Grove Announces Second Quarter 2024 Financial Results
-
Completes Voluntary
$42 Million Term Debt Paydown and Delays Principal Payments UntilJanuary 2026 -
Fourth Consecutive Quarter of Positive Adjusted EBITDA -
Second Quarter 2024 Positive Cash Flow of
$1.0M - Announces Revised FY24 Guidance
“Today’s update marks nearly my first full year as CEO and I am proud of our progress on delivering Adjusted EBITDA profitability, strengthening our balance sheet, stabilizing revenue, and leveraging sustainability as our point of differentiation. We have delivered positive-adjusted EBITDA in four consecutive quarters, positive operating cash flow in three of the last five quarters, and, subsequent to the end of the second quarter, paid down
Second Quarter 2024 Financial Results
Revenue was
Gross Margin was 53.9%, a decrease of 170 basis points from the first quarter of 2024, but an increase of 200 basis points year-over-year. The sequential decline was mostly driven by a decrease in recognized third party vendor allowances due to an accounting true-up in the first quarter of 2024, the discontinuation of certain customer fees, and an increase in discounts. Absent the accounting adjustment, third party vendor allowances increased in the second quarter compared to the first quarter as the Company onboarded more vendors to its subscribe and save program. The year-over-year improvement in gross margin was mostly due to the sell-through of previously reserved for inventory, lower discounts from a decrease in first order volume, and an increase in vendor allowances, offset by a decrease in Grove Brands % of Net Revenue.
Operating Expenses were
Net Loss was
Adjusted EBITDA1 was positive
Cash, Cash equivalents, and Restricted Cash was
Second Quarter 2024 Key Business Highlights:
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Three months ended |
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(in thousands, except DTC Net Revenue Per Order and percentages) |
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Financial and Operating Data |
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Grove Brands % Net Revenue |
|
45 |
% |
|
|
43 |
% |
|
|
41 |
% |
|
DTC Total Orders |
|
974 |
|
|
|
773 |
|
|
|
732 |
|
|
DTC Active Customers |
|
1,133 |
|
|
|
807 |
|
|
|
745 |
|
|
DTC Net Revenue Per Order |
$ |
65 |
|
|
$ |
66 |
|
|
$ |
68 |
|
Grove Brands % of Net Revenue was 41.1% in the second quarter of 2024, down 190 basis points quarter-over-quarter and 390 basis points year-over-year. The sequential and year-over-year declines were largely due to the expansion of the Company’s third party product offering and the recent transformation of the customer experience on the Company’s ecommerce platform, which no longer utilizes recommended baskets in first orders that included a higher percentage of Grove Branded products.
Direct to Consumer (DTC) Total Orders totaled 0.7 million, down 5.4%, quarter-over-quarter and 24.9% year-over-year. The year-over-year and sequential declines continued to be impacted by lower advertising spend, with sequential declines slowing as historical cohorts stabilize.
DTC Active Customers, the number of customers that have placed an order in the trailing twelve months ended
DTC Net Revenue Per Order was
Second Quarter 2024 Operational Highlights
Amidst Grove’s turnaround, the Company has refocused its priorities to be (1) Profitability and (2) Balance sheet strength, the foundational elements of financial stability, (3) Stabilizing Revenue, and ultimately delivering Revenue Growth, which will create long-term shareholder value, and (4) Sustainability, Grove’s point of differentiation and reason for being.
Key operational highlights related to the Company’s refocused strategic pillars in the second quarter include:
-
Profitability:
- Positive Adjusted EBITDA and Cash Flow: Delivered
$1.1 million of Adjusted EBITDA, the fourth consecutive positive quarter, and$1.0 million of positive cash flow as the Company continues to prioritize profitability, improve its cost structure and optimize working capital. The Company has also delivered positive operating cash flow three out of the last five quarters. - Continued Improvement of Operating Costs: Pursued additional initiatives, including vendor and contract negotiations, to increase operating leverage and improve profitability. Specifically, the Company signed a lease in a new location for its fulfillment center operations in
Reno, NV , avoiding a significant rent increase, and fully ceased operations in its fulfillment center inSt. Peters, MO.
