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Blue Apron Holdings, Inc. (APRN) SEC Filing 10-Q Quarterly report for the period ending Sunday, March 31, 2019

Blue Apron Holdings, Inc.

CIK: 1701114 Ticker: APRN

 

Exhibit 99.1

 

 

Blue Apron Holdings, Inc. Reports First Quarter 2019 Results

 

Key Highlights:

·

Improved net loss 83% year-over-year to $5.3 million in the first quarter of 2019 from a loss of $31.7 million.

·

Achieved profitability on an adjusted EBITDA basis of $8.6 million in the first quarter of 2019, with an improvement of $25.8 million year-over-year from an adjusted EBITDA loss of $17.2 million.

·

Delivered operating cash flow of $5.1 million and free cash flow of $3.4 million in the first quarter of 2019.

·

Improved COGS 750 basis points year-over-year to a record performance of 58.3% as a percentage of net revenue in the first quarter of 2019, resulting from operational efficiencies created through enhanced fulfillment center processes.

·

Appointed Linda Findley Kozlowski as President and Chief Executive Officer in April 2019; Kozlowski most recently served as Chief Operating Officer of Etsy, Inc.

New York, NY – April 30, 2019 – Blue Apron Holdings, Inc. (NYSE: APRN) announced today financial results for the quarter ended March 31, 2019.  

 

“I am thrilled to join Blue Apron as CEO and see significant opportunities ahead for the company as we deepen our relationship with customers to bring them more creativity, discovery and connection through cooking at home,” said Linda Kozlowski, Chief Executive Officer, Blue Apron. “Having achieved the important milestone of profitability on an adjusted EBITDA basis, positive operating cash flow, and set a company record for operational efficiency, we are now focused on leveraging this strong foundation as we build a strategy to reinvigorate the business for future sustainable growth.”

 

First Quarter 2019 Financial Results

·

Net revenue decreased 28% year-over-year to $141.9 million in the first quarter of 2019, compared to the first quarter of 2018 as the company deliberately reduced marketing spend while focusing on marketing efficiency and targeting high affinity consumers. Net revenue increased 1% quarter-over-quarter largely reflecting seasonal trends in the business.

·

Cost of goods sold, excluding depreciation and amortization (COGS), as a percentage of net revenue improved 750 basis points year-over-year from 65.8% to 58.3% and improved 250 basis points from the fourth quarter of 2018. These improvements, led by the company’s Linden facility, were primarily driven by efficiencies gained in labor, food, shipping and fulfillment packaging costs as a result of improved planning and process-driven strategies.

·

Marketing expense was $14.2 million, or 10.0% as a percentage of net revenue, in the first quarter of 2019,  compared to $39.3 million, or 20.0% as a percentage of net revenue, in the first quarter of 2018. This decrease is consistent with the company’s strategy to focus on marketing channels it believes to be the most efficient and consumers with high affinity and retention within its direct-to-consumer platform.

·

Product, technology, general, and administrative (PTG&A) costs decreased 21% year-over-year from $49.5 million in the first quarter of 2018 to $39.1 million in the first quarter of 2019, as the company remained focused on expense management and optimization of its cost structure.

1

 


The following information was filed by Blue Apron Holdings, Inc. (APRN) on Tuesday, April 30, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10‑Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019.

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to

 

Commission file number 001-38134

 

Blue Apron Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

Delaware

    

81‑4777373

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

 

 

40 West 23rd Street, New York, New York

 

10010

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (347) 719‑4312

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer ☐

Accelerated filer ☐

Smaller reporting company ☐

Emerging growth company 

 

 

 

 

Non-accelerated filer  

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).    Yes ☐  No 

 

Indicate the number of shares outstanding of each class of the issuer’s common stock as of the latest practicable date.

 

 

 

 

 

Class

Number of Shares Outstanding

Class A Common Stock, $0.0001 par value

95,521,128 shares outstanding as of March 31, 2019

Class B Common Stock, $0.0001 par value

99,560,837 shares outstanding as of March 31, 2019

Class C Capital Stock, $0.0001 par value

0 shares outstanding as of March 31, 2019

 

 

 


 

BLUE APRON HOLDINGS, INC.

TABLE OF CONTENTS

 

 

    

 

 

PART I 

 

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Consolidated Financial Statements (unaudited)

 

3

 

 

 

Consolidated Balance Sheets

 

3

 

 

 

Consolidated Statements of Operations

 

4

 

 

 

Consolidated Statement of Stockholders’ Equity (Deficit)

 

5

 

 

 

Consolidated Statements of Cash Flows

 

6

 

 

 

Notes to Consolidated Financial Statements

 

7

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

 

Item 3.

Quantitative and Qualitative Disclosures

 

32

 

 

Item 4.

Controls and Procedures

 

32

 

 

 

 

 

 

 

PART II 

 

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

 

34

 

 

Item 1A.

