GROV - Earnings call transcript Q3 2024 | Grove Collaborative Holdings, Inc.

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Operator

Good afternoon, and thank you for standing by. Welcome to Grove Collaborative Holdings, Inc.

Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Hosting today's call are Grove's CEO, Jeff Yurcisin; and CFO, Sergio Cervantes.

prepared review their safe forward-looking begin harbor. they remarks, the I'll statements Before

statements their future successfully today business of to forward-looking, made Some the to relating about risks be trends plans Grove's including statements the adjusted their by business the of remaining repayment strategies, and prospects, ability margin returns higher in term Delivering quarter, facility its to investments and to retail respond DTC, outstanding fourth exit under may considered net sequential guidance. channel. focusing revenue EBITDA debt industry and growth results, revenue financial in amounts

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

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

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

items to non-GAAP call comparable in Grove website. the would today's discuss to During on Investor these most available release, turn their which measures. earnings Yurcisin now to over GAAP Relations their I the certain begin. will of Reconciliation non-GAAP financial call, measures provided like to directly financial Jeff are is also

Jeff Yurcisin

environmental our to team serve of human progress Grove. remarkable we're for now today health. both the of that destination the build at on proud to trusted to also this as Thank I've calendar a you, be to full all operator. privilege the but turnaround customers, the I'm and year work prioritizes not over updates brand you doing share and conscientious with excited only the had underway leading continue and for

mission. our sheet sustainable retailer planet. and sustainable essential for the on business good And differentiation revenue strengthening the operating our our curates progress our highlighting in fostering are priorities pursuit that balance of laser-focused a and on for and creates products you profitability, of good are we're still that We as making driving growth,

on Let's profitability. with our Starting pillar updates priority #X, into X pillars. dive

on This previous with quarter adjusted saw us in positive of commitment EBITDA a quarters demonstrating of revenue to X breakeven our decline. adjusted spite consecutive EBITDA, profitability

positive X. so We cash done last flow marking this fourth the out also operating again quarter, the quarter we of achieved have

at now and leverage Nevada, XXXX optimize operating in our end our Contributing our facility. XXXX, is maintaining areas by flow, other of in our fulfillment fully we million to operating to our end including of discipline, helped in identify operating we lastly, expense to strict Reno, scale avoid $XX.X center transformation. million expenses continue reduced previous to significant to We're our to up a which and us running increase operations relocating ongoing rent positive increase QX continuing at $XX.X position current for the the further the cash And the ownership rightsizing from inventory business. QX of

second sheet balance Our pillar is strength.

Volition investment, was transaction million $XX million debt remaining 'XX. Directors. pay of the our partner, $XX led which of who Larry This the follows third announced the by invested managing voluntary million during in the off on from $XX sits Cheng, quarter, term plan an from Capital they August of additional we million $XX The top facility using the quarter. Volition's to investment also we on made payment proceeds Board our of We outstanding

million balance our facility, under into After enabling would paying off debt only cleaner loan the a XXXX. our remaining debt, going $X.X sheet term asset-based be

going shopping experience. forward. We output of top The priority delivering the as growth. is growth revenue third great view natural revenue a pillar our is This

we retailer, who are. speaks a about the As keep company we volumes

customers nontoxic those health. packaging curate have and cutting-edge with and brands to us sustainable products us high-quality, that to human trust environmental ingredients and Our shop support they because both the

quarter on XX.X% in compared of Our our the third-party the increasing selection third XXXX. brands by sold platform with third e-commerce to of number quarter expansion continued the

We across also & to We're customers expanded products all unlock program Subscribe opted and the bringing now they with XX% to our brands to of on and to needs, a in subscribe our their every discount. we for category. customers products meet Save want continuing offer to listen

and sequential fourth cumulative the going which the This #X, XXXX. serve the be first company to our This overall made, the progress the and expand lastly, foundation, the in and And value point the past our decision made differentiation. XXXX, strong continue sustainability would our and proposition our human pillar to end changes we customers. quarter, into of of a talk revenue about mission of project sustainability. underway on based better since growth, we environmental quarter quarter health momentum needs continues the to in of as Furthermore, encompass how growth for we to of definition of year, first

of of and our we customers to sustainability. in who ourselves today. find build amount of environmental outcomes about negative We aim the these discussions are as concerned serve growing we coverage our louder sides sustainable health linking in have both crisis a microplastics is voice to human There brand on a top

to future more this calls. speak will We in

Grove Beyond quarter, of the of shopping customers in amount now XXXX. Impact recovered by and also Grove. disclosed with impact an orders is new helps exclusive that launched the we their and since the avoided order plastic understand The Plastic each customer During individual lifetime Tracker, better their tool over