- Positive Adjusted EBITDA and Cash Flow: Delivered
-
Balance Sheet:
-
Debt Paydown: Subsequent to the end of the quarter, Grove repaid
$42M of term debt and delayed its term debt principal payments untilJanuary 2026 . More specific details can be found in the Current Report on Form 8-K filed by the Company onJuly 19, 2024 .2
-
Debt Paydown: Subsequent to the end of the quarter, Grove repaid
-
Revenue Growth:
-
Third Party Category and Selection Expansion: Grove continues to offer more planet-first brands and products that are relevant to the conscientious consumer, increasing the number of third party brands sold by 12% in the second quarter of 2024 compared to the second quarter of 2023. A sample of new brands welcomed to the collaborative this quarter include: Nellie’s,
Freestyle World , Fresh Wave, Caboo, and Koala Eco. Grove also continues to expand its subscribe and save program, with 63% of all products now available for customers to subscribe to at a discounted rate, providing customers an incentive to build larger planet- and wallet-friendly boxes. -
Shopify Transition: Grove today announced that it will replatform its custom direct to consumer website to Shopify technology as part of the Company’s ongoing transformation, meant to create opportunities for new customer enhancements, drive down costs for ongoing site maintenance, and better leverage industry best practices and innovations for future growth. The transition began in
July 2024 and is expected to be completed in the first quarter of 2025.
-
Third Party Category and Selection Expansion: Grove continues to offer more planet-first brands and products that are relevant to the conscientious consumer, increasing the number of third party brands sold by 12% in the second quarter of 2024 compared to the second quarter of 2023. A sample of new brands welcomed to the collaborative this quarter include: Nellie’s,
-
Sustainability:
- B Corporation Recertification: Grove launched its fifth annual sustainability report in
May 2024 , providing comprehensive reporting on key company commitments, progress, and partnerships. The Company also announced itsB Corp recertification with a score of 100.9 points3, significantly higher than its 2020 recertification of 80.3 points, joining the 5% of companies that have maintainedB Corp certification for more than ten years. - Plastic Intensity4: Plastic intensity across the entire Grove business (across all online and retail sales) was 1.02 pounds of plastic per
$100 in net revenue in the second quarter of 2024, down from 1.08 pounds in the first quarter of 2024 and down from 1.11 pounds in the second quarter of 2023.
- B Corporation Recertification: Grove launched its fifth annual sustainability report in
Financial Outlook:
Chief Financial Officer
The Company is announcing the following revised guidance for the full fiscal year 2024:
-
Net revenue of
$205 to$215 million , a decrease from$215M to$225M - Adjusted EBITDA margin of 0.5% to 1.5%, an increase from 0% to 1.0%
Conference Call Information:
The Company will host an investor conference call and webcast to review these financial results at
About
__________________________________ | ||
1 |
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. See “Non-GAAP Financial Measures” for a description of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to net loss and net loss margin in the table at the end of this press release. |
|
2 |
https://www.sec.gov/ix?doc=/Archives/edgar/data/1841761/000162828024032249/grov-20240716.htm |
|
3 |
https://www.bcorporation.net/en-us/find-a-b-corp/company/grove-collaborative/ |
|
4 |
Grove defines plastic intensity as pounds of plastic used per |
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 regarding Grove’s core initiatives reshaping their business, sequential growth in the fourth quarter and beyond, the rebuilt ecommerce customer experience leading to future sustained growth, an increase in advertising spend in the fourth quarter, completion of the replatform to Shopify in the first quarter 2025 and Grove’s 2024 guidance for Net revenue and Adjusted EBITDA margin. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. The forward-looking statements contained in this press release are based on Grove’s current expectations and beliefs in light of the Company’s experience and perception of historical trends, current conditions and expected future developments and their potential effects on the Company as well as other factors believed to be appropriate under the circumstances. There can be no assurance that future developments affecting the Company will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s 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 business, market, financial, political and legal conditions; legal and regulatory matters and developments; risks relating to the uncertainty of the projected financial information; Grove’s ability to successfully expand their business; competition; the uncertain effects of the COVID-19 pandemic; risks relating to inflation and interest rates; effectiveness of the Company’s ecommerce platform and selling efforts; demand for Grove products and other brands that sold and those factors discussed in documents filed, or to be filed, with the
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
Grove calculates Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense; depreciation and amortization; changes in fair values of derivative liabilities; transaction costs allocated to derivative liabilities upon closing of the transaction where Grove became a publicly traded company; interest income; interest expense; restructuring and severance related costs; provision for income taxes and certain litigation and legal settlement expenses. Grove defines Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. Because Adjusted EBITDA excludes these elements that are otherwise included in the Company’s GAAP financial results, this measure has limitations when compared to net loss determined in accordance with GAAP. Further, Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies. For these reasons, investors should not consider Adjusted EBITDA in isolation from, or as a substitute for, net loss determined in accordance with GAAP.
