Grove Collaborative Holdings Inc

Previous wording

The following discussion and analysis of the financial condition and results of operations of Grove Collaborative Holdings, Inc. (“Grove,” “we,” “us,” and “our”) should be read with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. This discussion and analysis contains forward-looking statements based upon current expectations that involves risks and uncertainties. Grove’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors” herein or in our Annual Report on Form 10-K for the year ended December 31, 2023 or in other parts of this Quarterly Report on Form 10-Q. Grove’s historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2023 refer to the year ended December 31, 2023.

Current wording

The following discussion and analysis of the financial condition and results of operations of Grove Collaborative Holdings, Inc. (“Grove,” “we,” “us,” and “our”) should be read with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. This discussion and analysis contains forward-looking statements based upon current expectations that involve risks and uncertainties. Grove’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors” herein or in our Annual Report on Form 10-K for the year ended December 31, 2023 or in other parts of this Quarterly Report on Form 10-Q. Grove’s historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2023 refer to the year ended December 31, 2023.

Previous wording

Our omnichannel distribution strategy enables us to reach consumers where they want to shop. We operate an online direct-to-consumer website and mobile application (“DTC platform”) where we both sell our Grove-owned brands (“Grove Brands”) and other leading natural and mission-based CPG brands, providing consumers with a selection of curated products across many categories and brands. We refer to this part of our business as “DTC.” We expanded into brick-and-mortar retail in April 2021 with the launch of a curated assortment of Grove Co. best sellers in cleaning, laundry, hand and dish categories at Target and have since established additional retail partnerships with Amazon, CVS, Meijer, and Kroger. Our products were sold in over 10,000 stores across these retail partnerships as of March 31, 2024. We believe our retail strategy will generate additional brand awareness, especially as consumer concerns about single-use plastic continue to rise.

Current wording

Our omnichannel distribution strategy enables us to reach consumers where they want to shop. We operate an online direct-to-consumer website and mobile application (“DTC platform”) where we both sell our Grove-owned brands (“Grove Brands”) and other leading natural and mission-based CPG brands, providing consumers with a selection of curated products across many categories and brands. We refer to this part of our business as “DTC.” We expanded into brick-and-mortar retail in April 2021 with the launch of a curated assortment of Grove Co. best sellers in cleaning, laundry, hand and dish categories at Target and have since established additional retail partnerships with CVS, Meijer, and Kroger. Our products were sold in over 10,000 stores across these retail partnerships and on Amazon.com as of June 30, 2024. We believe our retail strategy will generate additional brand awareness, especially as consumer concerns about single-use plastic continue to rise.

Previous wording

Grove is a public benefit corporation and a Certified B Corporation, meaning we adhere to third party standards for prioritizing social, environmental, and community well-being. We believe that improved innovation grows both topline and, over the long term, can expand margins as our innovation has historically tended to be both market expanding and margin accretive. Since inception, we have invested heavily in building out both our e-commerce platform and Grove Brands, and over this period we have operated at a loss. We have an accumulated deficit of $624.5 million as of March 31, 2024. Beginning in the second half of 2022, we substantially reduced our operating expenses across the business in support of our drive toward profitability. These expense reductions, particularly in advertising, have resulted in a substantial decline in our revenue.

Current wording

Grove is a public benefit corporation and a Certified B Corporation, meaning we adhere to third party standards for prioritizing social, environmental, and community well-being. We believe that improved innovation grows both revenue and, over the long term, can expand margins as our innovation has historically tended to be both market expanding and margin accretive. Since inception, we have invested heavily in building out both our e-commerce platform and Grove Brands, and over this period we have operated at a loss. We have an accumulated deficit of $634.5 million as of June 30, 2024. Beginning in the second half of 2022, we substantially reduced our operating expenses across the business in support of our drive toward profitability. These expense reductions, particularly in advertising, have resulted in a substantial decline in our revenue.

Previous wording

Our ability to attract new customers is a key factor for our future growth. To date we have successfully acquired new customers through online and offline marketing channels. In recent years, changes in the algorithms used for targeting and purchasing online advertising, changes to privacy and online tracking, supply and demand dynamics in the market, and other factors have caused the cost of marketing in these channels to increase consistently. We made changes in 2023 to our online purchase flow and subscription process. During the transition, we experienced a reduction of the rate at which visitors convert into subscribers, which has made it more difficult to cost-effectively acquire subscribers. We began to launch further improvements to this process in 2024, which initially caused a negative impact on conversion, but we have since experienced improving conversion. Failure to effectively adapt to changes in online marketing dynamics or changes to our internet platform, or to otherwise attract customers on a cost-efficient basis would adversely impact our path to revenue growth, profitability and our operating results. Recently, we implemented a lower-spend strategy to optimize the cost of acquiring new customers but as conversion improves, we plan to spend more on advertising to drive growth in future quarters. Our ability to balance cost-efficient acquisitions while driving consumer awareness may impact the cost of acquiring new customers, profitability and operating results.

