Q4 2024 Grove Collaborative Holdings Inc Earnings Call
Operator: Good afternoon, and thank you for standing by. Welcome to Grove Collaborative Holdings. fourth quarter and full year 2024 earning.
Good afternoon, and thank you for standing by welcome to Girls Collaborative Holdings, Inc. 's fourth quarter and full year of 'twenty 'twenty four earnings conference call.
Operator: At this time, all lines have been placed on mute to prevent any background noise. Following the speaker's remarks, we will open your lines for As a reminder, this conference call is being recorded.
At this time all lines have been placed on mute to prevent any background noise. Following the Speakers' remarks, we will open your lines for questions. As a reminder, this conference call is being recorded.
Operator: Hosting today's call are Grove's CEO, Jeff Yurcisin, and Interim CFO, Tom Serge. Before they begin their prepared remarks, we'll review the forward-looking statements safely. Some of the statements made today about future prospects, financial results, business strategies, industry trends, and Grown's ability to successfully respond to business may be considered forward-looking, including Shopify eliminating the need for extensive technical oversight, expansion of third-party products on Grove's platform, accelerating innovation, ensuring direct-to-consumer offer. Better Align with Consumer Demand, Unlocking Efficiencies and Capabilities with Shopify. Exploration of Accretive Acquisition Opportunities. creativeness of recent acquisitions. Future Acquisitions aligning with their mission and values and contributing positively to their financial results.
Tom Syracuse: Hosting todays call are CEO, Jeff your kitchen, and interim CFO, Tom Syracuse that.
Speaker Change: Before they begin the prepared remarks I'll review the forward looking statements Safe Harbor some of the statements made today about future prospects financial results business strategies and industry trends and grants ability to successfully respond to business risks, maybe could centered forwardlooking, including shopify, eliminating the need for extensive.
Speaker Change: Nickel oversight expansion of third party products and growth platforms, accelerating innovation and sharing direct to consumer offerings, better align with consumer demand I'm walking efficiencies and capabilities with shopify.
Speaker Change: Exploration of accretive acquisition opportunities accretive Ness.
Recent acquisitions future acquisitions, aligning with their mission and values and contributing positively to their financial results winding down to brick and mortar business by the end of the first half of 2020 fives, the exit from brick and mortar strengthening the bottom line.
Operator: Winding down the brick and mortar business by the end of the first half of 2025. The exit from brick and mortar strengthening the bottom line. Year-over-year revenue growth in the fourth quarter, revenue stabilization of the most tenured and largest customer co-op. First quarter 2025 revenue being the lowest. Revenue Corridor. Improvement of revenue through the second and third quarters of 2025, year-over-year growth in the low single-digit percentage range in the fourth quarter of 2025, full-year 2025 revenue being flat to down in the mid-single-digit percentage range year-over-year, and 2025 adjusted EBITDA being in the break-even to low single-digit millions.
Speaker Change: Year over year revenue growth in the fourth quarter revenue stabilization of the most tenured and largest customer cohorts first quarter 2025 revenue being the lowest.
Speaker Change: Revenue quarter.
Speaker Change: Movement of revenue through the second and third quarters of 2025 year over year growth in the low single digit percentage range in the fourth quarter of 2025 full year 2025 revenue being flat to down in the mid single digit percentage range year over year and 2025, adjusted EBITDA being in the breakeven to low single.
Speaker Change: Digit millions range such statements are based on current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially including risks relating to potential disruptions related to the implementation of shopify changes in business market financial.
Operator: Such statements are based on current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including risks relating to potential disruptions relating to the implementation of shoplifting. changes in business, market, financial, political, and legal. Legal and Regulatory Matters, and Development. Competition, Effectiveness of the Company's E-Commerce Platform, and Selling and Marketing Efforts and those factors discussed in their filings with the Securities and Exchange Commission. All of these statements are based on Grove's view today, and Grove assumes no obligation to update any forward-looking whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.
Speaker Change: Political and legal conditions legal and regulatory matters and developments competition effectiveness of the company's called E Commerce platform.
Speaker Change: Selling and marketing efforts and those factors discussed in their filings with the Securities and Exchange Commission.
Speaker Change: All of these statements are based on grocery you today and Grub assumes no obligation to update any forward looking statement, whether as a result of new information future events or otherwise, except as may be required under applicable securities laws.
Operator: For more information, please refer to the risk factors discussed in Grove's most recent filings with the SEC, which are available on Grove's investor relations website at investors.grove.com.
Speaker Change: More information please refer to the risk factors discussed in garage with most recent filings with the SEC, which are available on <unk> Investor Relations website at investors Dot group Dot com.
Operator: During today's call, Grove will also discuss certain non-GAAP financial Reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided in their earnings release, which is also available on their investor relationship.
Speaker Change: During today's call girl will also discuss certain non-GAAP financial measures.
Speaker Change: <unk> of these non-GAAP items to the most directly comparable GAAP financial measures are provided in the earnings release, which is also available on the Investor Relations website.
Jeff Yurcisin: I would now like to turn the call over to Jeff Yurcisin to begin. Thank you, operator. 2024 was a transformative year for Grove, and we entered 2025 with strong momentum, driven by our focus on profitability, balance sheet strength, and revenue growth. For the first time since early 2022, we achieved sequential revenue growth, an encouraging milestone in our journey toward long-term sustainable growth. Additionally, we maintain positive operating cash flow, reinforcing our commitment to deploying capital efficiently as we grow. Our strategic approach is yielding promising results, and we're optimistic about our trajectory as we start the year.
Jeff: I would now like to turn the call over to Jeff for your kitchen to begin.
Speaker Change: Operator.
Speaker Change: 'twenty 'twenty four it was a transformative year for growth and we entered 2025 with strong momentum driven by our focus on profitability.
Speaker Change: <unk> cheap strength and revenue growth for.
Speaker Change: For the first time since early 2022, we achieved sequential revenue growth an encouraging milestone in our journey toward long term sustainable growth. Additionally.
Speaker Change: Additionally, we maintained positive operating cash flow reinforcing our commitment to deploying capital efficiently as we grow.
