Grove Collaborative Holdings, Inc. Q4 FY2025 earnings call

• Financial headlines: Delivered on revised full year 2025 revenue and adjusted EBITDA guidance, returned to positive adjusted EBITDA in fourth quarter. - Customer experience initiatives: Launched Grove Green Rewards loyalty program, redesigned mobile app in February, focused on strengthening subscription experience. - Environmental and human health: Expanded ingredient standards in first quarter of 2026 to cover over 10,000 banned or restricted ingredients. - Strategic options: Continuing to evaluate strategic options to maximize shareholder value, including acquisitions, partnerships, divestitures. - Cost management: Executed reduction in force in November to generate ~$5 million of annualized savings.

Fourth quarter revenue was $42.4 million, down 14.3% year-over-year. Full year revenue was $173.7 million, within revised guidance range. Fourth quarter adjusted EBITDA was $1.6 million. DTC total orders were $539,000, down 25% year-over-year. Active customers ended the quarter at $599,000, down 13% versus prior year. DTC net revenue per order was $69.50, up 4.1% year-over-year. Gross margin was 53.0%, up 60 basis points. Advertising spend was $1 million, down 65.2% year-over-year. Product development expense was $1.9 million, down 59.2% year-over-year. SG&A expense was $21.2 million, down 20.8% versus prior year. Net loss was $1.6 million, and adjusted EBITDA was $1.6 million for fourth quarter. Full year net loss was $11.7 million, and adjusted EBITDA was negative $2.2 million.

• For full year 2026, expect net revenue to be approximately $140 million to $150 million and adjusted EBITDA to be approximately breakeven. - Q1 2026 to represent trough in revenue for the year, reflecting seasonality and continued disciplined advertising investment. - Sequential improvement in revenue expected from Q1 onward as customer experience enhancements support customer retention and enable measured reacceleration of customer acquisition investment.

• Risks related to e-commerce platform migration causing customer experience disruptions. - Uncertainty regarding advertising investment payback. - Competition in the market for clean, sustainable products.

Q: Maybe just to start off, if you could kind of talk about -- so first quarter is going to be the trough in sales and then pick up after that. Maybe talk about the drivers that's going to drive the pickup sequentially in sales as we go throughout the year. And then also, maybe if you could just talk about your customer acquisition investment for this year? Are you expecting to invest more in customer acquisition versus what you did last year?

A: Jeff Yurcisin: The core reason we're expecting the sequential growth goes back to building a better customer experience. Over the last 12 months since the platform migration, it's been a rough customer experience. The mobile app launched in Q1 and the loyalty program in Q4, each will improve the core customer experience. And we do expect to be increasing marketing spend because we are seeing the better repeat rates and a better LTV to CAC and ultimately, better paybacks. Tom Siragusa: If you look at our P&L in the fourth quarter, we took our advertising spend down from about $3 million in the third quarter, down to about $1 million in the fourth quarter. We expect to be in about the same range in the first quarter. And we're not going to give specifics as to what we think that ramp is going to look like over the course of the year. But given some of the technology improvements and the impact that those will have on the CX, those should be the enabler for us to go and grow advertising spend because there will be a better user experience, and that should be one of the key enablers for growth over the course of the year.

Q: Maybe if you could just talk about the categories that you offer currently on your site. And I guess, is there any white space left. You've obviously been able to expand quite a bit into health and wellness and then beauty and pet as well. So maybe just talk about kind of where you're at with those newer categories and then also any white space opportunity ahead.

A: Jeff Yurcisin: We think most of the opportunity is within our core categories, and we see real growth paths within the type of assortment that we are currently selling. Are there opportunities adjacent, of course, they are. So some of those will be when we think about wellness, thinking in a more broad perspective than just minerals and supplements, but everything going into air filters and even potentially mattresses where the opportunity is to deliver and curate the best products for a healthy home. And that goes beyond just our kind of standard categories. I would also say, this year, we will be enabling some drop ship capabilities, which will allow us to get into some higher AOV categories with the right type of economics.

Q: Maybe lastly, if you could just talk about the margins for this year and if there's any varying cadence by quarter, whether it's gross margin or operating expense to get to your breakeven for the year?

A: Tom Siragusa: In terms of margins, without giving specific guidance, from a gross margin perspective, we don't expect there to be a lot to move the needle one way or the other there. We did launch our loyalty program, which will allow us to be more tactical with our promotions from a point-based perspective. And from an advertising perspective, we're going to spend similar to the fourth quarter and the first quarter, and then we'll scale it from there. From an operating expense perspective, we executed the RIF in the fourth quarter that reset our cost base lower.