shipping due to the hotter weather. For this reason, to assess our performance, we focus on a comparison to the year-ago period. When you look at the year-over-year comparison, it is clear that we are continuing to move the ball forward with regards to our return-to-growth strategies.

Net revenue in the third quarter of 2020 rose 13% year-over-year to $112.3 million. Net revenue as well as some of the key customer metrics that I will review in a moment, reflect the adverse impact of customer credits issued related to a voluntary supplier recall of onions in August. These credits amounted to approximately $2 million and we are seeking to recover the cost of the recall. Even without adding back the $2 million in customer credits, our year-over-year revenue growth accelerated from the 10% year-over-year growth recorded in the 2020 second quarter.

Driving this revenue growth was the benefit of our more expansive menu offerings as well as the increased demand for meal kits as a result of changes in consumer behavior that we believe continue to solidify around cooking at home more frequently. Given in the net revenue and adjusted EBITDA loss performance, it's logical to ask if there was an opportunity in the quarter to lean harder into marketing to drive more demand. To address that, I'll highlight that while we have the equipment, facilities, supply chain and food safety protocols in place to support higher demand, adequate labor availability remains a challenge caused in part by a portion of our labor pool facing reductions in public transportation and/or childcare arrangement. However, as Linda discussed, we are also working to improve operational efficiencies to reduce labor needs.

We also continue to actively manage our marketing spend levels to ensure they are balanced with our ability to staff our fulfillment centers with adequate labor to support that demand. That said, we moderated our marketing efforts in the third quarter to help manage fulfillment center capacity. Marketing spend in the third quarter of 2020 was down in both absolute dollars and as a percentage of net revenue from $12.1 million in the prior year to $10.9 million and from 12.2% as a percentage net revenue to 9.7%.

As we've demonstrated for the last several quarters, our strategic focus on customer engagement and retention has made our marketing spend more efficient and we're getting a better return on our investment. We had 357,000 customers in the third quarter of 2020 compared to 396,000 in the second quarter, representing normal seasonal influences.

For the second consecutive quarter, orders per customer were 5.4, representing our highest level since prior to 2015, and a 20% increase year-over-year. Average order value was also $59 compared to $58 in the third quarter of 2019. However, if you add back the cost of the recall credits, average order value in the quarter was $60. Inclusive of the $2 million will be recall credits, average revenue per customer was more than $300 for the second consecutive quarter, rising 22% year-over-year to $314. Excluding the recall credit, third quarter average revenue per customer was $320. The last 2 quarters have been the only time Blue Apron has recorded average revenue per customer of more than $300 since prior to 2015.

On the cost side, COGS, excluding depreciation and amortization as a percentage of net revenue declined year-over-year by 130 basis points to 66.4%. Our variable margin was 33.6% in Q3 of 2020 compared to 32.3% in Q3 of 2019. The improvement in COGS and variable margin as a percentage of net revenue largely reflects our continued focus on cost efficiency which more than offset front-line wage and attendance bonus investments made in our fulfillment centers during the pandemic.

Our focus on cost discipline is also evident in Product Technology and G&A costs, or PT G&A, which declined 5% year-over-year to $33.7 million and 550 basis points to 30% as a percent of net revenue. This also reflects a full quarter's benefit from the closing of the Arlington facility in May. Other operating expense for the third quarter was $1.1 million for a charge relating to an estimated non-recurring legal settlement.

On the bottom line, we reported a net loss of $15.3 million, which compares favorably to our guidance for a net loss of no more than $18 million. Our adjusted EBITDA loss improved 64% year-over-year to $4.7 million. And we recorded negative operating cash flow and free cash flow of $7.1 million and $9.1 million, respectively. Both of these metrics demonstrate improvements from last year's third quarter.