Risk Factors

 

36

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

67

 

 

Item 3.

Defaults Upon Senior Securities

 

67

 

 

Item 4.

Mine Safety Disclosures

 

67

 

 

Item 5.

Other Information

 

67

 

 

Item 6.

Exhibits

 

68

 

 

 

 

 

 

 

SIGNATURES 

 

 

69

 

 

 

 

 

 

 

1


 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

·

our expectations regarding our expenses and revenue, our ability to maintain and grow adjusted EBITDA and to achieve profitability, the sufficiency of our cash resources, and needs for additional financing;

·

our ability to cost-effectively attract new customers and retain existing customers;

·

our ability to expand our product offerings and distribution channels;

·

our ability to maintain and grow the value of our brand and reputation;

·

our ability to resume revenue growth or to manage our revenue or future growth effectively;

·

our expectations regarding, and the stability of, our supply chain, including potential shortages or interruptions in the supply or delivery of ingredients;

·

our ability to maintain food safety and prevent food-borne illness incidents;

·

changes in consumer tastes and preferences or in consumer spending;

·

our ability to effectively compete;

·

our ability to attract and retain qualified employees and key personnel;

·

our ability to comply with modified or new laws and regulations applying to our business;

·

our vulnerability to adverse weather conditions or natural disasters; and

·

our ability to obtain and maintain intellectual property protection.

While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

2


 

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

BLUE APRON HOLDINGS, INC.

 

Consolidated Balance Sheets

 

(In thousands, except share and per-share data)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

2019

 

2018

ASSETS

 

 

  

 

 

  

CURRENT ASSETS:

 

 

  

 

 

  

Cash and cash equivalents

 

$

99,114

 

$

95,615

Accounts receivable, net

 

 

341

 

 

494

Inventories, net

 

 

33,036

 

 

33,634

Prepaid expenses and other current assets

 

 

7,773

 

 

11,116

Other receivables

 

 

931

 

 

1,143

Total current assets

 

 

141,195

 

 

142,002

Restricted cash

 

 

1,693

 

 

1,692

Property and equipment, net

 

 

202,326

 

 

209,515

Other noncurrent assets

 

 

3,682

 

 

1,690

TOTAL ASSETS

 

$

348,896

 

$

354,899

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

  

 

 

  

CURRENT LIABILITIES:

 

 

  

 

 

  

Accounts payable

 

$

22,357

 

$

22,573

Accrued expenses and other current liabilities

 

 

31,234

 

 

32,594

Deferred revenue

 

 

10,305

 

 

12,372

Total current liabilities

 

 

63,896

 

 

67,539

Long-term debt

 

 

82,693

 

 

82,603

Facility financing obligation

 

 

71,696

 

 

71,696

Other noncurrent liabilities

 

 

13,167

 

 

13,759

TOTAL LIABILITIES

 

 

231,452

 

 

235,597

Commitments and contingencies (Note 9)

 

 

  

 

 

  

STOCKHOLDERS’ EQUITY (DEFICIT):

 

 

  

 

 

  

Class A common stock, par value of $0.0001 per share — 1,500,000,000 shares authorized as of March 31, 2019 and December 31, 2018; 95,521,128 and 78,601,089 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively

 

 

10

 

 

 8

Class B common stock, par value of $0.0001 per share — 175,000,000 shares authorized as of March 31, 2019 and December 31, 2018; 99,560,837 and 115,710,547 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively

 

 

10

 

 

11

Class C common stock, par value of $0.0001 per share — 500,000,000 shares authorized as of March 31, 2019 and December 31, 2018; 0 shares issued and outstanding as of March 31, 2019 and December 31, 2018

 

 

 —

 

 

 —

Additional paid-in capital

 

 

593,597

 

 

590,521

Accumulated deficit

 

 

(476,173)

 

 

(471,238)

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

117,444

 

 

119,302

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

$

348,896

 

$

354,899

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

3


 

 

 

BLUE APRON HOLDINGS, INC.

Consolidated Statements of Operations

(In thousands, except share and per-share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2019

    

2018

 

Net revenue

 

$

141,890

 

$

196,690

 

Operating expenses:

 

 

 

 

 

 

 

Cost of goods sold, excluding depreciation and amortization

 

 

82,704

 

 

129,332

 

Marketing

 

 

14,234

 

 

39,329

 

Product, technology, general, and administrative

 

 

39,148

 

 

49,488

 

Depreciation and amortization

 

 

8,604

 

 

8,404

 

Other operating expense

 

 

230

 

 

 —

 

Total operating expenses

 

 

144,920

 

 

226,553

 

Income (loss) from operations

 

 

(3,030)

 

 

(29,863)

 

Interest income (expense), net

 

 

(2,232)

 

 

(1,777)

 

Income (loss) before income taxes

 

 

(5,262)

 

 

(31,640)

 

Benefit (provision) for income taxes

 

 

(13)

 

 

(25)

 

Net income (loss)

 

$

(5,275)

 

$

(31,665)

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to Class A, Class B, and Class C common stockholders:

 

 

 

 

 

 

 

Basic

 

$

(0.03)

 

$

(0.17)

 

Diluted

 

$

(0.03)

 

$

(0.17)

 

Weighted-average shares used to compute net income (loss) per share attributable to Class A, Class B, and Class C common stockholders:

 

 

 

 

 

 

 

Basic

 

 

194,698,505

 

 

191,494,036

 

Diluted

 

 

194,698,505

 

 

191,494,036

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

4


 

BLUE APRON HOLDINGS, INC.

