Grove Collaborative Holdings, Inc. Q1 FY2025 earnings call

• Strategy centered on creating best experience for conscientious consumers, focusing on four pillars: sustained profitability, balance sheet strength, revenue growth, environmental and human health.
• Completed eCommerce platform migration in early March 2025, which had a $2 million to $3 million revenue impact in Q1; addressing critical issues and working to improve customer experience.
• Navigating tariff landscape with pricing adjustments, supplier renegotiations, and sourcing shifts; evaluating alternatives for bamboo products.
• First quarter revenue $43.5M, down 18.7% YOY; progress on growth drivers like refined messaging, enhanced shopping experience, asset acquisitions of Grab Green and 8Greens, and expanded third-party assortment.
• Environmental and human health efforts include new educational content, sustainability report, and developing new category standards.

Revenue for the first quarter was $43.5 million, down 18.7% year-over-year. DTC net revenue per order was $66.49, a 0.3% increase primarily driven by a change in order mix to include higher-priced items. Gross margin was 53%, a decline of 260 basis points. Advertising spend was $2.8 million, a $0.8 million increase year-over-year. Product development expense was $1.8 million, a decline of 50.9% year-over-year. SG&A expense was $22 million, down 10.6% year-over-year. Adjusted EBITDA was negative $1.6 million or a margin of negative 3.7%.

• Q1 2025 is lowest revenue quarter of 2025, revenue expected to improve in Q2-Q3, with Q4 seeing slight year-over-year growth.
• Full year 2025 revenue expected to decline approximately mid-single-digit to low double-digit percentage points year-over-year.
• Full year 2025 adjusted EBITDA expected to be negative low single-digit to positive low single-digit millions, incorporating impact of eCommerce platform transition and tariff mitigation strategies.

• Uncertainty around tariff evolution, which could affect product costs and gross margin if mitigation efforts fall short.
• Disruption from eCommerce platform migration impacting revenue and customer retention.

Q: I was wondering, have you been able to layer on some additional marketing yet? And where are you at now with your marketing as a percent of sales?

A: Marketing spend in Q1 was 6.4% of sales. We're seeing better returns on new customer acquisition and are increasing spend as we're seeing better returns than in years past.

Q: Did you mention where you're at with the platform transition? Is it complete now? Do you think you're beyond those issues? Or how long should we think about it impacting the rest of the year?

A: We're through the most challenging parts of the transition. Impacts have been baked into our revised guidance, and we're seeing progress week-over-week.

Q: How are we thinking about the trajectory of sales for the third party and then your brands? Should we think of it as a steady improvement each quarter to get to that positive growth in fourth quarter?

A: Think of it as a little more steady. Guiding towards year-over-year growth in Q4 with a more steady growth pattern. Own brands percentage of revenue continues to decrease, but third-party partnerships are improving margins, with stability on the gross margin line