In August, we completed an underwritten public offering of 4 million shares of our Class A common stock, which resulted in net proceeds after underwriting discounts and commissions and costs of $32.9 million. As required under the terms of our revolving credit facility at the time, we utilized approximately 1/3 of the proceeds or $10.8 million to pay down our revolver. Reflecting those actions, we ended the third quarter with $58.7 million of cash and cash equivalent.

Subsequent to the end of the third quarter, we entered into a new $35 million term loan that matures in March 2023 and we utilized the proceeds from the term loan and cash on hand to repay in full all of the outstanding indebtedness under the revolving credit facility. The equity raise and debt refinancing combined with our recent improved performance, have served to strengthen our balance sheet and improve financial flexibility. As such, we are confident that we have the necessary capital resources to continue to execute our growth plan and we believe that Blue Apron is now in a sounder competitive position.

Turning to our financial outlook, let me preface our Q4 guidance by sharing some assumptions. Our guidance assumes both the consistent benefit to our business from the execution of our strategic growth initiatives and ongoing operational improvements, the company's ability in the fourth quarter to recognize the recovery of up to $2 million of customer credits issued for the onion recall as well as continued higher levels of demand from changes in consumer behavior. Further, our guidance assumes that we will not experience any significant disruptions in our fulfillment center operations or supply chain as a result of the pandemic, or otherwise.

Reflecting these factors and assumptions, we are expecting fourth quarter net revenue growth of approximately 15% to 19% year-over-year to $108 million to $112 million -- the third consecutive quarter of double-digit year-over-year growth in revenue. We expect to incur a net loss of no more than $15 million in the fourth quarter and an adjusted EBITDA loss of not more than $5 million.

Looking a little further ahead, with operational improvements in our fulfillment centers that we expect to continue to help address labor challenges, we intend to increase our first quarter 2021 marketing expenditures, which we believe will help drive year-over-year double-digit net revenue growth and a year-over-year increase in customers for that period.

For easy reference, our reconciliation table from our net loss with adjusted EBITDA is included in our earnings release, which has been posted on Blue Apron's Investor Relations website. Linda and I will now take your questions.

(Operator Instructions) Your first question today comes from Maria Ripps with Canaccord.

So you obviously had a very strong customer engagement and spend per customer in the quarter, but can you maybe talk a little bit more about subscriber declines this quarter? Was it a matter of slower gross additions or high disconnects or what can you share with us on that? And when your customers leave in the platform, how much do you know about why they leave and was it any different this quarter besides labor constraints issues that you mentioned?

Thanks, Maria. I can jump in on that question first and then Tim, feel free to jump in after. But from a customer standpoint, we actually saw a very similar trend to some of what we saw from our peer set as far as flat or year-over-year. Partially seasonally but then from a labor constraint perspective, it's really related to when we have to close the cycle because of high demand. So obviously when we close the cycle, we do moderate our marketing around that in order to avoid driving people in to cycles that are currently closed. So that's really where we're seeing most of the impact, is between those 2 things.

So otherwise as far as reason for customer numbers in the quarter, it's mostly seasonality that we see these numbers sort of fluctuate and again consistent with our peers. Not necessarily something that is different or abnormal from what we've seen in the past. In fact what we are doing is continuing to innovate on our products as we had promised to do to drive additional varieties, flexibility and choice so that customers can in fact engage more with the product to meet their lifestyle.

Tim, is there anything you want to add there?

No, I think that's great. Maria, thanks for the question. Yes. After a couple of quarters of sequential customer increase in Q1 and Q2, I think what Linda said is exactly right, of course, then our customer count is typically seasonally a little bit lower in Q3. And again, it seems to be pretty consistent with what we've seen across the category as well. We still have more customers at this point obviously than we ended then we ended 2019. So we're feeling pretty good about that.

And as I talked about as we look forward, the other important thing that Linda talked quite a bit about all of the operational efficiencies and things that we were doing to basically continue to offset any issues that we're having with labor availability in our [FCs]. And as we do that and all of those initiatives really take full strength across all of our ships -- both of our facilities as we move through the fourth quarter, we are expecting to have a good Q1 in terms of customer count. As I said in my remarks, both an increase sequentially and an increase year-over-year in Q1 as we lean mean more heavily into our marketing investment behind that. Hopefully greater capacity in our fulfillment centers.

