Grove laborative (GROV) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed notes for periods ended June 30, 2025 and 2024 Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets show a decrease in total assets and cash, and an increase in stockholders' deficit from December 31, 2024, to June 30, 2025 Condensed Consolidated Balance Sheets (Amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $10,049 | $19,627 | | Total current assets | $36,796 | $44,941 | | Total assets | $57,826 | $65,010 | | Total current liabilities | $27,631 | $27,064 | | Total liabilities | $47,062 | $48,787 | | Total stockholders' deficit | $(14,008) | $(8,549) | Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations show decreased revenue and gross profit, but a significantly reduced net loss due to lower interest expense Condensed Consolidated Statements of Operations (Amounts in thousands, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue, net | $44,026 | $52,099 | $87,573 | $105,644 | | Gross profit | $24,395 | $28,063 | $47,459 | $57,803 | | Operating loss | $(3,490) | $(6,936) | $(6,998) | $(7,469) | | Net loss | $(3,626) | $(10,061) | $(7,173) | $(13,452) | | Net loss per share attributable to common stockholders, basic and diluted | $(0.10) | $(0.28) | $(0.21) | $(0.38) | Condensed Consolidated Statements of Redeemable Convertible Preferred Stock, Common Stock and Stockholders' Equity (Deficit) This statement details changes in preferred stock, common stock, and equity, showing an increased stockholders' deficit from December 31, 2024, to June 30, 2025, primarily due to net losses Changes in Stockholders' Deficit (Amounts in thousands) | Metric | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :----------------------------------- | :---------------- | :------------- | :------------ | | Total Stockholders' Deficit | $(8,549) | $(11,648) | $(14,008) | | Net loss (Q1 2025) | | $(3,547) | | | Net loss (Q2 2025) | | | $(3,626) | | Stock-based compensation (H1 2025) | | $969 | $1,378 | | Class A shares issued and outstanding (June 30, 2025) | 35,871,574 | | 41,002,440 | Condensed Consolidated Statements of Cash Flows Cash flows show a net decrease in cash, equivalents, and restricted cash for H1 2025, driven by operating and investing activities Condensed Consolidated Statements of Cash Flows (Amounts in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,885) | $(10,769) | | Net cash used in investing activities | $(3,820) | $(906) | | Net cash used in financing activities | $(648) | $(554) | | Net decrease in cash, cash equivalents and restricted cash | $(10,353) | $(12,229) | | Cash, cash equivalents and restricted cash at end of period | $13,951 | $82,634 | Notes to the Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the financial statements, covering business, accounting policies, acquisitions, debt, equity, and subsequent events 1. Description of Business Grove Collaborative Holdings, Inc. is a digital-first, sustainability-oriented consumer products innovator - Grove Collaborative Holdings, Inc. is a digital-first, sustainability-oriented consumer products innovator specializing in household, personal care, and beauty products with an environmental focus[25] - The Company primarily sells products through its direct-to-consumer (DTC) platform (www.grove.co and mobile apps), offering both Grove-owned brands and third-party products[25] - In Q3 2024, the Company made a strategic decision to wind down sales through the retail channel to improve profitability[25] 2. Summary of Significant Accounting Policies This section outlines the company's significant accounting policies, including revenue recognition, going concern, and recent accounting standard adoptions - The Company has an accumulated deficit of $655.7 million as of June 30, 2025, and believes existing cash and cash equivalents will fund operations for at least one year, but additional capital may be needed long-term[28] - The Company is an 'emerging growth company' and utilizes the extended transition period for complying with new or revised accounting standards[30] - Revenue is primarily generated from product sales through the DTC platform, recognized upon delivery to a third-party carrier[43][47] - VIP membership fees are allocated to two material rights (free shipping, free products) and recognized ratably over the membership period[48][49] Revenue by Product Type (Amounts in thousands) | Product Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Grove Brands | $17,825 | $21,438 | $35,438 | $44,484 | | Third-party products | $26,201 | $30,661 | $52,135 | $61,160 | | Total revenue, net | $44,026 | $52,099 | $87,573 | $105,644 | Fulfillment Costs (Amounts in thousands) | Cost Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Shipping and Handling | $6,785 | $7,287 | $13,195 | $15,237 | | Fulfillment Labor | $2,267 | $2,591 | $4,686 | $5,377 | | Payment Processing | $1,095 | $1,254 | $2,145 | $2,521 | | Total fulfillment costs | $10,147 | $11,132 | $20,026 | $23,135 | - The Company adopted ASU 2023-07 (Segment Reporting) on January 1, 2024, for annual periods and January 1, 2025, for interim periods, with no impact on consolidated financial statements[54] - New tax law (One, Big, Beautiful, Bill Act) signed on July 4, 2025, is not expected to have a material impact on consolidated financial statements[59] 3. Acquisitions This section details