Provides update on strategy to achieve
sustainable profitable growth in 2024
Secures $35 million asset-based loan
facility
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 fourth
quarter and full fiscal year ended December 31, 2022.
Strategic Update - Drive toward
Profitability with Capital Efficient Growth:
Grove’s four-pronged value creation plan implemented in 2022
included: 1) improved marketing efficiency, 2) omni-channel
expansion, 3) net revenue management, and 4) operating expense
discipline, which allowed the Company to reduce net loss by $77.7
million and Adj. EBITDA loss by $41.7 million in the second half of
2022 as compared to the first half of 2022.
We continue to target profitability in 2024, and are announcing
an update to our strategy to achieve that goal:
1) Create stability and profitability in our business
a) We expect DTC to stabilize as we lap our
reduction in advertising spend that began in June 2022 b) Execute
strategic initiatives to strengthen customer engagement and expand
order size
2) Invest in multiple avenues for growth acceleration where
Grove’s DTC platform creates a natural advantage
a) Expansion into the health and wellness
vertical, which we are announcing today b) Retail revenue growth,
where we continue to gain traction as evidenced by the expansions
into Amazon, Walmart, Harris Teeter, H-E-B, and a major national
drugstore, all announced in the last 6 months c) Strategic, high
synergy acquisitions
We believe that through continued execution of our value
creation plan we will be able to achieve stability and
profitability of our business in 2024, when we are no longer
lapping the impact of elevated marketing spend in the first half of
2022, and that each of these three avenues can drive material
upside and long term growth. Through each avenue, Grove expects to
benefit uniquely from the over 1.3 million active customers on our
DTC platform, the strength of our brands, and our robust logistics
and distribution infrastructure. In executing this updated
strategy, we believe we can drive long term growth with strong
capital efficiency and increase our market leadership.
Fiscal Fourth Quarter 2022 Financial
Highlights:
Our financial highlights reflect our continued efforts to
eliminate less efficient advertising spend and drive improved
margins, on a sequential basis, in order to be profitable 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 $74.0 million, down 5% from the third quarter of
2022, and down 15% year-over-year
- Gross margin of 47.0%, down 210 basis points from the third
quarter of 2022, and up 200 basis points year-over-year
- Net loss margin of (17.1)%, compared to the net income margin
of 9.9% in the third quarter of 2022 and the net loss margin of
(36.7)% in the fourth quarter of 2021
- Net income margin in the third quarter of 2022 is inclusive of
gains on the remeasurement of derivative liabilities.
- Adjusted EBITDA margin(1) of (12.9)%, a decline of 50 basis
points from the third quarter of 2022 and an improvement of 1,610
basis point from the fourth quarter of 2021
Fiscal 2022 Financial
Highlights:
- Net revenue of $321.5 million, down 16% year-over-year
- Gross margin of 48.1%, down 100 basis points
year-over-year
- Net loss margin of (27.3)%, an improvement from (35.4)% in 2021
- Net loss margin is inclusive of gains on the remeasurement of
derivative liabilities.
- Adjusted EBITDA margin(1) of (24.8)%, a 350 basis point
improvement year-over-year
(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,
“Results for fiscal 2022 came in ahead of our guidance for both
revenue and adjusted EBITDA margin driven by continued marketing
efficiencies on lower spend, further improvement in DTC net revenue
per order, and the acceleration of strategic actions taken to
improve profitability. While the reduction in advertising spend has
resulted in transitory pressure on our business which will continue
in 2023, our current advertising efficiency is excellent and we
remain confident that it is the right step to position ourselves
for success in the future. As we look ahead, we have a clear
strategy to achieve profitable growth with stabilization in the DTC
business, and we are investing in new ways to grow including
omni-channel distribution, category expansion with a push into
health & wellness, and potential high synergy M&A
opportunities through our partnership with HumanCo. We are well
positioned to execute our strategic priorities, which will generate
sustainable profitable growth in the years ahead and create
long-term value for our shareholders.”