Speaker Change: Our strategic approach is yielding promising results and we're optimistic about our trajectory as we start the year.
Jeff Yurcisin: With this progress, I wanted to discuss changes to our leadership.
Speaker Change: With this progress I wanted to discuss changes to our leadership team.
Jeff Yurcisin: This past quarter, we announced that our Chief Financial Officer, Sergio Cervantes, and Chief Technology Officer and Co-Founder, Chris Clark, were moving on from Grove. These leaders helped build this company, helped to drive our turnaround, and played a key role in the progress and success that we report today. We recently appointed Tom Siaragusa, who is our VP of finance, interim CFO, while we partner with our board to identify the right candidate to drive our future.
Speaker Change: This past quarter, we announced that our chief financial Officer, Sir He I'll say about this and Chief Technology Officer, and cofounder, Chris Clark were moving on from growth. These leaders helped build this company helped to drive our turnaround and played a key role in the progress and success that we report today.
Speaker Change: We recently appointed Tom <unk>, who is our VP of finance and interim CFO, while we partner with our board to identify the right candidate to drive our future growth with our transition to Shopify, we do not plan to search for a new Chief Technology officer as the platform provides a robust manage infrastructure that eliminates the need for it.
Jeff Yurcisin: With our transition to Shopify, we do not plan to search for a new Chief Technology Officer as the platform provides a robust, managed infrastructure that eliminates the need for extensive in-house technical oversight in the long run. We are in the middle of the Shopify transition as we speak and as expected, we are navigating early stage challenges related to platform performance and customer experience, which our teams are actively addressing.
Speaker Change: Stenson in house technical oversight in the long term.
Speaker Change: We are in the middle of the Shopify transition as we speak and as expected. We are navigating early stage challenges related to platform performance and customer experience, which our teams are actively addressing.
Jeff Yurcisin: Now, let's dive into our four priority pillars for the fourth. We have been undergoing a multi-year turnaround effort. and we believe we are now in the late stages of successfully completing that transformation. The financial pillars guiding this turnaround have been balance sheet strength, sustainable profitability and revenue growth. The fourth pillar, environmental and human health, remains our foundation, mission and key difference.
Speaker Change: Now, let's dive into our four priority pillars for the fourth quarter.
Speaker Change: We have been undergoing a multi year turnaround effort and we believe we are now in the late stages of successfully completing that transformation.
Speaker Change: The financial pillars guiding this turnaround had been balance sheet strength sustainable profitability and revenue growth the fourth pillar environmental and human Health remains our foundation mission and key differentiator.
Jeff Yurcisin: In the fourth quarter of 2024, we achieved our first pillar, balance sheet strength, by fully eliminating the $72 million in term debt, significantly improving our financial position, and reducing future interest expense. Following the $42 million voluntary prepayment in the third quarter, we prepaid the remaining $30 million of our term debt facility using proceeds from the Volition Investment and cash on hand. As a result, our only remaining debt is $7.5 million outstanding under our asset-based loan facility. We will continue to strategically manage our liquidity to preserve our strength and balance sheet while positioning the company for long-term success.
Speaker Change: In the fourth quarter of 'twenty 'twenty four we achieved our first pillar balance sheet strength by fully eliminating the $72 million in term debt significantly improving our financial position and reducing future interest expense.
Speaker Change: Following the $442 million voluntary prepayment in the third quarter, we prepaid the remaining $30 million of our term debt facility using proceeds from the volition investment and cash on hand as a result, our only remaining debt is $7 $5 million outstanding under our asset based loan facility.
Speaker Change: We will continue to strategically manage our liquidity to preserve our strength and balance sheet, while positioning the company for long term success.
Jeff Yurcisin: The second pillar, sustainable profitability, was also realized in 2024 by delivering full-year positive adjusted EBITDA for the first time in the company's history. We expect to build on this momentum in 2025 by delivering a second year of positive adjusted EBITDA, further reinforcing the financial stability we have worked hard to achieve. Additionally, we generated $0.3 million in positive operating cash flow in the fourth quarter, making our third consecutive quarter of positive operating cash flow. Our focus on these two pillars first was by design, as they represent the critical financial foundation of our business.
Speaker Change: The second pillar sustainable profitability was also realized in 2024 by delivering full year positive adjusted EBITDA for the first time in the company's history.
Speaker Change: We expect to build on this momentum in 2025 by delivering a second year of positive adjusted EBITDA further reinforcing the financial stability. We have worked hard to achieve Additionally, we generated zero point $3 million in positive operating cash flow in the fourth quarter, making our third consecutive quarter of positive operating.
Speaker Change: Cash flow.
Speaker Change: I'll focus on these two pillars first was by design as they represent the critical financial foundation of our business with that foundation now firmly in place we're shifting our primary focus to the third pillar.
Jeff Yurcisin: With that foundation now firmly in place, we're shifting our primary focus to the third pillar. Revenue. Growth.
Speaker Change: Revenue growth.
Jeff Yurcisin: During this turnaround process, we experienced 10 consecutive quarters of sequential revenue decline, leading to a natural question, when will the decline stop? As noted already, we're pleased to share that this trend reversed in the fourth quarter of 2024, marking our first sequential quarterly revenue increase in three years, a significant milestone for our company. While the first quarter of 2025 is expected to be lower than the fourth quarter of 2024 due to seasonality, in addition to navigating the Shopify transition, we expect progression throughout the rest of the year. This will culminate in a return to year-over-year revenue growth by the fourth quarter of 2024.
Speaker Change: During this turnaround process, we experienced 10 consecutive quarters of sequential revenue decline leading to a natural question when will that decline stop.
Speaker Change: As noted already we are pleased to share that this trend reversed in the fourth quarter of 2024, marking our first sequential quarterly revenue increase in three years, a significant milestone for our company.
Speaker Change: Well, the first quarter of 2020 five is expected to be lower than the fourth quarter of 2024 due to seasonality.
Speaker Change: In addition to navigating the shopify transition, we expect progression throughout the rest of the year. This will culminate in a return to year over year revenue growth by the fourth quarter of 2025 also supported by the revenue contributions from our recent acquisitions of grab green and eight Greens as well as the continued revenue.
