Boxed SPAC deal hints at profit challenge

For grocery-focused e-commerce businesses: Online sales are there, sure, but it’s the logistics and fulfillment that are the roadblocks on the path to positive operating measures.

To that end, in one of the latest headlines in the Special Purpose Acquisition Company (SPAC) space, the Boxed online grocer announced this week that it becomes public in connection with a merger with Seven Oaks Acquisition Corp., a blank check company.

As we delve deeper into the investor presentation and projections, we see that there are margin pressures that are common for fast growing companies. The question is when (maybe even if) projections of positive results on the EBITDA line (a rough measure of cash flow) meet reality in a hyper-competitive space.

SPAC vs. Traditional IPO

As to the why-a-PSPC question: In an interview with CNNBoxed CEO and co-founder Chieh Huang said the company chose to go the SPAC route because it would raise a “quantum of capital” more than what would have been seen with a traditional listing.

The company said in its presentation that grocery e-commerce is growing at a compound annual growth rate of 19% and will be worth up to $ 248 billion in 2025. According to the release and financial data, Boxed sees itself as revenue growth business at about twice that rate, at about 40 percent per year.

Within this market and as the tailwind of these growth rates, Boxed operates as an e-commerce platform that includes two segments, B2C and B2B. The B2C segment, according to the presentation, has more than 450,000 active customers, measured in 2020, with a GMV of $ 158 million during that period and an average order value of $ 96. Projections predict 36% CAGR growth through 2026.

The B2B segment has approximately 24,000 active customers, with $ 35 million in GMV, with an average order value of $ 198.

The sidebar notes in the literature that its average order value (on the B2C side) of nearly $ 100 compares favorably with average order values ​​of $ 85 for wholesale wholesalers, $ 60 for pure online businesses and $ 45 for traditional groceries.

In details related to its financial model (Boxed is also licensing its technology in a white-label omnichannel offering), the company notes that net revenues will accelerate from percentage point growth in mid-teens this year, before accelerating to more than 40% and gradually decreasing. at the low level of 30 percentage points. In the meantime, cash operating costs – in particular, execution, personnel and overheads – will also increase at double-digit rates, resulting in Adjusted EBITDA that will not be positive before. fiscal year 2025, to around $ 3 million, which in turn increases. to $ 63 million the following year. Boxed says 90 percent of delivery is available with a two-day (or less) window.

The online space is of course crowded, vying for the online dollars of consumers (and businesses) to order groceries and essentials and have them delivered (with speed). Amazon bought Whole Foods, Target bought Shipt.

Infrastructure, of course, is part of the secret sauce that makes or breaks e-commerce, and especially delivery companies (just ask Webvan). We argue that ever shorter delivery windows and pressures on trade execution components may remain hallmarks of the space.

The PSPC agreements are renowned for their upbeat projections – and it remains to be seen where Boxed’s own models lie on the path between spreadsheet and reality.

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About the study: The AI ​​In Focus: The Bank Technology Roadmap is a research and interview report examining how banks are using artificial intelligence and other advanced IT systems to improve credit risk management and other aspects of their operations. The Playbook is based on a survey of 100 banking executives and is part of a larger series assessing the potential of AI in finance, healthcare and others.






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