the company's recent acquisitions of Grab Green and 8Greens in early 2025, including their cash consideration and related transaction costs - On February 10, 2025, the Company acquired Grab Green, an eco-friendly cleaning products company, for $2.2 million in cash[60][61] - On March 10, 2025, the Company acquired 8Greens, a healthy effervescent tablets and gummies company, for $0.6 million in cash[62][64] - Acquisition-related transaction costs for both acquisitions totaled $0.6 million and were expensed[64] 4. Fair Value Measurements and Fair Value of Financial Instruments This section describes the company's fair value measurements for financial instruments, classifying them into a three-level hierarchy and detailing valuation methods - The Company classifies financial instruments measured at fair value into a three-level hierarchy based on input observability[67] - Earn-Out Shares, Public Warrants, and Private Placement Warrants are classified as Level 3 liabilities and valued using Black-Scholes or Monte Carlo models[71][72][76] Fair Value of Financial Liabilities (Amounts in thousands) | Financial Liabilities | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Earn-Out Shares | $1,060 | $1,257 | | Public Warrants | $0 | $9 | | Private Placement Warrants | $0 | $8 | | Total | $1,060 | $1,274 | - The change in fair value of these liabilities for the six months ended June 30, 2025, resulted in a gain of $214 thousand[77] 5. Other Financial Statement Information This section provides details on accrued expenses and intangible assets, including their net values and estimated amortization for future periods Accrued Expenses (Amounts in thousands) | Accrued Expense Category | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Inventory purchases | $4,504 | $1,657 | | Compensation and benefits | $1,039 | $4,149 | | Advertising costs | $440 | $558 | | Fulfillment costs | $830 | $540 | | Sales taxes | $847 | $1,106 | | Other accrued expenses | $3,784 | $3,536 | | Total accrued expenses | $11,444 | $11,546 | Intangible Assets, Net (Amounts in thousands) | Intangible Asset | June 30, 2025 (Net) | December 31, 2024 (Net) | | :-------------------- | :------------------ | :---------------------- | | Customer relationships | $1,027 | $0 | | Trademarks | $839 | $56 | | Grove.com domain name | $656 | $656 | | Total Intangible Assets, net | $2,522 | $712 | - The estimated annual amortization of intangible assets for the next five years totals $1.866 million[79] 6. Debt This section details the Siena Revolver, including its extended maturity date, interest rate structure, outstanding balance, and additional borrowing capacity - The Siena Revolver maturity date was extended to April 10, 2028, and the financial covenant was eliminated via Siena Amendment No. 3 on May 8, 2025[82] - Interest rates for the Siena Revolver are based on a fluctuating rate, either Base Rate plus 3.25% or Term SOFR plus 4.25%[82] - As of June 30, 2025, the outstanding principal balance under the Siena Revolver was $7.5 million with an interest rate of 8.58%, and additional borrowing capacity was $0.4 million[85] 7. Commitments and Contingencies This section outlines the company's merchandise purchase commitments, letters of credit, and ongoing legal investigation by the California Autorenewal Task Force Merchandise Purchase Commitments (Amounts in millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Merchandise Purchase Commitments | $9.2 | $9.1 | Letters of Credit (Amounts in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Standby Letters of Credit | $1.8 | $2.1 | - The Company is under investigation by the California Autorenewal Task Force regarding compliance with California's Automatic Renewal Law, Unfair Competition Law, and False Advertising Law, and it is probable a loss will be incurred, though the amount is not yet estimable[90] 8. Common Stock and Warrants This section details changes in common stock, outstanding warrants, Earn-Out Shares, and the Amended Standby Equity Purchase Agreement with Yorkville - In February 2025, all outstanding Class B Common Stock automatically converted into Class A Common Stock, and the Class B Common Stock was retired in April 2025[93] - 2,602,412 Earn-Out Shares remain unvested as of June 30, 2025, with vesting contingent on Class A common stock reaching $62.50 and $75.00 per share thresholds within ten years[95][97] Outstanding Warrants (as-converted basis) | Warrant Type | Shares | Exercise Price | | :---------------------- | :---------- | :------------- | | Public Warrants | 1,460,146 | $57.50 | | Private Placement Warrants | 1,340,000 | $57.50 | - The Company entered into an Amended Standby Equity Purchase Agreement (SEPA) with Yorkville on July 8, 2025, extending the term to August 1, 2027, and amending the purchase price for Class A common stock[106][135] - As of June 30, 2025, 6,363,567 shares were available to be sold to Yorkville under the Exchange Cap, with 147,965 shares already sold for $2.4 million gross proceeds[106] Shares Reserved for Future Issuance (as-if converted basis) | Category | June 30, 2025 (Class A Common Stock) | December 31, 2024 (Class A Common Stock) | | :---------------------------------------- | :----------------------------------- | :--------------------------------------- | | Private Placement Warrants | 1,340,000 | 1,340,000 | | Public Warrants | 1,460,146 | 