Jeff Yurcisin: Also supported by the revenue contributions from our recent acquisitions of Grab Green and 8 Greens, as well as the continued revenue stabilization of our most tenured and largest customer cohort.
Speaker Change: The stabilization of our most tenured and largest customer cohorts.
Jeff Yurcisin: I'd like to spend a bit more time diving deeper into our revenue growth strategy. In 2024, we transformed our online experience, shifting from a gated model with default subscriptions to a more flexible, incentive-driven approach. By introducing options such as Subscribe & Save, we empowered customers with greater ease and autonomy, enhancing exploration and discovery. At the same time, we aggressively expanded our third-party category offerings, increasing the number of third-party brands sold on our e-commerce platform by 30% compared to the quarter of 2023. This growth reflects our commitment to listening to our customers, curating vetting products, and expanding our platform's offerings.
Speaker Change: I'd like to spend a bit more time diving deeper into our revenue growth strategy.
Speaker Change: In 2024, we transformed our online experience shifting from a gated model with default subscriptions to a more flexible incentive driven approach by introducing options such as subscribe and save we empowered customers with greater ease and autonomy enhancing exploration and discovery at the same time, we aggressively.
Speaker Change: We expanded our third party category offerings, increasing the number of third party brands sold on our e-commerce platform by 30% compared to the fourth quarter of 2023. This growth reflects our commitment to listening to our customers' curating of adding products and expanding our platforms offering.
Jeff Yurcisin: Building on this momentum in 2025, we expect to continue aggressively expanding third-party products on our platform and to focus on high potential areas, such as clean beauty, personal care, kitchen and pantry, baby, and wellness.
Speaker Change: Building on this momentum in 2025, we expect to continue aggressively expanding third party products on our platform and a focus on high potential areas, such as clean beauty personal care kitchen, and pantry baby and wellness.
Jeff Yurcisin: Simultaneously, we plan to optimize our Grove Co. portfolio by accelerating innovation as an exclusive brand to our platform, ensuring our direct-to-consumer offerings better align with evolving consumer demand. Additionally, as we transition to Shopify's eCommerce platform, we expect to unlock efficiencies and capabilities that were previously limited by our custom-built platform.
Speaker Change: Simultaneously, we plan to optimize our gross co portfolio by accelerating innovation as an exclusive brand to our platform, ensuring our direct to consumer offerings better align with evolving consumer demands. Additionally.
Speaker Change: Additionally, as we transition to Shopify E Commerce platform, we expect to unlock efficiencies and capabilities that were previously limited by our custom built platform.
Jeff Yurcisin: We also intend to explore additional acquisition opportunities that we expect to be accretive to our financial results, similar to those we've recently announced. As highlighted in two separate press releases, in the first quarter of 2025, we announced two strategic acquisitions, Grab Green, a pioneer in eco-friendly, high-performance cleaning products, and Eight Greens, a leading wellness brand known for its nutrient-rich, effervescent tablets, gummies, and The acquisition of GrabGreen reinforces our mission to make consumer products a force for environmental and human health, while strengthening our leadership in home cleaning. A third-party vendor on Gross Platform since 2019, GrabGreen has consistently ranked as a top-performing brand in both sales and marketing.
Speaker Change: We also intend to explore additional acquisition opportunities that we expect to be accretive to our financial results similar to those we've recently announced.
Speaker Change: As highlighted in two separate press releases in the first quarter of 2025, we announced two strategic acquisitions grabbed green a pioneer in eco friendly high performance cleaning products and eight Greens, a leading wellness brand known for its nutrient rich effort.
Tablets gummies anymore.
Speaker Change: The acquisition of grass Green reinforces our mission to make consumer products, a force for environmental and human health, while strengthening our leadership in home cleaning.
Speaker Change: Third party vendor on gross platform since 2019 grabbed grain has consistently ranked as a top performing brand in both sales and market share driven by its beloved laundry in specialty cleaning products that complement <unk> existing portfolio of sustainable home essentials.
Jeff Yurcisin: driven by its beloved laundry and specialty cleaning products that complement Grove's existing portfolio of sustainable home essentials. and with the purchase of eight greens, Grove expands into the high-priority wellness category with a first-party offer. This acquisition enhances Grove's ability to provide customers with high quality wellness solutions while aligning with its renewed emphasis on wellness as a category and human health as a strategic focus. Both GrabGreen and 8Greens align with our values and commitment to sustainability, innovation, and personal health. And we're excited to integrate these brands into the Grove family.
Speaker Change: And with the purchase of eight cranes Grove expands into the high priority wellness category with our first party offering this.
Speaker Change: This acquisition enhances <unk> ability to provide customers with high quality wellness solutions, while aligning with its renewed emphasis on wellness as a category and human health is a strategic focus.
Speaker Change: Both grabbed green and Green is aligned with our values and commitment to sustainability innovation and personal health and we're excited to integrate these brands into the gross family.
Jeff Yurcisin: We believe acquisitions can enhance our competitive positioning and drive long-term value creation for our shareholders. As we continue evaluating potential acquisitions, we will remain disciplined in our approach, seeking brands that align with our values and contribute positively to our financial For more information, visit www.FEMA.gov We remain confident in the significant market opportunity ahead, with an estimated 57 million conscientious consumers seeking a trusted resource for their purchasing decision.
Speaker Change: We believe acquisitions can enhance our competitive positioning and drive long term value creation for our shareholders. As we continue evaluating potential acquisitions, we will remain disciplined in our approach seeking brands that align with our values and contribute positively to our financial results.
Speaker Change: We remain confident in the significant market opportunity ahead, with an estimated 57 million conscientious consumers seeking a trusted resource for their purchasing decision.
Jeff Yurcisin: By positioning ourselves as a trusted partner in our customers' environmental and human health journeys, we draw a contrast to mass e-commerce and traditional retailers positioning us well to capture and grow within this expanding market.
Speaker Change: By positioning ourselves as a trusted partner in our customers' environmental and human health journeys, we draw a contrast to mass e-commerce and traditional retailers positioning us well to capture and grow within this expanding market.