Fiscal Fourth Quarter 2022 Key Business
Highlights:
- DTC net revenue per order was $63.40 in the fourth quarter of
2022, up 5% quarter-over-quarter and up 11% from the fourth quarter
of 2021
- Grove Brand products represented 45.5% of net revenue in the
fourth quarter of 2022, a decrease of 140 basis points
quarter-over-quarter and down 220 basis points from the fourth
quarter of 2021
- In the fourth quarter, 65% 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, an all time high and up from 63% in the third quarter of
2022 and 49% in the fourth quarter of 2021
- 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 0.98 pounds of plastic per $100 in revenue in the
fourth quarter of 2022 as compared to 1.03 in the third quarter of
2022 and 1.21 in the fourth quarter of 2021, following the intended
trajectory
- Across all Grove Brands, plastic intensity was 0.80 pounds of
plastic per $100 in revenue in the fourth quarter of 2022, which
was our best result to date, compared to 0.85 pounds in the third
quarter of 2022 and 0.99 pounds in the fourth quarter of 2021
- The Company announced a strategic partnership with HumanCo, a
mission-driven health and wellness holding company, to find one or
more synergistic M&A opportunities to meaningfully accelerate
our profitable growth strategy, and in which HumanCo has agreed to
consider funding with up to $100 million of new capital
- During the quarter, the Company refinanced its existing debt
facility, extending maturity and pushing out principal repayments
until 2025
Fiscal Fourth Quarter 2022 Key
Operational Highlights:
- Continued execution against four-pronged value creation plan,
encompassing:
- Improved marketing efficiency
- Continued to gain efficiencies on lower spend across
channels
- Further optimization of new marketing technology stack to
improve targeting
- Omni-channel expansion
- Grove Co. secured first quarter launch at Walmart and
Amazon
- Peach not Plastic, our plastic-free personal care brand, and
Superbloom, our vegan skincare brand, reached $1 million in sales
on Amazon
- Net revenue management
- Implemented net revenue management processes including
strategic pricing on both third party and owned brands, and the
optimization of membership, shipping, and fee revenue
- Operating expense discipline
- Extreme discipline in reduction of operating expenses is
reflected in significant adjusted EBITDA margin improvement both
sequentially and year-over-year
Subsequent Event:
On March 10, 2023, the Company secured 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 interest rates applicable to borrowings under
the revolving credit facility are based on a fluctuating rate of
interest measured by reference to either, at the Borrowers’ option,
(i) a Base Rate, plus an applicable margin, or (ii) the Term SOFR
rate then in effect, plus 0.10% and an applicable margin. The Base
Rate is defined as the greater of: (1) Prime Rate as published in
the Wall Street Journal, (2) Federal Funds Rate plus 0.5% and (3)
5.0% per annum. The applicable margin for the revolving credit
facility borrowings is based on the monthly average principal
balance outstanding and ranges from 2.75% to 4.50% per annum in the
case of base rate borrowings and 3.75% to 5.50% per annum in the
case of Term SOFR borrowings. The loan is for a term of up to 3
years and will support the Company’s strategic initiatives and
working capital needs.
Union Square Advisors LLC acted as exclusive financial advisor
to Grove in connection with this credit facility.
Financial Outlook:
“We made considerable strides toward profitability in 2022,
ending the year at a significantly lower burn rate than that with
which we began it. Yet the macro environment remains challenging,
consumers continue to feel pressure and we are seeing the impact
across our business, particularly in retail sales. We view 2023 as
a transitional year for Grove, during which we continue to focus on
profitability, stabilize our core business as we lap the reduction
in advertising spend that began in June 2022, and generate new
sources of growth to position ourselves for profitable growth in
2024,” said Sergio Cervantes, Chief Financial Officer of Grove.