1,460,146 | | Backstop Warrants | 775,005 | 775,005 | | Shares issuable upon conversion of redeemable convertible preferred stock | 12,500,097 | 12,500,097 | | Other outstanding common stock warrants | 473,895 | 362,000 | | Outstanding stock options | 1,649,627 | 930,956 | | Outstanding restricted stock units | 4,938,665 | 4,656,655 | | Shares available for issuance under 2022 Equity Incentive Plan | 5,869,921 | 5,182,186 | | Shares available for issuance under 2022 Employee Stock Purchase Plan | 1,104,661 | 846,157 | | Total shares of common stock reserved | 30,112,017 | 28,053,202 | 9. Redeemable Convertible Preferred Stock This section details the Series A and Series A' Preferred Stock issuances, their associated rights, cumulative dividends, and classification as temporary equity - The Company issued Series A Preferred Stock ($10.0 million) in August 2023 and Series A' Preferred Stock ($15.0 million) in September 2024 to Volition Capital Fund IV, L.P[109][110] - In connection with the Series A' issuance, Volition Warrants and Volition Penny Warrants were canceled, and Series A Preferred Stock redemption terms were modified[110] - Holders of Preferred Stock are entitled to cumulative dividends at 6% per annum, with total undeclared dividends of $1.8 million as of June 30, 2025[114] - Preferred Stock has liquidation preferences and voting rights equivalent to Class A Common Stock on an as-converted basis[115][116] - The Preferred Stock is classified as temporary equity due to deemed liquidation rights that are contingent redemption features not solely within the Company's control[120] 10. Stock-Based Compensation This section details stock option and restricted stock unit activity, along with the associated stock-based compensation expense and unrecognized compensation expense Stock Option Activity (Amounts in thousands, except share and per share amounts) | Metric | Number of Options | Weighted-Average Exercise Price | | :-------------------------- | :---------------- | :------------------------------ | | Balance – December 31, 2024 | 1,707,450 | $7.34 | | Cancelled/forfeited | (57,823) | $7.06 | | Balance – June 30, 2025 | 1,649,627 | $7.35 | | Options vested and exercisable – June 30, 2025 | 1,446,194 | $5.74 | Restricted Stock Units (RSUs) Activity | Metric | Number of Shares | Weighted-Average Grant Date Fair Value Per Share | | :------------------------ | :--------------- | :----------------------------------------------- | | Unvested – December 31, 2024 | 4,657,655 | $2.62 | | Granted | 2,769,300 | $1.52 | | Vested | (1,598,724) | $2.88 | | Forfeited | (889,566) | $3.03 | | Balance – June 30, 2025 | 4,938,665 | $1.85 | Stock-Based Compensation Expense (Amounts in millions) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total | $1.4 | $3.4 | $2.3 | $6.5 | - As of June 30, 2025, total unrecognized compensation expense for unvested options and RSUs was $6.5 million, to be recognized over an estimated weighted average period of 2.3 years[128] 11. Segments This section confirms the company operates as a single segment, with the CEO as CODM, using net loss to evaluate performance - The Company operates in one operating segment, with the Chief Executive Officer as the chief operating decision maker (CODM)[129] - The CODM uses net loss to evaluate the Company's return on assets and investment decisions[131] Segment Revenue, Significant Expenses and Net Loss (Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue, net | $44,026 | $52,099 | $87,573 | $105,644 | | Cost of goods sold | $19,631 | $24,036 | $40,114 | $47,841 | | Gross profit | $24,395 | $28,063 | $47,459 | $57,803 | | Fulfillment costs | $10,147 | $11,132 | $20,026 | $23,135 | | Advertising | $2,722 | $2,439 | $5,529 | $4,492 | | Product development and other SG&A expenses | $13,150 | $15,605 | $25,689 | $26,508 | | Consolidated net loss | $(3,626) | $(10,061) | $(7,173) | $(13,452) | 12. Net Loss Per Share Attributable to Common Stockholders This section details potentially dilutive shares excluded from EPS calculations for the three and six months ended June 30, 2025 and 2024 Potentially Dilutive Shares Excluded from EPS Calculation | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Redeemable convertible preferred stock | 12,500,097 | 4,739,336 | 12,500,097 | 4,739,336 | | Restricted stock units | 4,938,665 | 5,132,111 | 4,938,665 | 5,132,111 | | Public Warrants and Private Placement Warrants | 2,800,146 | 2,800,146 | 2,800,146 | 2,800,146 | | Earn-Out Shares | 2,602,412 | 2,602,412 | 2,602,412 | 2,602,412 | | Options | 1,649,627 | 1,712,021 | 1,649,627 | 1,712,021 | | Common Stock Warrants | 473,895 | 2,596,673 | 473,895 | 2,596,673 | | ESPP Shares | 43,804 | 31,597 | 43,804 | 31,597 | | Total | 25,008,646 | 19,614,296 | 25,008,646 | 19,614,296 | - These shares were excluded from diluted net loss per share calculations because their inclusion would have been anti-dilutive[36][134] 13. Subsequent Events This section reports the amendment of the Standby Equity Purchase Agreement with Yorkville on July 8, 2025, extending its term - On July 8, 2025, the Company and Yorkville amended the Standby Equity Purchase Agreement (SEPA) to extend the commitment period to August 1, 2027, and modify the purchase price for Class A common stock[135] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, covering key performance factors, operating