Jeff Yurcisin: And lastly, pillar number four, environmental and human health. We're proud to continue our industry leadership in moving consumer products beyond plastic as we curate a selection that prioritizes environmental health. But as noted last quarter, we are also expanding our focus to humans. Through content and guided recommendations, we aim to build on the trust we've established in environmental sustainability by integrating human health education throughout our platform, helping consumers make informed choices that support the health of their families, their homes, and our planet. We know that our customer, regardless of the category, wants the best product, which they define as formulas with natural and non-toxic ingredients that are also contained in packaging that has less of an impact on the environment.
Speaker Change: And lastly, pillar number for <unk>.
Speaker Change: Environmental and human health, we're proud to continue our industry leadership and moving consumer products beyond plastic as we curate our selection that prioritizes environmental health, but as noted last quarter. We are also expanding our focus to human health through content and guided recommendations, we aim to build on.
Speaker Change: The trust, we've established an environmental sustainability by integrating human health education throughout our platform, helping consumers make informed choices that support the health of their families their homes and our planet.
Speaker Change: We know that our customer regardless of the category once the best product, which they define as formulas with natural and nontoxic ingredients that are also contained in packaging that has less of an impact on the environment. We're the only retailer that is vetting every brand and product in their assortment against high standards, we have a right to win.
Jeff Yurcisin: We're the only retailer that is vetting every brand and product in their assortment against high standards, and have a right to win where others do not.
Speaker Change: Others do not.
Jeff Yurcisin: Based on our expanded focus, we're updating our tagline from Go Beyond Plastic, which has championed our environmental sustainability strategy, to Your Home Health. We believe this better captures our differentiation and helps define our brand based on what customers are looking for, a healthier home and plan.
Speaker Change: Based on our expanded focus we're updating our tagline from bill beyond plastic, which has championed our environmental sustainability strategy to your home healthier.
Speaker Change: We believe this better captures our differentiation and helps define our brand based on what customers are looking for.
Speaker Change: Your home and planet.
Jeff Yurcisin: By the end of 2025, we expect to have completed the financial turnaround that we've been working towards for multiple years. Our balance sheet will remain strong. We will have demonstrated two consecutive years of full-year adjusted EBITDA profitability, and we will have returned to consistent revenue growth. From this strengthened position, we believe Grove will be poised to create substantial value as we execute on our expanded mission, creating and curating the best products that prioritize both human and environmental health.
Speaker Change: By the end of 2025, we expect to have completed the financial turnaround that we've been working towards for multiple years, our balance sheet will remain strong. We will have demonstrated two consecutive years of full year adjusted EBITDA profitability and we will have returned to consistent revenue growth.
Speaker Change: From the strengthened position, we believe growth will be poised to create substantial value as we execute on our expanded mission, creating and curating the best products that prioritize both human and environmental health.
Jeff Yurcisin: Before we review our financial results in more detail, I wanted to spend a bit more time introducing our Interim CFO, Tom Siragusa. Tom has been part of the Grove team for six years, most recently leading our finance function and helping us chart the course. for and navigate the waters related to our turnaround. He's been an incredible partner, an integral driver of our strategy and progress to date. And I'm thrilled to be working more closely with him and I'm confident in his ability to drive Grove's journey forward.
Speaker Change: Before we review our financial results in more detail I wanted to spend a bit more time, introducing our interim CFO, Tom CRE goose.
Speaker Change: It's been part of the growth team for six years, most recently, leading our finance function, helping US chart the course.
Speaker Change: Before and navigate the waters related to our turnaround and he's been an incredible partner and an integral driver of our strategy and progress to date and I'm thrilled to be working more closely with him and I'm confident in his ability to drive growth journey forward. Tom. Please go ahead.
Tom Siragusa: Tom, please go ahead. Thank you, Jeff. I share your enthusiasm for the progress we've made in reshaping Grove, and I'm eager to continue strengthening its financial foundation.
Tom Syracuse: Thank you, Jeff I share your enthusiasm for the progress we made in reshaping grills and I'm eager to continue strengthening its financial foundation.
Tom Siragusa: As in previous calls, I will provide both quarter-over-quarter and year-over-year comparisons, as we believe sequential comparisons reflect business trends and measure the effectiveness of our strategic initiatives. Starting with the top line, revenue for the fourth quarter was $49.5 million, up 2.5% from the third quarter, but down 17.4% year-over-year. The sequential increase was driven by higher repeat orders and increased first orders due to incremental advertising spend as we invested in growth. The increase was also due to higher retail revenue following the estimated brick-and-mortar markdowns recorded in the third quarter. While the brick-and-mortar markdowns contributed to the sequential growth, it's worth highlighting that revenue would have grown in the fourth quarter without it.
Tom Syracuse: As in previous calls I will provide those quarter over quarter and year over year comparisons as we believe sequential comparisons reflect the business trends and measure the effectiveness of our strategic initiatives.
Tom Syracuse: Starting with the topline revenue for the fourth quarter was $49 5 million up two 5% from the third quarter, but down 17, 4% year over year.
Tom Syracuse: The sequential increase was driven by higher repeat orders and increased first orders due to incremental advertising spend as we invested in growth.
Tom Syracuse: The increase was also due to higher retail revenue following the estimated brick and mortar markdowns recorded in the third quarter.
Tom Syracuse: While the brick and mortar markdowns contributed to the sequential growth it's worth highlighting that revenue would have grown in the fourth quarter without it.
Tom Siragusa: The year-over-year decline reflects fewer repeat orders, which continues to be impacted by lower advertising spend throughout 2024. As Jeff mentioned, this marks our first quarter of sequential revenue growth since 2022, an encouraging sign of stabilization. While we don't expect sequential revenue growth every quarter in 2025, this milestone underscores the progress of our turnaround strategy. Despite active customers declining 3.1% quarter over quarter to 688,000 and 25.2% year over year, total orders were 717,000, up 1.3% sequentially, down 17% year over year. Similar to revenue, the sequential increase in orders marks the first time since the first quarter of 2022 that total orders increased quarter over quarter.
