Reports record Gross Margin; Raises FY Adjusted
EBITDA margin guidance; maintains revenue guidance; expects to be
at or near Adjusted EBITDA break-even in Q3, ahead of schedule
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 first
fiscal quarter ended March 31, 2023.
First Fiscal Quarter 2023 Financial
Highlights:
Our financial highlights reflect our progress to rapidly improve
our bottom-line-results year-over-year and sequentially by
increasing margins, creating operating efficiency, and eliminating
less productive spend, in order to be profitable, on an Adjusted
EBITDA basis, in 2024. As our strategy changed to focus on
profitability in the second half of 2022, we believe that our
sequential quarterly results are the best indicator of our current
financial performance.
- Net revenue of $71.6 million, down 3.3% from the fourth quarter
of 2022, and down 20.9% year-over-year, largely due to reductions
in advertising spend as we focus on profitability.
- Gross margin of 52.1%, a record for the Company, was up 510
basis points from the fourth quarter of 2022, and up 480 basis
points year-over-year.
- Net loss margin of (18.3)%, compared to (17.1)% in the fourth
quarter of 2022 and (52.4)% in the first quarter of 2022.
- Adjusted EBITDA margin(1) of (9.6)%, an improvement of 330
basis points from the fourth quarter of 2022 and 3,420 basis points
from the first quarter of 2022. See the reconciliation of adjusted
EBITDA, a non-GAAP financial measure, to net loss in the table at
the end of this press release.
Stuart Landesberg, Chief Executive Officer of Grove, said, “I am
pleased to announce another successful quarter, during which record
gross margin performance, a 25.4% reduction in SG&A
year-over-year, and an approximately 50% year-over-year improvement
in media CAC and the related reduction in advertising expense,
drove improvement in adjusted EBITDA margin. The expense
efficiencies we have achieved reinforce our confidence in our goal
of achieving profitability in 2024, and we believe the steps we
have taken to improve our liquidity position ensure we have the
means to reach that goal. We are making excellent progress towards
reaching breakeven bottom line and are seeing exciting green shoots
in our strategic growth drivers of omni-channel distribution, the
health & wellness category, and potential M&A
opportunities, while staying true to our vision that the HPC
industry can be a positive force for human and environmental
health.”
First Fiscal Quarter 2023 Key Business
Highlights:
(in thousands, except DTC Net Revenue Per
Order and percentages)
Q1'2023
Q4'2022
Q1'2022
Financial and Operating Data
Grove Brands % Net Revenue
48.9
%
45.5
%
51.7
%
DTC Total Orders
1,097
1,132
1,558
DTC Active Customers
1,241
1,377
1,653
DTC Net Revenue Per Order
$
61.64
$
63.40
$
55.14
Grove Brand products represented 48.9% of net revenue in the
first quarter of 2023, an increase of 340 basis points
quarter-over-quarter and a decrease of 290 basis points
year-over-year. The year-over-year decrease is due to fewer new
customer orders, which include more Grove Brand products. The
sequential increase is due an increase in net revenue from our
retail sales channel as a % of total net revenue.
DTC total orders were 1.1 million, down 3% quarter-over-quarter
and 30% year-over-year. The year-over-year and sequential declines
are due to lower advertising spend throughout 2022, resulting in
fewer new customers and therefore fewer overall orders.
DTC active customers were 1.2 million, down 10%
quarter-over-quarter and 25% year-over-year. The year-over-year and
sequential declines are due to lower advertising spend resulting in
fewer new customers.
DTC net revenue per order was $61.64 in the first quarter of
2023, down 3% quarter-over-quarter and up 12% year-over-year. The
sequential decline is due to strong seasonal performance in the
fourth quarter of 2022 not continuing in the first quarter or 2023,
whereas the year-over-year improvement is due to net revenue
management initiatives including the introduction of the supply
chain fee and strategic price increases on Grove Brands and third
party products.
In the first quarter, 70% of Grove Co. product net revenue came
from either zero-plastic, re-usable or refillable and zero plastic
waste products, determined as meeting the Company’s Beyond Plastic™
standard1, in line with 70% in the fourth quarter of 2022 and down
slightly from 71% in the first quarter of 2022.
