Grove Collaborative Holdings, Inc. Q4 FY2024 earnings call

• 2024 was transformative with sequential revenue growth for the first time since early 2022 and positive operating cash flow.
• Eliminated $72 million in term debt, with only $7.5 million remaining on the asset-based loan facility.
• Achieved full year positive adjusted EBITDA for the first time.
• Transitioning to Shopify, with early-stage challenges being addressed.
• Acquired Grab Green and 8Greens, expanding into new categories and aligning with sustainability values.
• Focus on revenue growth, with third-party assortment expansion by 30% q-o-q, and optimization of Grove Co portfolio.
• Updated tagline to 'Your Home Healthier' to better reflect focus on human health.

In the fourth quarter, revenue was $49.5 million, up 2.5% quarter-over-quarter but down 17.4% year-over-year. Gross margin was 52.4%, down 60 basis points from the third quarter. Advertising expense totaled $3 million, up 4.7% quarter-over-quarter but down 24.3% year-over-year. Product development expense was $4.6 million, down 4.4% quarter-over-quarter but up 0.8% year-over-year. SG&A expense was $26.7 million, up 8.1% quarter-over-quarter but down 16.6% year-over-year. Adjusted EBITDA was negative $1.6 million. Cash ended the quarter at $24.3 million, down from $55.6 million in the third quarter, and inventory was $19.4 million, down $5.2 million quarter-over-quarter.

• First quarter 2025 revenue expected to be the lowest, improving through Q2-Q3 2025.
• Year-over-year revenue growth in low single-digit percentage range in Q4 2025.
• Full year 2025 revenue expected to be flat to down mid-single-digit percentage year-over-year.
• 2025 adjusted EBITDA expected to be in breakeven to low single-digit millions range.
• Plan to wind down brick-and-mortar business by end of first half of 2025.

• Tariffs on product sourcing from China, Mexico, and Canada.
• Challenges related to the Shopify transition, including platform performance and customer experience.
• Competition, regulatory matters, and effectiveness of e-commerce platform and marketing efforts.

Q: Alec asked about higher repeat order rates in the fourth quarter, asking for underlying drivers like targeted marketing and cohort curve.

A: Jeff Yurcisin responded that it's due to improvement in core customer experience, increase in third-party assortment giving customers more reasons to shop, and aggressive inventory movement with discounts on Grove Co. product.

Q: Another analyst asked about the third-party assortment pipeline in 2025, focusing on categories.

A: Jeff Yurcisin mentioned focus on wellness, kitchen and pantry, baby, pet, and human health across categories, with the 8Greens acquisition showing entry into the wellness space.

Q: Analyst asked about branding/marketing campaigns pushing human health message.

A: Jeff Yurcisin stated there will be consistent messaging on human health, seen in blog content, guided shopping experience, and marketing across funnels.

Q: Analyst asked about financials impact of Shopify in the first quarter.

A: Tom Siragusa said there are accretive and dilutive impacts to gross margin, disciplined expense management, and advertising spending focused on return on investment.