Grove Collaborative Holdings, Inc. Q3 FY2025 earnings call

• Focus on long-term shareholder value by building a stronger, more resilient business with pillars: balance sheet strength, sustainable profitability, revenue growth, and environmental/human health. • eCommerce platform migration faced customer experience challenges, with near-term focus on improving mobile app and subscription experience. • Pulled back advertising in September and will continue discipline through Q4; rightsized SG&A with $5M annualized savings from headcount reduction. • Leaned into AI and automation to increase efficiency. • Expanded third-party assortment in high potential categories like clean beauty, personal care, pantry, wellness, and baby. • Evaluating strategic options like acquisitions/partnerships while prioritizing durable, profitable growth.

Revenue for the third quarter was $43.7 million, down 0.7% sequentially and 9.4% year-over-year, marking the smallest year-over-year decline since Q4 2021. Gross margin was 53.3%, up 30 basis points from Q3 2024. Advertising spend was $3.2 million, an 11.8% year-over-year increase. Product development expense was $1.6 million, down 66.1% year-over-year. SG&A expense was $21.3 million, a 14% decrease year-over-year. Adjusted EBITDA was negative $1.2 million (2.7% margin), and net loss was negative $3 million compared to negative $1.3 million in the prior year.

• Full year 2025 revenue expected $172.5 million to $175 million, at the lower end of previous guidance range. • Fourth quarter revenue expected to be roughly flat sequentially. • Full year adjusted EBITDA within negative low single-digit millions to breakeven; fourth quarter adjusted EBITDA expected positive due to advertising pullback and SG&A reductions.

• Risks associated with forward-looking statements. • Customer experience issues during eCommerce platform migration. • Impact of macro environment on advertising spend and sales. • Risks related to strategic options like acquisitions/divestitures, including uncertainties around paybacks and lifetime value relative to customer acquisition costs.

Q: Talk about the factors changing sales expectations, pullback in advertising, and macro environment impact.

A: Revision to near-term outlook is due to prioritizing liquidity, protecting profitability, and core experience issues. No macro trend impact; driven by intentional advertising pullback and customer experience hiccups with payments in mobile app.

Q: Timeline for resolving customer disruption?

A: Product and engineering team is focused on fixing core experience, with near-term focus on 1-2 quarters, and product/engineering team more energized than in past year, closing gaps weekly.

Q: M&A plans, categories of interest, and funding?

A: Focus on building durable, profitable stand-alone company; assessing strategic opportunities like acquisitions/partnerships that could accelerate scale. Would consider using cash or raising funds, guided by payback standards. Interested in wellness/supplements, baby, beauty/personal care categories.

Q: SKU expansion plan and progress?

A: In talks with many wellness brands, launching some in recent quarters, with more significant launches in next 100 days; currently shifting focus to fixing core experience over selection.