|
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Consolidated Balance Sheets |
||||||||
(In thousands, except per share amounts) |
||||||||
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|
|
||||
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|
|
|
||||
|
(Unaudited) |
|
|
|||||
Assets |
|
|
|
|||||
Current assets: |
|
|
|
|||||
Cash and cash equivalents |
$ |
78,807 |
|
|
$ |
86,411 |
|
|
Restricted cash |
|
3,325 |
|
|
|
5,650 |
|
|
Inventory, net |
|
27,842 |
|
|
|
28,776 |
|
|
Prepaid expenses and other current assets |
|
3,352 |
|
|
|
3,359 |
|
|
Total current assets |
|
113,326 |
|
|
|
124,196 |
|
|
Restricted cash |
|
502 |
|
|
|
2,802 |
|
|
Property and equipment, net |
|
7,995 |
|
|
|
11,625 |
|
|
Operating lease right-of-use assets |
|
7,744 |
|
|
|
9,612 |
|
|
Other long-term assets |
|
2,208 |
|
|
|
2,507 |
|
|
Total assets |
$ |
131,775 |
|
|
$ |
150,742 |
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|||||
Current liabilities: |
|
|
|
|||||
Accounts payable |
$ |
9,251 |
|
|
$ |
8,074 |
|
|
Accrued expenses |
|
11,322 |
|
|
|
16,020 |
|
|
Deferred revenue |
|
6,886 |
|
|
|
7,154 |
|
|
Operating lease liabilities, current |
|
1,551 |
|
|
|
3,489 |
|
|
Other current liabilities |
|
221 |
|
|
|
306 |
|
|
Total current liabilities |
|
29,231 |
|
|
|
35,043 |
|
|
Debt, noncurrent |
|
73,404 |
|
|
|
71,662 |
|
|
Operating lease liabilities, noncurrent |
|
7,149 |
|
|
|
14,404 |
|
|
Derivative liabilities |
|
11,305 |
|
|
|
11,511 |
|
|
Total liabilities |
|
121,089 |
|
|
|
132,620 |
|
|
Commitments and contingencies (Note 6) |
|
|
|
|||||
Redeemable convertible preferred stock — |
|
10,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|||||
Stockholders’ equity: |
|
|
|
|||||
Common stock — |
|
4 |
|
|
|
4 |
|
|
Additional paid-in capital |
|
635,224 |
|
|
|
629,208 |
|
|
Accumulated deficit |
|
(634,542 |
) |
|
|
(621,090 |
) |
|
Total stockholders’ equity |
|
686 |
|
|
|
8,122 |
|
|
Total liabilities, redeemable convertible preferred stock and stockholders’ equity |
$ |
131,775 |
|
|
$ |
150,742 |
|
|
|
||||||||||||||||
Consolidated Statements of Operations |
||||||||||||||||
(Unaudited) |
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(In thousands, except share and per share amounts) |
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|
Three Months Ended
|
|
Six Months Ended
|
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|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Revenue, net |
$ |
52,099 |
|
|
$ |
66,106 |
|
|
$ |
105,644 |
|
|
$ |
137,671 |
|
|
Cost of goods sold |
|
24,036 |
|
|
|
31,798 |
|
|
|
47,841 |
|
|
|
66,108 |
|
|
Gross profit |
|
28,063 |
|
|
|
34,308 |
|
|
|
57,803 |
|
|
|
71,563 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating expenses: |
|
|
|
|
|
|
|
|||||||||
Advertising |
|
2,439 |
|
|
|
4,657 |
|
|
|