Got it. That's very helpful and maybe related to your sort of increase in marketing spend in Q1 of next year, can you give us a little bit more color around that? Which platforms or channels are you planning on leveraging and is there anything that you're anticipating doing differently this time compared to sort of regular practices there?

Sure. I can I can elaborate that on a little bit. So actually, what we've been building over the last several quarters as far as a more robust integrated marketing plan that includes top of funnel, all the way through our deeper investment in strategically targeting within performance marketing. We've already been implementing a lot of those improvements. As we noted in our comments, we have been having to moderate marketing spend based on capacity in order to move the business forward in a healthy way. That being said, we have seen continued improvements in our efficiencies and being able to actually connect marketing across channels more efficiently than in the past. So the mix will continue to expand into the right level of top of funnel spend as we lean into that more integrated marketing program and you'll start to see that investment go across multiple channels including the ones we have historically used including search, display and some of the other influence or advertising that we've done. But we will continue to expand into the top of funnel again in a responsible way that we know increases the efficiency of the overall marketing spend.

And maybe one more question if I could. Generally you introduce multiple product improvements over the past several quarters, do you think your menu options now are sort of where you want them to be or do you see room for more improvement there?

We definitely have our eyes set on room for more improvement there. As we've said multiple times, this is an ongoing process where we want to continue to add variety, flexibility and choice to our customers. We want to continue to introduce healthier options that don't involve any sacrifice for our chefs, they want to have the same level of flavor and experience that they're used to with Blue Apron menus but that have some healthier options that are specifics to their dietary needs and lifestyle. So we're definitely continuing on our way with product innovation and we are happy with the progress we've made so far and we love, particularly the new recipe customization opportunity that allows people to even bulk up proteins for families and or swap out some of the parts meal if they want to maybe make something more vegetable heavy rather than starch heavy. So those are some really important areas of progress that we've made, but we definitely have a lot more opportunity and we definitely see more opportunity for customer demand based on that.

(Operator Instructions) Your next question, it comes from Donald Broughton with Broughton Capital.

Can you walk me through how you get to your revenue guidance for the fourth quarter, how much of that is customer count, how much of it is orders per customer, and how much of that is revenue per order?

This is Tim. And let me take a first shot at that. So one of the, first of all, we don't typically get into that level of detail in our guidance and particularly right now in the fourth quarter. One of the reasons that that we don't is we have a lot of levers that we're pulling on a week-to-week basis to be able to drive the revenue growth either through any of those, either through the marketing spend that we can lean into on a week-to-week basis to drive new customers or marketing spend to drive additional customer engagement. So as we go through the quarter and we see how our initiatives going that are unleashing more labor capacity, what does that allow us to do with marketing spend as we move through the quarter?

How are the other initiatives that we have out there and continue to impact customer engagement, which obviously has been very positive so far this year? What are any continuing lasting effects of changes in consumer behavior in pandemic all of that basically comes together in pluses or minuses as we move through the quarter for at the end of the day for us to deliver into that 15% to 19% year-over-year growth.

So we're not, we're not guiding to or specifically giving out direction on each of those individual components, but we're managing all of those on a week to week basis depending on what we see around again the key drivers of how we're doing on all these initiatives to drive labor capacity to be able to invest more in marketing and to be able to see how our customer engagement scores move.

And Donald, I'll just add to that. Let me just jump and add to that really quickly, which is one of the things that we've mentioned before and we will continue to do in the fourth quarter is because of the fact that we are focused both on how to make sure we increase capacity, but also continuing our long-term strategic growth plan. We are implementing the product changes while also increasing capacity. So the goal is to both increase flexibility and capacity, which increases complexity. But these product changes that we’re actually doing for the customers are really based on the combination of how we can both increase the value per each customer as well as attract and retain new customers coming into the platform. So everything that we're doing has dual-purpose across a variety of metrics. And so we continue to move aggressively forward on those. Sorry to interrupt your second question.

