GROV - Earnings call transcript Q1 2024 | Grove Collaborative Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and thank you for standing by. Welcome to Grove Collaborative Holdings, Inc.'s First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Hosting today's call are Grove's CEO, Jeff Yurcisin and CFO, Sergio Cervantes.

Before they begin their prepared remarks, I will review the full safe harbor.

considered made the trends future successfully program, second subscribe increase and sequential business may statements business financial respond marketing the relating and and first risks industry adjusted year statements of strategies, Grove's be margin improvement spend, of the guidance, today intention order prospects, about results, half our to conversion for to products addition Some our including to to forward-looking ability future period revenue our rates growth net the in revenue of and save profitability EBITDA in and payback adjusted EBITDA to XXXX.

to expectations a discussed factors materially, our statements based and including filings could risks in Such and Securities with in results our that and number on Exchange differ of subject Commission. to current those uncertainties are the actual beliefs cause

these All future may assumes update under laws. obligation to statements on and result applicable be today, new based statements, a Grove of except Grove's securities as no or as otherwise, of forward-looking are any required view whether events information,

refer please which Grove's to are Relations on risk investors.grove.com. in Grove's factors information, most the recent available more For Investor at website SEC, discussed filings with the

will certain also During today's call, Grove non-GAAP financial discuss measures.

call Relations items Investor non-GAAP to website. the measures Jeff are I earnings directly now to provided over these of their comparable would Reconciliations to in available Yurcisin also release, most the GAAP the turn on financial to which begin. like is

Jeff Yurcisin

earnings confident certain and XXXX with you performance as incredible against CEO, operational ongoing First, I the I'm to financial deliver going ability and to; well our you, for my incremental This as results remain Thank is Grove today. operator. of quarter share everyone, for deeply team's third updates. strategy. our joining call in thank announcement the Hello, first our as

profitability sustainability decision-making progress. our focus customer, on of pillars guides Our and our core and activities

and third-party own our recent in product customers' We've years into expanded conscientious our assortment to brand destination the consumers. for brand meet significantly evolve Second, our needs.

who for and in. destination We their will a consumers continue the to for best trusted conscientious want be family

growth for to transform beginning our foundation and for Third, transformation of building our our new The collaborative. results represent into of strategy sustainable company the the a a household brand a of expand company, products. name multiyear early

us to sustainability We know remain to Grove opportunity, States a pursuit the focused can the crisis society of sustainable be as the their consumer mission. sustainability must This and and X our especially significant to of continue profitability. pillars: The to opportunity retail a that operating void a for climate percentage customer, our shoppers fill in United industries in is that products purchases, prioritize meet And expand sustainable we and continues plastic in for our by on business rapidly. and remarkable. ensure guided we pursuit

an daily First, make first I'll we customer begin our in changes customers. gated access experience customers. order meaningful pillar Removing that and expanded the with more to made effort Grove launched our customer for product subscriptions, our to the shared experience updated reducing in our an where offerings experience. lives friction quarter, significant we Last in we of default and new

optimize of the importantly, building has new and incentivize first reduced launch our the individual and to it business. our program is the a but business significant experience. change products continues subscribe in order represented launched save to model. shift also We orders. on improve card a initially how as repeat more The This we're front we beginning improved conversion, and end of since rebuilding But

customers advertising with acquire intend spend new to repeat to on conversion order and we As paybacks. rates efficient improve, more

products XX% year-over-year in made the our quarter, third-party Grove of third-party first progress In we XXX% products top nearly save program. assortment enrolled our expanded in of also initiatives. our enrolled and expansion of branded also the on subscribe program by on We XX% category the third-party and

agree over As vendors our funding additional be will program time. the third-party vendor products to to added terms, more

past owned significant a and flagship brand, rebrand one quarter where sustainable our including aluminum we beautiful Grove executed products. a Co, was this of Grove launches, a our across leveraging and for number Lastly, artwork new Co packaging of portfolio

