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Grove Collaborative Holdings, Inc. (GROV)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $43.5M, down 18.7% YoY and impacted by the early-March eCommerce platform migration, which management estimates reduced revenue by $2–$3M; gross margin fell 260 bps to 53.0% and adjusted EBITDA was -$1.6M (−3.7%) .
  • Guidance was revised: FY2025 revenue now expected to decline approximately mid-single-digit to low double-digit percentage points YoY (prior: approximately flat to down mid-single digits), and FY2025 adjusted EBITDA now expected to be negative low single-digit to positive low single-digit millions (prior: breakeven to positive low single-digit) .
  • Q1 was framed as the “revenue trough”; management guides to slight YoY revenue growth in Q4 2025, supported by improving new-customer metrics, broader assortment, and platform stabilization .
  • Liquidity/credit update: an amendment to the asset-based loan facility extended maturity to April 2028 and removed the minimum liquidity covenant, increasing availability; the company ended Q1 with $13.5M in cash and restricted cash and negative operating cash flow of $6.9M .
  • Post-quarter, Grove received a NYSE notice of non-compliance with continued listing standards (market cap and stockholders’ equity thresholds), requiring a cure plan within 45 days; the notice has no immediate impact on listing status .

What Went Well and What Went Wrong

What Went Well

  • Improved new-customer acquisition efficiency and first-order economics allowed Grove to responsibly increase advertising spend despite migration headwinds; ad spend was $2.8M (+$0.8M YoY) and marketing was 6.4% of sales in Q1, with management seeing “better returns than we have in years” .
  • Assortment expansion continues: third-party brands offered grew 41% YoY and products 54% YoY, with additions such as Billie, Cocofloss, Hydro Flask, Solaray, The Neighborgoods, and The Unscented Company; management expects expanded assortment in clean beauty, personal care, kitchen/pantry, baby, and wellness to lift net revenue per order and frequency .
  • Balance sheet steps: ABL amendment extended maturity to April 2028 and increased availability; inventory rose to $22.1M primarily from acquiring Grab Green and 8Greens, advancing strategic category exposure (home cleaning, wellness) .

What Went Wrong

  • The eCommerce platform migration negatively affected order conversion and volume; management estimates a $2–$3M revenue headwind in Q1 and incorporated ongoing attrition effects into revised FY2025 guidance .
  • Top-line pressure from prior years’ reduced advertising spend led to fewer repeat orders and a smaller active customer base; total orders fell 20% YoY to 622k and active customers declined 16% YoY to 678k .
  • Gross margin compressed 260 bps YoY to 53.0%, reflecting removal of certain customer fees and smaller benefit from sell-through of previously reserved inventory; adjusted EBITDA deteriorated to -$1.6M vs. +$1.9M in Q1 2024 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$48.3 $49.5 $43.5
Gross Margin %53.0% 52.4% 53.0%
Adjusted EBITDA ($USD Millions)$0.0 (breakeven) -$1.6 -$1.6
DTC Total Orders (000s)708 717 622
DTC Active Customers (000s)710 688 678
DTC Net Revenue Per Order ($)$67.02 $66.94 $66.49
EPS vs EstimatesQ1 2024Q4 2024Q1 2025
Revenue Consensus Mean ($)53,400,000*48,790,500*47,009,500*
Actual Revenue ($)53,545,000 49,501,000 43,547,000
Revenue Surprise (%)+0.3%*+1.5%*-7.4%*
Primary EPS Consensus Mean ($)N/A-0.15*-0.03*
Primary EPS Actual ($)-0.1827*-0.2102*-0.0516*

Values with an asterisk (*) were retrieved from S&P Global.

KPIs (YoY):

KPIQ1 2024Q1 2025
DTC Total Orders (000s)773 622
DTC Active Customers (000s)807 678
DTC Net Revenue Per Order ($)$66.27 $66.49
Gross Margin %55.5% 53.0%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025Approximately flat to down mid-single-digit YoY Down approximately mid-single-digit to low double-digit YoY Lowered
Adjusted EBITDAFY 2025Breakeven to positive low single-digit $M Negative low single-digit to positive low single-digit $M Lowered
Quarterly Revenue Trajectory2025Q1 expected lowest; improve through Q2–Q3; Q4 YoY growth in low single digits Q1 lowest; improve through Q2–Q3; Q4 slight YoY growth Reiterated direction; tempered magnitude
Liquidity/ABLCurrent$7.5M ABL outstanding; term debt repaid in Q4 2024 ABL amended: maturity to April 2028; min liquidity covenant removed; availability increased Improved facility terms