metrics, non-GAAP measures, liquidity, and critical accounting estimates Overview This overview describes Grove as a sustainability-oriented DTC consumer products company, its exit from retail, and accumulated deficit - Grove is a sustainability-oriented consumer products company operating primarily through an online direct-to-consumer (DTC) platform[143][144] - The Company decided to exit the brick-and-mortar retail channel in Q4 2024, expecting improved profitability with insignificant revenue impact, to be completed in H2 2025[144] - As of June 30, 2025, the Company has an accumulated deficit of $655.7 million[145] - New tax legislation (OBBB) signed July 4, 2025, is not expected to have a material impact on the Company's consolidated financial statements[146] Key Factors Affecting Our Operating Performance This section discusses factors impacting performance, including brand awareness, product innovation, customer acquisition, profitability, and e-commerce platform migration - Future business growth depends on increasing brand awareness by highlighting natural, sustainable, and effective product qualities and marketing efforts[148] - Continued product innovation, especially in environmentally responsible packaging, is integral to future growth, despite reduced investment in recent periods[149] - Cost-efficient acquisition and retention of customers on the DTC platform are crucial, facing challenges from increasing online advertising costs and privacy changes[150][151] - The Company aims for profitable growth by re-investing to expand its DTC business and achieve scale, acknowledging that recent profitability gains may not be sustainable short-term[153] - The migration of the e-commerce platform to third-party providers has caused and is expected to continue causing disruptions, impacting user experience, inventory, fulfillment, and payment processing[154][155] Key Operating and Financial Metrics This section presents key operating metrics, including DTC Total Orders, Active Customers, and Net Revenue Per Order, with explanations for their changes Key Operating Metrics (Amounts in thousands, except DTC Net Revenue Per Order) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | DTC Total Orders | 640 | 732 | 1,262 | 1,505 | | DTC Active Customers | 664 | 745 | 664 | 745 | | DTC Net Revenue Per Order | $65 | $68 | $66 | $67 | - DTC Total Orders decreased in Q2 and H1 2025 due to lower advertising spend in prior periods, fewer new customer acquisitions, and temporary e-commerce platform migration disruptions[158] - DTC Active Customers decreased in Q2 and H1 2025, primarily due to reduced advertising spend in prior years leading to fewer new customer acquisitions and repeat orders[159] - DTC Net Revenue Per Order decreased in Q2 and H1 2025 due to an increase in lower-value recurring orders and the elimination of certain customer fees, partially offset by improved promotional strategies[160] Non-GAAP Financial Measures: Adjusted EBITDA and Adjusted EBITDA Margin This section defines Adjusted EBITDA as a non-GAAP measure used by management to evaluate operating performance, providing a reconciliation to net loss - Adjusted EBITDA is a non-GAAP measure used by management to evaluate operating performance, excluding items like stock-based compensation, depreciation, changes in derivative fair value, interest, restructuring costs, and transaction costs[162] Reconciliation of Net Loss to Adjusted EBITDA (Amounts in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(3,626) | $(10,061) | $(7,173) | $(13,452) | | Stock-based compensation | 1,378 | 3,397 | 2,347 | 6,510 | | Depreciation and amortization | 488 | 2,426 | 866 | 4,627 | | Changes in fair value of derivative liabilities | (70) | (8) | (214) | (206) | | Interest income | (109) | (993) | (281) | (2,079) | | Interest expense | 305 | 4,117 | 651 | 8,246 | | Restructuring and severance related costs | — | 2,170 | — | (715) | | Transaction related costs | 712 | — | 1,275 | — | | Provision for income taxes | 10 | 10 | 19 | 20 | | Total Adjusted EBITDA | $(912) | $1,058 | $(2,510) | $2,951 | | Adjusted EBITDA margin (loss) | (2.1)% | 2.0% | (2.9)% | 2.8% | Components of Results of Operations This section details revenue sources, cost of goods sold, gross margin drivers, operating expenses (advertising, product development, SG&A), and non-operating expenses - Revenue is primarily generated from DTC sales of Grove Brands and third-party products, recognized net of discounts, sales tax, credits, and estimated refunds[165] - Cost of goods sold includes product costs, inbound freight, vendor allowances, inventory shrinkage, and write-offs[167] - Gross margin is generally higher for Grove Brands and fluctuates based on promotional activity, product mix, and inbound transportation rates[168] - Operating expenses include advertising (expensed as incurred), product development (personnel, platform support, innovation), and selling, general and administrative (corporate functions, fulfillment, marketing, environmental offsets)[169][170][171][172][173] - Non-operating expenses include interest expense (decreased due to debt extinguishment), changes in fair value of derivative liabilities (fluctuates with stock price), and other income (primarily interest income)[174][175][176] Results of Operations This section provides a detailed comparison of revenue, cost of goods