Tom Syracuse: The year over year decline reflects fewer repeat orders, which continues to be impacted by lower advertising spend throughout 2024.
Tom Syracuse: As Jeff mentioned this marks our first quarter of sequential revenue growth since 2022, and encouraging sign of stabilization well, we don't expect sequential revenue growth every quarter in 2025. This milestone underscores the progress of our turnaround strategy.
Despite active customers declining three 1% quarter over quarter to 688025, 2% year over year total orders were 717000 up one 3% sequentially.
Tom Syracuse: 17% year over year.
Tom Syracuse: Similar to revenue the sequential increase in orders marks the first time since the first quarter of 2022 that total orders increased quarter over quarter.
Tom Siragusa: DTC net revenue per order was $66.94, down 0.1% from the third quarter, and flat year-over-year. The slight sequential decline was due to increased promotional activity, mostly offset by a higher average number of units per order. Year-over-year, the metric remained stable as the elimination of certain customer fees was offset by an increase in the average number of units per order. Our gross margin was 52.4%, down 60 basis points from the third quarter, primarily due to increased promotional activity, partially offset by the sell-through of previously reserved inventory. Year-over-year, gross margin declined 200 basis points, also impacted by the elimination of certain customer fees and a higher percentage of third-party product revenue.
Tom Syracuse: D T C net revenue per order was $66.94.
Tom Syracuse: 0.1% from the third quarter and flat year over year.
Tom Syracuse: Slight sequential decline was due to increased promotional activity, mostly offset by a higher average number of units per order.
Tom Syracuse: Year over year, the metric remained stable as the elimination of certain customer fees was offset by an increase in the average number of units per order.
Tom Syracuse: Okay and was 52, 4% down 60 basis points from the third quarter, primarily due to increased promotional activity, partially offset by the sell through of previously reserved inventory.
Tom Syracuse: Year over year gross margin declined 200 basis points also impacted by the elimination of certain customer fees and a higher percentage of third party product revenue.
Tom Siragusa: Brand Products as a percentage of net revenue was 40.1%, up 160 basis points from the third quarter but down 470 basis points year-over-year. The sequential increase was due to higher seasonal discounting and promotions on Grove Brand Products, while the year-over-year decline reflects continued third-party expansion.
Tom Syracuse: Grove brand products as a percentage of net revenue was 41% a.
Tom Syracuse: 160 basis points from the third quarter, but down 470 basis points year over year.
Tom Syracuse: The sequential increase was due to higher seasonal discounting and promotions on grub brand products, while the year over year decline reflects continued third party expansion.
Tom Siragusa: As previously mentioned, we plan to stop sharing this metric after this quarter given our focus on our direct-to-consumer business and on order economics, whether the product is from third-party or our own brand. Advertising expense totaled $3 million in the fourth quarter, up 4.7% quarter-over-quarter, but down 24.3% year-over-year. The sequential increase was primarily driven by higher spend on existing customers, aligning with our strategy to encourage repeat orders earlier in the customer journey, enabled by our expanded assortment. Additionally, we increased DPC-specific advertising on new customers, capitalizing on improving first-order conversion rates. These increases were partially offset by a decrease in brick-and-mortar specific advertising.
Tom Syracuse: As previously mentioned, we plan to start sharing this metric after this quarter given our focus on our direct to consumer business and on order economics, whether the product is from third party or our own brands.
Tom Syracuse: Advertising expense totaled $3 million in the fourth quarter.
Tom Syracuse: 4.7% quarter over quarter, but down 24, 3% year over year.
Tom Syracuse: The sequential increase was primarily driven by higher spend on existing customers aligning with our strategy to encourage repeat orders earlier in the customer journey enabled by our expanded assortment.
Tom Syracuse: Additionally, we increased DTC specific advertising on new customers capitalizing on improving first order conversion rates.
These increases were partially offset by a decrease in brick and mortar specific advertising.
Tom Siragusa: On a year-over-year basis, advertising expense remain lower. As we progress through our transformation, we remain disciplined in our advertising approach, balancing revenue growth with profitability, and focusing investments on the channels that deliver the highest return on investment. Product Development Expense was $4.6 million, down 4.4% quarter over quarter, but up 0.8% year over year. The sequential decline is due to reductions in personnel expenses, while the year-over-year increase is due to accelerated depreciation costs. Those were driven by our decision to transition our homegrown e-commerce platform to Shopify technology. SG&A expense was $26.7 million, up 8.1% quarter over quarter, but down 16.6% year over year.
On a year over year basis advertising expense remain lower as we progressed through our transformation. We remain disciplined in our advertising approach balancing revenue growth with profitability and focusing investments on the channels that deliver the highest return on investment.
Tom Syracuse: Product development expense was $4 6 million down 4.4% quarter over quarter, but up <unk>, 8% year over year.
Tom Syracuse: The sequential decline is due to reductions in personnel expenses well the year over year increase is due to accelerated depreciation costs.
Tom Syracuse: Those were driven by our decision to transfer it to transition our homegrown e-commerce platform to Shopify technology.
Tom Syracuse: SG&A expense was $26 7 million up eight 1% quarter over quarter, but down 16, 6% year over year.
Tom Siragusa: The quarter-over-quarter increase was primarily driven by a $1.6 million restructuring charge and higher fulfillment costs due to increased orders. The year-over-year decline reflects lower fulfillment costs from fewer orders and savings mainly from reductions to personnel, facility, professional fees, and technology costs as we right-size our cost structure for our current scale. Adjusted EBITDA was negative $1.6 million, or a negative 3.3% margin, compared to breakeven in the third quarter and $0.1 million, or a 0.2% margin, in the fourth quarter of 2023. However, despite negative adjusted EBITDA in the fourth quarter, operating cash flow was positive $0.3 million, marking our third consecutive quarter of positive operating cash flow.
Tom Syracuse: Quarter over quarter increase was primarily driven by a $1 6 million restructuring charge and higher fulfillment costs due to increased orders for.