The plastic, million million water bottles XXX and the pounds standard XX.X Grove since over avoided of of XXXX. recovered equivalent community has

our this strategic from which plastic. intensity metrics afternoon Transitioning in earnings to the to for providing revenue the of disclosed release plastic another continue accountability latest use we also our We our update. at decouple pace

by returns test DXC the We're experience. who brick-and-mortar and channels. conscientious consumers. mission-driven our first our early higher learned brick-and-mortar in the begun of selection We branded can partners we our it X.X we different XXXX products in our this entered these business serve Co We after believe April deliver We in channel, with our nationwide the that online. to to years stores more retail from focusing XX grateful million less a for learn can but curated XXXX. process the consumers them, that But been higher locations Grove constitutes from household of opportunity with X% have believe We've than accessible consistently exiting incredibly of premium Co retail to Grove to make brick-and-mortar has our by investment we and income seek products unprofitable. consumers and a are customers best and

meaningful in this ample healthy DXC our runway believe segment lives. growth future also and customers' role We into growing customer and is gives while for playing a us the

before time for Sergio, to I this it year. in the turn reduced as our noted revenue guidance Lastly, today, second press over release our we

we were optimistic at of the XXXX, throughout changes our back year. to Looking too light we made experience in the e-commerce

expectations. Brick-and-mortar has also retail underperformed

each baseline While fourth on rest revenue in we're year for we proud profitable remain we business focused have of set to ultimate where what of and August strategic progress gone than 'XX, through of and made in success. our excited Again, continue expectations the quarter, slightly make the reduced expect and and based sequential we have to as this function the we revenue sustainable, we lower current Grove still on we trends. our for I anticipated, we of at be about goal. a to but optimize impactful changes achieving originally up the we growth joined are headed, to doing growth ongoing Since

to start these We of have implemented changes. excited seeing are many the and critical updates results

Our to our and cumulative detail. results term. ahead. Sergio both to review the to me financial in the I near more over progress long now please everything come will turn call excites Sergio, for go in term

Sergio Cervantes

previous Thank I growth happy see achieved the as in reflect for a you, so Similar the to and Jeff. long-term growth. in year-over-year the effectiveness comparisons of will believe I'm addition the also taken far. provide to progress in have measure revenue sustainable have to quarter-over-quarter and changes we provide we continue profitable to the calls, help the business we sequential to comparisons ourselves position of trends transformation of steps the

Starting was markdown XX.X% repeat years. the orders mainly compared revenue. impacted line, net to down and XXXX year-over-year, fewer was second quarter throughout lower retail advertising of prior with in This and X.X% million down quarter, also third to $XX.X from due million the XXXX $X.X revenue the decline a to top spend by brick-and-mortar

of which stabilization we look which of X.X relative periods. in fourth million by X.X% gradual were However, customers significant customers, is X.X% our advertising down sequential and factor repeat we reduced and quarter-over-quarter orders active confidence that toward in revenue by the as Total we were growth. revenue also year-over-year, while QX, to will from XX.X% XX.X% both $X.X are year-over-year, million, down quarter, influenced see continued encouraged the prior spend were quarter-over-quarter a

sequential decline slowed our the base has and in stabilizes initiatives. our the However, has advertising customer support to spend increased aggregate as

sequential order orders, As QX, a per XX average months. driven revenue which was who up X% This $XX.XX have customers a the percentage order. decline was as down net an order by we in per reminder, but those net placed from first define have last year-over-year. customers DTC active X.X% revenue of lower higher QX, in