Consolidated Statement of Stockholders’ Equity (Deficit)

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

Class B

 

Class C

 

Additional

 

 

 

 

Total

 

 

Common Stock

 

Common Stock

 

Common Stock

 

Paid-In

 

Accumulated

 

Stockholders'

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity (Deficit)

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — December 31, 2018

 

78,601,089

 

$

 8

 

115,710,547

 

$

11

 

 —

 

$

 —

 

$

590,521

 

$

(471,238)

 

$

119,302

Conversion from Class B to Class A common stock

 

16,561,377

 

 

 2

 

(16,561,377)

 

 

(2)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of common stock upon exercise of stock options and vesting of restricted stock

 

358,662

 

 

0

 

411,667

 

 

 1

 

 —

 

 

 —

 

 

102

 

 

 —

 

 

103

Share-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,974

 

 

 —

 

 

2,974

Impact of adoption of accounting standard update

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

340

 

 

340

Net income (loss)

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(5,275)

 

 

(5,275)

Balance — March 31, 2019

 

95,521,128

 

$

10

 

99,560,837

 

$

10

 

 —

 

$

 —

 

$

593,597

 

$

(476,173)

 

$

117,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — December 31, 2017

 

37,657,649

 

$

 4

 

153,727,228

 

$

15

 

 —

 

$

 —

 

$

572,528

 

$

(348,697)

 

$

223,850

Conversion from Class B to Class A common stock

 

19,239,436

 

 

 2

 

(19,239,436)

 

 

(2)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of common stock upon exercise of stock options and vesting of restricted stock

 

233,927

 

 

0

 

150,905

 

 

0

 

 —

 

 

 —

 

 

46

 

 

 —

 

 

46

Share-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

4,595

 

 

 —

 

 

4,595

Impact of adoption of accounting standard update

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

392

 

 

(392)

 

 

 —

Net income (loss)

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(31,665)

 

 

(31,665)

Balance — March 31, 2018

 

57,131,012

 

$

 6

 

134,638,697

 

$

13

 

 —

 

$

 —

 

$

577,561

 

$

(380,754)

 

$

196,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

5


 

BLUE APRON HOLDINGS, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

 

2019

    

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income (loss)

 

$

(5,275)

 

$

(31,665)

 

Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

8,604

 

 

8,404

 

Loss (gain) on disposal of property and equipment

 

 

110

 

 

514

 

Changes in reserves and allowances

 

 

(671)

 

 

(581)

 

Share-based compensation

 

 

2,835

 

 

4,215

 

Non-cash interest expense

 

 

125

 

 

645

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Receivables

 

 

314

 

 

1,059

 

Inventories

 

 

1,216

 

 

2,972

 

Prepaid expenses and other current assets

 

 

3,180

 

 

(2,649)

 

Accounts payable

 

 

279

 

 

(2,247)

 

Accrued expenses and other current liabilities

 

 

(1,319)

 

 

4,642

 

Deferred revenue

 

 

(1,727)

 

 

(4,763)

 

Other noncurrent assets and liabilities

 

 

(2,533)

 

 

(1,006)

 

Net cash from (used in) operating activities

 

 

5,138

 

 

(20,460)

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Decrease (increase) in restricted cash

 

 

(1)

 

 

125

 

Purchases of property and equipment

 

 

(1,734)

 

 

(5,077)

 

Proceeds from sale of property and equipment

 

 

67

 

 

430

 

Net cash from (used in) investing activities

 

 

(1,668)

 

 

(4,522)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Payments of debt issuance costs

 

 

(7)

 

 

 —

 

Proceeds from exercise of stock options

 

 

102

 

 

46

 

Principal payments on capital lease obligations

 

 

(66)

 

 

(61)

 

Net cash from (used in) financing activities

 

 

29

 

 

(15)

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

3,499

 

 

(24,997)

 

CASH AND CASH EQUIVALENTS — Beginning of period

 

 

95,615

 

 

228,514

 

CASH AND CASH EQUIVALENTS — End of period

 

$

99,114

 

$

203,517

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Cash paid for income taxes, net of refunds

 

$

 —

 

$

 —

 

Cash paid for interest

 

$

2,174

 

$

1,720

 

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:

 

 

 

 

 

 

 

Acquisition (disposal) of property and equipment financed under capital lease obligations

 

$

 —

 

$

184

 

Non-cash additions to property and equipment

 

$

138

 

$

380

 

Purchases of property and equipment in Accounts payable and Accrued expenses and other current liabilities

 

$

250

 

$

1,509

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

6


 

BLUE APRON HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

When used in these notes, Blue Apron Holdings, Inc. and its subsidiaries are collectively referred to as the “Company.”

