Blue Apron to reduce 10% of workforce, cut spend

Blue Apron released business updates regarding the funding status from affiliates of Joseph Sanberg, its expense reduction initiatives and its liquidity position. As previously disclosed, on November 6, Blue Apron entered into a pledge agreement under which one of Sanberg’s affiliates pledged shares of private companies to the company to secure the private placement obligation of $56.5M of Class A common stock. As Sanberg’s affiliate did not fund by November 30, under the agreement, the company now has the right to foreclose on the pledged collateral. While the company continues to assess the ability of Sanberg’s affiliate to meet its obligations, Blue Apron is actively working with its financial advisors to maximize value from the pledged collateral, including potentially selling or leveraging the pledged collateral to enhance its credit with its current or future lenders. Blue Apron continues to identify and execute against multiple initiatives to both reduce expenses, and streamline decision-making and organizational structure, including a plan for meaningful reduction in marketing, consulting and labor spend in 2023. As such, to create a more nimble, focused organization and to better align internal resources with strategic priorities, Blue Apron is streamlining its personnel this week. This will result in a reduction of approximately 10% of its total corporate workforce. As a result of these actions, the company expects to incur approximately $1.2M in employee-related expenses, primarily consisting of severance payments, substantially all of which will result in cash expenditures. The company expects to recognize such expenses in the fourth quarter of 2022. Blue Apron plans to further reduce expenses and has identified expense reductions of up to approximately $50M in 2023, as compared to 2022, including the headcount changes identified above. These savings are planned to be implemented throughout the coming year. The cost reduction plans address both near-term and long-term expenses as Blue Apron focuses on driving towards profitability in the future. Including the expense reduction plans outlined above, Blue Apron is working to strengthen its balance sheet to maintain compliance with its $25M minimum liquidity covenant. The company plans to continue to execute on its at-the-market program, if market conditions permit, and execute on the additional planned expense reductions outlined above. With the ATM proceeds received to date, anticipated cost savings and working capital management, and without receipt of the private placement funds and funds owed under a gift card agreement with Sanberg’s affiliate, Blue Apron believes it has sufficient cash flow to maintain compliance under its minimum liquidity covenant in the first quarter of 2023. In addition, if the company receives the private placement funds, funds owed under the gift card agreement, the full proceeds from its current ATM program, and is able to achieve the anticipated benefits of cost savings in 2023 as described above, the company believes it will have sufficient cash flow to maintain compliance under its minimum liquidity covenant into 2024. Blue Apron continues to work with its financial advisors to evaluate financing and other alternatives, in addition to being in discussions with its lender.