XX Gross fees basis is due as XX.X%, XXXX, a the decreased mentioned lower favorable particularly basis gross growth of year-over-year, due improvements Growth product towards quarter-over-quarter and per quarter and of increase brand decreased as well revenue points to strategy. a product as retail products. of reflect an earlier. down as price of mainly Year-over-year, the order, and increases. margin to the to down customer key second the proportion mix of number by points product margin basis our as due was revenue shifted mainly to net XX%, XX from percentage in The XXX elimination third-party which expansion average offerings, strategic year-over-year a of points of of XXX products products units third-party well points third-party part margins the higher basis markdowns

expanding assortment, the fourth no stop strategy growth it quarter metric our and as is forward. we of on increase As this to emphasis a plan our to third-party critical longer we after XXXX input sharing moving

an brick-and-mortar expenses quarter, increase a rates, as compared the mainly to conversion specific to due third to Advertising by XX.X% to second improving is we but due advertising. compared XX.X% increase to sequential advertising of the channel in quarter in the invest $X.X DTC offset first The the decline in million. decreased retail increased in quarter XXXX order more third

lower Although remain disciplined still scale spend advertising efficiently. is year-over-year and as we

to platform e-commerce quarter-over-quarter, but to accelerated SG&A due increased decreased depreciation second decline prior $XX.X quarter-over-quarter Shopify mainly million. driven severance and our stock-based decision to in lower the our sequential The costs, to facility, $X.X quarter, X.X% charge fewer Product by to quarter. driven orders due decline in fewer fulfillment quarter-over-quarter million. recorded reductions personnel, due and Both increase XX.X% savings, year-over-year costs. costs from expense to XX.X% is from to year-over-year fees lower the and million and is is by professional transition also fulfillment expense. is the costs to homegrown development The technology decline year-over-year decreased year-over-year technology. The orders XX.X% from expense $X.X lower compensation The incurred restructuring mainly were costs.

In current the sequential a $X.X in facility. million decline $X.X moving quarter the million EBITDA cost lower million compared associated of to we the and center to were organization. of by XXXX this Reno the expense spite second in partially revenue year-over-year fulfillment discipline company's with strict of offset quarter XXXX. and across The $X.X breakeven Adjusted was in the costs headwinds, quarter QX the maintained of

cash was flow our million, last flow marking cash positive X in $X.X operating fourth quarter operating quarters. Lastly, the of

quarters. In our cash addition continue has last make discipline, inventory, to the expense progress our a to been for source several particularly improving capital, reducing we which working of

Capital, ended sheet. voluntary debt. to term cash, The a now debt, remaining quarter which offset million $XX.X and term Turning million million from $XX in million investment us prepayment by from million equivalents down in to We the reflects our enabled $XX.X recent restricted the $XX with $XX off Volition partially the pay of cash QX. balance cash, decrease

ended inventory $X.X inventory quarter-over-quarter, million an mainly the also to Grove we ownership million, We branded quarter balance continue of improve driven with by our $XX.X a as down in position. inventory reduction

Now our outlook. to turning

gave XXXX X.X%, XXXX, adjusted and maintaining revising ending net our year X.X% XX, EBITDA expect net fiscal from of are million a in the to million range margin are revenue to we we be $XXX at For our the guidance but $XXX guidance we guidance previously. to million, million $XXX $XXX revenue to now change December

underscoring discipline, commitment We and margin profitable growth to our to prioritize a strict expense continue and model. sustainable

year sequential by fourth look forward continue aggregated now XXXX quarter for back like I driving over excited closing base, and revenue would transformation in the our we Jeff we into remarks. and to of to are call this We the turn stabilization growth in beyond. the customer as some our to

Jeff Yurcisin

decades, in Thank everyday brand you, centering Grove a is meaningful back that and everything for we over Sergio. that fundamentals and through channels to of e-commerce I've it to in know excites strategic X our reaching customer worked in that the direct-to-consumer, their is efficient. me building do, life are them and getting

experience our to We've meeting brand so curated in we from not those to fundamentals, needs, fantastic made their and needs that omnichannel comes want being emotional understanding e-commerce matter We create life, loyalty going progress basics truly building, and on and that connection an back business company. selection. from their which

but We company happy ourselves are and to profitable the have do, turnaround have. for that, sustainable, building essential you our more up new questions setting any growth. for we're for Operator, questions. to efforts foundation answer these open line plenty please With for the

Operator

comes question of line the Canaccord with first Genuity. Susan Our Anderson from

Alec Legg

on for Alec Susan.