Grove convey requiring of accessible We ready-to-use a introduced glance. out This and dish retail entry with dispensers. offers customers life detergent to more develop price brought new line soap at not store was and soap, points Target also of that the assortment assortment partnership on stands through a ongoing durable our purchase Co laundry product liquid that sustainability for hand by shelves to a

our We by under first wipes, X strategy. care Grove personal years Beauty rooted nearly in also new facial our Co brand launch launched

well origin our Spray. new Mint fragrances As as including Pomelo, portfolio, Shower, Fresh across natural Sea and Sun Wild

launched efforts in our also partnership celebrating summer limited the ongoing and conservation we Alaska. Finally, Southeast with Nature existing our edition collection Conservancy,

serve which of to and our our as sustainability to continues point mission Turning pillar differentiation. foundation,

We further have a of driven key that our leadership. industry initiatives number drive

celebration, throughout our First, April. Earth start to I'd like which place took month with

Grove First sustainability do further on more planet. the underway milestone our while celebrate month a for is educating key customers even about work to for to us at the progress

individual with This replaced going change seal packages. we be plastic tape During permanent within will the tape products paper a forward. month, to

impact Perfection titled Progress We to our isn't of is with campaign celebrate the digital shopping also a customers launched growth. sustainable.

publishing detailed progress Grove's equity. XXXX business, our providing standards and are a important annual report carbon, relating to summary plastic, issues May, key justice forest ingredient we sustainability in and commitments, of our across health, partnerships and Second,

our plastic latest we providing decouple Finally, for use which continue afternoon at in pace our the metrics this from plastic. of revenue we our the accountability disclosed earnings to intensity release

I'm maintain in Finally, we EBITDA proud profitability a to continued quarter our pillar. that for we to turn to row. adjusted report the third have positive

on our closure headquarters of us facility St. and positive goal long-term but is Francisco quarter streamline cash our fulfillment progress announcing We generate center including past step first Peters, that the make journey EBITDA. restructuring our Our positive the flow, lease this along operations. to Missouri is expenses, to adjusted Specifically, saw fulfillment San

throughout our footprints with scale. have the reflected be corporate savings align size are us These the We but These in and will progress to coming updates fulfillment for our team to pillars quarters. has P&L and made future Grove make sustainability action of current room demonstrate taking quarters. ensure our the business will in to center still the profitability across that customer and our continue

in the to more call to financial I'll ahead. over Sergio, now detail. review turn our go please results Sergio

Sergio Cervantes

to and as of provide that sustainable effectiveness comparisons ourselves of long-term sequential for measure Thank comparisons the quarter-over-quarter calls, provide the in to trends to we steps in a continue have the business taken to profitable growth. you, Jeff. we changes believe Similar will year-over-year we previous and addition position retreat

revenue continues Net quarter XX.X% the first to million, Starting fourth in revenue. with impact the from was of quarter of impact XXXX lower the ongoing down The line. $XX.X year-over-year. advertising and top XX.X%

transformation a the as the record experience navigate the we low efficiency, market during As of and advertising of revenue quarter. prioritized quarter first was a percentage

our scale in to improve growth spend support advertising to rate coming quarter payback revenue to quarters, our period. as and conversion expect We first we continue

continue impacted year-over-year million. advertising active be XX.X% An quarter-over-quarter to XX.X% down orders were uptick Both and XX% $X.X On XX.X% by customers customers and year-over-year lower spend. to down to million. orders were $X.X total quarter-over-quarter and

customer well by X.X% per to an year-over-year DTC as a orders, improvement for was net to wellness. existing driven increase existing shift revenue but $XX.XX. was number The quarter-over-quarter, the within health orders in mix order up and down of year-over-year as customer units X.X% particularly

was as margin as XXX up As in quarter-over-quarter offering paper points goods. we Gross basis to category, continue XX.X%. to well expand and XXX our year-over-year product basis points