The Company creates original recipes, which are sent along with fresh, high-quality, seasonal ingredients, directly to customers for them to prepare, cook, and enjoy. The Company creates meal experiences around original recipes every week based on what’s in-season with farming partners and other suppliers. Customers can choose which recipes they would like to receive in a given week, and the Company delivers those recipes to their doorsteps along with the pre-portioned ingredients required to cook those recipes. In 2018, the Company also introduced meal solutions that can be accessed in a retail environment or through on-demand delivery.

In addition to meals, the Company sells wine through Blue Apron Wine, a direct-to-consumer wine delivery service launched in September 2015. The Company also sells a curated selection of cooking tools, utensils, and pantry items through Blue Apron Market, an e-commerce marketplace launched in November 2014.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The unaudited interim Consolidated Financial Statements have been prepared on the same basis as the audited Consolidated Financial Statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2019 and December 31, 2018, results of operations for the three months ended March 31, 2019 and 2018, and cash flows for the three months ended March 31, 2019 and 2018. These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2019 (the “Annual Report”). The Company adopted Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606) as of January 1, 2019 using a modified retrospective approach. See Revenue Recognition below for further discussion. There have been no other significant changes in the Company's significant accounting policies from those that were disclosed in Note 2, Summary of Significant Accounting Policies, included in the Annual Report.

The accompanying Consolidated Financial Statements include the accounts of Blue Apron Holdings, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company prepares its Consolidated Financial Statements and related disclosures in conformity with accounting principles generally accepted in the United States (“GAAP”).

Revenue Recognition

The Company adopted ASU 2014-09,  Revenue from Contracts with Customers (Topic 606), as of January 1, 2019. The Company primarily generates revenue from the sale of its products to customers, including meals, wine and kitchen tools. For the three months ended March 31, 2019 and 2018, the Company derived substantially all of its Net revenue from sales of its meals.

The Company's revenue contracts represent a single performance obligation to sell its products to its customers. The Company recognizes revenue upon transfer of control, including passage of title to the customer and transfer of risk of loss related to the products, in an amount that reflects the consideration the Company expects to be entitled to. In general, the Company charges credit cards in advance of shipment. Transfer of control generally passes upon delivery to

7


 

the customer. Sales taxes imposed on the Company’s sales are presented on a net basis in the Consolidated Statements of Operations, and therefore do not impact Net revenue or Cost of goods sold, excluding depreciation and amortization.

The Company deducts promotional discounts, actual customer credits and refunds as well as credits and refunds expected to be issued to determine Net revenue. Customers who receive a damaged meal or wine order or are dissatisfied with an order and contact the Company within seven days of receipt of the order may receive a full or partial refund, full or partial credit against future purchase, or replacement, at the Company's sole discretion. Credits only remain available for customers who maintain a valid account with the Company. Customers who return an unused, undamaged Blue Apron Market product within 30 days of receipt receive a full refund. The Company estimates and records expected credits and refunds based on prior history, recent trends, and projections for credits and refunds on sales in the current period. Reserves for credits and refunds are included within Accrued expenses and other current liabilities on the Consolidated Balance Sheet.

The Company periodically enters into agreements with third parties to market the Company’s products. The Company records revenue from such arrangements at the gross amount as the Company is the principal in these arrangements as it is primarily responsible for fulfilling the goods to customers, provides primary customer service for such products sold on its website, has latitude in establishing price and selecting such products sold on its website, and maintains inventory risk.

The Company has two types of contractual liabilities: (i) cash collections from its customers prior to delivery of products purchased, which are included in Deferred revenue on the Consolidated Balance Sheet, and are recognized as revenue upon transfer of control of its products, and (ii) unredeemed gift cards and other prepaid orders, which are included in Deferred revenue on the Consolidated Balance Sheet, and are recognized as revenue when gift cards are redeemed and the products are delivered. Certain gift cards are not expected to be redeemed, also known as breakage, and are recognized as revenue over the expected redemption period, subject to requirements to remit balances to governmental agencies.

Contractual liabilities included in Deferred revenue on the Consolidated Balance Sheets were $10.3 million as of March 31, 2019 and $12.4 million as of December 31, 2018, respectively. During the three months ended March 31, 2019, the Company recognized $10.2 million to Net revenue from the Deferred revenue at December 31, 2018.