Is transformations digital offer? tools have update the last uplift with I any with then the on they there? track? on transition over digital And the quarter. still announced Shopify, any it question a to Just seen that you guess

Jeff Yurcisin

guiding and us sequential corner. around growth ultimate for towards that We is And are That still implies significant. sequential goal. it is is growth. our growth the clearly really year-over-year profitable

to starting right advertising it continue the us sense. of you type are to when is seen we've on see into economics stabilizing, we're advertising what this that our and get transformation, cohorts So will lean with makes

EBITDA focus in could create growth. the This But profitable is long-term a fluctuation quarterly going forward. again,

early of Shopify. be is part to We until fully Shopify your QX. the second The platform on don't migration, announced the expect we question but

a will to we're us We to we excited enable. loyal do Shopify, to years. about Grove that with really resonates that customer what the trying with and what shopping been But have are that sure who now, maintain really transition the right make customers experience is we as visiting over

Alec Legg

Got it. there. takes to growth. could What some work of the kind and what growth some you mentioned and I to for the I happen guess quarter potential think And need gives that get think I guidance fourth leeway what needs be sequential in are that And sequential to quarter? puts fourth headwinds?

Jeff Yurcisin

QX we dig we've you'll by you pressure has same that exist going the brick-and-mortar quarter-over-quarter we not in where of is is that in could brick-and-mortar fully points to that But terms that quarter-over-quarter hitting we by brick-and-mortar QX, just basis been out. of this The was expectations when we were into DXC the -- had type believe business you from pushed channel. if in working. headwind. Alex, set pressure decline a offset Mike, believe It the be that of to growth headwind they're a Yes. XXX XXX even the our real numbers, to see the was a if in about look at

We obviously, this over X customers. acquisition model, new months little a have ago. offering our now business, to new transformed a a We

into scene advertising it, the will As see we a lean of can have numbers. scene in, and customer segment is see a And of even offering you'll continue lean some our differentiated we we one from Board serving where that to when we everyone describes that is specific what members else. working, that see have QX in you'll new our

Alec Legg

it. think line, on stop when have say, And know exiting to XXXX the I overall if gross headwinds just selling P&L? don't of XXX early kind but I of how I you about guess, said you're margin of think that able said a that a to brick-and-mortar. said number Is base? then follow-up in. you time of you I bps Got in might quarter. impact how you the you the think good a to

Jeff Yurcisin

I margin talking think sequential bps brick-and-mortar we'll of signal to we XXX the guiding When is more that do in line. shelves ultimate mark XXXX, growth on Sorry, that I our growth quarter-over-quarter struggling exclamation growth really call. that and Look, still clear year-over-year But emphasize the more gross start on less want give real the were and is impact, our the are earnings make. towards next idea we goal. we a about would the guidance profitable

may you acquisition about how there brick-and-mortar conscientious are were we really type us. natural losses and/or this looking for so targets. think type offset to products million be then business right environmentally find if scene, And enough that has if planet-first customers this the are brick-and-mortar the a to XXXX, possibility we and be M&A channel, believe of growing could in We've for any type in XX talked of of We our are DXC to great still is the who past friendly. strong

from differentiated believe a real forward. as the almost we in everyone we're else serve think platform We space, and going this can

we So be we terms always key talk to kind be table. expect on with... And is the that, the being we growing have here about there goal. brick-and-mortar, to brick-and-mortar the to is ultimate offset do and the to -- But of in profitable M&A of and would able

Alec Legg

selling one into quick silly helpful. and one when of follow-up the into I consumer. question on just guess, That's you But the heading the health will holiday. really consumer the the holiday health quick And then hit then the then the of one about heading Amazon? is, of the still kind And be

items? what a Have consumers lower interesting up, any you down, lot platform seen consumers of first-party if trading to trading DTC can you get trading are. down is cost you data, Your so are in habits pretty their that see

Jeff Yurcisin

strategy see don't our the brick-and-mortar going we Amazon Amazon, forward. On question. Great impacting strategy

Amazon. intend be on we to So

will AOV, we the consumers, have at fee changes removed of AOV. to year-over-year look you terms that in offset see you been order supply chain our value, every if that with order an able In average with from increase we macro overall trends offset

that it has signals DXC our our you think emphasis at that who moving a What are $XXX,XXX I up. look actually And I customer, be customers that of other when plus. income big woman is a would highlight is the household would $XXX,

customer a that's so is bit than shopping shelves. customer And the that brick-and-mortar different on

planet. quite we're that that. think enable and her she And meet product ones about income, customer disposable the for can serve the has right we And and for that family just cares confident that she so that be are the her we good we to is going to that

Operator

There no this time. the to at remarks. like Jeff questions are back over further I'd closing pass to for call any

Jeff Yurcisin

I thank joining everyone call. Thank to a want our you for you. great again Hope night. have

Operator

This concludes teleconference. today's

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

Grove Collaborative (GROV) 12 Nov 242024 Q3 Earnings call transcript