Grove believes that publishing plastic intensity (pounds of
plastic sold per $100 in revenue) 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 1.02 pounds of plastic per $100 in revenue in the
first quarter of 2023 up slightly from 0.98 in the fourth quarter
of 2022 and an improvement from 1.16 in the first quarter of
2022
- Across all Grove Brands, plastic intensity was 0.90 pounds of
plastic per $100 in revenue in the first quarter of 2023,
increasing from our record best 0.80 pounds in the fourth quarter
of 2022 and an improvement from 0.94 pounds in the first quarter of
2022
During the quarter, the Company strengthened its liquidity
position by securing a $35 million asset-based revolving credit
facility, for which borrowing capacity is derived from Grove’s
inventory and accounts receivable balances, among other conditions.
The loan is for a term of up to 3 years and will support the
Company’s strategic initiatives and working capital needs.
Fiscal First Quarter 2023 Operating
Results
Net revenue of $71.6 million, down 3.3% from the fourth quarter
of 2022, and down 20.9% year-over-year. The sequential and
year-over-year declines were due to a decrease in DTC Orders caused
by a reduction in DTC Active Customers from the reduction in
advertising spend, partially offset by the increase in DTC Net
Revenue Per Order.
Gross margin of 52.1%, a record for the Company, was up 510
basis points from the fourth quarter of 2022, and up 480 basis
points year-over-year. The sequential improvement is largely due to
the decrease in inventory reserves and increase in Grove Brands %
Net Revenue. The year-over-year improvement is driven by the
decrease in number of lower-margin first orders as a percentage of
total orders, impacts of net revenue management initiatives
including the introduction of a supply chain fee and strategic
price increases on Grove Brands and third party products, decreases
in inventory reserves, partially offset by an increase in product
costs and decrease in Grove Brands mix as a percentage of total
revenue.
Operating expenses of $50.9 million, down 19% from the fourth
quarter of 2022, and down 43% year-over-year. The sequential
improvement is largely due to a $6.4 million decrease in
stock-based compensation and a $5.9 million decrease in
restructuring related charges recorded in the fourth quarter of
2022, offset by a $1.8 million increase in advertising expenses.
Other smaller decreases in operating expenses include lower
professional and technology fees, which are reflective of our
strategy of creating operating efficiency, and eliminating less
productive spend, to focus on profitability.
Net loss margin of (18.3%), compared to (17.1%) in the fourth
quarter of 2022 and (52.4)% in the first quarter of 2022.
Adjusted EBITDA margin of (9.6)%, an improvement of 330 basis
points from the fourth quarter of 2022 and 3,420 basis point from
the first quarter of 2022, reflecting improvements in gross margin
in the first quarter of 2023, coupled with lower operating and
advertising costs. See the reconciliation of adjusted EBITDA, a
non-GAAP financial measure, to net loss in the table at the end of
this press release.
______________________________ 1 Starting this quarter and moving
forward, we will break out Beyond Plastic™ for Grove Co. as our
flagship brand, instead of grouping together all owned brands
within the Grove family.
First Quarter 2023 Key Operational
Highlights:
The Company continued to make progress against its four-pronged
value creation plan, compassing:
- Improved marketing efficiency
- Reduced Media CAC by 50% year-over-year through channel
diversification and improved customer targeting as we focus on
maximizing our returns on marketing investment.
- Launched Fresh Horizons, our exclusive collection with Drew
Barrymore, on end caps in Target with over 1.9 billion earned media
impressions associated with the launch.
- Omni-channel expansion
- Grove Co., our flagship brand, launched on Amazon.com,
Walmart.com and on shelves in select Walmart stores in February.
The latest retail additions bring the Company’s retail footprint to
more than 5,000 brick-and-mortar stores nationwide.
- Net revenue management
- Rolled out improvements to our VIP program, increasing the
value to the customer, while maintaining the same annual cost, just
$19.99 / year.
- Launched Grove Wellness, a dedicated online health and wellness
hub that offers a curated assortment of high-quality health &
wellness products. Wellness products were included in a record high
percent of orders and made up a record high percent of revenue for
Grove in the first quarter. We are optimistic about continued
market acceptance in coming periods as we expand our assortment and
improve awareness of the wellness offering.
- Successfully implemented net revenue management initiatives to
drive continued improvement in DTC Net Revenue per order and gross
margin by shifting into higher margin categories and initiating
selective pricing actions.
- Operating expense discipline
- Demonstrated improved efficiencies across all line items of the
P&L as we monitor and eliminate unproductive spend across the
business.