sold, gross profit, operating expenses, and non-operating expenses for the three and six months ended June 30, 2025 and 2024 Revenue, Net Comparison (Amounts in thousands, except percentages) | Metric | June 30, 2025 | June 30, 2024 | Change Amount | Change % | | :---------- | :------------ | :------------ | :------------ | :------- | | Three Months Ended | | | | | | Revenue, net | $44,026 | $52,099 | $(8,073) | (15)% | | Six Months Ended | | | | | | Revenue, net | $87,573 | $105,644 | $(18,071) | (17)% | - Revenue decreased primarily due to lower DTC Total Orders from reduced advertising in prior periods, temporary e-commerce platform migration disruptions, and decreases in DTC Net Revenue Per Order[180] Cost of Goods Sold and Gross Profit Comparison (Amounts in thousands, except percentages) | Metric | June 30, 2025 | June 30, 2024 | Change Amount | Change % | | :-------------- | :------------ | :------------ | :------------ | :------- | | Three Months Ended | | | | | | Cost of goods sold | $19,631 | $24,036 | $(4,405) | (18)% | | Gross profit | $24,395 | $28,063 | $(3,668) | (13)% | | Gross margin | 55% | 54% | 1.55 pp | | | Six Months Ended | | | | | | Cost of goods sold | $40,114 | $47,841 | $(7,727) | (16)% | | Gross profit | $47,459 | $57,803 | $(10,344) | (18)% | | Gross margin | 54% | 55% | (0.52) pp | | - Cost of goods sold decreased due to lower DTC Total Orders; gross margin increased in Q2 2025 but decreased in H1 2025 due to various factors[181][182][183][184] Operating Expenses Comparison (Amounts in thousands, except percentages) | Metric | June 30, 2025 | June 30, 2024 | Change Amount | Change % | | :------------------ | :------------ | :------------ | :------------ | :------- | | Three Months Ended | | | | | | Advertising | $2,722 | $2,439 | $283 | 12% | | Product development | $2,207 | $5,436 | $(3,229) | (59)% | | Selling, general and administrative | $22,956 | $27,124 | $(4,168) | (15)% | | Six Months Ended | | | | | | Advertising | $5,529 | $4,492 | $1,037 | 23% | | Product development | $3,986 | $9,062 | $(5,076) | (56)% | | Selling, general and administrative | $44,942 | $51,718 | $(6,776) | (13)% | - Advertising expenses increased due to higher online and television advertising; product development expenses decreased significantly due to lower amortization, severance, and salaries[185][186][187] - Selling, general and administrative expenses decreased due to lower fulfillment costs, stock-based compensation, corporate salaries, and depreciation, partially offset by acquisition support fees[188][189][190] Non-Operating Expenses (Income), Net Comparison (Amounts in thousands, except percentages) | Metric | June 30, 2025 | June 30, 2024 | Change Amount | Change % | | :------------------ | :------------ | :------------ | :------------ | :------- | | Three Months Ended | | | | | | Interest expense | $305 | $4,117 | $(3,812) | (93)% | | Changes in fair value of derivative liabilities | $(70) | $(8) | $(62) | ** | | Other income, net | $(109) | $(994) | $885 | (89)% | | Six Months Ended | | | | | | Interest expense | $651 | $8,246 | $(7,595) | (92)% | | Changes in fair value of derivative liabilities | $(214) | $(206) | $(8) | ** | | Other income, net | $(281) | $(2,077) | $1,796 | (86)% | - Interest expense decreased significantly due to the extinguishment of the term debt facility in 2024; other income decreased due to lower on-hand cash[191][193] Liquidity, Capital Resources and Requirements This section discusses the company's cash position, accumulated deficit, debt, borrowing capacity, NYSE compliance, and future capital needs - As of June 30, 2025, the Company had $10.0 million in unrestricted cash and cash equivalents and incurred negative cash flows from operating activities of $5.9 million for the six months ended June 30, 2025[194] - The Company has an accumulated deficit of $655.7 million and total outstanding indebtedness of $7.5 million as of June 30, 2025[194] - The Siena Revolver provides $0.4 million in additional borrowing capacity as of June 30, 2025, with its maturity extended to April 10, 2028[197] - The NYSE accepted the Company's business plan to regain compliance with the minimum market capitalization and stockholders' equity standard by August 5, 2025[198] - The Amended SEPA with Yorkville, extended to August 1, 2027, allows the Company to sell up to $100.0 million of common stock, with approximately $8.7 million in additional gross proceeds available as of July 31, 2025, subject to the Exchange Cap and stock price[199] - Management believes current resources are sufficient for at least one year, but additional capital may be required for strategic initiatives and future operations[200] Contractual Obligations and Other Commitments This section details the company's merchandise purchase commitments and the outstanding principal and borrowing capacity of the Siena Revolver - As of June 30, 2025, the Company had $9.2 million in enforceable and legally binding inventory purchase commitments, predominantly due within one year[202] - The Siena Revolver has an outstanding principal of $7.5 million as of June 30, 2025, with $0.4 million additional borrowing capacity, maturing on April 10, 2028[203][204] Cash Flows This section summarizes cash flows from operating, investing, and financing activities, highlighting changes and their primary drivers for H1 2025 Cash Flow Summary (Amounts in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change % | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Net cash used in operating activities | $(5,885) | $(10,769) | (45.4)% | | Net cash used in investing activities | $(3,820) | $(906) | 321.6% | | Net cash used in financing activities | $(648) | $(554) | 17.0% | | Net decrease in cash, cash equivalents and restricted cash | $(10,353) | $(12,229) | | - Net cash used in operating activities decreased by 45.4% in H1 2025, primarily due to lower net loss and favorable changes in operating assets and liabilities[206][207] - Net cash used in investing activities increased significantly by 321.6% in H1 2025, mainly due to cash paid for strategic acquisitions ($2.8 million) and property and equipment purchases[208] - Net cash used in financing activities remained relatively stable in H1 2025, primarily consisting of payments related to stock-based awards offset by ESPP proceeds[209] Off-Balance Sheet Arrangements The Company confirms it has no off-balance sheet financing arrangements as of June 30, 2025 - The Company does not have any off-balance sheet financing arrangements as of June 30, 2025[210] Critical Accounting Estimates This section states there have been no significant changes to the company's critical accounting policies since December 31, 2024 - There have been no significant changes to the Company's critical accounting policies since December 31, 2024[211] Emerging Growth Company Status The Company, as an 'emerging growth company,' utilizes JOBS Act exemptions, potentially affecting comparability with other public companies - The Company is an 'emerging growth company' under the JOBS Act and utilizes exemptions from certain reporting requirements, including auditor attestation and reduced executive compensation disclosures[212] - The Company has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[356] Smaller Reporting Company Status The Company qualifies as a 'smaller reporting company,' allowing for reduced disclosure obligations due to its market value - The Company is a 'smaller reporting company' with a market value of stock held by non-affiliates less than $250 million, allowing for reduced disclosure obligations[213] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Grove Collaborative Holdings, Inc. is exempt from market risk disclosures - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[214] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures as of June 30, 2025, with no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures The Company's Certifying Officers concluded that disclosure controls and procedures were effective as of June 30, 2025 - The Company's Certifying Officers concluded that disclosure controls and procedures were effective as of June 30, 2025[216] Changes in Internal Control over Financial Reporting There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025 - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[217] Limitations on the Effectiveness of Controls This section acknowledges that disclosure controls and procedures provide only reasonable, not absolute, assurance due to inherent limitations - Disclosure controls and procedures provide only reasonable, not absolute, assurance and have inherent limitations[218] Part II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 7 for details regarding legal proceedings and contingencies - Refer to Note 7, Commitments and Contingencies, for information on legal proceedings[220] Item 1A. Risk Factors This section outlines material risks impacting the company's business, operating results, financial condition, and ownership of its securities Summary of Risk Factors This summary highlights that an investment in the company's securities is speculative and risky, not covering all potential risks - An investment in the Company's securities is speculative and risky, and this summary does not cover all potential risks[222] Risks Related to Our Business This section details risks related to business operations, including macroeconomic conditions, product claims, growth, platform disruptions, and competition - The Company's business relies on consumer discretionary spending, which is vulnerable to adverse macroeconomic conditions like high unemployment, inflation, and economic uncertainty[226] - Advertising inaccuracies or product mislabeling, especially regarding 'natural,' 'organic,' or 'sustainable' claims, could lead to lawsuits, recalls, regulatory actions, and harm to brand reputation[227][228][232] - After years of rapid growth, the Company has experienced revenue declines and may struggle to achieve sustainable profitable growth, particularly if investments in growth initiatives are insufficient or ineffective[233][234] - Outsourcing the e-commerce platform to third-party providers has caused and may continue to cause disruptions in operations, user experience, inventory management, and payment processing, potentially harming financial results[235][237][238][239] - Quarterly operating results fluctuate due to various factors, including seasonality, product launches, marketing effectiveness, and platform disruptions, which could lead to stock price declines[240][241] - The Company has incurred significant losses since inception and expects future losses, requiring substantial revenue growth to achieve and maintain profitability[242][243][244] - Additional