mix to due our to inventory. inventory reductions mostly trend third-party further increase and total in better the first was funding margin as of orders decrease percentage an the benefited lower in offset improvement The a charges estimated a Grove the sell-through decrease reserve to a a sequential partially of percentage The as was in by orders revenue. improvement of of reflect total of by number year-over-year Brands allowance

offering. net due and to recent the average items relates expansion Especially Wellness the orders, to Health points as historically XXX of and which quarter-over-quarter down fewer have XXX our the sequential to year-over-year new points product the The customer Brands experience. of third-party on decline revenue and basis Grove had percentage products first of largely branded was basis was growth as year-over-year XX%. and transformation a it category, more

and Advertising and transform we reflects expense Sequential decreased pullback million. advertising XX.X% in order year-over-year rate. as XX.X% experience and spend conversion to year-over-year decline $X.X order, quarter-over-quarter at customer improved first efficiency our on the focus first

a our improving as for advertising order which quarter-over-quarter revenue anticipate continue growth improved to retail reduction in also improve while as improving a prioritized first course has the are the over channels. advertising We customer experience the we optimize and spend also profitability net increase in the We to our rate, sequential to The decline as of due specific we efficiency. conversion and of new percentage balance chart. year have in continues

Product development due $XX.X $X.X and quarter. decreased The of is of charges year-over-year a quarter-over-quarter expense in XX% the partially million. from XX.X% to SG&A and million decline fourth sequential million $X.X reclassification to lapping restructuring

Excluding stable and was these year-over-year. items, quarter-over-quarter product development expense declined

decrease quarter The year-over-year compensation. decreased decline decline was The and $XX.X to SG&A impact lower costs in impact reduction mainly lower XX.X% and modification year-over-year fewer and year count fulfillment to our expense a from restructuring third is prior stock-based quarter-over-quarter the million. orders, and year-over-year release. of of quarter-quarter XX.X% personnel of from head lower quarter-over-quarter due to in a costs primarily due facility

million million costs. $X.X further the included was restructuring. to primarily which a in EBITDA QX $X.X loss XXXX quarter the $X.X SG&A a was to from lease a million to benefited million Adjusted $X.X quarter and service decline the in of headquarters Of compared of reduction quarter XXXX. $X.X gain million our by professional restructuring, the fourth includes in fourth current expense the amendment for year-over-year quarter The from first note, XXXX compared

XXXX. X.X% margin EBITDA negative adjusted on profitability. X.X% quarter in and The to was continues to hyper QX Our our X.X% compared EBITDA positive QX XXXX improving in positive focus demonstrate fourth in adjusted for improvement the

mentioned positive on cash this in a improvement is only is flow. However, that previously, as transformation milestone Jeff focused our delivering

of to Net XXXX loss $X.X million compared of quarter first of was and quarter net $X.X million a loss the XXXX. in in fourth quarter in loss million the $XX.X the

from is the the quarter annual million cash, Turning termination expense. lease million the of cash, our the ended We payment $XX.X decrease balance to sheet. The $XX.X payout cash of incentive and equivalents mainly previous bonus now interest restricted decrease and in due quarter. a with headquarters, to

extremely efficient to focused recover In payback this on the less than remain outflows lease Based payment. cash X-year such period a expect the the preservation termination period, we and outflow. target rent cash we savings, on transformation, cash on initial as returns

QX of trends, an XXXX, driven working of quarter up an finished we to to inventory our million capital the relates million, the with balance third-party $XX.X in it support end by $X.X investment primarily category initiatives. As increased from inventory financial

the on have draws in $X.X since million $X.X made of capacity XXXX. capacity. million not inventories we and on any asset-based under accounts current our facility receivable have borrowing available minimum We draw balances, of QX taking Based loan

Now turning to our outlook.