Based on performance to date and current expectations, Grove is
providing the following guidance:
For the 12-month fiscal period ending December 31, 2023, we
expect:
- Net revenue of $260.0 to $270.0 million
- Adjusted EBITDA margin(1) of (9)% to (11)%
(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 fourth
quarter and full year 2022 financial results and other business
updates today, March 14, 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 March
28, 2023 and can be accessed by dialing (877) 660-6853 or (201)
612-7415, access code: 13736393. 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 drive toward profitability in 2024, our
expectation that the DTC business will stabilize, our ability to
consummate acquisitions, 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 of debt. We define Adjusted EBITDA Margin as
Adjusted EBITDA divided by revenue.
Grove Collaborative Holdings,
Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
81,084
$
78,376
Restricted cash
11,950
—
Inventory, net
44,132
54,453
Prepaid expenses and other current
assets
4,844
8,104
Total current assets
142,010
140,933
Restricted cash
2,951
—
Property and equipment, net
14,530
15,932
Operating lease right-of-use assets
12,362
21,214
Other long-term assets
2,192
4,394
Total assets
$
174,045
$
182,473
Liabilities, Convertible Preferred
Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable
$
10,712
$
21,346
Accrued expenses
31,354
20,651
Deferred revenue
10,878
11,267
Operating lease liabilities, current
3,705
3,550
Other current liabilities
249
1,650
Debt, current
575
10,750
Total current liabilities
57,473
69,214
Debt, noncurrent
60,620
56,183
Operating lease liabilities,
noncurrent
16,192
20,029
Derivative liabilities
13,227
—
Other long-term liabilities
—
5,408
Total liabilities
147,512
150,834
Commitments and contingencies
Convertible preferred stock
—
487,918
Stockholders’ equity (deficit):
Common stock
18
1
Additional paid-in capital
604,373
33,863
Accumulated deficit
(577,858
)
(490,143
)
Total stockholders’ equity (deficit)
26,533
(456,279
)
Total liabilities, convertible preferred
stock and stockholders’ equity (deficit)
$
174,045
$
182,473
Grove Collaborative Holdings,
Inc.
Condensed Consolidated
Statements of Operations
(In thousands, except share
and per share amounts)
Three months ended
December 31,
Year ended December
31,
2022
2021
2022
2021
(Unaudited)
Revenue, net
$
74,036
$
87,264
$
321,527
$
383,685
Cost of goods sold
39,245
48,002
166,875
195,181
Gross profit
34,791
39,262
154,652
188,504
Operating expenses:
Advertising
6,910
16,702
66,269
107,313
Product development
4,576
6,972
22,503
23,408
Selling, general and administrative
51,703
46,029
206,863
186,638
Operating loss
(28,398
)
(30,441
)
(140,983
)
(128,855
)
Interest expense
2,767
1,930
9,685
5,202
Loss on extinguishment of debt
4,663
—
4,663
1,027
Change in fair value of Additional Shares
liability
(243
)
—
727
—
Change in fair value of Earn-Out
liability
(20,223
)
—
(66,359
)
—
Change in fair value of Public and Private
Placement Warrants liability
(1,917
)
—
(5,900
)
—
Other expense, net
(781
)
(397
)
3,862
760
Interest and other expense (income),
(15,734
)
1,533
(53,322
)
6,989
Loss before provision for income taxes
(12,664
)
(31,974
)
(87,661
)
(135,844
)
Provision for income taxes
19
13
54
52
Net loss
$
(12,683
)
$
(31,987
)
$
(87,715
)
$
(135,896
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.08
)
$
(3.49
)
$
(0.97
)
$
(15.86
)
Weighted-average shares used in computing
net loss per share attributable to common stockholders, basic and
diluted
162,060,316
9,174,129
90,507,024
8,571,157
Grove Collaborative Holdings,
Inc.