The Company adopted ASU 2014-09 using a modified retrospective approach and recognized $0.3 million cumulative-effect adjustment to reduce Accumulated deficit as of January 1, 2019. The cumulative-effect adjustment to Accumulated deficit was due to breakage of gift cards to the extent there is no requirement for remitting balances to governmental agencies. Under the modified retrospective approach, prior period balances are not retrospectively adjusted.

Use of Estimates

In preparing its Consolidated Financial Statements in accordance with GAAP, the Company is required to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs, and expenses, and disclosure of contingent assets and liabilities which are reported in the Consolidated Financial Statements and accompanying disclosures. The accounting estimates that require the most difficult and subjective judgments include revenue recognition, inventory valuation, leases, recoverability of long-lived assets, the fair value of share-based awards, recoverability of net deferred tax assets and related valuation allowance, and the recognition and measurement of income tax uncertainties and other contingencies. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from the Company’s estimates and assumptions.

Emerging Growth Company Status

The Company is an "emerging growth company," as defined in the Jumpstart Our Business Startups (JOBS) Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." The Company may take advantage of these exemptions until the Company is no longer an "emerging growth company." Section 107 of the JOBS Act provides that an

8


 

"emerging growth company" can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, its financial statements may not be comparable to companies that comply with public company effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that it is no longer an emerging growth company. The Company would cease to be an emerging growth company if it has more than $1.07 billion in annual revenue, has more than $700.0 million in market value of its stock held by non-affiliates (and it has been a public company for at least 12 months, and has filed one annual report on Form 10-K), or it issues more than $1.0 billion of non-convertible debt securities over a three-year period.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued its final standard on lease accounting, Accounting Standards Update No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. The new accounting standard requires the recognition of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The new standard also provides additional guidance on the measurement of the right-of-use assets and lease liabilities and will require enhanced disclosures about the Company’s leasing arrangements. In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, to add SEC paragraphs pursuant to an SEC Staff Announcement made at the July 20, 2017 Emerging Issues Task Force (EITF) meeting. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, to improve and clarify certain aspects of ASU No. 2016-02. In January 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements, to improve and clarify aspects of ASU No. 2016-02. For the Company, the new standard is effective for annual periods beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact this new guidance will have on its Consolidated Financial Statements.

In November 2016, the FASB issued Accounting Standards Update No. 2016-18 (“ASU 2016-18”), Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). The standard is intended to eliminate diversity in practice in the treatment of restricted cash in the statement of cash flows and requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. For the Company, the amendments in ASU 2016-18 are effective for annual periods beginning after December 15, 2018, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued Accounting Standards Update No. 2018-15 (“ASU 2018-15”), Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The standard is intended to clarify the accounting for implementation costs of a hosting arrangement that is a service contract. For the Company, the amendments in ASU 2018-15 are effective for annual periods beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the impact this new guidance may have on its Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09,  Revenue from Contracts with Customers (Topic 606). ASU 2014-09 affects any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The new guidance supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. The new standard also includes enhanced disclosures which are significantly more comprehensive than those in existing revenue standards. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Principal versus Agent Considerations), to clarify the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Identifying Performance Obligations and Licensing), to clarify the implementation guidance on identifying performance obligations and licensing. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with

9


 

Customers (Narrow-Scope Improvements and Practical Expedients), to clarify the implementation guidance on assessing collectibility, presentation of sales taxes, noncash consideration and completed contracts, and contract modifications at transition. In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, (Revenue from Contracts with Customers), to clarify the guidance or to correct unintended application of guidance. In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, to add SEC paragraphs pursuant to an SEC Staff Announcement made at the July 20, 2017 Emerging Issues Task Force (EITF) meeting. The Company adopted the new standard as of January 1, 2019, using a modified retrospective approach and recognized $0.3 million cumulative-effect adjustment to reduce Accumulated deficit as of January 1, 2019.

 

3. Inventories, Net

Inventories, net consist of the following:

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2019

    

2018

 

 

(In thousands)

Fulfillment

 

$

2,640

 

$

3,050

Product

 

 

30,396

 

 

30,584

Inventories, net

 

$

33,036

 

$

33,634

Product inventory primarily consists of bulk and prepped food, containers, products available for resale, and wine products. Fulfillment inventory consists of packaging used for shipping and handling. Product and fulfillment inventories are recognized as components of Cost of goods sold, excluding depreciation and amortization in the accompanying Consolidated Statements of Operations when sold.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2019

    

2018

 

 

(In thousands)

Prepaid insurance

 

$

5,454

 

$

6,374

Other current assets

 

 

2,319

 

 

4,742

Prepaid expenses and other current assets

 

$

7,773

 

$

11,116

 

 

 

10


 

5. Property and Equipment, Net

Property and equipment, net consists of the following:

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2019

    

2018

    

 

 

(In thousands)

 

Computer equipment

 

$

11,111

 

$

10,969

 

Capitalized software

 

 

16,226

 

 

15,701

 