Financial Outlook:
“The progress we have made in improving operating efficiencies
and reducing expenses gives us the confidence to increase our
adjusted EBITDA margin guidance for fiscal 2023, despite continued
challenges in the macroeconomic environment. This is a result of
durable improvements in our gross margin profile along with
exceptional efforts to execute our full P&L value creation
plan,” stated Sergio Cervantes, Chief Financial Officer of
Grove.
Based on performance to date and current expectations, Grove is
providing the following updated guidance:
For the 12-month period ending December 31, 2023, we expect:
- Net revenue of $260.0 to $270.0 million
- Adjusted EBITDA margin(1) of (5.5)% to (7.5)%, up from (9)% to
(11)% previously
(1)
Adjusted EBITDA margin is a
non-GAAP financial measure. See “Non-GAAP Financial Measures” for
additional information.
Adjusted EBITDA Break Even Timing:
The Company has stated repeatedly that it expects to hit
Adjusted EBITDA profitability during calendar year 2024. Given the
strong progress in the business to date against the Company’s Value
Creation Plan, Grove now expects Q3 2023 Adjusted EBITDA to be
approximately break-even. While the Company has raised its Adjusted
EBITDA margin guidance, this guidance continues to forecast losses
in Q2 2023 and Q4 2023.
”We expect to be approximately breakeven on an adjusted EBITDA
basis in the third quarter of this year, as we continue to progress
towards our stated goal of profitability in 2024. Note that while
this is ahead of schedule, due to seasonality and other trends in
the business, we do not anticipate our path to long term
profitability to be a straight line,” said CFO Sergio
Cervantes.
“This accelerated timing reflects the exceptional work of our
team, the importance of our differentiation, our sustainability
mission to our consumers, and the loyalty of our community. This is
an exciting step towards profitable growth for Grove,” said CEO
Stuart Landesberg.
Conference Call
Information:
The Company will host a conference call to discuss first fiscal
quarter 2023 financial results and other business updates today,
May 11, 2023, 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 May 25, 2023 and can be accessed
by dialing (877) 660-6853 or (201) 612-7415, access code: 13738115.
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. The first plastic neutral retailer in
the world, Grove is a public benefit corporation on a mission to
move Beyond Plastic™. In 2021, Grove entered physical retail for
the first time at Target stores nationwide, making sustainable home
care products even more accessible.
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 reach Adjusted EBITDA breakeven in the third
quarter of 2023, our confidence in achieving profitability in 2024,
whether our improved liquidity position will help meet our
profitability goals, continued market acceptance of our wellness
offering, our 2023 financial outlook, including our forecasted
losses in the second and fourth quarter of 2023, 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, consumer discretionary spending, 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; risks related to advertising inaccuracies or product
mislabeling that may have an adverse effect on our business by
exposing us to lawsuits, product recalls or regulatory enforcement
actions; 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, Structural Derivative liabilities; (5) transaction
costs allocated to derivative liabilities upon Business
Combination; (6) interest income; (7) interest expense; (8)
restructuring costs and (10) provision for income taxes. We define
Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue.