financing may be required, and failure to obtain it on acceptable terms could force delays or reductions in strategic initiatives, adversely impacting future growth[245][246][247] - The Company operates in rapidly evolving and intensely competitive markets, facing competitors with longer histories, larger infrastructures, and greater resources, which could adversely affect its business[248][249][250][251][252] - Failure to cost-effectively acquire new customers or retain existing ones, due to rising marketing costs, changes in advertising platforms, or ineffective new strategies, could adversely affect operating results[254][255][256][257] - Reductions in advertising and marketing spending to achieve profitability may harm brand awareness and market position[258] - Real or perceived issues with product quality, safety, efficacy, or environmental impact could diminish brand reputation, lead to recalls, regulatory actions, and loss of sales[259][260][261] - Failure to introduce new products that meet customer expectations or are more costly than anticipated could harm the business and impair growth potential[262][263] - Evolving government regulations of the Internet and e-commerce, including consumer protection, privacy, and sales practices, could increase costs, limit growth, and expose the Company to legal actions[264] - Selling consumer products involves inherent product liability risks, including claims of personal injury, illness, or environmental damage, which could lead to recalls, lawsuits, and harm to reputation and liquidity[265][266][267][268] - The Company is subject to a broad range of federal, state, local, and foreign laws and regulations (e.g., OSHA, FDA, CPSC, USDA, FTC, EPA), and non-compliance or changes in these laws could result in fines, sanctions, recalls, and increased operating costs[269][270][271][272] - Acquisitions, a part of the Company's strategy, involve risks such as integration difficulties, potential impairment charges, assumption of liabilities, and challenges in retaining key relationships, which could harm the business[273] - Damage or destruction to distribution centers from natural disasters or man-made events could disrupt operations, reduce inventory value, and harm the business[274] - The Company's success depends on its management team, and the loss of key employees could harm the business and hinder the timely implementation of its business plan[275] - Labor-related matters, including potential unionization or work stoppages, could disrupt operations and increase labor costs[276] - Reliance on a limited number of third-party suppliers and manufacturers, especially international ones, exposes the Company to price fluctuations, supply disruptions, quality control issues, and increased costs from tariffs[277][278][279][280][281][282][283] - Failure of third-party suppliers and manufacturers to comply with ethical business practices or applicable laws could harm the Company's reputation and expose it to litigation and enforcement actions[284][285][286] - Ineffective optimization, operation, or management of warehouse fulfillment centers could lead to excess or insufficient capacity, increased costs, and harm to customer relationships[287][288] - Dependence on third-party shipping vendors means changes in arrangements, interruptions, or rising costs could negatively impact operating results and customer experience[289] - Outsourcing fulfillment and technology functions to third-party service providers, including those in foreign countries, creates risks of service failures, increased costs, and operational disruptions[290] - Risks associated with online payment methods, including reliance on third-party processors, potential for increased fees, compliance with industry standards (PCI-DSS), and fraud, could materially impact operations and financial performance[291][292][293][294] - Inability to adequately obtain, maintain, protect, defend, and enforce intellectual property rights (patents, trademarks, copyrights, trade secrets) could allow competitors to mimic products and diminish brand value[295][296][297][298][299][300][301][302][303][304][305][306][307] - Claims that employees or contractors have wrongfully used or disclosed confidential information or trade secrets of third parties could lead to litigation, loss of intellectual property, or key personnel[308] - Indemnity provisions in agreements could expose the Company to substantial, potentially uncapped, liability for intellectual property infringement claims, harming financial condition and relationships[309][310] - Failure to successfully maintain, scale, and upgrade information technology systems could lead to business disruptions and increased operating costs[311][312] - Inability to protect against or mitigate cybersecurity attacks, service interruptions, or data corruption could disrupt operations, harm reputation, and incur significant remediation costs and legal claims[313][314][315][316][317][318][319] - Actual or perceived failure to comply with evolving privacy and data protection laws (e.g., CCPA, CPRA) and industry standards could increase compliance costs, liability, and negatively impact business[320][321][322][323][324][325][326] - Changes in existing laws or regulations, or adoption of new ones (e.g., Endorsement Guides, Green Guides, MOCRA, tariff policies), could increase