Grove Collaborative Holdings, Inc. (NYSE: GROV) (“Grove” or “the
Company”), a leading sustainable consumer products company and
certified B Corp™, today reported financial results for its fiscal
third quarter ended September 30, 2022.
Fiscal Third Quarter 2022 Financial
Highlights:
Our financial highlights reflect our continued efforts to
eliminate unprofitable revenue and drive improved margins, on a
sequential basis, in order to be profitable in 2024.
- Net revenue of $77.7 million, down 2% from the second quarter
of 2022, and down 18% year-over-year
- Gross margin of 49.1%, in line with the second quarter of 2022,
and down 130 basis points year-over-year
- Net income margin of 9.9%, an improvement from the net loss
margin of (44.5)% in the second quarter of 2022 and (39.4)% in the
third quarter of 2021
- Net income margin is inclusive of gains on the remeasurement of
derivative liabilities.
- Adjusted EBITDA margin(1) of (12.4)%, an improvement from
(26.6)% in the second quarter of 2022 and (32.8)% in the third
quarter of 2021
(1)
Adjusted EBITDA margin is a non-GAAP
financial measure. See “Non-GAAP Financial Measures” for additional
information. A reconciliation to the most comparable GAAP measure
can be found in the tables at the end of this press release.
Stuart Landesberg, Chief Executive Officer of Grove, said, “I am
pleased with our third quarter results as we cut our adjusted
EBITDA loss by more than half from the second quarter, greatly
improving our adjusted EBITDA margin both sequentially and
year-over-year. During the quarter, we advanced progress on several
key elements of our value creation plan, as we successfully
expanded our retail distribution, gained efficiencies on marketing
spend, reduced operating costs, and took strides toward improving
the user experience on our direct-to-consumer platform, all while
navigating macroeconomic headwinds. The steps we took progress us
towards our goal of driving profitable growth in 2024, and we are
excited about the plans in front of us.”
Landesberg continued, “In light of our strong results to date,
which continue to be above our expectations, we are raising
guidance for fiscal 2022. However, we are aware that the
environment remains challenging and we expect that to factor into
our business plans and performance in 2023 and beyond. Consumers
continue to battle high inflation while returning to more
normalized buying patterns following the height of the pandemic. We
expect volatility in the macro environment to persist and costs to
remain elevated. While we are cautious as we look ahead to next
year, we remain confident in the long term trends toward
sustainability, the strength of the Grove brand, and the strategies
we have in place to drive sustainable profitable growth.”
Fiscal Third Quarter 2022 Key Business
Highlights:
- DTC net revenue per order was $60.63 in the third quarter of
2022, up 7% year-over-year from $56.43 in the third quarter of
2021
- Grove Brand products represented 46.9% of net revenue in the
third quarter of 2022, a decrease of 120 basis points from 48.1% in
the third quarter of 2021
- In the third quarter, 63% of Grove Brands net revenue came from
either zero-plastic, re-usable or refillable and zero plastic waste
products, determined as meeting the Company’s Beyond Plastic™
standard, up significantly from 46% in the third quarter of 2021 as
Grove’s no- and low-plastic assortment grows and continues to be
adopted by customers
- Grove believes that publishing plastic intensity (pounds of
plastic sold per $100 in revenue as measured by the Company)
enables the Company to hold itself accountable for the pace at
which it decouples revenue from its use of plastic
- Across the Grove.co site and through retail partners, plastic
intensity was 1.03 pounds of plastic per $100 in revenue in the
third quarter of 2022 as compared to 1.33 in the third quarter of
2021, following the intended trajectory
- Across all Grove Brands, plastic intensity was 0.85 pounds of
plastic per $100 in revenue in the third quarter of 2022 as
compared to 1.14 pounds in the third quarter of 2021, as Grove
Brands are designed for sustainability
Fiscal Third Quarter 2022 Operational
Highlights:
- Executed against four-pronged value creation plan,
encompassing:
- Improved marketing efficiency
- Achieved efficiencies on lower spend across paid social, linear
TV, and performance partnership channels
- Continued roll out and optimization of new marketing technology
stack to improve targeting
- Leveraged and evolved creative featuring Drew Barrymore,
originally launched in the second quarter, driving reduced customer
acquisition costs in linear and paid social
- Omni-channel expansion
- Expanded retail footprint by adding three new retail partners,
including first drugstore partnership encompassing 2,200 doors
- Net revenue management
- Began testing, implementing, and optimizing net revenue
management processes focused on strategic pricing, maximizing
category mix, and enhancing promotional sell through
- Operating expense discipline
- Executed company-wide reorganization, which included a
workforce reduction of approximately 18% of the corporate
workforce, to streamline operations and reallocate resources to
initiatives that align with the Company’s goal of achieving
profitability
- Removed additional operating expenses accelerating the
reduction in cash burn
Financial Outlook:
Based on performance to date and current expectations, Grove is
raising guidance as follows:
For the 12-month period ending December 31, 2022, we expect:
- Net revenue of $313 to $320 million, up from $302.5 to $312.5
million
- Adjusted EBITDA margin(1) of (24.0)% to (26.0)%, up from
(27.5)% to (30.5)%
(1)
Adjusted EBITDA margin is a non-GAAP
financial measure. See “Non-GAAP Financial Measures” for additional
information.
