Grove Collaborative Announces Fiscal First Quarter 2022 Financial Results and Provides Updated Guidance

Releases Annual Plastic Scorecard and Sustainability Report

SAN FRANCISCO--(BUSINESS WIRE)--June 02, 2022-- 

Grove Collaborative, Inc. ("Grove" or "the Company"), a certified B Corp$(TM)$ and leading sustainable consumer products company, today reported financial results for its fiscal first quarter ended March 31, 2022.

Grove and Virgin Group Acquisition Corp. II ("VGII") $(VGII)$, a publicly traded special purpose acquisition company sponsored by Virgin Group, previously announced that they entered into a definitive business combination agreement that will result in Grove becoming a public company. Upon closing of the transaction, the combined company will continue to operate under the Grove name and will be listed on the NYSE under the new "GROV" ticker symbol.

Fiscal First Quarter 2022 Financial Highlights:

   -- Net revenue of $90.5 million, down 11% year-over-year 
 
   -- Gross margin of 47.2%, down 380 basis points year-over-year 
 
   -- Net loss margin of (52.4)%, as compared to (37.1)% in the first quarter 
      of 2021 
 
   -- Adjusted EBITDA margin(1) of (43.8)%, as compared to (30.7)% in the first 
      quarter of 2021 
 
  (1)    (Adjusted EBITDA margin is a non-GAAP financial measure. See 
         "Non-GAAP Financial Measures" for additional information. A 
         reconciliation to the most comparable GAAP measure can be found in 
         the tables at the end of this press release.) 
 

Stuart Landesberg, Chief Executive Officer of Grove, said, "Our strategy to accelerate our omnichannel presence served us well in the first quarter, a period in which we continued to see headwinds in direct-to-consumer ("DTC") driven by media cost inflation and consumers returning to physical retail. While revenues were down year-over-year on a difficult comparison against our largest sales quarter on record in the first quarter of 2021, we are pleased to report strong retail sales as we deepened our relationship with Target and shipped into our second retail partner, a leading omnichannel retailer with over 1,100 stores. Furthermore, we continued to strengthen our leadership position in zero-waste and plastic-free products as evidenced by the record high revenue mix in the quarter of Grove Brands products and through the expansion into a new category with our launch of Peach Kids, the first-ever 100% plastic-free hair and body care line for kids."

Landesberg continued, "The secular tailwinds powering the move away from plastic are long term and growing across the industry, and Grove is leading the charge. Our brand awareness continues to grow, and our innovative assortment of sustainable products combined with strategic initiatives to drive both diversification in revenue and growth in profitability lay a strong foundation for success as we prepare to become a public company. We are confident that as the environment normalizes, we will be positioned for long term profitable growth. We look forward to partnering with VGII on our mission to transform the use of consumer products into a force for human and environmental good, creating value for all stakeholders."

Other Fiscal First Quarter 2022 Highlights:

   -- DTC net revenue per order was $55.14 in the first quarter of 2022, down 
      slightly from $55.99 in the first quarter of 2021 
 
   -- Grove Brand products represented 51.7% of net revenue in the first 
      quarter of 2022, an increase of 60 basis points from 51.1% in the first 
      quarter of 2021 
 
   -- During the quarter, the Company launched Peach Kids, the first-ever 100% 
      plastic-free personal care line exclusively for kids, following the 
      successful initial launch of Peach Not Plastic in 2020 and marking entry 
      into the kids' category 
 
   -- In the first quarter, 58% of Grove Brands net revenue came from 
      zero-plastic, re-usable product models and zero plastic waste alternative 
      products, meeting the Company's Beyond Plastic(TM) standard, up from 43% 
      in the first quarter of 2021 
 
   -- Grove believes measuring plastic intensity (pounds of plastic per $100 in 
      revenue) enables the Company to decouple its plastic footprint from its 
      revenue growth and truly pin its success to plastic reduction 
 
          -- Across the Grove.co site, plastic intensity was 1.16 pounds of 
             plastic per $100 in revenue in the first quarter of 2022 as 
             compared to 1.37 in the first quarter of 2021 
 