4,492 |
|
|
|
13,330 |
|
|
Product development |
|
5,436 |
|
|
|
4,052 |
|
|
|
9,062 |
|
|
|
8,268 |
|
|
Selling, general and administrative |
|
27,124 |
|
|
|
35,159 |
|
|
|
51,718 |
|
|
|
73,180 |
|
|
Operating loss |
|
(6,936 |
) |
|
|
(9,560 |
) |
|
|
(7,469 |
) |
|
|
(23,215 |
) |
|
|
|
|
|
|
|
|
|
|||||||||
Non-operating expenses: |
|
|
|
|
|
|
|
|||||||||
Interest expense |
|
4,117 |
|
|
|
4,044 |
|
|
|
8,246 |
|
|
|
7,773 |
|
|
Changes in fair value of derivative liabilities |
|
(8 |
) |
|
|
(1,727 |
) |
|
|
|
|
|||||
Other income, net |
|
(994 |
) |
|
|
(1,021 |
) |
|
|
(2,077 |
) |
|
|
(5,638 |
) |
|
Total non-operating expenses (income), net |
|
3,115 |
|
|
|
1,296 |
|
|
|
5,963 |
|
|
|
700 |
|
|
Loss before provision for income taxes |
|
(10,051 |
) |
|
|
(10,856 |
) |
|
|
(13,432 |
) |
|
|
(23,915 |
) |
|
Provision for income taxes |
|
10 |
|
|
|
11 |
|
|
|
20 |
|
|
|
21 |
|
|
Net loss |
$ |
(10,061 |
) |
|
$ |
(10,867 |
) |
|
$ |
(13,452 |
) |
|
$ |
(23,936 |
) |
|
Less: Accumulated dividends on redeemable convertible preferred stock |
|
(150 |
) |
|
|
— |
|
|
|
(300 |
) |
|
|
— |
|
|
Net loss attributable to common stockholders, basic and diluted |
$ |
(10,211 |
) |
|
$ |
(10,867 |
) |
|
$ |
(13,752 |
) |
|
$ |
(23,936 |
) |
|
Net loss per share attributable to common stockholders, basic and diluted |
$ |
(0.28 |
) |
|
$ |
(0.32 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.70 |
) |
|
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
36,768,249 |
|
|
34,280,844 |
|
|
|
36,517,787 |
|
|
|
34,015,827 |
|
|||
|
||||||||
Consolidated Statements of Cash Flows |
||||||||
(Unaudited) |
||||||||
(In thousands) |
||||||||
|
|
|
||||||
|
|
Six Months Ended |
||||||
|
|
2024 |
|
2023 |
||||
Cash Flows from Operating Activities |
|
|
|
|||||
Net loss |
$ |
(13,452 |
) |
|
$ |
(23,936 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|||||
Gain on lease modification |
|
(3,139 |
) |
|
|
— |
|
|
Stock-based compensation expense |
|
6,510 |
|
|
|
9,841 |
|
|
Depreciation and amortization |
|
4,627 |
|
|
|
2,897 |
|
|
Changes in fair value of derivative liabilities |
|
(206 |
) |
|
|
(1,435 |
) |
|
Reduction of transaction costs allocated to derivative liabilities upon Business Combination |
|
— |
|
|
|
(3,745 |
) |
|
Non-cash interest expense |
|
1,922 |
|
|
|
1,911 |
|
|
Inventory reserve |
|
(1,216 |
) |
|
|
1,228 |
|
|
Other non-cash expenses |
|
— |
|
|
|
95 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|||||
Inventory |
|
2,150 |
|
|
|
8,355 |
|
|
Prepaids and other assets |
|
99 |
|
|
|
716 |
|
|
Accounts payable |
|
1,175 |
|
|
|
(34 |
) |
|
Accrued expenses |
|
(4,700 |
) |
|
|
812 |
|
|
Deferred revenue |
|
(268 |
) |
|
|
(1,890 |
) |
|
Operating lease right-of-use assets and liabilities |
|
(4,886 |
) |
|
|
(507 |
) |
|
Other liabilities |
|
(85 |
) |
|
|
120 |
|
|