Grove Collaborative Holdings,
Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
March 31, 2023
December 31,
2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
81,653
$
81,084
Restricted cash
5,850
11,950
Inventory, net
40,930
44,132
Prepaid expenses and other current
assets
5,806
4,844
Total current assets
134,239
142,010
Restricted cash
2,951
2,951
Property and equipment, net
13,852
14,530
Operating lease right-of-use assets
11,721
12,362
Other long-term assets
2,817
2,192
Total assets
$
165,580
$
174,045
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
12,293
$
10,712
Accrued expenses
13,967
31,354
Deferred revenue
9,152
10,878
Operating lease liabilities, current
3,762
3,705
Other current liabilities
565
249
Debt, current
340
575
Total current liabilities
40,079
57,473
Debt, noncurrent
69,049
60,620
Operating lease liabilities,
noncurrent
15,233
16,192
Derivative liabilities
13,519
13,227
Total liabilities
137,880
147,512
Commitments and contingencies
Stockholders’ equity:
Preferred stock
—
—
Common stock
18
18
Additional paid-in capital
618,609
604,373
Accumulated deficit
(590,927
)
(577,858
)
Total stockholders’ equity
27,700
26,533
Total liabilities and stockholders’
equity
$
165,580
$
174,045
Grove Collaborative Holdings,
Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except share
and per share amounts)
Three Months Ended
March 31,
2023
2022
Revenue, net
$
71,565
$
90,479
Cost of goods sold
34,310
47,742
Gross profit
37,255
42,737
Operating expenses:
Advertising
8,673
32,793
Product development
4,216
6,240
Selling, general and administrative
38,021
50,970
Operating loss
(13,655
)
(47,266
)
Interest expense
3,729
2,087
Change in fair value of Additional Shares
liability
223
—
Change in fair value of Earn-Out
liability
143
—
Change in fair value of Public and Private
Placement Warrants liability
(674
)
—
Change in fair value of Structural
Derivative liability
600
—
Other income, net
(4,617
)
(1,992
)
Interest and other expense (income),
net
(596
)
95
Loss before provision for income taxes
(13,059
)
(47,361
)
Provision for income taxes
10
23
Net loss
$
(13,069
)
$
(47,384
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.08
)
$
(5.05
)
Weighted-average shares used in computing
net loss per share attributable to common stockholders, basic and
diluted
168,739,298
9,387,142
Grove Collaborative Holdings,
Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended March
31,
2023
2022
Cash Flows from Operating
Activities
Net loss
$
(13,069
)
$
(47,384
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Remeasurement of convertible preferred
stock warrant liability
—
(1,886
)
Stock-based compensation
4,893
4,460
Depreciation and amortization
1,448
1,410
Changes in fair value of derivative
liabilities
292
—
Reduction in transaction costs allocated
to derivative liabilities upon Business Combination
(3,745
)
—
Non-cash interest expense
948
195
Inventory reserve
124
856
Other non-cash expenses
77
8
Changes in operating assets and
liabilities:
Inventory
3,078
3,038
Prepaids and other assets
(828
)
(3,312
)
Accounts payable
1,554
10,287
Accrued expenses
162
2,917
Deferred revenue
(1,726
)
159
Operating lease right-of-use assets and
liabilities
(261
)
(22
)
Other liabilities
316
(229
)
Net cash used in operating
activities
(6,737
)
(29,503
)
Cash Flows from Investing
Activities
Purchase of property and equipment
(784
)
(1,352
)
Net cash used in investing
activities
(784
)
(1,352
)
Cash Flows from Financing
Activities
Proceeds from issuance of contingently
redeemable convertible common stock
—
27,500
Payment of transaction costs related to
the Business Combination
(4,150
)
(489
)
Proceeds from issuance of debt
7,500
—
Payment of debt issuance costs
(837
)
—
Repayment of debt
(235
)
(275
)
Proceeds from exercise of stock options
and settlement of restricted stock units, net of withholding taxes
paid related to common stock issued to employees
(288
)
171
Net cash provided by financing
activities
1,990
26,907
Net decrease in cash, cash equivalents and
restricted cash
(5,531
)
(3,948
)
Cash, cash equivalents and restricted cash
at beginning of period
95,985
78,376
Cash, cash equivalents and restricted cash
at end of period
$
90,454
$
74,428
Grove Collaborative Holdings,
Inc.
Non-GAAP Financial
Measures
(Unaudited)
(In thousands)
Three Months Ended March
31,
2023
2022
Reconciliation of Net Loss to Adjusted
EBITDA
(in thousands)
Net loss
$
(13,069
)
$
(47,384
)
Stock-based compensation
4,893
4,460
Depreciation and amortization
1,448
1,410
Remeasurement of convertible preferred
stock warrant liability
—
(1,886
)
Change in fair value of Additional Shares
liability
223
—
Change in fair value of Earn-Out
liability
143
—
Change in fair value of Public and Private
Placement Warrants liability
(674
)
—
Change in fair value of Structural
Derivative liability
600
—
Reduction in transaction costs allocated
to derivative liabilities upon Business Combination
(3,745
)
—
Interest income
(424
)
—
Interest expense
3,729
2,087
Restructuring costs
—
1,636
Provision for income taxes
10
23
Total Adjusted EBITDA
$
(6,866
)
$
(39,654
)
Net loss margin
(18.3
)%
(52.4
)%
Adjusted EBITDA margin
(9.6
)%
(43.8
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230510005982/en/
Investor Relations Contact
ir@grove.co
Media Relations Contact
pr@grove.co
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