Current wording

Our ability to attract new customers is a key factor for our future growth. To date we have successfully acquired new customers through online and offline marketing channels. In recent years, changes in the algorithms used for targeting and purchasing online advertising, changes to privacy and online tracking, supply and demand dynamics in the market, and other factors have caused the cost of marketing in these channels to increase consistently. We made changes in 2023 to our online purchase flow and subscription process. During the transition, we experienced a reduction of the rate at which visitors convert into subscribers, which has made it more difficult to cost-effectively acquire subscribers. We began to launch further improvements to this process in 2024, which initially caused a negative impact on conversion, but we have since experienced improving conversion and are still seeing improvement. Failure to effectively adapt to changes in online marketing dynamics or changes to our internet platform, or to otherwise attract customers on a cost-efficient basis would adversely impact our path to revenue growth, profitability and our operating results. Recently, we implemented a lower-spend strategy to optimize the cost of acquiring new customers but as conversion improves, we plan to spend more on advertising to drive growth in future quarters. Our ability to balance cost-efficient acquisitions while driving consumer awareness may impact the cost of acquiring new customers, profitability and operating results.

Previous wording

The future activity level and profitability of our DTC customer base will depend on our ability to continue to offer a compelling value proposition to consumers including strong selection, pricing, customer service, smooth and compelling web and mobile app experience, fast and reliable fulfillment, and curation within natural and sustainable products. Our success is also dependent on our ability to maintain relevance with our consumers on a regular basis through high performing products and a consumer-friendly refill and fulfillment process, and most importantly to provide consumers with products that consistently outperform their expectations. Our ability to execute on these key value-driving areas for consumers, and to remain competitive and compelling in a post-pandemic landscape, are necessary for our future growth. A lack of success in these areas would materially impact our operating results and financial performance.

Current wording

The future activity level and profitability of our DTC customer base will depend on our ability to continue to offer a compelling value proposition to consumers including strong selection, pricing, customer service, smooth and compelling web and mobile application experience, fast and reliable fulfillment, and curation within natural and sustainable products. Our success is also dependent on our ability to maintain relevance with our consumers on a regular basis through high performing products and a consumer-friendly refill and fulfillment process, and most importantly to provide consumers with products that consistently outperform their expectations. Our ability to execute on these key value-driving areas for consumers, and to remain competitive and compelling in a post-pandemic landscape, are necessary for our future growth. A lack of success in these areas would materially impact our operating results and financial performance.

Previous wording

We believe we are in the early stages of realizing a substantial opportunity to transform the consumer products industry into a force for human and environmental good by relentlessly creating and curating planet-first, high-performance brands and products. After experiencing high rates of growth prior to and in part driven by the COVID-19 pandemic, in 2022 and 2023 we substantially reduced our expense structure and operations in light of declining revenue, and as a result we have reduced our operating losses and cash consumption. To grow and achieve profitability over the longer term, we will need to expand our DTC business, continue to grow our retail presence and achieve scale that will allow us to drive efficiencies in generating brand awareness, acquiring customers, creating operating leverage over headcount and other overhead, and fulfilling orders. Our recent gains in approaching profitability may not be sustainable in the near term due to the effects of seasonality, steps we may take to drive growth or other factors. If we are unable to achieve profitable growth, our prospects may be materially and adversely affected.

Current wording

We believe we are in the early stages of realizing a substantial opportunity to transform the consumer products industry into a force for human and environmental good by creating and curating planet-first, high-performance brands and products. After experiencing high rates of growth prior to and in part driven by the COVID-19 pandemic, in 2022 and 2023 we substantially reduced our expense structure and operations in light of declining revenue, and as a result we have reduced our operating losses and cash consumption. To grow and achieve profitability over the longer term, we will need to re-invest to expand our DTC business, continue to grow our retail presence and achieve scale that will allow us to drive efficiencies in generating brand awareness, acquiring customers, creating operating leverage over headcount and other overhead, and fulfilling orders. Our recent gains in approaching profitability may not be sustainable in the near term due to the effects of seasonality, steps we may take to drive growth or other factors. If we are unable to achieve profitable growth, our prospects may be materially and adversely affected.

Previous wording

We believe that the future of CPG brand building and consumer demand is omnichannel. Our DTC platform remains a core part of our strategy and customer value proposition in addition to providing key data and customer feedback driving our innovation process. We kicked off our expansion into brick and mortar retail in April 2021 with the launch of a curated assortment of Grove Co. products at Target. We continued to expand into other retailers, including Amazon, CVS, Meijer, and Kroger.

Current wording

We believe that the future of CPG brand building and consumer demand is omnichannel. Our DTC platform remains a core part of our strategy and customer value proposition in addition to providing key data and customer feedback driving our innovation process. We kicked off our expansion into brick and mortar retail in April 2021 with the launch of a curated assortment of Grove Co. products at Target. We continued to expand by offering Grove Co. products in other stores, including Amazon.com, CVS, KeHe, Meijer, and Kroger.

Previous wording

We define Grove Brands % Net Revenue as total net revenue across all channels attributable to Grove Brands, including Grove Co., Honu, Peach, Rooted Beauty and Superbloom divided by our total net revenue. Our total DTC net revenue includes revenue from both Grove Brands and third-party brands that we carry, while our retail sales total net revenues is comprised exclusively of revenue from Grove Brand products. In the three months ended March 31, 2024, Grove Brands % Net Revenue declined due to a decrease in Grove Brands products in existing customer orders as we continue to expand our third-party offerings and a decrease in new customer orders, which typically include more Grove Brands products.

Current wording

We define Grove Brands % Net Revenue as total net revenue across all channels attributable to Grove Brands, including Grove Co., Honu, Peach, Rooted Beauty and Superbloom divided by our total net revenue. Our total DTC net revenue includes revenue from both Grove Brands and third-party brands that we carry, while our retail sales total net revenues is comprised exclusively of revenue from Grove Brand products. In the three and six months ended June 30, 2024, Grove Brands % Net Revenue declined due to a decrease in Grove Brands products in existing customer orders as we continue to expand our third-party offerings and a decrease in new customer orders, which typically include more Grove Brands products.

Previous wording

We determine our number of DTC Total Orders by counting the number of customer orders submitted through our website and mobile application that have been shipped within the period. The metric includes orders that have been refunded, excludes reshipments of customer orders for any reason including damaged and missing products, and excludes retail orders. Refunded orders are included in DTC Total Orders as we believe this provides more meaningful order management performance metrics, including fulfillment cost efficacy and refund rates. Changes in DTC Total Orders in a reporting period capture both the inflow of new customers, changes in order frequency of existing customers and customer attrition. We view the number of Total DTC Orders as a key indicator of trends in our DTC platform, and our future success in this channel will depend in part on our ability to drive growth through new customer acquisition and by increasing existing customer engagement. In the three months ended March 31, 2024, DTC Total Orders declined primarily due to our reduction in advertising spend, resulting in fewer new customers and therefore fewer overall orders.

Current wording

We determine our number of DTC Total Orders by counting the number of customer orders submitted through our website and mobile application that have been shipped within the period. The metric includes orders that have been refunded, excludes reshipments of customer orders for any reason including damaged and missing products, and excludes retail orders. Refunded orders are included in DTC Total Orders as we believe this provides more meaningful order management performance metrics, including fulfillment cost efficacy and refund rates. Changes in DTC Total Orders in a reporting period capture both the inflow of new customers, changes in order frequency of existing customers and customer attrition. We view the number of Total DTC Orders as a key indicator of trends in our DTC platform, and our future success in this channel will depend in part on our ability to drive growth through new customer acquisition and by increasing existing customer engagement. In the three and six months ended June 30, 2024, DTC Total Orders declined primarily due to our reduction in advertising spend, resulting in fewer new customers and therefore fewer overall orders.

Previous wording

As of the last day of each reporting period, we determine our number of DTC Active Customers by counting the number of individual customers who submitted orders through our DTC platform, and for whom an order has shipped, at least once during the preceding 364-day period. The change in active customers in a reporting period captures both the inflow of new customers as well as the outflow of customers who have not made a purchase in the last 364 days. We view the number of active customers as one of the key indicators of growth in our DTC channel. In the three months ended March 31, 2024, DTC Active Customers declined primarily due to our reduction in advertising spend resulting in fewer new customers and therefore fewer overall orders.

Current wording

As of the last day of each reporting period, we determine our number of DTC Active Customers by counting the number of individual customers who submitted orders through our DTC platform, and for whom an order has shipped, at least once during the preceding 364-day period. The change in active customers in a reporting period captures both the inflow of new customers as well as the outflow of customers who have not made a purchase in the last 364 days. We view the number of active customers as one of the key indicators of growth in our DTC channel. In the three and six months ended June 30, 2024, DTC Active Customers declined primarily due to our reduction in advertising spend resulting in fewer new customers and therefore fewer overall orders.

Previous wording

We define DTC Net Revenue Per Order as our DTC Total Net Revenue in a given reporting period, divided by the DTC Total Orders in that period. We view DTC Net Revenue per Order as a key indicator of the performance of our DTC business. DTC Net Revenue Per Order increased in the three months ended March 31, 2024 compared to the prior year comparative period as a result of decreases in the number of lower-net revenue first orders, increased number of products sold per order due to our expanded product offering.

Current wording

We define DTC Net Revenue Per Order as our DTC Total Net Revenue in a given reporting period, divided by the DTC Total Orders in that period. We view DTC Net Revenue per Order as a key indicator of the performance of our DTC business. DTC Net Revenue Per Order increased in the three and six months ended June 30, 2024 compared to the prior year comparative period as a result of a decrease in the number of lower-net revenue first orders, increased number of products sold per order due to our expanded product offering.

Previous wording

We calculate Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense; depreciation and amortization; changes in fair values of derivative liabilities; transaction costs allocated to derivative liabilities upon closing of the Business Combination; interest income; interest expense; restructuring and severance related costs; provision for income taxes and legal settlement expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. Because Adjusted EBITDA excludes these elements that are otherwise included in our GAAP financial results, this measure has limitations when compared to net loss determined in accordance with GAAP. Further, Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies. For these reasons, investors should not consider Adjusted EBITDA in isolation from, or as a substitute for, net loss determined in accordance with GAAP.

Current wording

We calculate Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense; depreciation and amortization; changes in fair values of derivative liabilities; transaction costs allocated to derivative liabilities upon closing of the transaction where we became a publicly traded company; interest income; interest expense; restructuring and severance related costs; provision for income taxes and certain litigation and legal settlement expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. Because Adjusted EBITDA excludes these elements that are otherwise included in our GAAP financial results, this measure has limitations when compared to net loss determined in accordance with GAAP. Further, Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies. For these reasons, investors should not consider Adjusted EBITDA in isolation from, or as a substitute for, net loss determined in accordance with GAAP.

Previous wording

(1)Restructuring expenses for the three months ended March 31, 2024 consisted of a $3.1 million gain from the Company’s modification of its lease at its San Francisco headquarters offset by $0.3 million in severance-related charges. For the three months ended March 31, 2023, restructuring expenses consisted solely of severance-related charges.

Current wording

(1)Restructuring expenses for the three months ended June 30, 2024 consisted of $1.2 million of severance-related charges, $0.7 million of asset impairment charges and $0.3 million of costs related to the closure of our facility in Missouri. Restructuring expenses for the six months ended June 30, 2024 consisted of $3.1 million gain from the Company’s modification of its lease at its San Francisco headquarters offset by $1.5 million in severance-related charges, $0.7 million of asset impairment charges and $0.3 million of costs related to the closure of our facility in Missouri. For the three and six months ended June 30, 2023, restructuring expenses consisted solely of severance-related charges.

Previous wording

Fulfillment costs represent those costs incurred in operating and staffing our fulfillment centers, including costs attributable to receiving, inspecting and warehousing inventories, picking, packing and preparing customer orders for shipment (“Fulfillment Labor”), shipping and handling expenses, packing materials costs and payment processing and related transaction costs. These costs are included within selling, general and administrative expenses in the statements of operations. We expect fulfillment costs to be consistent with 2023 on a per order basis.

Current wording

Fulfillment costs represent those costs incurred in operating and staffing our fulfillment centers, including costs attributable to receiving, inspecting and warehousing inventories, picking, packing and preparing customer orders for shipment, shipping and handling expenses, packing materials costs and payment processing and related transaction costs. These costs are included within selling, general and administrative expenses in the statements of operations. We expect fulfillment costs to be consistent with 2023 on a per order basis.

Previous wording

Interest expense consists primarily of interest expense associated with our debt financing arrangements. In recent periods we have recorded higher interest expense due to higher interest rates on our Structural Debt Facility (as defined below) and increases in the prime rate. To the extend there are changes in prevailing interest rates in future periods we anticipate cash payments for interest and interest expense to fluctuate as interest rates change in the future.

Current wording

Interest expense consists primarily of interest expense associated with our debt financing arrangements. In recent periods we have recorded higher interest expense due to higher interest rates on our Structural Debt Facility (as defined below) and increases in the prime rate. To the extent there are changes in prevailing interest rates in future periods we anticipate cash payments for interest and interest expense to fluctuate as interest rates change in the future.

Previous wording

Other income, net consists primarily of changes in fair values of Additional Shares, Earn-Out Shares, Public and Private Placement Warrant and Structural Derivative liabilities, transaction costs allocated to derivative liabilities upon Business Combination, interest income and losses or gains on remeasurement of our convertible preferred stock warrant liabilities. To the extent there are changes in prevailing interest rates in future periods, we expect interest income on our deposits to fluctuate with interest expense related to our borrowings. Changes in the fair value of our derivative liabilities may fluctuate significantly in future periods primarily due to fluctuations in the fair value of our common stock.

Current wording

Other income, net consists primarily of changes in fair values of Additional Shares, Earn-Out Shares, Public and Private Placement Warrant and Structural Derivative liabilities, transaction costs allocated to derivative liabilities upon Business Combination, and interest income. To the extent there are changes in prevailing interest rates in future periods, we expect interest income on our deposits to fluctuate with interest expense related to our borrowings. Changes in the fair value of our derivative liabilities may fluctuate significantly in future periods primarily due to fluctuations in the fair value of our common stock.

Previous wording

Comparisons of the Three Months Ended March 31, 2024 and March 31, 2023

Current wording

Comparisons of the Three and Six Months Ended June 30, 2024 and June 30, 2023

Previous wording

Revenue decreased by $18.0 million, or 25%, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily driven by a decrease in DTC Total Orders and a reduction in DTC Active Customers primarily due to the reduction in advertising spend, partially offset by increases in DTC Net Revenue Per Order.

Current wording

Revenue decreased by $14.0 million, or 21%, and $32.0 million or 23% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. This decline was primarily driven by a decrease in DTC Total Orders, partially offset by increases in DTC Net Revenue Per Order. Revenue decreased primarily as a result of a reduction in our advertising spend.

Previous wording

Advertising expenses decreased by $6.6 million, or 76%, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to the implementation of a lower-spend strategy to optimize the cost of acquiring new customers, while balancing driving consumer awareness and cash flow management. Performance partnerships and advertising specifically aimed at attracting retail customers declined by $3.1 million, social media and other online advertising decreased by $2.3 million and television, audio and direct mail advertising decreased $0.9 million.

Current wording

Advertising expenses decreased by $2.2 million, or 48%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to the implementation of a lower-spend strategy to optimize the cost of acquiring new customers, while balancing driving consumer awareness and cash flow management. Performance partnerships advertising decreased by $1.0 million, advertising specifically aimed at attracting retail customers decreased by $1.0 million, and social media and other online advertising decreased by $0.1 million.

Previous wording

Selling, general and administrative expenses decreased by $13.4 million, or 35% for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. Stock-based compensation expense decreased by $1.4 million driven by lower expense under the accelerated attribution method for awards granted prior to the closing of the Business Combination and reductions of headcount. Fulfillment costs decreased by $4.9 million, including a $3.1 million decrease in shipping and handling expenses and $1.1 million decrease in fulfillment labor. The decrease in shipping and handling expenses was driven by a decrease in the volume of orders. The decrease in fulfillment labor was due to a decrease in the volume of orders and the ability to fulfill orders more efficiently. Other general and administrative expenses, excluding stock-based compensation expense and fulfillment costs, decreased by $7.1 million, due to a $3.1 million gain from our modification of the lease related to our headquarters and $2.2 million due to decreases in corporate salaries and benefits from reductions in headcount related to our cost management initiatives. These decreases were partially offset by increased depreciation charges due to the closure of our facility in Missouri by $0.9 million.

Current wording

Selling, general and administrative expenses decreased by $8.0 million, or 23% for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Stock-based compensation expense decreased by $1.4 million driven by lower expense relating to the vesting of RSU awards resulting from the terms of the option exchange we effected in October 2022, lower expense under the accelerated attribution method for awards granted prior to the closing of the Business Combination and reductions in headcount. Fulfillment costs decreased by $3.9 million, including a $2.4 million decrease in shipping and handling expenses and $0.8 million decrease in fulfillment labor both due to a decrease in the volume of orders. Other general and administrative expenses, excluding stock-based compensation expense and fulfillment costs, decreased by $2.7 million, mainly due to reductions in corporate salaries and benefits and professional fees. These decreases were partially offset by an increase of $0.7 million in asset impairment charges.

Previous wording

Interest expense increased by $0.4 million, or 11%, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 primarily due to increases in the amount of our outstanding debt. See the section titled “Liquidity and Capital Resources” below for further details.

Current wording

Interest expense increased by $0.1 million, or 2%, and $0.5 million or 6% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023 primarily due to increases in the amount of our outstanding debt and interest rates. See the section titled “Liquidity and Capital Resources” below for further details.

Previous wording

The change in the fair value of derivative liabilities for the three ended March 31, 2024, other than the Structural Derivative liability, was primarily driven by the changes in our stock price from December 31, 2023 through March 31, 2024. The change in fair value of the Structural Derivative liability for the three ended March 31, 2024 was driven by the passage of time to when the Structural Subsequent Shares could be issued.

Current wording

The change in the fair value of derivative liabilities for the three and six ended June 30, 2024, other than the Structural Derivative liability, was primarily driven by the changes in our stock price from December 31, 2023 through June 30, 2024. The change in fair value of the Structural Derivative liability for the three and six ended June 30, 2024 was primarily driven by the length of time before the Structural Subsequent Shares could be issued.

Previous wording

As of March 31, 2024, we had $77.8 million in unrestricted cash (excluding restricted cash of $3.8 million) and cash equivalents. We incurred negative cash flows from operating activities of $12.4 million for the three months ended March 31, 2024. We have incurred significant losses since inception and have an accumulated deficit of approximately $624.5 million. To date, we have funded our operations principally through convertible preferred stock and common stock financings, the incurrence of debt and the Closing of the Business Combination. We have total outstanding indebtedness of $72.5 million, net of debt issuance costs, as of March 31, 2024.

Current wording

As of June 30, 2024, we had $78.8 million in unrestricted cash and cash equivalents, which excludes restricted cash of $3.8 million. We incurred negative cash flows from operating activities of $10.8 million for the six months ended June 30, 2024. We have incurred significant losses since inception and have an accumulated deficit of approximately $634.5 million. To date, we have funded our operations principally through convertible preferred stock and common stock financings, the incurrence of debt and the Closing of the Business Combination. We have total outstanding indebtedness of $73.4 million, net of debt issuance costs, as of June 30, 2024. As described more fully below, in July 2024, we used $42.0 million of cash to prepay a portion of our outstanding indebtedness.

Previous wording

On March 10, 2023, we entered into the Siena Revolver (defined below) with Siena Lending Group, LLC (“Siena”) which permits us to receive funding through a revolving line of credit with an initial commitment of $35.0 million. The total borrowing capacity under the Siena Revolver is subject to certain conditions, including our inventory and accounts receivable balances and other limitations as specified in the agreement. Additional borrowing capacity from the Siena Revolver was $9.1 million as of March 31, 2024.

Current wording

On March 10, 2023, we entered into the Siena Revolver (defined below) with Siena Lending Group, LLC (“Siena”) which permits us to receive funding through a revolving line of credit with an initial commitment of $35.0 million. The total borrowing capacity under the Siena Revolver is subject to certain conditions, including our inventory and accounts receivable balances and other limitations as specified in the agreement. Additional borrowing capacity from the Siena Revolver was $6.4 million as of June 30, 2024.

Previous wording

On July 18, 2022, we entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD. (“Yorkville”), whereby we have the right, but not the obligation, to sell to Yorkville up to $100.0 million of our shares of common stock at our request until July 18, 2025, subject to certain conditions. The shares of our common stock that may be issued under the SEPA may be sold by us to the Yorkville at our discretion from time to time and sales of our common stock under the SEPA will depend upon market conditions and other factors. Additionally, in no event may we sell more than 6,511,532 shares of our common stock to Yorkville under the SEPA, which number of shares is equal to 19.99% of the shares of the Company's common stock outstanding immediately prior to the execution of the SEPA (the “Exchange Cap”), unless we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with applicable NYSE rules or comply with certain other requirements as described in the SEPA. As a result, unless our average stock price under the SEPA exceeds $15.33 we will be unable to sell the full $100.0 million commitment to Yorkville without seeking stockholder approval to issue additional shares in excess of the Exchange Cap. As of April 30, 2024, under the terms of the SEPA we would be able to raise gross proceeds of approximately $9.3 million. As of March 31, 2024, we have sold 147,965 shares under the SEPA and there were 6,363,567 shares available to be sold to Yorkville under the Exchange Cap.

Current wording

On July 18, 2022, we entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD. (“Yorkville”), whereby we have the right, but not the obligation, to sell to Yorkville up to $100.0 million of our shares of common stock at our request until July 18, 2025, subject to certain conditions. The shares of our common stock that may be issued under the SEPA may be sold by us to the Yorkville at our discretion from time to time and sales of our common stock under the SEPA will depend upon market conditions and other factors. Additionally, in no event may we sell more than 6,511,532 shares of our common stock to Yorkville under the SEPA, which number of shares is equal to 19.99% of the shares of the Company's common stock outstanding immediately prior to the execution of the SEPA (the “Exchange Cap”), unless we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with applicable NYSE rules or comply with certain other requirements as described in the SEPA. As a result, unless our average stock price exceeds $15.33 we will be unable to sell the full $100.0 million commitment to Yorkville without seeking stockholder approval to issue additional shares in excess of the Exchange Cap. As of June 30, 2024, we have sold 147,965 shares under the SEPA and there were 6,363,567 shares available to be sold to Yorkville under the Exchange Cap. As of July 31, 2024, under the terms of the SEPA we would be able to raise gross proceeds of approximately $8.6 million.

Previous wording

Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide, including the trading price of common stock. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. Debt financing arrangements may require us to pledge certain assets or enter into covenants that could restrict our operations or our ability to pay dividends or other distributions on our common stock or incur further indebtedness. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. In addition, our Class A Common Stock trading price may not exceed the respective exercise prices of our Public Warrants, Private Placement Warrants, warrants granted to HGI (as defined below),

Current wording

Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide, including the trading price of common stock. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. Debt financing arrangements may require us to pledge certain assets or enter into covenants that could restrict our operations or our ability to pay dividends or other distributions on our common stock or incur further indebtedness. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. In addition, our Class A Common Stock trading price may not exceed the respective exercise prices of our Public Warrants, Private Placement Warrants, warrants granted to HGI (as defined below), Volition Warrants and/or our Legacy Grove Warrants before the respective warrants expire, and therefore we may not receive any proceeds from the exercise of warrants to fund our operations. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be materially and adversely affected.

Previous wording

Our most significant contractual obligations relate to our loan facilities, purchase commitments on inventory and operating lease obligations on our fulfillment centers and corporate offices. As of March 31, 2024, we had $10.7 million of enforceable and legally binding inventory purchase commitments predominantly due within one year. For information on our contractual obligations for operating leases, see “Leases” in Note 8 of the Notes to our audited consolidated financial statements as of and for the years ended December 31, 2023 and December 31, 2022 included in Form 10-K filed with the SEC on March 20, 2024.

Current wording

Our most significant contractual obligations relate to our loan facilities, purchase commitments on inventory and operating lease obligations on our fulfillment centers and corporate offices. As of June 30, 2024, we had $10.3 million of enforceable and legally binding inventory purchase commitments predominantly due within one year. For information on our contractual obligations for operating leases, see “Leases” in Note 8 of the Notes to our audited consolidated financial statements as of and for the years ended December 31, 2023 and December 31, 2022 included in Form 10-K filed with the SEC on March 20, 2024.

Previous wording

In December 2022, we entered into a Loan and Security Agreement (“Structural Debt Facility”) with third-party lenders to borrow gross proceeds of $72.0 million which was used primarily to settle other outstanding obligations with a prior lender. The Structural Debt Facility bears an annual rate of interest at the greater of 15.00% or 7.50% plus the prime rate, payable monthly. As of March 31, 2024, the Company’s contractual interest rate on the Structural Debt Facility was 16.00%. The principal repayment period commences on July 1, 2025 and continues until the maturity date of December 21, 2026. The Company may prepay all outstanding amounts under this facility at any time. Under the agreement, when amounts are prepaid or repaid in full at the maturity date, the Company may be obligated to pay additional fees which would allow for the lenders to reach a minimum return.

Current wording

In December 2022, we entered into a Loan and Security Agreement (“Structural Debt Facility”) with third-party lenders to borrow gross proceeds of $72.0 million which was used primarily to settle other outstanding obligations with a prior lender. In July 2024, we entered into an amendment to the Structural Debt Facility (the “Structural Amendment”) which required us to prepay $42.0 million of the outstanding principal amount and delayed the principal repayment period until January 1, 2026 and modified covenants related to our cash balances. The Structural Amendment did not modify interest terms of the Structural Debt Facility. The Structural Debt Facility bears an annual rate of interest at the greater of 15.00% or 7.50% plus the prime rate, payable monthly. As of June 30, 2024, the contractual interest rate on the Structural Debt Facility was 16.00%. We may prepay all outstanding amounts under this facility at any time. Under the agreement, when amounts are prepaid or repaid in full at the maturity date, we may be obligated to pay additional fees which would allow for the lenders to reach a minimum return.

Previous wording

The Structural Debt Facility is collateralized by the assets of the Company and includes financial covenants we must meet in order to avoid an Event of Default, as defined by the agreement. Such covenants include (i) maintaining a minimum of $57.0 million in unrestricted cash at all times and (ii) achieving certain revenue targets for the trailing four quarter period beginning with the fiscal quarter ended March 31, 2023. The Structural Debt Facility contains a subjective acceleration clause in the event that lenders determine that a material adverse change has or will occur within the business, operations, or financial condition of the Company or a material impairment of the prospect of repaying any portion of this financial obligation. In accordance with the loan agreement, Structural has been provided with our periodic financial statements and updated projections to facilitate their ongoing assessment of the Company. We believe the likelihood that lenders would exercise the subjective acceleration clause is remote. As of March 31, 2024, we were in compliance with these covenants.

Current wording

The Structural Debt Facility, as modified by the Structural Amendment, is collateralized by our assets and includes financial covenants we must meet in order to avoid an Event of Default, as defined by the agreement. Such covenants include (i) maintaining a minimum of $23.8 million in unrestricted cash at all times and (ii) achieving certain revenue targets for the trailing four quarter period beginning with the fiscal quarter ended March 31, 2023. The Structural Debt Facility contains a subjective acceleration clause in the event that lenders determine that a material adverse change has or will occur within the business, operations, or financial condition of the Company or a material impairment of the prospect of repaying any portion of this financial obligation. In accordance with the loan agreement, Structural has been provided with our periodic financial statements and updated projections to facilitate their ongoing assessment of the Company. We believe the likelihood that lenders would exercise the subjective acceleration clause is remote. As of June 30, 2024, we were in compliance with these covenants.

Previous wording

On March 10, 2023, we entered into a Loan and Security Agreement (the “Siena Revolver”) with Siena Lending Group, LLC which permits us to receive funding through a revolving line of credit with an initial commitment of $35.0 million. The borrowing capacity under the Siena Revolver is subject to certain conditions, including our inventory and accounts receivable balances and other limitations as specified in the agreement. Additional borrowing capacity from the Siena Revolver was $9.1 million as of March 31, 2024, of which there was an outstanding principal amount of $7.5 million.

Current wording

On March 10, 2023, we entered into a Loan and Security Agreement (the “Siena Revolver”) with Siena Lending Group, LLC which permits us to receive funding through a revolving line of credit with an initial commitment of $35.0 million. In July 2024, we entered into an amendment to the Siena Revolver (the “Siena Amendment”). The borrowing capacity under the Siena Revolver, as modified by the Siena Amendment, is subject to certain conditions, including our inventory and accounts receivable balances and other limitations as specified in the agreement. As of June 30, 2024, there was an outstanding principal amount of $7.5 million and additional borrowing capacity from the Siena Revolver was $6.4 million.