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
eCommerce platform migrationAnnounced transition to Shopify, expected early Q1 2025; cautious on UX during transition In-progress; early-stage challenges expected; quantified Q1 as lowest quarter partly due to transition Executed in early March; $2–$3M Q1 revenue impact; critical issues addressed; win-back underway Near-term friction; stabilization underway
Advertising efficiencyIncreased DTC spend; improving conversion; disciplined ROI Leaning into channels with improved paybacks; balanced with profitability $2.8M spend; 6.4% of sales; better returns than seen in years on new customer acquisition Improving efficiency; scaling prudently
Assortment expansion3P brands +18.3% YoY; Subscribe & Save expansion Plan aggressive expansion in clean beauty/personal care/kitchen & pantry/baby/wellness 3P brands +41% YoY; products +54%; additions across categories Accelerating breadth to lift AOV/frequency
Tariffs/macroHighlighted microplastics/human health narrative, not tariffs Monitoring tariffs; sourcing from China/Mexico/Canada Mitigation via pricing, supplier renegotiations, sourcing shifts; uncertainty persists Risk managed; residual margin pressure possible
Balance sheet & debtVolition $15M; plan to repay term debt; ABL remains Term debt repaid; $7.5M ABL; positive OCF Q4 ABL amended; maturity April 2028; covenant relief; cash $13.5M Lower interest burden; enhanced flexibility
Channel strategyExit brick-and-mortar by early 2025 to refocus on DTC Wind-down brick-and-mortar in H1 2025 DTC focus reiterated; own brands % revenue decreasing with acceptable margin gap vs 3P DTC-centric; margin mix manageable

Management Commentary

  • “We estimate the migration resulted in a $2 million to $3 million revenue impact in Q1… We are actively implementing win-back strategies to reengage affected customers and rebuild trust due to the outages.” — CEO Jeff Yurcisin .
  • “Adjusted EBITDA for the first quarter was a negative $1.6 million or a margin of negative 3.7%... We remain committed to strengthening our underlying cost structure and driving operating efficiencies.” — CEO Jeff Yurcisin .
  • “We amended our asset-based loan facility, extending its maturity to April 2028… removing the minimum liquidity covenant.” — Interim CFO Tom Siragusa .
  • “Q1 was our revenue trough and we are guiding towards year-over-year growth in Q4. We're seeing green shoots across the business and know that our transformation is working.” — CEO Jeff Yurcisin .
  • “This quarter, we were at 6.4% [advertising as % of sales]… we are seeing better returns than we have in years on new customer acquisition.” — CEO Jeff Yurcisin (Q&A) .

Q&A Highlights

  • Marketing intensity and returns: Advertising was 6.4% of sales in Q1; management aims to increase investment given improved returns on new customer acquisition (landing pages, dynamic offers) .
  • Platform transition timing/impact: Critical issues largely resolved; impacts embedded in revised revenue guidance; progress improving week-over-week .
  • Mix shift to third-party: Own brands are decreasing as a % of revenue; margin gap vs third-party has narrowed, supporting margin stability at contribution level despite mix shift .

Estimates Context

  • Q1 2025 vs consensus: Revenue $43.547M vs $47.010M estimate (−7.4% miss); Primary EPS −$0.0516 vs −$0.03 estimate (miss) — migration disruption and smaller repeat order base drove the shortfall *.
  • Q4 2024 vs consensus: Revenue $49.501M vs $48.791M (beat); Primary EPS −$0.2102 vs −$0.15 (miss) — sequential revenue stabilization, but promotions and cohort dynamics weighed on EPS *.
  • Q1 2024 vs consensus: Revenue $53.545M vs $53.400M (slight beat); Primary EPS actual −$0.1827 *.

Values retrieved from S&P Global (*). Consensus coverage is thin (1–2 estimates per metric), which increases variability and reduces signal strength for surprise analysis.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025Approximately flat to down mid-single-digit YoY Down approximately mid-single-digit to low double-digit YoY Lowered
Adjusted EBITDAFY 2025Breakeven to positive low single-digit $M Negative low single-digit to positive low single-digit $M Lowered
Q4 2025 RevenueQ4 2025Return to YoY growth low-single-digit % Slight YoY growth Tempered
Quarterly Pattern2025Q1 lowest; sequential improvement Q2–Q3 Reiterated Maintained
ABL FacilityCurrent$7.5M outstanding; term debt gone Extended to Apr-2028; covenants amended Improved terms

Earnings Call Themes & Trends

(See table above for detailed evolution across Q3 2024, Q4 2024, and Q1 2025.)

Key Takeaways for Investors

  • Near-term headwinds from the platform migration — quantified at $2–$3M in Q1 and baked into revised FY guide — should diminish as fixes and win-back efforts take hold; monitor order conversion and repeat order recovery in Q2/Q3 .
  • The mix shift toward third-party brands, while reducing own-brand revenue share, is less margin-dilutive than historically; assortment breadth is a lever for AOV/order frequency stabilization .
  • Advertising ROI is improving (6.4% of sales, scaled prudently); management intends to lean into high-return channels (CTV, influencer) — watch for sequential demand normalization and CAC/COH trends .
  • Gross margin pressure (−260 bps YoY) reflects fee changes and inventory effects; tariff mitigation (pricing, supplier renegotiations, sourcing diversification) is ongoing, but residual risk remains .
  • Liquidity/covenant flexibility improved via ABL amendment; however, the NYSE non-compliance notice introduces capital markets risk and potential overhang until a cure plan is accepted and progress observed .
  • Q4 2025 is guided to slight YoY growth despite tempered expectations; if Q2/Q3 sequential improvement materializes, this could be a narrative inflection into year-end, contingent on platform stabilization and cohort behavior .
  • Strategic acquisitions (Grab Green, 8Greens) broaden core categories (home cleaning, wellness) and can support gross margin and engagement; integration and working-capital impacts should be monitored .