Peak Bubble? Blue Apron Claims To Be “Profitable” When You Ignore Most Costs And Declining Sales

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via MarketWatch:

Stock rockets 38% after company says it can be profitable based on a non-GAAP metric that ignores losses and falling sales

Meal-kit provider Blue Apron Holdings Inc.‘s shares rocketed 38% on Tuesday, after the company said it is confident it can achieve a version of profitability this year. The recipe for the stock’s turnaround may be mostly accounting.

The rosy outlook for the first quarter and year is dependent on an adjusted, non-standard method of accounting that ignores chronic losses and declining revenue. By standard accounting, called GAAP, for Generally Accepted Accounting Principles, the results have been dismal, pushing the stock down 60% in the last 12 months.

New York-based Blue Apron APRN, -1.20%  said it “plans to reaffirm confidence in achieving profitability on an adjusted EBITDA basis both in the first quarter of 2019 and for full year 2019 as it actively pursues the appropriate strategies to create value for its stakeholders.”

EBITDA, or earnings before interest, taxes, depreciation and amortization, is already an adjusted number, one that is often used as a measure of cash flow. The company said its redefined “adjusted EBITDA” also eliminates share-based compensation expense as well as interest income (expense), net, other operating expense, other income (expense), net, benefit (provision) for income taxes and depreciation and amortization.

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The exclusion of share-based compensation is likely because the company says it “has recently been, and will continue to be for the foreseeable future, a significant recurring expense for the company’s business and an important part of its compensation strategy.”

In its latest quarterly filing with the Securities and Exchange Commission, the company said stock-based compensation rose to $13.6 million in the nine months to end September from $8.8 million in the year-earlier period. That company posted a net loss of $33.9 million for the quarter, equal to 18 cents a share, that compared with a loss of $87.2 million, or 47 cents a share in the year-earlier period. Revenue fell to $150.6 million from $210.6 million.

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In case you missed it: People like meal kits, but their business model is unsustainable

The company announced on November 13 that it would lay off 4% of its workforce to speed the path to profitability.

Rosanna Landis Weaver, program manager, CEO Pay at nonprofit As You Sow, criticized the move.

“They call them “Generally Accepted Accounting Principles” for a reason,” she said. “There are some limited rationales for straying from them, but for a company with a balance sheet like Blue Apron’s to stray so far raises legitimate concerns.”

Tom Selling, a professor emeritus at the Thunderbird School of Global Management, and author of the Accounting Onion blog, said EBITDA would not be the first measure of interest to him regarding Blue Apron.

“What I would want to know with a company like this is what is their revenue,” he told MarketWatch. “Maybe traders today are filling in the blanks differently than I would.”


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