Just a second before we just one more thing on that is, when we're talking about just a second ago as well, obviously in Q2 as we got revenue growth from all components, revenue grew customer, we grew revenue per customer. In Q3, our growth was obviously came primarily from revenue per customer growth, albeit at a very high kind of historically high levels in Q4, like I said, we'll balance all of these things as we move through the quarter and accelerate that growth rate a bit up to that 14% to 19%. But when we get to Q1, we are pretty confident that we believe that we're going to be in a position where we've unleashed enough labor capacity where we can lean into marketing spend to bring more customers in. And so we would believe that in Q1 and that double-digit growth rate that we are expecting that we talked about in our remarks and will be driven again by increasing customers as well as increase in revenue per customer.

Those all sounded to say, except that I'm trying to figure out how you get to that number, because I know you don't want to put it in exact terms but you lost 40,000 customers and sequentially and orders dropped about 235,000 sequentially. I see that kind of sequential drop, but I think enrollment was in the wrong direction. So how do you change that and maybe you could give us, just tell us how you look at customer acquisition cost, because I don't know how you do that when customers are declining in your marketing, you still spending more money on marketing, so how do you look at customer acquisition costs?

Yes, we look at our customer acquisition costs on a return basis, probably like everybody does in the industry and we set goals out there in terms of where we're adding customers and spending marketing dollars where we get return on that marketing dollar at least within 1 year. We obviously are doing significantly better than that this year on customer acquisition costs. Then decline in customers in Q3 is pretty typical for the seasonality of the business. So -- and we did actually spend lower dollars in Q3 than we did in Q2, it is a little bit higher. Obviously, as a percentage of net revenue but lower in dollars and certainly lower than what we spent a year ago.

And again, some of the factors around that or what Linda going through in her remarks around as we're trying to balance and build labor capacity or balanced marketing spend, the labor capacity. But as we alleviate those labor capacity issues and by the way we've been alleviated and obviously we've been growing double-digit. So we've been able to have some success in that area [steadily]. But as we alleviate that further and we lean more into marketing spend, which as we said, we intend to do in Q1.

We'll get customer growth back and when that customer growth comes back, we'll get additional revenue growth from the new customers coming in as well as continuing to move the needle on customer engagement. And some of the customer engagements stuff, we can expect to continue to move forward as we're getting the full impact of all of these product improvements that we've been rolling out or improvements in our overall product offering that we've been rolling out throughout this year, but as Linda enumerated actually stepping up in Q4 with the customization initiatives.

Exactly, so I think part of what we've been looking at is the product improvements that we've put into place early on had a significant impact based on our existing customers in our best customer behaviors and continuing to drive those forward. And so that does add some complexity compared to the same time last year in the product but what we do see is, it's really more about those labor constraints that really has been the primary driver when we think about our ability to lean heavily into marketing. On the flip side of that, the marketing has been getting significantly more efficient, we were already within 1 year of payback on our marketing programs, but we're continuing to see growth in efficiency as we integrate full funnel marketing into our programs going forward.

So the trajectory is there, it's really just focused on making sure that we can unlock that capacity, while making sure that we are adding those new customer and product initiatives that help engage and retain both existing and new customers.

Ladies and gentlemen, this will conclude our question and answer session. As we approach the conclusion of our call. I will now turn it back over to Ms. Kozlowski for closing remarks.

Thank you very much. And I appreciate your time on behalf of everyone at Blue Apron. We want to wish you, your families, colleagues and friends well, and let you know that our teams are working diligently and effectively to bring incredible home cooking into people's homes. We look forward to providing an update when we report our fourth quarter results early next year.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.