Release Date: March 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Grove Collaborative Holdings Inc (NYSE:GROV) achieved sequential revenue growth for the first time since early 2022, marking a significant milestone in their turnaround strategy.
• The company fully eliminated $72 million in term debt, significantly improving its financial position and reducing future interest expenses.
• Grove Collaborative Holdings Inc (NYSE:GROV) maintained positive operating cash flow for the third consecutive quarter, reinforcing their commitment to efficient capital deployment.
• The company expanded its third-party product offerings by 30% compared to the fourth quarter of 2023, enhancing customer choice and driving revenue growth.
• Grove Collaborative Holdings Inc (NYSE:GROV) completed strategic acquisitions of Grab Green and 8 Greens, aligning with their mission and expected to positively impact financial results.

Negative Points

• Revenue for the fourth quarter was down 17.4% year over year, reflecting fewer repeat orders and lower advertising spend throughout 2024.
• Active customers declined by 3.1% quarter over quarter and 25.2% year over year, indicating challenges in customer retention.
• Gross margin decreased by 200 basis points year over year, impacted by increased promotional activity and a higher percentage of third-party product revenue.
• The company expects the first quarter of 2025 to be the lowest revenue quarter due to seasonality and the Shopify transition.
• Grove Collaborative Holdings Inc (NYSE:GROV) anticipates full-year 2025 revenue to be flat to down in the mid-single digit percentage range year over year, indicating ongoing revenue challenges.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with GROV.

Q: In the fourth quarter, you noted higher repeat order rates. What were the underlying drivers for this increase? A: The increase in repeat order rates was primarily due to improvements in the core customer experience, particularly the expansion of third-party assortment. This provided customers with more options, making it easier for them to find enough items to build a box more frequently. Additionally, aggressive inventory movement and discounts on Grove products contributed to this trend. (Respondent: Unidentified_6)

Q: Can you discuss the pipeline for third-party assortment in 2025, including the number of brands or categories of focus? A: While expanding our assortment, we aim to maintain high standards for product quality. We are focusing on wellness, with the recent acquisition of 8 Greens marking our entry into this space. Our strategy includes expanding into categories like kitchen, home, baby, and pet, emphasizing products that are good for families and the planet. (Respondent: Unidentified_6)

Q: You mentioned shifting from a focus on being beyond plastic to human health. Are there plans for branding or marketing campaigns to support this message? A: Yes, we are not moving away from our sustainability stance but are expanding our messaging to include human health. We plan to enhance content, education, and storytelling, especially after the Shopify transition. Our marketing will consistently emphasize human health, from upper funnel to bottom funnel strategies. (Respondent: Unidentified_6)

Q: Could you provide some insights into the financial outlook for 2025, particularly regarding gross margins and operating expenses? A: While we don't provide specific guidance on line items, we anticipate both accretive and dilutive impacts on gross margin. Exiting brick and mortar, which has been more dilutive, and the accretive nature of recent acquisitions will influence margins. We will continue to manage expenses carefully, focusing on channels that deliver the highest return on investment. (Respondent: Unidentified_7)

Q: How do you plan to manage advertising expenses in 2025? A: We approach advertising by focusing on paybacks and returns rather than as a percentage of the P&L. We aim for full-year positive adjusted EBITA and will manage advertising costs actively, investing in channels that are most effective. (Respondent: Unidentified_7)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.