costs, restrict marketing, and adversely affect business[327][328][329][330][331][332][333] - Failure by partners, suppliers, or manufacturers to comply with product safety, environmental, or other laws could disrupt supply, harm reputation, and lead to lawsuits or regulatory actions[334] - The Company's status as a public benefit corporation and Certified B Corporation may not yield anticipated benefits and could lead to reputational harm if standards are not met or if the focus shifts from public benefit[335][336][337] - As a public benefit corporation, the duty to balance various stakeholder interests may result in actions that do not maximize stockholder value, potentially affecting stock price[338][339] - Increased derivative litigation concerning the duty to balance stockholder and public benefit interests could arise, diverting management attention and impacting financial condition[340] - The Company and its directors/executive officers may face litigation for various claims, which could harm reputation, divert resources, and adversely affect financial condition[341][342][343] Risks Related to Ownership of Our Securities This section covers risks related to securities ownership, including stock price volatility, dilution from warrants, delisting, and anti-takeover provisions - The price of the Company's Class A Common Stock and warrants may be volatile due to industry changes, operating performance, analyst reports, key personnel changes, regulatory changes, and macroeconomic conditions[344][345] - Exercise of outstanding warrants (Public, Private Placement, Legacy Grove, Backstop) and issuance of additional shares could dilute existing stockholders and negatively affect market prices[346][347][348][349][350] - Public Warrants may expire worthless if the stock price does not exceed the exercise price, and their terms can be amended adversely with 65% holder approval[351] - The Company may redeem unexpired Public Warrants at a disadvantageous time for holders, potentially making them worthless[353][354] - As an 'emerging growth company,' the Company's use of disclosure exemptions may make its securities less attractive to investors and complicate performance comparisons with other public companies[355][356] - Future acquisitions or strategic alliances may involve incurring debt, assuming contingent liabilities, or issuing equity, which could dilute stockholders or impose business restrictions[357] - Future sales, or the perception of future sales, of Class A Common Stock by the Company or its stockholders in the public market could cause the market price to decline[358][359][360] - The NYSE may delist the Company's securities if it fails to meet listing standards, which could limit trading, reduce liquidity, and trigger adverse consequences[361][362] - The Company has no current plans to pay cash dividends on Class A Common Stock, meaning holders may only receive a return on investment through stock appreciation[363] - The Series A Preferred Stock and Series A' Preferred Stock have rights, preferences, and privileges (e.g., liquidation preference, voting restrictions) that could limit business flexibility or reduce Class A Common Stock value[364] - Covenants in loan agreements (e.g., Siena Revolver) restrict business operations, and failure to manage them or insufficient cash flow for repayment could adversely affect financial condition[365] - Lack of research or negative reports from securities analysts could cause the stock price and trading volume to decline[366] - As a public company, the Company faces significant expenses and administrative burdens, potentially impacting business and financial results[367] - Inability to maintain effective internal control over financial reporting could lead to loss of investor confidence, inaccurate reporting, and a decline in stock price[368][369][370] - Delaware law and governing documents contain anti-takeover provisions (e.g., classified board, preferred stock issuance, advance notice procedures) that could delay or discourage takeover attempts[371][372] - The Certificate of Incorporation designates Delaware courts as the exclusive forum for most disputes, potentially limiting stockholders' ability to choose a favorable judicial forum[373][374] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reports no unregistered sales of equity securities or use of proceeds - No unregistered sales of equity securities or use of proceeds to report[376] Item 3. Defaults Upon Senior Securities The Company reports no defaults upon senior securities - No defaults upon senior securities to report[377] Item 4. Mine Safety Disclosures The Company reports no mine safety disclosures - No mine safety disclosures to report[378] Item 5. Other Information The Company reports no other information - No other information to report[379] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including merger agreements, corporate governance, and warrant agreements - Exhibits include the Agreement and Plan of Merger, Certificate of Incorporation, Amended and Restated Bylaws, Warrant Agreements, Subscription Agreements, and Certifications[381][382][383][384][385] Signatures This section contains the official signatures for the report, confirming its submission by the Interim Chief Financial Officer - The report is signed by Tom Siragusa, Interim Chief Financial Officer, on August 7, 2025[389]