Fulfillment equipment

 

 

54,990

 

 

54,187

 

Furniture and fixtures

 

 

3,725

 

 

3,724

 

Leasehold improvements

 

 

41,397

 

 

41,408

 

Buildings(1)

 

 

148,507

 

 

148,507

 

Construction in process

 

 

2,231

 

 

2,207

 

Property and equipment, gross

 

 

278,187

 

 

276,703

 

Less: accumulated depreciation and amortization

 

 

(75,861)

 

 

(67,188)

 

Property and equipment, net

 

$

202,326

 

$

209,515

 


(1)

Includes build-to-suit lease arrangements in Linden, New Jersey and Fairfield, California where the Company is considered the owner for accounting purposes, of which $62.1 million was included in Buildings as of March 31, 2019 and December 31, 2018. Costs incurred directly by the Company relating to these arrangements were $82.3 million as of March 31, 2019 and December 31, 2018. Capitalized interest for construction projects related to build-to-suit lease arrangements was $4.2 million as of March 31, 2019 and December 31, 2018.

In October 2017, the Company performed a review of its real estate needs and decided to no longer pursue its planned build-out of the Fairfield facility and as a result, recorded an impairment charge of $3.2 million. The Company is pursuing potential alternatives for the leased Fairfield property. As of March 31, 2019, the Company had future non-cancelable minimum lease payments of $36.4 million through 2028 related to this facility.

 

 

 

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2019

    

2018

 

 

(In thousands)

Accrued compensation

 

$

11,305

 

$

12,909

Accrued credits and refunds reserve

 

 

1,127

 

 

1,180

Accrued marketing expenses

 

 

5,027

 

 

6,027

Accrued shipping expenses

 

 

4,749

 

 

1,910

Other current liabilities

 

 

9,026

 

 

10,568

Accrued expenses and other current liabilities

 

$

31,234

 

$

32,594

 

 

 

7. Deferred Revenue

Deferred revenue consists of the following:

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2019

 

2018

 

 

(In thousands)

Cash received prior to fulfillment

 

$

7,437

 

$

7,029

Gift cards, prepaid orders, and other

 

 

2,868

 

 

5,343

Deferred revenue

 

$

10,305

 

$

12,372

 

 

11


 

8. Debt

Revolving Credit Facility

In August 2016, the Company entered into a revolving credit and guaranty agreement (the “revolving credit facility”) with a maximum amount available to borrow of $150.0 million. In May 2017 and June 2017, the Company executed amendments to the agreement that each increased the total commitment by $25.0 million, resulting in a total commitment of $200.0 million. In October 2018, the Company amended and refinanced the revolving credit facility to, among other things, reduce the maximum amount available to borrow to $85.0 million and extend the maturity date of the facility to February 2021.

As of March 31, 2019 and December 31, 2018, the Company had $83.6 million in outstanding borrowings and $1.4 million in issued letters of credit under the revolving credit facility. The remaining amount available to borrow as of March 31, 2019 and December 31, 2018 was $0.0 million. The Company incurred and capitalized $0.5 million in deferred financing costs in long-term debt in connection with the revolving credit facility in August 2016. In conjunction with the refinancing in October 2018, the Company incurred and capitalized $0.9 million in deferred financing costs in long-term debt, which will be amortized over the new term. As of March 31, 2019 and December 31, 2018, the total unamortized deferred financing costs was $0.9 million and $1.0 million, respectively.

As of March 31, 2019 and December 31, 2018, outstanding borrowings of long-term debt consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31,

 

 

    

Maturity Date

 

2019

    

2018

 

 

 

 

 

(In thousands)

 

Revolving credit facility

 

February 2021

 

$

83,578

 

$

83,578

 

Weighted average interest rate

 

 

 

 

6.80

%

 

6.41

%

Prior to the credit facility refinancing, borrowings under the revolving credit facility bore interest, at the Company’s option, at (1) a base rate based on the highest of prime rate, the federal funds rate plus 0.50% and an adjusted LIBOR rate for a one month interest period plus 1.00% (“the base rate”), plus in each case a margin ranging from 0.50% to 1.00% or (2) an adjusted LIBOR rate (“the eurodollar rate”) plus a margin ranging from 1.50% to 2.00%, based on the Company’s total leverage ratio for the preceding four fiscal quarters and the Company’s status as a public or non-public company. Subsequent to the credit facility refinancing, base rate loans bear interest at a rate equal to the base rate plus 3.00% and eurodollar rate loans bear interest at a rate equal to the eurodollar rate plus 4.00%. As of March 31, 2019 and December 31, 2018, the Company had outstanding borrowings of $83.6 million utilizing the eurodollar rate. As of March 31, 2019 and December 31, 2018, the Company had outstanding borrowings of $0.0 million utilizing the base rate. The Company is also obligated under the revolving credit facility to pay customary fees, including an unused commitment fee on undrawn amounts of 0.15%. The Company incurred unused commitment fees related to the revolving credit facility of $0.0 million during the three months ended March 31, 2019 and March 31, 2018.