Tom Syracuse: The year over year decline reflects lower fulfillment costs from fewer orders and savings mainly from reductions to personnel facility professional fees and technology costs as we rightsize our cost structure for our current scale.
Tom Syracuse: Yeah.
Tom Syracuse: Adjusted EBITDA was negative $1 6 million or a negative 3.3% margin compared to breakeven in the third quarter and 0.1 million great 0.2% margin in the fourth quarter of 2023.
Tom Syracuse: However, despite negative adjusted EBITDA in the fourth quarter operating cash flow was positive 0.3 million, marking our third consecutive quarter of positive operating cash flow.
Tom Siragusa: In the fourth quarter, we used a targeted discounting approach to move through aged inventory. While this negatively impacted our adjusted EBITDA in the quarter, it was a deliberate strategy to move through our inventory position heading into 2025. Turning now to the balance sheet, we ended the quarter with $24.3 million in cash, cash equivalents, and restricted cash. down from $55.6 million in the third quarter. The approximately $31 million reduction primarily reflects our recent voluntary prepayment of term debt. We also ended the quarter with an inventory balance of $19.4 million, down to $5.2 million quarter over quarter, mainly driven by reduced Grove brand inventory as we optimize our inventory ownership.
Tom Syracuse: In the fourth quarter, we used a targeted discounting approach to move through aged inventory well this negatively impacted our adjusted EBITA in the quarter. It was a deliberate strategy to move through our inventory position heading into 2025.
Tom Syracuse: Turning now to the balance sheet, we ended the quarter with $24 3 million in cash cash equivalents and restricted cash down from $55 6 million in the third quarter.
Tom Syracuse: Approximately $31 million reduction primarily reflects our recent voluntary prepayment of term debt.
Tom Syracuse: We also ended the quarter with an inventory balance of $19 4 million down to $5 2 million quarter over quarter, mainly driven by reduced growth brand inventory.
Tom Syracuse: Optimize our inventory ownership.
Tom Siragusa: Before we discuss our outlook, we want to take a moment to address the impact of tariffs on our business. Our projections take into account the current tariff environment as it relates to our product sourcing from China, Mexico, and Canada. Given the evolving nature of trade policies, we are actively monitoring the situation and working closely with our international partners to assess potential risks and opportunities. Our priority is to ensure a stable supply chain while exploring strategic alternatives to mitigate any potential cost impacts. We remain committed to adapting swiftly and effectively as new developments arise.
Tom Syracuse: Before we discuss our outlook, we want to take a moment to address the impact of tariffs on our business.
Tom Syracuse: Our projections take into account the current tariff environment as it relates to our product sourcing from China, Mexico and Canada.
Tom Syracuse: Given the evolving nature of trade policies, we are actively monitoring the situation and working closely with our international partners to assess potential risks and opportunities.
Tom Syracuse: Our priority is to ensure a stable supply chain, while exploring strategic alternatives to mitigate any potential cost impacts we remain committed to a Japanese swiftly and effectively as new developments arise.
Tom Siragusa: Now turning to our For the 12-month period ending December 31, 2025, we are providing the following guidance. for Revenue. First quarter revenue is expected to be the lowest revenue quarter in 2025 and going forward, including the negative revenue impact of the Shopify transition. Revenue is expected to improve through the second and third quarters, leading to year-over-year growth in the low single-digit percentage range in the fourth quarter. and full year 2025 revenue is expected to be approximately flat to down mid-single-digit percentage year-over-year. Adjust Viva Dial is expected to be break-even to positive low single-digit millions. Our outlook includes the revenue and adjusted EBITDA contributions from our most recent acquisitions.
Tom Syracuse: Now turning to our outlook.
Tom Syracuse: For the 12 month period, ending December 31, 2025, we are providing the following guidance.
For revenue.
Tom Syracuse: First quarter revenue is expected to be the lowest revenue quarter in 2025, and going forward, including the negative revenue impact of the shopify transition.
Tom Syracuse: Revenue is expected to improve through the second and third quarters, leading to year over year growth in the low single digit percentage range in the fourth quarter.
Tom Syracuse: And full year 2025 revenue is expected to be approximately flat to down mid single digit percentage year over year.
Tom Syracuse: Adjusted EBITDA is expected to be breakeven to positive low single digit millions.
Tom Syracuse: Our outlook includes the revenue and adjusted EBITDA contributions from our most recent acquisitions.
Tom Siragusa: We recognize that our four-year revenue guidance for 2025 does not reflect year-over-year growth. This is primarily due to two key factors. First, our run rate revenue in the fourth quarter of 2024 was lower than where we started 2024. Second, our strategic decision to exit Groveco products from brick-and-mortar retail while applying top-line pressure is expected to strengthen our bottom line and allow us to deepen our focus on our direct-to-consumer offering. We expect to have fully wound down our brick-and-mortar business by the end of the first half of 2025.
Tom Syracuse: We recognize that our full year revenue guidance for 2025 does not reflect a year over year growth.
Tom Syracuse: Primarily due to two key factors first our run rate revenue in the fourth quarter of 2024 was lower than where we started 2024.
Tom Syracuse: And our strategic decision to exit growth co products from brick and mortar retail while applying topline pressure is expected to strengthen our bottom line and allow us to keep our focus on our direct to consumer offering.
Tom Syracuse: We expect our fully wound down our brick and mortar business by the end of the first half of 2025.
Jeff Yurcisin: I would now like to turn the call back over to Jeff for some closing remarks. Thank you, Tom. I'm incredibly proud of the work we're doing at Grove and the progress we're making each day, not only as a business, but it's a trusted brand and meaningful partner to our We've spent a lot of time in recent months getting to know them better and understand who they are, what they care about, and what they need. We've been reaffirmed by the research that we're on the right path, but the work remains far from done. In the past year, and even the past quarter, we've seen green shoots in our business, which are a direct result of our discipline and following our strategy.
Jeff: I would now like to turn the call back over to Jeff for some closing remarks.
Jeff: Thank you Tom.
Jeff: I'm incredibly proud of the work, we're doing that growth and the progress we're making each day.
Jeff: Not only as a business, but as a trusted brand and meaningful partner to our customers.
