Releases Annual Plastic Scorecard and
Sustainability Report
Grove Collaborative, Inc. (“Grove” or “the Company”), a
certified B Corp™ 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”) (NYSE:
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™
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.
Every product Grove offers — from its flagship brand of
sustainably powerful home care essentials, Grove Co., plastic-free,
vegan personal care line, Peach Not Plastic, and zero-waste pet
care brand, Good Fur, to its exceptional third-party brands — has
been thoroughly vetted against strict standards to be
uncompromisingly healthy, beautifully effective, ethically produced
and cruelty-free. Grove Collaborative is a public benefit
corporation on a mission to move Beyond Plastic™ and in 2021,
entered physical retail for the first time at Target stores
nationwide, making sustainable home care products even more
accessible. Grove is the first plastic neutral retailer in the
world and is committed to being 100% plastic-free by 2025. For more
information, visit www.grove.com.
On December 7, 2021, Grove and Virgin Group Acquisition Corp. II
(“VGII”) (NYSE: VGII), a publicly traded special purpose
acquisition company sponsored by Virgin Group, 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.
No Offer or Solicitation
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, or a solicitation
of any vote or approval, nor shall there be any sale of these
securities in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state or
jurisdiction.
INVESTMENT IN ANY SECURITIES DESCRIBED HEREIN HAS NOT BEEN
APPROVED OR DISAPPROVED BY THE SEC OR ANY OTHER REGULATORY
AUTHORITY NOR HAS ANY AUTHORITY PASSED UPON OR ENDORSED THE MERITS
OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Participants in the
Solicitation
VGII, Grove and their respective directors, executive officers,
other members of management, and employees, under SEC rules, may be
deemed to be participants in the solicitation of proxies of VGII’s
shareholders in connection with the proposed business combination.
Information regarding the persons who may, under SEC rules, be
deemed participants in the solicitation of VGII’s shareholders in
connection with the proposed business combination is set forth in
VGII’s definitive proxy statement/prospectus. Investors and
security holders may obtain more detailed information regarding the
names and interests in the proposed business combination of VGII’s
directors and officers in VGII’s filings with the SEC.
Caution Concerning Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements regarding our or our management
team’s expectations, hopes, beliefs, intentions, plans, prospects
or strategies regarding the future, including possible business
combinations, revenue growth and financial performance, product
expansion and services. Any statements contained herein that are
not statements of historical fact may be deemed to be
forward-looking statements. In addition, any statements that refer
to projections, forecasts or other characterizations of future
events or circumstances, including any underlying assumptions, are
forward-looking statements. The words “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intends,” “may,”
“might,” “plan,” “possible,” “potential,” “predict,” “project,”
“should,” “would” and similar expressions may identify
forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. The forward-looking
statements contained in this press release are based on our current
expectations and beliefs made by the management of VGII and Grove
in light of their respective experience and their perception of
historical trends, current conditions and expected future
developments and their potential effects on VGII and Grove as well
as other factors they believe are appropriate in the circumstances.
There can be no assurance that future developments affecting VGII
or Grove will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties
(some of which are beyond the control of the parties) or other
assumptions that may cause actual results or performance to be
materially different from those expressed or implied by these
forward-looking statements, including that the VGII stockholders
will approve the transaction, regulatory approvals, product and
service acceptance, and that Grove will have sufficient capital
upon the approval of the transaction to operate as anticipated.
Should one or more of these risks or uncertainties materialize, or
should any of our assumptions prove incorrect, actual results may
vary in material respects from those projected in these
forward-looking statements. Additional factors that could cause
actual results to differ are discussed under the heading “Risk
Factors” and in other sections of VGII’s filings with the SEC, and
in VGII’s current and periodic reports filed or furnished from time
to time with the SEC. All forward-looking statements in this press
release are made as of the date hereof, based on information
available to VGII and Grove as of the date hereof, and VGII and
Grove assume 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.
Non-GAAP Financial
Measures
Some of the financial information and data contained in this
press release, such as adjusted EBITDA and adjusted EBITDA margin,
have not been prepared in accordance with United States generally
accepted accounting principles (“GAAP”). These non-GAAP measures,
and other measures that are calculated using such non-GAAP
measures, are an addition to, and not a substitute for or superior
to, measures of financial performance prepared in accordance with
GAAP and should not be considered as an alternative to revenue,
operating income, profit before tax, net income or any other
performance measures derived in accordance with GAAP. A
reconciliation of historical adjusted EBITDA to Net Income is
provided in the tables at the end of this press release. The
reconciliation of projected adjusted EBITDA and adjusted EBITDA
Margin to the closest corresponding GAAP measure is not available
without unreasonable efforts on a forward-looking basis due to the
high variability, complexity, and low visibility with respect to
the charges excluded from these non-GAAP measures, such as the
impact of depreciation and amortization of fixed assets,
amortization of internal use software, the effects of net interest
expense (income), other expense (income), and non-cash stock based
compensation expense. Grove believes these non-GAAP measures of
financial results, including on a forward-looking basis, provide
useful information to management and investors regarding certain
financial and business trends relating to Grove’s financial
condition and results of operations. Grove’s management uses these
non-GAAP measures for trend analyses and for budgeting and planning
purposes. Grove believes that the use of these non-GAAP financial
measures provides an additional tool for investors to use in
evaluating projected operating results and trends in and in
comparing Grove’s financial measures with other similar companies,
many of which present similar non-GAAP financial measures to
investors. Management of Grove does not consider these non-GAAP
measures in isolation or as an alternative to financial measures
determined in accordance with GAAP. However, there are a number of
limitations related to the use of these non-GAAP measures and their
nearest GAAP equivalents. For example, other companies may
calculate non-GAAP measures differently, or may use other measures
to calculate their financial performance, and therefore Grove’s
non-GAAP measures may not be directly comparable to similarly
titled measures of other companies.