The obligations under the revolving credit facility are guaranteed by the guarantor as defined in the revolving credit and guaranty agreement, Blue Apron Holdings, Inc. Obligations under the revolving credit facility are secured by substantially all of the assets of the guarantor and its subsidiaries. The revolving credit facility contains certain restrictive covenants, including limitations on the incurrence of indebtedness and liens, restrictions on affiliate transactions, restrictions on the sale or other disposition of collateral, and limitations on dividends and stock repurchases. The October 2018 amendment to the revolving credit facility made certain additional changes to affirmative and financial reporting covenants and various negative covenants restricting the activities of the Company and its subsidiaries. In addition, the revolving credit facility requires the Company to comply with certain additional financial covenants, including to maintain a minimum aggregate liquidity balance of $50.0 million and, in the event the Company has positive consolidated total net debt, maintain minimum quarterly consolidated adjusted EBITDA in excess of certain specified thresholds as defined in the revolving credit and guaranty agreement. As of March 31, 2019 and December 31, 2018, the Company was in compliance with all of the covenants under the revolving credit facility.

12


 

Facility Financing Obligation

As of March 31, 2019 and December 31, 2018, the Company had a facility financing obligation of $71.7 million related to leased facilities in Linden and Fairfield under the build-to-suit accounting guidance.

9. Commitments and Contingencies

Legal Proceedings

The Company records accruals for loss contingencies associated with legal matters when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss is reasonably possible, the Company discloses the matter, and, if estimable, the amount or range of the possible loss in the notes to the Consolidated Financial Statements. 

The Company is subject to a consolidated putative class action lawsuit in the U.S. District Court for the Eastern District of New York alleging federal securities law violations in connection with the Company’s June 2017 initial public offering, or the IPO.  The amended complaint alleges that the Company and certain current and former officers and directors made material misstatements or omissions in the Company’s registration statement and prospectus that caused the stock price to drop. Pursuant to a stipulated schedule entered by the parties, defendants filed a motion to dismiss the amended complaint on May 21, 2018.  Plaintiffs filed a response on July 12, 2018 and defendants filed a reply on August 13, 2018. The motion to dismiss remains pending before the Court. The Company is also subject to two putative class action lawsuits filed in New York Supreme Court alleging federal securities law violations in connection with the IPO, which are substantially similar to the above-referenced federal court action. The parties have entered into stipulations staying the state court actions pending resolution of the motion to dismiss filed in the federal court action. The Company is unable to provide any assurances as to the ultimate outcome of any of these lawsuits or that an adverse resolution of any of these lawsuits would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

The Company is subject to a shareholder derivative action filed in the Delaware Court of Chancery. The plaintiff seeks a declaratory judgment challenging the validity of a provision of the Company’s restated certificate of incorporation that requires shareholders to bring claims under the Securities Act of 1933 solely in federal court. On December 19, 2018, the Court entered summary judgment in favor of the plaintiff. The Company currently intends to appeal the Court’s ruling at the appropriate time. The Company is unable to provide any assurances as to the ultimate outcome of this lawsuit or that an adverse resolution of this lawsuit would not have a material adverse effect on the Company’s consolidated financial position or results of operations. 

The Company is subject to a lawsuit filed in California Superior Court under the Private Attorneys General Act (“PAGA”) on behalf of certain non-exempt employees in the Company’s Richmond, California fulfillment center.  The complaint was filed on October 16, 2017, and alleges that the Company failed to pay wages and overtime, provide required meal and rest breaks, provide suitable resting facilities and provide accurate wage statements, to non-exempt employees in violation of California law. Plaintiffs’ counsel filed a separate class action lawsuit alleging largely the same claims, but covering a longer period, which is now pending in the United States District Court for the Northern District of California. The Company believes that it is likely that the two cases will be consolidated, and the parties are preparing for mediation in an attempt to resolve both cases. The Company is currently unable to provide any assurances as to the ultimate outcome of these lawsuits or that adverse resolution of these lawsuits would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

On July 20, 2018, one of the Company’s suppliers, West Liberty Foods, L.L.C., (i) made an arbitration demand against the Company with JAMS, and (ii) together with certain related entities, filed a lawsuit against the Company in Iowa state court. The arbitration demand alleges breach of contract, fraud, and other common law claims in connection with, among other things, a dispute under the supply agreement between the parties related to the purchase of certain beef and poultry inventory of the supplier. The lawsuit, which has been removed to the U.S. District Court for the Southern District of Iowa, alleges breach of oral contract and other common law claims in connection with a purported agreement between the Company and the supplier relating to the supplier’s acquisition of another company. On

13


 

December 28, 2018, the Court denied the Company’s motion to dismiss the plaintiffs’ amended complaint. The parties are presently engaged in discovery in both the lawsuit and arbitration. The Company is currently unable to provide any assurances as to the ultimate outcome of this matter or that an adverse resolution of this matter would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

Although the Company believes that it is reasonably possible that it may incur losses in these cases, the Company is currently unable to estimate the amount of such losses due to the early stages of the litigation, among other factors. 