Conference Call
Information:
The Company will host a conference call to discuss third quarter
2022 financial results and other business updates today, November
10, 2022, at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time. The
conference call will be available via live audio webcast on the
Company’s investor relations website at investors.grove.co. To
participate via telephone, interested parties may dial (877)
413-7205, or (201) 689-8537 if calling internationally. A replay of
the call will be available until November 24, 2022, and can be
accessed by dialing (877) 660-6853 or (201) 612-7415, access code:
13733984. The webcast will also be available on Grove’s investor
relations website for 6 months following the conference call.
About Grove Collaborative Holdings,
Inc.
Launched in 2016 as a Certified B Corp, Grove Collaborative
Holdings, Inc. (NYSE: GROV) is transforming consumer products into
a positive force for human and environmental good. Driven by the
belief that sustainability is the only future, Grove creates and
curates more than 150 high-performing eco-friendly brands of
household cleaning, personal care, laundry, clean beauty, baby and
pet care products serving millions of households across the U.S.
each year. With a flexible monthly delivery model and access to
knowledgeable Grove Guides, Grove makes it easy for everyone to
build sustainable routines.
Every product Grove offers — from its flagship brand of
sustainably powerful home care essentials, Grove Co., plastic-free,
vegan personal care line, Peach Not Plastic, and zero-waste pet
care brand, Good Fur, to its exceptional third-party brands — has
been thoroughly vetted against Grove’s strict standards to be
beautifully effective, supportive of healthy habits, ethically
produced and cruelty-free. Grove is a public benefit corporation on
a mission to move Beyond Plastic™ and in 2021, entered physical
retail for the first time at Target stores nationwide, making
sustainable home care products even more accessible. Grove is the
first plastic neutral retailer in the world and is committed to
being 100% plastic-free by 2025. For more information, visit
www.grove.com.
Caution Concerning Forward-Looking
Statements
This press release contains "forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. Such statements include, but are not limited to, statements
about our ability to achieve profitable growth in 2024, our 2023
business performance, the 2023 financial outlook, and our or our
management team’s expectations, hopes, beliefs, intentions, plans,
prospects or strategies regarding the future, including revenue
growth and financial performance, profitability, product expansion
and services. Any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking
statements. In addition, any statements that refer to projections,
forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are
forward-looking statements. The words “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intends,” “may,”
“might,” “plan,” “possible,” “potential,” “predict,” “project,”
“should,” “would” and similar expressions may identify
forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. The forward-looking
statements contained in this press release are based on our current
expectations and beliefs made by our management in light of their
experience and their perception of historical trends, current
conditions and expected future developments and their potential
effects on the Company as well as other factors they believe are
appropriate in the circumstances. There can be no assurance that
future developments affecting the Company will be those that we
have anticipated. These forward-looking statements involve a number
of risks, uncertainties (some of which are beyond our control) or
other assumptions that may cause actual results or performance to
be materially different from those expressed or implied by these
forward-looking statements, including changes in domestic and
foreign business, market, financial, political and legal
conditions; risks relating to the uncertainty of the projected
financial information with respect to Grove; Grove’s ability to
successfully expand its business; competition; the uncertain
effects of the COVID-19 pandemic; risks relating to growing
inflation and rising interest rates; and those factors discussed in
documents of Grove filed, or to be filed, with the U.S. Securities
and Exchange Commission (the “SEC”). Should one or more of these
risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may vary in material
respects from those projected in these forward-looking statements.
All forward-looking statements in this press release are made as of
the date hereof, based on information available to Grove as of the
date hereof, and Grove assumes no obligation to update any
forward-looking statement, whether as a result of new information,
future events or otherwise, except as may be required under
applicable securities laws.
