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With Boxed, Investors Can Stack Gains With ‘Chewy for Humans’

IPO Edge
·4-min read

  • Boxed to merge with ESG-focused Seven Oaks Acquisition Corp. (Nasdaq: SVOK) in 4Q

  • Delivers high-repeat essentials in bulk from fulfillment centers to consumers and businesses

  • SaaS partnerships with Aeon Co., 786 Holdings allowing global expansion

  • Company projecting +40% 2022 YoY revenue growth; $1 billion in sales and 30% gross margin by 2026

  • Led by CEO Chieh Huang, who brings a decade of experience in executive leadership

  • Gary Matthews, chairman and CEO of SVOK, will serve as Boxed chairman

  • Covid rebound to drive B2B growth with customers like United Airlines

  • Priced at 3 times 2021 sales, well below comps Ocado, Etsy, Shopify

By Jarrett Banks and John Jannarone

Remember playing the game Tetris as a kid? Imagine if you’d had artificial intelligence help you stack those blocks. That’s exactly how Boxed Inc. is using technology to build “baskets” of high-repeat essentials to ship to consumers and businesses.

That’s also where the margin lies. Automation technology should cut down on its own operational costs while software can bring in additional revenue. Boxed plans to go public via SPAC Seven Oaks Acquisition Corp. (Nasdaq: SVOK), and the deal is expected to close in the fourth quarter. The combined company will be called Boxed Inc., under the ticker symbol “BOXD.”

Boxed is shaking up the online grocery market like Chewy, Inc. did for the pet food market, by focusing on a product category and providing excellent customer support. Chewy makes money on items it sells in addition to cat food or dog food. For Boxed, this means paper towels, lunch bags, paper plates and fruit snacks.

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The New York-based company’s proprietary platform, using AI and robotics, offers a mobile-first way for households and businesses to buy consumables. Founded in 2013, Boxed will continue to be led by current CEO Chieh Huang after the merger, while Gary Matthews, chairman and CEO of SVOK, one of a few ESG-focused SPACs out there, will serve as Boxed’s chairman.

On the ESG front, Boxed puts environmentally friendly shipping at the forefront, as well as how it treats employees and frontline staff. It will also be one of a few publicly listed companies where the majority corporate leadership is made up of minorities.

For its consumer segment, Boxed sells in bulk to customers in rural areas who are far away from Costco and are somewhat “anti-Amazon.” The look, feel and voice of Boxed is very different from Amazon—which puts very few items in any single package. Boxed ships eight to 10 items per package to consumers on average—stacking them via AI.

For its business segment, which tends to buy in larger quantities, Boxed ships 15 items on average per package. Before Covid, 25 percent of Boxed’s business was B2B, including United Airlines and transit hubs. Boxed is also selling ads to vendors and fees through a third-party marketplace, contributing additional revenue streams.

What’s more, Boxed monetizes it e-commerce platform via a software-as-a-service (SaaS) offering. The company licensed its platform earlier this year to Japanese big box store Aeon Co. for its domestic operations and in Malaysia.

This will help the Japanese company grow its digital business as it expands into other Asian countries, according to Aeon documents translated by IPO Edge. Aeon will use Boxed’s platform at over 40 locations for in-store pick-up or on-demand grocery delivery, and includes an e-commerce storefront website, mobile app and proprietary inventory-picking software.

Boxed also recently announced plans to bring its platform to Saudi Arabia, the UAE, Egypt, Oman, Qatar, Bahrain, Turkey and Kuwait, through a partnership with 786 Holdings Ltd. The partnership will build out B2B operations in the Middle East and North Africa, starting with Saudi Arabia in the first half of 2022.

Turning to valuation, Boxed looks like a bargain by almost any comparison at an enterprise value of 3 times 2021 sales. Britain’s Ocado Group PLC, a straight e-commerce comp, trades at 4.8 times, according to Sentieo, an AI-enabled research platform. Boxed also bears similarity to Etsy, an online marketplace that trades at 12 times. Arguably, Boxed also should be compared to SaaS leader Shopify Inc., which trades at a staggering 36 times.

Technology and an ESG focus are key differentiators for Boxed. Investors would be wise to start stacking baskets of shares.

Contact:

Jarrett Banks, Editor-at-Large

jb@capmarketsmedia.com

Twitter: @IPOEdge

Instagram: @IPOEdge