Net cash used in operating activities |
|
(10,769 |
) |
|
|
(5,572 |
) |
|
|
|
|
|
|||||
Cash Flows from Investing Activities |
|
|
|
|||||
Purchase of property and equipment |
|
(906 |
) |
|
|
(1,539 |
) |
|
Net cash used in investing activities |
|
(906 |
) |
|
|
(1,539 |
) |
|
|
|
|
|
|||||
Cash Flows from Financing Activities |
|
|
|
|||||
Payment of transaction costs related to the Business Combination |
|
— |
|
|
|
(4,150 |
) |
|
Proceeds from issuance of debt |
|
— |
|
|
|
7,500 |
|
|
Payment of debt issuance costs |
|
— |
|
|
|
(925 |
) |
|
Repayment of debt |
|
— |
|
|
|
(575 |
) |
|
Payments related to stock-based award activities, net |
|
(789 |
) |
|
|
(1,201 |
) |
|
Proceeds from issuance under employee stock purchase plan |
|
235 |
|
|
|
213 |
|
|
Payment in lieu of fractional shares in connection with reverse split |
|
— |
|
|
|
(1 |
) |
|
Net cash (used in) provided by financing activities |
|
(554 |
) |
|
|
861 |
|
|
|
|
|
|
|||||
Net decrease in cash, cash equivalents and restricted cash |
|
(12,229 |
) |
|
|
(6,250 |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
94,863 |
|
|
|
95,985 |
|
|
Cash, cash equivalents and restricted cash at end of period |
$ |
82,634 |
|
|
$ |
89,735 |
|
|
|
||||||||||||||||
Non-GAAP Financial Measures |
||||||||||||||||
(Unaudited) |
||||||||||||||||
(In thousands, except percentages) |
||||||||||||||||
|
|
|
|
|
||||||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of Net Loss to Adjusted EBITDA |
|
|||||||||||||||
Net loss |
$ |
(10,061 |
) |
|
|
(10,867 |
) |
|
$ |
(13,452 |
) |
|
|
(23,936 |
) |
|
Stock-based compensation |
|
3,397 |
|
|
|
4,948 |
|
|
$ |
6,510 |
|
|
|
9,841 |
|
|
Depreciation and amortization |
|
2,426 |
|
|
|
1,449 |
|
|
$ |
4,627 |
|
|
|
2,897 |
|
|
Changes in fair value of derivative liabilities |
|
(8 |
) |
|
|
(1,727 |
) |
|
$ |
(206 |
) |
|
|
(1,435 |
) |
|
Reduction of transaction costs allocated to derivative liabilities upon Business Combination |
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
(3,745 |
) |
|
Interest income |
|
(993 |
) |
|
|
(1,021 |
) |
|
|
(2,079 |
) |
|
|
(1,445 |
) |
|
Interest expense |
|
4,117 |
|
|
|
4,044 |
|
|
|
8,246 |
|
|
|
7,773 |
|
|
Restructuring and severance related costs(1) |
|
2,170 |
|
|
|
553 |
|
|
|
(715 |
) |
|
|
553 |
|
|
Provision for income taxes |
|
10 |
|
|
|
11 |
|
|
|
20 |
|
|
|
21 |
|
|
Total Adjusted EBITDA |
$ |
1,058 |
|
|
$ |
(2,610 |
) |
|
$ |
2,951 |
|
|
$ |
(9,476 |
) |
|
Net loss margin |
|
(19.3 |
)% |
|
|
(16.4 |
)% |
|
|
(12.7 |
)% |
|
|
(17.4 |
)% |
|
Adjusted EBITDA margin (loss) |
|
2.0 |
% |
|
|
(3.9 |
)% |
|
|
2.8 |
% |
|
|
(6.9 |
)% |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240808504609/en/
Investor Relations Contact
ir@grove.co
Media Relations Contact
Ryan.Zimmerman@grove.co
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