Non-GAAP Financial
Measures
Some of the financial information and data contained in this
press release, such as adjusted EBITDA and adjusted EBITDA margin,
have not been prepared in accordance with United States generally
accepted accounting principles (“GAAP”). These non-GAAP measures,
and other measures that are calculated using such non-GAAP
measures, are an addition to, and not a substitute for or superior
to, measures of financial performance prepared in accordance with
GAAP and should not be considered as an alternative to revenue,
operating income, profit before tax, net income or any other
performance measures derived in accordance with GAAP. A
reconciliation of historical adjusted EBITDA to Net Income is
provided in the tables at the end of this press release. The
reconciliation of projected adjusted EBITDA and adjusted EBITDA
Margin to the closest corresponding GAAP measure is not available
without unreasonable efforts on a forward-looking basis due to the
high variability, complexity, and low visibility with respect to
the charges excluded from these non-GAAP measures, such as the
impact of depreciation and amortization of fixed assets,
amortization of internal use software, the effects of net interest
expense (income), other expense (income), and non-cash stock based
compensation expense. Grove believes these non-GAAP measures of
financial results, including on a forward-looking basis, provide
useful information to management and investors regarding certain
financial and business trends relating to Grove’s financial
condition and results of operations. Grove’s management uses these
non-GAAP measures for trend analyses and for budgeting and planning
purposes. Grove believes that the use of these non-GAAP financial
measures provides an additional tool for investors to use in
evaluating projected operating results and trends in and in
comparing Grove’s financial measures with other similar companies,
many of which present similar non-GAAP financial measures to
investors. Management of Grove does not consider these non-GAAP
measures in isolation or as an alternative to financial measures
determined in accordance with GAAP. However, there are a number of
limitations related to the use of these non-GAAP measures and their
nearest GAAP equivalents. For example, other companies may
calculate non-GAAP measures differently, or may use other measures
to calculate their financial performance, and therefore Grove’s
non-GAAP measures may not be directly comparable to similarly
titled measures of other companies.
We calculate adjusted EBITDA as net loss, adjusted to exclude:
(1) stock-based compensation expense; (2) depreciation and
amortization; (3) remeasurement of convertible preferred stock
warrant liability; (4) changes in fair values of Additional Shares,
Earn-out Shares and Public and Private Placement Warrant
liabilities; (5) transaction costs allocated to derivative
liabilities upon Business Combination; (6) interest expense; (7)
provision for income taxes; (8) restructuring expenses; and (9)
loss on extinguishment on debt. We define Adjusted EBITDA Margin as
Adjusted EBITDA divided by revenue.
Grove Collaborative Holdings,
Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
September 30,
2022
December 31,
2021
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
103,791
$
78,376
Inventory, net
56,045
54,453
Prepaid expenses and other current
assets
7,240
8,104
Total current assets
167,076
140,933
Property and equipment, net
15,390
15,932
Operating lease right-of-use assets
18,628
21,214
Other long-term assets
2,097
4,394
Total assets
$
203,191
$
182,473
Liabilities, Convertible Preferred
Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable
$
13,642
$
21,346
Accrued expenses
35,809
20,651
Deferred revenue
10,816
11,267
Operating lease liabilities, current
3,820
3,550
Other current liabilities
863
1,650
Debt, current
28,447
10,750
Total current liabilities
93,397
69,214
Debt, noncurrent
37,773
56,183
Operating lease liabilities,
noncurrent
17,089
20,029
Derivative liabilities
27,737
—
Other long-term liabilities
2,160
5,408
Total liabilities
178,156
150,834
Commitments and contingencies
Convertible preferred stock
—
487,918
Stockholders’ equity (deficit):
Common stock
16
1
Additional paid-in capital
590,194
33,863
Accumulated deficit
(565,175
)
(490,143
)
Total stockholders’ equity (deficit)
25,035
(456,279
)
Total liabilities, convertible preferred
stock and stockholders’ equity (deficit)
$
203,191
$
182,473
Grove Collaborative Holdings,
Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except share
and per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Revenue, net
$
77,733
$
95,178
$
247,491
$
296,421
Cost of goods sold
39,566
47,194
127,630
147,179
Gross profit
38,167
47,984
119,861
149,242
Operating expenses:
Advertising
