Grove Collaborative’s Mixed Earnings Call Highlights

Grove Collaborative Holdings, Inc. ((GROV)) has held its Q2 earnings call. Read on for the main highlights of the call.

Grove Collaborative Holdings, Inc. recently held its earnings call, revealing a mixed sentiment. While the company showcased achievements in sequential revenue growth, gross margin improvement, and positive cash flow, challenges persist with year-over-year revenue declines, negative adjusted EBITDA, and a decrease in active customers, reflecting ongoing headwinds.

Sequential Revenue Growth

The company reported revenue of $44 million for the second quarter, marking a 1.1% sequential increase from the first quarter. This growth signals early momentum in stabilizing and rebuilding the business, offering a glimpse of potential recovery.

Gross Margin Improvement

Grove Collaborative achieved a gross margin of 55.4%, an improvement of 150 basis points from the previous year. This enhancement is attributed to increased third-party vendor funding and improved promotional strategies, reflecting the company’s efforts to optimize profitability.

Positive Cash Flow

The company delivered positive operating and total cash flow, with operating cash flow reaching $1 million for the quarter. This achievement was driven by disciplined working capital management, showcasing the company’s focus on financial health.

Enhanced Liquidity

Proactive measures were taken to amend and extend the asset-based loan facility, extending its maturity to 2028. This move improves access to capital on more favorable terms, bolstering the company’s liquidity position.

Strategic Collaboration with HumanCo

A working group was established with HumanCo to unlock greater value through strategic and operational initiatives. This collaboration aims to enhance shareholder value by reinforcing a strong partnership.

Year-Over-Year Revenue Decline

Revenue for the second quarter was $44 million, reflecting a 15.5% decline year-over-year. This decrease was impacted by reduced advertising spend and the migration of the eCommerce platform, posing challenges to the company’s growth trajectory.

Negative Adjusted EBITDA

The adjusted EBITDA for the second quarter was negative $0.9 million, or a negative 2.1% margin, falling below expectations. This shortfall was primarily due to the short-term revenue impact of the eCommerce platform migration.

Decline in Active Customers

Active customers decreased to 664,000 by the end of the quarter, a 10.9% drop compared to the previous year. This decline was influenced by reduced advertising efforts in 2024 and prior periods.

DTC Net Revenue Per Order Decrease

The direct-to-consumer net revenue per order was $65.22, down 3.7% from last year. This decrease was driven by an increase in low-value shipments and the removal of select customer fees.

NYSE Compliance Notice

The company received a continued listing standard notice from the NYSE after its market capitalization fell below the $50 million threshold. However, a compliance plan has been accepted, indicating efforts to address this issue.

Forward-Looking Guidance

Looking ahead, Grove Collaborative is focusing on profitable growth with expectations of continued sequential revenue growth in the second half of 2025 and slight year-over-year growth in the fourth quarter. The company anticipates the first quarter as the lowest revenue period moving forward, with full-year 2025 revenue expected to decline by mid-single-digit to low double-digit percentage points year-over-year. Adjusted EBITDA is projected to be in the negative low single-digit millions to breakeven, highlighting a strategic focus on balance sheet strength and sustained profitability.

In summary, Grove Collaborative Holdings, Inc.’s earnings call presented a mixed outlook, with achievements in revenue growth and financial management countered by challenges such as revenue declines and customer attrition. The company’s forward-looking guidance emphasizes a strategic focus on profitability and growth, aiming to navigate the ongoing headwinds effectively.