          -- Across all Grove-owned brands, plastic intensity was 0.94 pounds 
             of plastic per $100 in revenue in the first quarter of 2022 as 
             compared to 1.15 in the first quarter of 2021 
 
   -- During the first quarter, the Company announced the appointment of 
      Chairman of the Board, John Replogle, former CEO of Burt's Bees and 
      Seventh Generation, two of the industry-defining brands in the natural 
      products space 
 
   -- In the first quarter, Grove announced a company-wide reorganization which 
      included a reduction in workforce of approximately 17% of corporate 
      employees to reduce operating expenses and strengthen key areas across 
      the business 
 
          -- In connection with the reorganization, the Company recorded 
             charges totaling $1.6 million in the first quarter 
 
   -- The Company strengthened its balance sheet with a new $50 million 
      redemption backstop agreement with VGII, designed to provide additional 
      liquidity to pursue growth. This agreement underpins VGII's commitment to 
      the strategic business combination with Grove and to its mission. More 
      details can be found here. 

Subsequent Events:

On April 11, 2022, Sergio Cervantes joined Grove as Chief Financial Officer, enhancing the senior leadership team. Cervantes came to Grove with significant financial executive experience in global consumer products, including 18 years with Unilever and four years at Gillette. More details can be found here.

On May 31, 2022, Grove published its annual Plastic Scorecard and Sustainability Report which can be found at grove.co/sustainabilityreport2021 and grove.co/plasticscorecard, respectively. Highlights include the following:

   -- The Company reached its goal to plant 1 million trees across the U.S. in 
      partnership with the Arbor Day Foundation, months ahead of its year end 
      goal. 
 
   -- Through its environmental impact shop, a unique offering launched in 
      August 2021 that lets customers amplify the impact of every order, Grove 
      customers have funded the planting of over 50,000 additional trees to 
      support California wildfire restoration along with over 25,000 acres of 
      rainforest conservation and 300,000 pounds of plastic collected in India. 

Financial Outlook:

"We have identified and are implementing strategies to proactively manage expenses and cash burn, while remaining nimble and capital efficient as we pursue the attractive long-term opportunity to drive accelerated growth and profitability. As part of these efforts and in light of the uncertain macro environment, continued inflationary pressure, and consumer behavior that is reverting to pre-pandemic levels earlier than anticipated, we are revising our outlook. We remain highly focused on maximizing the power of our direct-to-consumer business, accelerating our retail expansion, and increasing efficiency in our marketing and corporate structure. We are seeing great success as we enter new retail distribution and have taken steps to right-size the overall business, and we will continue to focus on reducing operating expenses in medium term. We have pulled back on advertising spend both in light of media cost inflation and as we focus on evolving our direct-to-consumer business to make it easier for consumers to use Grove.co, either on subscription or through a more traditional ecommerce experience. We believe these strategic actions will position us well to create long-term value for all stakeholders," stated Sergio Cervantes, Chief Financial Officer.

Based on performance to date and current expectations, we are updating the outlook given in our December 2021 investor presentation as follows:

For the 12-month period ending December 31, 2022, we now expect:

   -- Net revenue of $300 to $310 million 
 
   -- Adjusted EBITDA margin(1) of (29)% to (32)% 

For the 12-month period ending December 31, 2023, we now expect:

   -- Net revenue of $300 to $310 million 
 
   -- Adjusted EBITDA margin(1) of (13)% to (16)% 

For the 12-month period ending December 31, 2024, we now expect:

   -- Net revenue of $330 to $360 million 
 
   -- Adjusted EBITDA margin(1) of greater than 0% 
 
  (1)    (Adjusted EBITDA margin is a non-GAAP financial measure. See 
         "Non-GAAP Financial Measures" for additional information.) 
 

About Grove Collaborative

Launched in 2016 as a Certified B Corp, Grove Collaborative is transforming consumer products into a positive force for human and environmental good. Driven by the belief that sustainability is the only future, Grove creates and curates over 150 high-performing eco-friendly brands of household cleaning, personal care, laundry, clean beauty, baby and pet care products serving millions of households across the U.S. each year. With a flexible monthly delivery model and access to knowledgeable Grove Guides, Grove makes it easy for everyone to build sustainable routines.

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June 02, 2022 06:00 ET (10:00 GMT)