Jeff: We spent a lot of time in recent months getting to know them better and understand who they are what they care about what they need we've been reaffirmed by the research that we're on the right path, but the work remains far from done in the past year and even the past quarter, we've seen green shoots in our business, which are a direct result.
Jeff: Of our discipline and following our strategy. We also have the benefit of being a company founded on our mission and our purpose to transform the products consumers, who use everyday into a force for environmental and human health. This mission resonates with our customers and the broader conscientious consumer that we aim to serve.
Jeff Yurcisin: We also have the benefit of being a company founded on a mission and a purpose to transform the products consumers use every day into a force for environmental and human health. This mission resonates with our customers and the broader conscientious consumer that we aim to serve, a mission that we reaffirm and that is now more important than ever. With that, we're happy to answer any questions you have.
Jeff: Our mission that we reaffirm and that is now more important than ever with that we're happy to answer any questions. You have operator. Please open the line for questions.
Operator: Operator, please open the line for questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the queue. You May press star two to remove yourself from the queue.
Operator: with a question. If you'd like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the queue.
Operator: You may press star 2 to remove yourself from It may be necessary to pick up the handset before pressing the star keys if you are using speaker earphones. One moment while we pull.
Speaker Change: It may be necessary to pick up the handset before pressing the star keys. If you are using speaker equipment one.
Speaker Change: One moment, while we poll for questions.
Alec Legg: And our first question comes from Susan Anderson with Canaccord Genuity. Please proceed with your question. Hey Jeff, Tom, Alec on for Susan. Nice job on just the whole year and getting the revenues to return to sequential growth. So I guess just to start in fourth quarter, you noted that there were higher repeat order rates. I think you talked a little bit about some of the underlying drivers like more targeted marketing. But was there anything more that helped drive that higher repeat order rate? Or is also the cohort curve flattening just like.
Speaker Change: And our first question comes from Susan Anderson with Canaccord Genuity. Please proceed with your question.
Speaker Change: Hey, Jeff Tom Alec on for Susan Nice job on.
Speaker Change: Just the whole year and getting the revenues to return to sequential growth.
Speaker Change: So I guess just to start in fourth quarter. You noted that they were higher repeat order rates I think you talked a little bit about some of the underlying drivers like more targeted marketing.
Speaker Change: Is there anything more that helped drive that higher repeat order rate or also the cohort curve flattening just like any details there.
Jeff Yurcisin: Thank you, Alec. In short, this is just the continued the result of our continued improvement on the core customer experience. So, the first thing that I would call out would be the increase in third-party assortment. It just gives the customer more reasons to shop. When there was less assortment, it was harder for a customer to find enough items to build a box in the frequency that now they are doing. So, what you will see is we are still continuing to drive up improvement of orders per active customer, and we see this as a natural output of the improvement in 3P selection and the overall shopping experience.
Alec: Thank you Alec.
Alec: In short this is just the continued the result of our continued improvement on the core customer experience. So the first thing that I would call out would be the increase in third party assortment. It just gives customers more reasons to shop, when there was less assortment it was harder.
Alec: Hardware for a customer to find enough items to make to build a box and the frequency that now they are doing so what you'll see is we are still continuing to drive up our improvement in the orders per active customer.
Alec: And we see this as a natural output of the improvement in <unk> selection and the overall shopping experience.
Jeff Yurcisin: In Q4, we also were pretty aggressive on moving through some inventory and offering good discounts on GrowthCode product. You also saw that as an output in our operating cash flow for the quarter. Thanks.
Alec: In Q4.
Alec: We also were pretty aggressive on moving through some inventory and offering good discounts on growth co product. You also saw that as an output and our operating cash flow for the quarter.
Jeff Yurcisin: And then just on the third-party assortment, are you able to talk about the pipeline for 2025, whether it be number of brands or just the categories you're focused on? Yeah, thank you so much. So a few thoughts here. One, even though we're expanding assortment, I want to emphasize that we're not trying to be the everything store, we want to be and aspire to be have the highest standards for product quality. We're just moving across into new categories. And we've been talking about wellness for a while. The acquisition that we just announced today of eight greens shows that we will start having our own brand in the wellness space that gives us an opportunity for us to use this platform to reach more of more of our consumers.
Speaker Change: Thanks, and then just on the third party assortment are you able to talk about the pipeline for 2025.
Alec: The number of brands or just the categories you're focused on.
Speaker Change: Yes. Thank you so much so a few thoughts here.
Speaker Change: One even though we're expanding assortment I wanted to emphasize that we're not trying to be the everything store, we want to be and aspire to beat had the highest standards for product quality, we're just moving across into new categories and we've been talking about wellness for awhile. The acquisition that we just announced today of a green shows.
Speaker Change: We will start having our own brand in the wellness space that gives us an opportunity for us to use this platform to reach more of more of our consumers, but youre going to see the real focus on human health and this is not just vitamins minerals and supplements. This is how you think about human health across all categories.
Jeff Yurcisin: But you're going to see the real focus on human health. And this is not just vitamins, minerals and supplements. This is how you think about human health across all categories. One of our investors uses this phrase like a non-toxic marketplace. And it's just like, how can you build a destination built on trust with products in a wide range of categories? You will see us continue pushing into the kitchen and home and baby and pet. And each one of these, we see opportunities for a customer who is just looking to try to find products that are good for the family and good for the planet.
Speaker Change: One of our investors uses the phrase like a nontoxic marketplace and it's just like how can you build a destination built on trust with products in a wide range of categories. You will see us continue pushing into kitchen, and home men baby and pet and.
Speaker Change: Each one of these we see opportunities for a customer who is just looking to try to find products that are good for that family and good for the plan.
Alec Legg: Yeah, I think that makes sense.
Speaker Change: Yes, no that makes sense, you mentioned I think briefly moving away from the messaging and just being beyond plastic and more them too.
Jeff Yurcisin: You mentioned, I think, briefly moving away from the messaging of just being beyond plastic and more into human health, I guess, is there a thought on branding or marketing campaigns this year to push that message further? Very much so. So I think when you think about this company, we are not going backwards on our stance of being the leader when it comes to sustainability and being plastic neutral. I'm really proud of our efforts there. But as we've mentioned in past calls, customers just trust us because of that to help them find the right type of product in other areas.
Speaker Change: Human Health I guess is there.
Speaker Change: Thought on branding or marketing campaigns this year to push that message further.
Speaker Change: Very much so so I think.
Speaker Change: When you think about this company, we are not going backwards on our stance of being the leader when it comes to sustainability and being plastic neutral I'm really proud of our efforts there, but as we've mentioned in past calls customers just trust us because of that to help them find the right type of product in other area. So what youre going to just now.
Jeff Yurcisin: So what you're going to just now see is a more consistent messaging pushing on human health. I'm really excited about the type of content we're generating on our blog. Once we're on the other side, fully of the Shopify transition, you will see that our ability to lean into content, education, storytelling, a more guided shopping experience will be consistent around the theme of human health. And then this Your Home Healthier, you will see it in marketing that is both upper funnel and all the way down to bottom funnel type of marketing. So it will be a shift in how we are positioning the brand to our consumers, but consistent with the type of assortment that we are at.
Speaker Change: <unk> is a more consistent messaging pushing on human health I'm really excited about the content, we're generating on our blog once we're on the other side fully of the Shopify transition you will see that our ability to lean into content education storytelling, a more guided shopping experience will be.
Speaker Change: <unk> around the theme of human Health and then this your home healthier you will see it and marketing that is both upper funnel and all the way down to bottom funnel type of marketing. So it will be a shift in how we are positioning the brand to our consumers are consistent with the type of assortment that we are adding.
Alec Legg: Thanks.
Alec Legg: And then just last question on the financials. Are you able to help provide some color on the moving parts in the P&L this year? Just how are you thinking about gross margins and then the various operating expense buckets like advertising? And then are you able to quantify the impact of Shopify in the first quarter? Great. I'm actually going to hand this to Tom. Tom, do you want to take it? Sure. Yeah, Alec, thanks for the question. So, you know, we don't give specific guidance as it relates to, you know, some of those line items, but I think from a higher level, I can provide some context.
Speaker Change: Thanks, and then just last question on the financials are you able to help provide some color on the moving parts in the P&L. This year just how are you thinking about gross margins and then the various operating expense buckets like advertising.
Speaker Change: Are you able to quantify the impact of shopify in first quarter. Thank you.
Tom Syracuse: Great I'm actually going to hand, this to Tom Tom do you want <unk> sure Yeah, Eric Thanks for the question so.
Tom Syracuse: So you know we don't give specific guidance as it relates to some of those line items, but I think from a high level I can provide some context in 2025, well you know theres going to be both accretive and dilutive.
Tom Siragusa: In 2025, we'll, you know, there's going to be both accretive and dilutive impacts to our gross margin. We're exiting brick and mortar, which has been historically more dilutive. We had, you know, the benefit of the inventory reserve release in 2024, which won't be of the magnitude of 2025, but we're also, you know, the two acquisitions that we recently announced are, you know, accretive to our gross margin. And so, you know, while we don't expect While we don't give specific guidance, there will be some movements in both directions. As it relates to some of the more expensive, and we've done a really We've done a really good job of managing our expenses over the last 24 months.
Tom Syracuse: Impacts to our gross margin, we're exiting brick and mortar which has been historically more dilutive we had.
Tom Syracuse: The benefit of the inventory reserve released in two weeks before and which won't be able to say magnitude between 25, but we're also you know the two acquisitions that we recently announced are accretive to our gross margin. So.
Tom Syracuse: You know, while we don't expect.
Tom Syracuse: Well, we don't give specific guidance there will be some movements in both directions as it relates to some of the more expensive and we've done a really.
Tom Syracuse: Good job of managing our expenses over the last 24 months. We've managed our every line item across the P&L from our vendors to our fulfillment centers to personnel and.
Tom Siragusa: We've managed our, you know, every line item across the P&L from our vendors to our fulfillment centers to personnel. And we, you know, we don't expect to grow our expenses until we have, you know, revenue growth that, you know, we consistently rely on. So we will remain disciplined as it relates to our expenses. And then advertising, you know, we don't think about advertising necessarily as a percentage of our P&L. We think about the paybacks and the return that we get on that investment. And so, you know, we're guiding to four-year positive adjusted EBITDA, but, you know, as we kind of move through our strategy over the course of the year, we will actively kind of manage that cost and lean in where we need to and find the right channels to spend effectively.
Tom Syracuse: We don't expect to grow our expenses until we have you know.
Tom Syracuse: Revenue growth that we consistently rely on so well.
Tom Syracuse: We will remain disciplined as.
Tom Syracuse: As it relates to our expenses and then advertising yeah. We we don't think about advertising necessarily as a percentage of our arpino. If we think about the the paybacks and the return that we get on that investment and so you were guiding to full year positive adjusted EBITA, but you know as we kind of move.
Tom Syracuse: Move through our strategy over the course of the year, we will actively manage that cost him leaning where we need to and find the right channels to to spend effectively.
Alec Legg: Thank you. That's great. Thank you. That's really helpful. Thank you.
Speaker Change: That's great. Thank you that's really helpful. Thank you I'll turn it back and exciting to see everything and we'll watch you started with.
Alec Legg: I'll turn it back and exciting to see everything and we'll watch you the rest of the year. Thank you so much, Alec. Thanks, Alec. you.
Tom Syracuse: Thank you.
Eric: So much thanks, Eric.
Eric: Thank you and it looks like there are no further questions at this time I would like to turn the floor back to management for closing remarks.
Operator: It looks like there are no further questions at this time.
Operator: I'd like to turn the floor back to management for closing remarks. Thank you. Thank you for joining us this evening and have a great night. Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines. Guerrero Thanks for watching!
Eric: Thank you. Thank you for joining us this evening and have a great night.
Eric: Thank you. This does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.
Eric: Hum.
Eric: Hum.
Eric: Uh-huh.
Eric: Okay.
Eric: Okay.
Eric: [music].