8,668
32,459
59,359
90,611
Product development
5,765
5,586
17,927
16,436
Selling, general and administrative
46,295
46,100
155,160
140,609
Operating loss
(22,561
)
(36,161
)
(112,585
)
(98,414
)
Interest expense
2,546
1,213
6,918
3,272
Loss on extinguishment on debt
—
—
—
1,027
Change in fair value of Additional Shares
liability
(1,045
)
—
970
—
Change in fair value of Earn-Out
liability
(28,791
)
—
(46,136
)
—
Change in fair value of Public and Private
Placement Warrants liability
(2,803
)
—
(3,983
)
—
Other expense, net
(140
)
113
4,643
1,157
Interest and other expense (income),
net
(30,233
)
1,326
(37,588
)
5,456
Income (loss) before provision for income
taxes
7,672
(37,487
)
(74,997
)
(103,870
)
Provision for income taxes
10
11
35
39
Net income (loss)
$
7,662
$
(37,498
)
$
(75,032
)
$
(103,909
)
Net income (loss) per share attributable
to common stockholders, basic
$
0.05
$
(4.24
)
$
(1.13
)
$
(12.42
)
Net income (loss) per share attributable
to common stockholders, diluted
$
0.05
$
(4.24
)
$
(1.13
)
$
(12.42
)
Weighted-average shares used in computing
net income (loss) per share attributable to common stockholders,
basic
154,995,402
8,837,011
66,393,538
8,366,464
Weighted-average shares used in computing
net income (loss) per share attributable to common stockholders,
diluted
166,104,259
8,837,011
66,393,538
8,366,464
Grove Collaborative Holdings,
Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended September
30,
2022
2021
Cash Flows from Operating
Activities
Net loss
$
(75,032
)
$
(103,909
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Remeasurement of convertible preferred
stock warrant liability
(1,616
)
1,526
Stock-based compensation
34,348
10,858
Depreciation and amortization
4,291
3,633
Changes in fair value of derivative
liabilities
(49,149
)
—
Transaction costs allocated to derivative
liabilities upon Business Combination
6,873
—
Non-cash interest expense
447
509
Inventory reserve
3,540
1,933
Loss on extinguishment of debt
—
1,027
Other non-cash expenses
170
396
Changes in operating assets and
liabilities:
Inventory
(5,132
)
(14,819
)
Prepaids and other assets
715
(2,081
)
Accounts payable
(7,550
)
7,400
Accrued expenses
(1,826
)
5,431
Deferred revenue
(451
)
159
Operating lease right-of-use assets and
liabilities
(84
)
62
Other liabilities
909
(878
)
Net cash used in operating
activities
(89,547
)
(88,753
)
Cash Flows from Investing
Activities
Purchase of property and equipment
(3,580
)
(4,268
)
Net cash used in investing
activities
(3,580
)
(4,268
)
Cash Flows from Financing
Activities
Proceeds from issuance of common stock
upon Closing of Business Combination
97,100
—
Proceeds from issuance of contingently
redeemable convertible common stock
27,500
—
Proceeds from issuance of shares under the
ELOC Agreement
138
—
Payment of transaction costs related to
the Closing of the Business Combination, the ELOC Agreement and
convertible preferred stock issuance costs
(5,358
)
(340
)
Proceeds from the issuance of debt
—
50,000
Repayment of debt
(865
)
(21,523
)
Payment of debt issuance costs
(211
)
(375
)
Payment of debt extinguishment
—
(2,499
)
Proceeds from exercise of stock options,
net of withholding taxes paid related to common stock issued to
employees, and warrants
270
749
Repurchase of common stock
(32
)
(297
)
Net cash provided by financing
activities
118,542
25,715
Net increase (decrease) in cash and cash
equivalents
25,415
(67,306
)
Cash and cash equivalents at beginning of
period
78,376
176,523
Cash and cash equivalents at end of
period
$
103,791
$
109,217
Grove Collaborative Holdings,
Inc.
Non-GAAP Financial
Measures
(Unaudited)
(In thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
Net income (loss)
$
7,662
$
(37,498
)
$
(75,032
)
$
(103,909
)
Stock-based compensation
9,814
3,589
34,348
10,858
Depreciation and amortization
1,427
1,296
4,291
3,633
Remeasurement of convertible preferred
stock warrant liability
—
218
(1,616
)
1,526
Change in fair value of Additional Shares
liability
(1,045
)
—
970
—
Change in fair value of Earn-Out
liability
(28,791
)
—
(46,136
)
—
Change in fair value of Public and Private
Placement Warrants liability
(2,803
)
—
(3,983
)
—
Transaction costs allocated to derivative
liabilities upon Business Combination
200
—
6,873
—
Interest expense
2,546
1,213
6,918
3,272
Restructuring expenses
1,356
—
2,992
—
Loss on extinguishment on debt
—
—
—
1,027
Provision for income taxes
10
11
35
39
Total Adjusted EBITDA
$
(9,624
)
$
(31,171
)
$
(70,340
)
$
(83,554
)
Net income (loss) margin
9.9
%
(39.4
)%
(30.3
)%
(35.1
)%
Adjusted EBITDA margin
(12.4
)%
(32.8
)%
(28.4
)%
(28.2
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221110005405/en/
Investor Relations Contact
Alexis Tessier ir@grove.co
Media Relations Contact
Caroline Zalla czalla@grove.co
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