In addition, from time to time the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. Although the results of such litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business, operating results, financial condition or cash flows.

Sales Tax

On June 21, 2018, the U.S. Supreme Court decided, in South Dakota v. Wayfair, Inc., that state and local jurisdictions may, at least in certain circumstances, enforce a sales and use tax collection obligation on remote vendors that have no physical presence in the jurisdiction. A number of states have already begun, or have positioned themselves to begin, requiring sales and use tax collection by remote vendors and/or by online marketplaces. The details and effective dates of these collection requirements vary from state to state. The Company is in the process of determining how and when its collection practices will need to change in other jurisdictions. It is possible that one or more jurisdictions may assert that the Company has liability for periods for which it has not collected sales, use or other similar taxes, and if such an assertion or assertions were successful it could result in substantial tax liabilities, including for past sales as well as penalties and interest, which could materially adversely affect the Company’s business, financial condition and operating results.

10. Share-based Compensation

The Company recognized share-based compensation for share-based awards of $2.8 million and $4.2 million during the three months ended March 31, 2019 and 2018, respectively. For the three months ended March 31, 2019 and 2018, the Company recognized $2.6 million and $3.7 million of share-based compensation in Product, technology, general, and administrative expenses and $0.2 million and $0.5 million in Cost of goods sold, excluding depreciation and amortization, respectively.

11. Earnings per Share

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period.

Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares, including potential dilutive common shares assuming the dilutive effect of outstanding common stock options and convertible preferred stock. For periods in which the Company has reported net loss, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The rights, including the liquidation and dividend rights, of the Class A, Class B, and Class C common stock are substantially the same, other than voting rights. For the three months ended March 31, 2019 and 2018, the Company did not have any outstanding shares of Class C common stock. 

14


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

  

2019

 

2018

 

 

Class A

  

Class B

  

Class C

 

Class A

 

Class B

 

Class C

(in thousands, except share and per-share data)

 

 

 

 

 

Numerator:

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

  

Net income (loss)

 

$

(2,313)

 

$

(2,962)

 

$

 —

 

$

(7,777)

 

$

(23,888)

 

$

 —

Undistributed earnings reallocated to convertible preferred stock

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Net income (loss) attributable to common stockholders

 

$

(2,313)

 

$

(2,962)

 

$

 —

 

$

(7,777)

 

$

(23,888)

 

$

 —

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—basic

 

 

85,379,756

 

 

109,318,749

 

 

 —

 

 

47,035,065

 

 

144,458,971

 

 

 —

Effect of dilutive securities

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—diluted

 

 

85,379,756

 

 

109,318,749

 

 

 —

 

 

47,035,065

 

 

144,458,971

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders—basic (1)

 

$

(0.03)

 

$

(0.03)

 

$

 —

 

$

(0.17)

 

$

(0.17)

 

$

 —

Net income (loss) per share attributable to common stockholders—diluted (1)

 

$

(0.03)

 

$

(0.03)

 

$

 —

 

$

(0.17)

 

$

(0.17)

 

$

 —

 


(1)

Net income (loss) per share attributable to common stockholders — basic and net income (loss) per share attributable to common stockholders — diluted may not recalculate due to rounding.

 

 

The following have been excluded from the computation of diluted net income (loss) per share attributable to common stockholders as their effect would have been antidilutive:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

2019

 

2018

 

  

Class A

  

Class B

  

Class C

  

Class A

  

Class B

  

Class C

Stock options

 

1,513,531

 

5,235,546

 

 —

 

 —

 

8,544,099

 

 —

Restricted shares

 

 —

 

12,458

 

 —

 

 —

 

27,458

 

 —

Restricted stock units

 

10,623,145

 

 —

 

 —

 

9,478,025

 

 —

 

 —

Convertible preferred stock

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

Total anti-dilutive securities

 

12,136,676

 

5,248,004

 

 —

 

9,478,025

 

8,571,557

 

 —

 

 

 

 

 

 

12. Fair Value of Financial Instruments

The fair value of financial instruments is determined based on assumptions that market participants would use when pricing an asset or liability at the balance sheet date. Certain assets are categorized based on the following fair value hierarchy of market participant assumptions:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

 

Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

 

Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value of the asset or liability and supported by little or no market activity.

15


 

The Company uses observable market data when available, and minimizes the use of unobservable inputs when determining fair value.

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2) and significant unobservable inputs (Level 3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

    

Level 1

    

Level 2

    

Level 3

    

Total

 

 

(In thousands)

Financial Assets: