Grove laborative (US:GROV)2023-03-16 20:53Financial Performance - Grove Collaborative Holdings, Inc. reported an accumulated deficit of $577.9 million as of December 31, 2022, indicating ongoing financial challenges [289]. - The company experienced a revenue decline of approximately 16% in the year ended December 31, 2022, compared to the prior year, attributed to changing consumer behaviors post-COVID-19 [301]. - The company reported a net loss of $87.7 million in 2022, an improvement from a net loss of $135.9 million in 2021 [323]. - Adjusted EBITDA for 2022 was $(79.9) million, compared to $(108.8) million in 2021, indicating a reduction in operational losses [323]. - The net loss margin for 2022 was (27.3)%, improving from (35.4)% in 2021, while the adjusted EBITDA margin was (24.8)%, compared to (28.4)% in 2021 [323]. - Operating loss increased to $140.983 million in 2022 from $128.855 million in 2021, reflecting a 9.3% increase in losses [430]. - The company’s net loss was equal to its comprehensive loss for all periods presented [457]. Revenue and Customer Metrics - Total revenue decreased by $62.2 million, or 16%, to $321.5 million for the year ended December 31, 2022, compared to $383.7 million in 2021, primarily due to a reduction in DTC Active Customers and advertising spend [339]. - DTC total orders declined to 5,248 in 2022 from 6,659 in 2021, reflecting a decrease in new customer acquisition due to reduced advertising spend [316]. - DTC active customers decreased to 1,377 in 2022, down from 1,640 in 2021, indicating challenges in customer retention as the economy recovers from the COVID-19 pandemic [317]. - DTC net revenue per order increased to $59 in 2022, up from $56 in 2021, attributed to strategic price increases on Grove Brands and third-party products [318]. - Grove Brands' net revenue percentage was 48% in 2022, a slight decrease from 49% in 2021 and an increase from 45% in 2020 [314]. Cost Management and Expenses - A workforce reduction of more than 30% was implemented in 2022, resulting in charges totaling $3.6 million to reduce operating expenses [290]. - Advertising expenses were reduced by $41.0 million, or 38%, to $66.3 million in 2022, driven by cash flow management initiatives [342]. - Selling, general and administrative expenses increased by $20.2 million, or 11%, to $206.9 million in 2022, primarily due to increased stock-based compensation and restructuring-related expenses [344]. - Interest expense rose by $4.5 million, or 86%, to $9.7 million in 2022, attributed to draws under loan facilities and rising prime interest rates [345]. - Product development costs are anticipated to remain consistent as a percentage of revenue, balancing investments in technology and product innovation with revenue growth [330]. Business Strategy and Expansion - Grove has launched over 500 individual products in recent years, emphasizing its commitment to product innovation and sustainability [298]. - The company expanded its retail partnerships to over 4,000 stores, including major retailers like Target and CVS, to enhance brand awareness and distribution [288]. - The company plans to aggressively expand its physical retail presence over the next few years to enhance omnichannel leadership and sustainability [312]. - The company anticipates that retail expansion may lead to potential negative effects on gross margins, which could be offset by savings in fulfillment costs [299]. - Ongoing investments in advertising and strategic initiatives are expected to continue, necessitating additional capital resources for operations [289]. Cash Flow and Financing - Net cash used in operating activities decreased by $30.8 million in 2022 compared to 2021, primarily due to a $22.6 million decrease in net loss and a $41.0 million reduction in advertising expenses [382]. - Net cash provided by financing activities was $118.1 million for the year ended December 31, 2022, mainly from $97.1 million in common stock issuance and $70.8 million in debt issuance, offset by $66.0 million in debt extinguishment [386]. - The company entered into a Structural Debt Facility in December 2022, borrowing gross proceeds of $72.0 million to settle previous loan facilities [375]. - The company entered into a Loan and Security Agreement with Siena Lending Group, allowing for a revolving line of credit up to $35.0 million, with a borrowing capacity of $16.5 million as of March 10, 2023, and an outstanding principal balance of $7.5 million [377]. - The company had $81.1 million in unrestricted cash and cash equivalents as of December 31, 2022, with an accumulated deficit of $577.9 million [363]. Inventory and Assets - As of December 31, 2022, total assets amounted to $174,045,000, a decrease from $182,473,000 in 2021 [428]. - Inventory, net decreased to $44,132,000 in 2022 from $54,453,000 in 2021, reflecting a reduction of approximately 19% [428]. - Total current liabilities decreased to $57,473,000 in 2022 from $69,214,000 in 2021, a reduction of approximately 17% [428]. - Total stockholders' equity improved to $26,533,000 in 2022 from $(456,279,000) in 2021, marking a significant turnaround [428]. Stock and Liabilities - The company has not paid dividends on its common stock and has no plans to do so, maintaining an expected dividend yield of zero [409]. - The fair value of common stock is determined based on market prices and significant judgment by the board of directors [407]. - The company recognized stock-based compensation expenses using various valuation models, including the Black-Scholes option-pricing model and Monte Carlo simulations [407][411]. - The company recorded a debt discount of $1.1 million related to the issuance of 4,950,000 shares of Class A Common Stock in connection with the Structural Debt Facility [402]. - The Earn-Out Share liability includes 13,999,960 shares subject to vesting based on stock price performance, with 7,000,173 shares vesting if the stock price exceeds $12.50 over a specified period [391].