We calculate adjusted EBITDA as net loss, adjusted to exclude:
(1) stock-based compensation expense; (2) depreciation and
amortization; (3) remeasurement of convertible preferred stock
warrant liability; (4) interest expense; (5) provision for income
taxes; and (6) restructuring expenses. We define Adjusted EBITDA
Margin as Adjusted EBITDA divided by revenue.
Grove Collaborative,
Inc.
Balance Sheets
(In thousands)
December 31,
March 31,
2021
2022
(unaudited)
Assets Current assets: Cash and cash equivalents
$
78,376
$
74,428
Inventory, net
54,453
50,559
Prepaid expenses and other current assets
8,104
11,264
Total current assets
140,933
136,251
Property and equipment, net
15,932
16,095
Operating lease right-of-use assets
21,214
20,471
Other long-term assets
4,394
5,550
Total assets
$
182,473
$
178,367
Liabilities, Convertible Preferred Stock, Contingently
Redeemable Convertible Common Stock and Stockholders’ Deficit
Current liabilities: Accounts payable
$
21,346
$
31,822
Accrued expenses
20,651
24,208
Deferred revenue
11,267
11,426
Operating lease liabilities, current
3,550
3,724
Other current liabilities
1,650
894
Debt, current
10,750
16,720
Total current liabilities
69,214
88,794
Debt, noncurrent
56,183
50,034
Operating lease liabilities, noncurrent
20,029
19,090
Other long-term liabilities
5,408
3,924
Total liabilities
150,834
161,842
Convertible preferred stock
487,918
487,918
Contingently redeemable convertible common stock
—
27,473
Stockholders’ deficit: Common stock
1
1
Additional paid-in capital
33,863
38,660
Accumulated deficit
(490,143
)
(537,527
)
Total stockholders’ deficit
(456,279
)
(498,866
)
Total liabilities, convertible preferred stock, contingently
redeemable convertible common stock and stockholders’ deficit
$
182,473
$
178,367
Grove Collaborative,
Inc.
Statements of
Operations
(In thousands)
(unaudited)
Three Months Ended March
31,
2021
2022
Revenue, net
$
102,220
$
90,479
Cost of goods sold
50,028
47,742
Gross profit
52,192
42,737
Operating expenses: Advertising
35,636
32,793
Product development
5,162
6,240
Selling, general and administrative
47,538
50,970
Operating loss
(36,144
)
(47,266
)
Interest expense
963
2,087
Other expense (income), net
776
(1,992
)
Interest and other expense, net
1,739
95
Loss before provision for income taxes
(37,883
)
(47,361
)
Provision for income taxes
12
23
Net loss
$
(37,895
)
$
(47,384
)
Grove Collaborative,
Inc.
Statements of Cash
Flows
(In thousands)
(unaudited)
Three Months Ended March
31,
2021
2022
Cash Flows from Operating Activities Net loss
$
(37,895
)
$
(47,384
)
Adjustments to reconcile net loss to net cash used in operating
activities: Remeasurement of convertible preferred stock warrant
liability
932
(1,886
)
Stock-based compensation
3,460
4,460
Depreciation and amortization
1,128
1,410
Non-cash interest expense
97
195
Inventory reserve
383
856
Other non-cash expenses
—
8
Changes in operating assets and liabilities: Inventory
(8,996
)
3,038
Prepaids and other assets
(2,889
)
(3,312
)
Accounts payable
7,181
10,287
Accrued expenses
6,024
2,917
Deferred revenue
2,442
159
Operating lease right-of-use assets and liabilities
26
(22
)
Other liabilities
155
(229
)
Net cash used in operating activities
(27,952
)
(29,503
)
Cash Flows from Investing Activities Purchase of
property and equipment
(1,262
)
(1,352
)
Net cash used in investing activities
(1,262
)
(1,352
)
Cash Flows from Financing Activities Proceeds from
issuance of contingently redeemable convertible common stock
—
27,500
Payment of deferred offering and convertible preferred stock
issuance costs
(151
)
(489
)
Repayment of debt
(682
)
(275
)
Proceeds from exercise of stock options
290
171
Repurchase of common stock
(297
)
—
Net cash provided (used in) by financing activities
(840
)
26,907
Net decrease in cash and cash equivalents
(30,054
)
(3,948
)
Cash and cash equivalents at beginning of period
176,523
78,376
Cash and cash equivalents at end of year period
$
146,469
$
74,428
Grove Collaborative,
Inc.
Non-GAAP Financial
Measures
(In thousands)
(unaudited)
Three Months Ended March
31,
2021
2022
Reconciliation of Net Loss to Adjusted EBITDA Net loss
$
(37,895
)
$
(47,384
)
Stock-based compensation
3,460
4,460
Depreciation and amortization
1,128
1,410
Remeasurement of convertible preferred stock warrant liability
932
(1,886
)
Interest expense
963
2,087
Restructuring expenses
—
1,636
Provision for income taxes
12
23
Total Adjusted EBITDA
$
(31,400
)
$
(39,654
)
Net loss margin
(37.1
)%
(52.4
)%
Adjusted EBITDA margin
(30.7
)%
(43.8
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220527005423/en/
Investor Relations Contact: Alexis
Tessier ir@grove.co Media Relations
Contact: Meika Hollender meika@grove.co
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