December of million expect XXXX, period adjusted our in course XX, year. EBITDA spend revenue of model save advertising we million, $XXX and the the catalysts XX-month half ending around continue we to changes sequential the over be the to growth will transformation optimistic to launch still ability an and Despite the of and are guidance to revenue the order of maintaining X%. year, business experience For first second that and X% our increase $XXX net to uncertainty the margin our of the for the be subscribe

to seeing efficiently, improvements us rate commercial done. customers order as be but there allowing expected new already more first are is to to acquire work more our We we

our closing updates and well top to the look lease the future of the sharing remarks. to continue progress would turn bottom more transformation over back some headquarters to modifications expenses match in first also the forward in quarter. line of for We the call quarters. the I including Jeff midst like in completion now I on to

Jeff Yurcisin

the beginning. Thank just you, results These are Sergio.

pursue transformation for multiyear we As growth. a

ever than me how our is more You've mission sustainable heard needed before. speak about now

our environment this and Just the headlines look climate at differentiation. is our about as

a to mission. to business committed building sustainable that are We pursue

Our that drives efforts on a creation are through shareholder value the focused generation cash. building business of

revenue shareholders. We're excited focused are full for we're growth of sequential results Operator, Our questions. and while year, strategy profitable any year. answer plan questions that, basis our is first for on implementing our an you please happy to keep EBITDA end the the have. open our being adjusted drive for laser the to the line by on to step With

Operator

Canaccord with Susan the And the question Instructions] from [Operator Anderson first Genuity. line comes of

Susan Anderson

Yes.

should also just we think kind So I the just of year. you about improvement as I the could terms the And I it what throughout talk was maybe should cadence then guess, throughout quarter-to-quarter think about as guess, about will year. sales of decline? sequentially of go improving, on be sales go we in the the wondering we driver how of if the we

Jeff Yurcisin

Susan. it, Appreciate

being focused just more and improving great where experience experience. customers customer initiatives guiding into we're when marketing existing the around those First, we're only we new believe XXXX. are But occurred bottoming on back say out we This growth. in while shopping towards overall our wellness, the sequential I to we're near up on customers, this the so on heavily following success would opening seeing What that growth experience a shopping that unusual comps and spent browsing of doing is we year.

That's where our energy. we're putting

we start this the this what more looking growth go we you are -- at sustainable that we forecasting, sequential and into when so will year importantly, XXXX. going revenue forward see as are this impacts And be growth

Susan Anderson

then you had any them out new wondering was products And at And also in customers rolled the into Great. seeing any packaging retail. bring terms you're the with I of new reads all ones new you if the if at brand? initial that on

Jeff Yurcisin

world. launch Oscars the It it. rebrand, packaging new We is are within Summer the didn't quite mention the It's design category about energized. an of in excited this on I products, of the award limited appreciate we the like awarded Awards. very we but the our some of shopping. around of early products, We're new Co Growth edition release, home the these the by almost collection. Guideline were but

out already in now first some what sold anecdotally, we're of so And seeing is right heard we've the targets we've week. that

underlying We're new positioning we're energized about about early. it No to packaging excited just as the of efficacy and what really now, doing we're price. product, for quite guidance very me, the recognizing it's the about from I'm really giving the right the excited and just that the

Susan Anderson

Great. first That the gross the few or think quarters there. margin should quarter impacts you wondering margin consistent talk we if -- as the about it should remainder think seasonality sounds And for was being about drivers of exciting. in And gross year. I or then to maybe could of the percent, we the next for about terms

Jeff Yurcisin

appreciate it. I

take to Sergio, do So want you that?

Sergio Cervantes

can. Yes, Thank you,. I

the thank So for you question, Susan.

just say, be thinking a gross of, shouldn't one-off during margin, continuing that in In has terms following you of that the of QX couple quarters.

over forward. just that, efforts guide So margins all we do of apart have becoming of margin continues not from I terms obviously continue, will to going priorities continue is past those simply say that gross months, think it milestones. we the as we XX way the put gross the be But about on in to and we and done to one profitable --

in put quarters. the increasing So it upcoming continue put the behind to is margin, will emphasis we and about on way to we all think efforts it gross