Previous wording

The interest rates applicable to borrowings under the Siena Revolver are based on a fluctuating rate of interest measured by reference to either, at our option, (i) a Base Rate, plus an applicable margin, or (ii) the Term SOFR then in effect, plus 0.10% and an applicable margin. The Base Rate is defined as the greatest of: (1) Prime Rate as published in the Wall Street Journal, (2) Federal Funds Rate plus 0.5% and (3) 5.0% per annum. The applicable margin for the Siena Revolver borrowings is based on the Company’s monthly average principal balance outstanding and ranges from 2.75% to 4.50% per annum in the case of Base Rate Borrowings, as defined by the Siena Revolver, and 3.75% to 5.50% per annum in the case of Term SOFR borrowings, as defined by the Siena Revolver. The Siena Revolver also contains various financial covenants we must maintain to avoid an Event of Default, as defined by the agreement, including a subjective acceleration clause in the event that Siena determines that a material adverse change has or will occur with the business. We believe the likelihood of Siena exercising the subjective acceleration clause is remote. In accordance with the agreement, Siena has been provided with our periodic financial statements and updated projections to facilitate their ongoing assessment of the Company. The Siena Revolver matures at the earlier of March 10, 2026 or the maturity date of the Structural Debt Facility. As of March 31, 2024, we were in compliance with all covenants related to the Siena Revolver.

Current wording

The interest rates applicable to borrowings under the Siena Revolver were not modified by the Siena Amendment and are based on a fluctuating rate of interest measured by reference to either, at our option, (i) a Base Rate, plus an applicable margin, or (ii) the term SOFR then in effect, plus 0.10% and an applicable margin. The Base Rate is defined as the greatest of: (1) Prime Rate as published in the Wall Street Journal, (2) Federal Funds Rate plus 0.5% and (3) 5.0% per annum. The applicable margin for the Siena Revolver borrowings is based on the Company’s monthly average principal balance outstanding and ranges from 2.75% to 4.50% per annum in the case of Base Rate Borrowings, as defined by the Siena Revolver, and 3.75% to 5.50% per annum in the case of Term SOFR borrowings, as defined by the Siena Revolver. The Siena Revolver also contains various financial covenants we must maintain to avoid an Event of Default, as defined by the agreement, including a subjective acceleration clause in the event that Siena determines that a material adverse change has or will occur with the business. We believe the likelihood of Siena exercising the subjective acceleration clause is remote. In accordance with the agreement, Siena has been provided with our periodic financial statements and updated projections to facilitate their ongoing assessment of the Company. The Siena Revolver matures at the earlier of March 10, 2026 or the maturity date of the Structural Debt Facility. As of June 30, 2024, we were in compliance with all covenants related to the Siena Revolver.

Previous wording

Net cash used in operating activities increased by $5.6 million for the three months ended March 31, 2024 compared to March 31, 2023, primarily attributable to an increase in outflow related to changes in net operating assets and liabilities of $13.7 million and a decrease in net loss, net of noncash activities, of $8.1 million. The increase in outflow was primarily driven by an increase in inventory and a decrease in accounts payable and accrued expenses, as well as a one-time $4.9 million payment related to our operating leases. The decrease in net loss, net of non-cash activities, was primarily driven by a decrease in advertising expenses of $6.6 million and a decrease in selling, general and administrative expenses of $13.4 million.

Current wording

Net cash used in operating activities increased by $5.2 million for the six months ended June 30, 2024 compared to June 30, 2023, primarily attributable to an increase in outflow related to changes in net operating assets and liabilities of $14.1 million offset by a decrease in net loss, net of noncash activities, of $8.9 million. The increase in outflow was primarily driven by a decrease in cash inflows related to inventory and decreases in accounts payable and accrued expenses, as well as a one-time $4.8 million payment related to our operating leases. The decrease in net loss, net of non-cash activities, was primarily driven by a decrease in advertising expenses of $8.8 million and a decrease in selling, general and administrative expenses of $21.5 million.

Previous wording

Net cash used in investing activities of $0.5 million and $0.8 million for the three months ended March 31, 2024 and 2023 was primarily due to the capitalization of internally developed software costs.

Current wording

Net cash used in investing activities of $0.9 million and $1.5 million for the six months ended June 30, 2024 and June 30, 2023 was primarily due to the capitalization of internally developed software costs.

Previous wording

Net cash used in financing activities of $0.4 million for the three months ended March 31, 2024 which consists of payments related to stock-based award activities.

Current wording

Net cash used in financing activities of $0.6 million for the six months ended June 30, 2024 primarily consists of net payments related to stock-based award activities offset by proceeds related to the Company’s ESPP plan.

Previous wording

Net cash provided by financing activities of $2.0 million for the three months ended March 31, 2023 primarily consisted of $7.5 million in proceeds from the Siena Revolver offset by the payment of transaction costs related to the Business Combination of $4.2 million and payment of debt fees of $0.8 million.

Current wording

Net cash provided by financing activities of $0.9 million for the six months ended June 30, 2023 primarily consisted of $7.5 million in proceeds from the Siena Revolver offset by the payment of transaction costs related to the Business Combination of $4.2 million, payment of debt fees of $0.9 million, and payment related to stock-based award activities of $1.2 million.