Condensed Consolidated
Statements of Cash Flows
(In thousands)
Year Ended December
31,
2022
2021
Cash Flows from Operating
Activities
Net loss
$
(87,715
)
$
(135,896
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Remeasurement of convertible preferred
stock warrant liability
(1,616
)
1,234
Stock-based compensation
45,660
14,610
Depreciation and amortization
5,716
4,992
Changes in fair value of derivative
liabilities
(71,532
)
—
Transaction costs allocated to derivative
liabilities upon Business Combination
6,873
—
Non-cash interest expense
586
704
Inventory reserve
7,036
4,725
Loss on extinguishment of debt
4,663
1,027
Impairment of operating lease right-of-use
asset
5,300
—
Other non-cash expenses
274
1,274
Changes in operating assets and
liabilities:
Inventory
3,285
(12,598
)
Prepaids and other assets
3,114
(3,294
)
Accounts payable
(10,518
)
(2,489
)
Accrued expenses
(5,004
)
(817
)
Deferred revenue
(389
)
148
Operating lease right-of-use assets and
liabilities
(130
)
65
Other liabilities
(1,864
)
(774
)
Net cash used in operating
activities
(96,261
)
(127,089
)
Cash Flows from Investing
Activities
Purchase of property and equipment
(4,222
)
(5,768
)
Net cash used in investing
activities
(4,222
)
(5,768
)
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 the issuance of common
stock
4,924
—
Payment of transaction costs related to
the Closing of the Business Combination, the ELOC Agreement and
convertible preferred stock issuance costs
(6,558
)
(1,396
)
Proceeds from the issuance of debt
70,820
60,000
Payment of debt issuance costs
(2,463
)
(375
)
Repayment of debt
(5,180
)
(21,932
)
Payment of debt extinguishment
(66,034
)
(2,499
)
Proceeds from exercise of stock options,
settlement of restricted stock units, net of withholding taxes paid
related to common stock issued to employees, and warrants
(1,985
)
1,209
Repurchase of common stock
(32
)
(297
)
Net cash provided by financing
activities
118,092
34,710
Net increase (decrease) in cash, cash
equivalents and restricted cash
17,609
(98,147
)
Cash, cash equivalents and restricted cash
at beginning of period
78,376
176,523
Cash, cash equivalents and restricted cash
at end of period
$
95,985
$
78,376
Grove Collaborative Holdings,
Inc.
Non-GAAP Financial
Measures
(In thousands)
Three Months Ended
December 31,
Year Ended December
31,
2022
2021
2022
2021
Reconciliation of Net Loss to Adjusted
EBITDA
Net loss
$
(12,683
)
$
(31,987
)
$
(87,715
)
$
(135,896
)
Stock-based compensation
11,312
3,752
45,660
14,610
Depreciation and amortization
1,425
1,359
5,716
4,992
Remeasurement of convertible preferred
stock warrant liability
—
(292
)
(1,616
)
1,234
Change in fair value of Additional Shares
liability
(243
)
—
727
—
Change in fair value of Earn-Out
liability
(20,223
)
—
(66,359
)
—
Change in fair value of Public and Private
Placement Warrants liability
(1,917
)
—
(5,900
)
—
Transaction costs allocated to derivative
liabilities upon Business Combination
—
—
6,873
—
Interest income
(521
)
—
(521
)
—
Interest expense
2,767
1,930
9,685
5,202
Restructuring expenses
5,887
—
8,879
—
Loss on extinguishment of debt
4,663
—
4,663
1,027
Provision for income taxes
19
13
54
52
Total Adjusted EBITDA
$
(9,514
)
$
(25,225
)
$
(79,854
)
$
(108,779
)
Net loss margin
(17.1
) %
(36.7
) %
(27.3
) %
(35.4
) %
Adjusted EBITDA margin
(12.9
) %
(28.9
) %
(24.8
) %
(28.4
) %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230314005917/en/
Investor Relations Contact
ir@grove.co
Media Relations Contact
GrovePR@icrinc.com
Grove Collaborative (NYSE:GROV)
Historical Stock Chart
From May 2024 to Jun 2024
Grove Collaborative (NYSE:GROV)
Historical Stock Chart
From Jun 2023 to Jun 2024