Susan Anderson

Okay. if could maybe talk Great. just And then last you one about advertising. for me,

had picking before should that the up that year. year? back going the -- maybe the of thoughts talked there any I And still the half is advertising be is should think I about in guess, we of it around guess, for where plan and I advertising forward? level you this

Jeff Yurcisin

advertising our operating that, paybacks say they're discipline, and Susan. I expecting demanding spend. appreciate from strong I with really would strict

And customer transformed so what's this happening is experience. as we've

experience, we learning. new As harp we opened we're up testing have the shopping and and channels,

And XX. that seeing on is week-over-week what we're since launch improvement February

not to can high that Right so advertising and a world lead efficiencies guiding to see now, number specific on confidence invest I'm those of higher where as a very there. to a revenue will we with spend. percent continue we And improve, paybacks

that is say most it we level is about important makes think where on this invest will only an incremental we what I and will sense. rational

investing and do see a as confidence can we cash we revenue, think of spend their are when we So percentage investors carefully I treating are increase expectations returns. marketing have that high that with of

Susan Anderson

of Okay. rest year. Great. luck the the Good

Operator

Telsey next Really the from Telsey Susan. Group. line comes it. appreciate the with of Thanks, Advisory question the Dana

Dana Telsey

seeing third-party little see what attributes How the brands you than a brand, about about can it's brands differences Can between or thinking you're in brands this Jeff, quarter, talk it? the Is where performing? what there you business -- bit you there? on better you XX% I are settle Grove that perform of think others. to which how And out? of was does And

Jeff Yurcisin

appreciate chance bit little the products. about I to talk a more

able driven is primarily to we're more as faster. first, growing data the and third-party grow SKUs because channel. in is suggests, selection So that faster This

are However, backwards really we from I've working needs. backwards mentioned is We working percentage before. an from What doing ideal are not mix. this customer

brand is owned products margin be output front as to more investors on focus going more an party than our can gross of percent would quarter-over-quarter performing the towards and If could I party mark I worried, planet improve it point -- wellness. we'll are think in put of our So even If be share truly customers. them around has to is one that metric continues friendly, metric. an wallet products our third you versus putting an the input and third keep are presenting of first highest categories, set exclamation taken

items. survey an we customers perspective. our customers other than out from trust XX a trust us but that ingredient So selling by we the perspective, among have X of environmental an standards more there did We've on retailers of high earned and them our wellness from that was that also

increased quarter, And so to orders year year. from this with XX.X% item what past VMS a this seen last we've X%

their products and XXX an points as add customers selection also relevant meeting to continue to is more of our that increase are quarter-over-quarter brands we needs. This basis really great introduce

X customers we're following strong there. that a we're we're that success it energized just seeing And so our some by and category is and

Dana Telsey

When numbers do active how up a And then those increases? Got about think as are evolve stabilization cadence? progressing through you move terms how on metrics on metrics, of you following question customers, it. in year? we of AOV thinking orders the those should How --

Jeff Yurcisin

Yes. Good question.

Q&A the of X.X% where was see and math, we quarter this cohort I natural Susan in of the curves earlier can towards. we marching of first that I year, -- that's the growth, world a at year-over-year. towards it was we out you with So half and When the some see sequential some and are revenue order the mentioned per up believe, bottoming in $XX.XX look at back we

revenue expectations deliver economics continue of the reasonable of wallet what gross on are order -- per great type to Those that maintain work to and a the right type that's are pay customers bills our getting margin. to enables we're so able and deal to

what a a So more as year-over-year I to the half of improvement think continued orders of revenue. year you'll back stabilization see of the and is get we in

Operator

back floor There are time. turn I would Jeff Yurcisin to no further at the to any for over questions closing like comments. this

Jeff Yurcisin

the a time. appreciate want night. I much. Thank great you very hope and I everyone thank you I to your call, have for joining

Operator

gentlemen, teleconference. ladies does you. and And today's Thank that conclude

your your for You you participation. Thank may lines disconnect time. this at

Grove Collaborative (GROV) 14 May 242024 Q1 Earnings call transcript