Grove Collaborative Holdings, Inc. 2026 Q2 Earnings Call

Thank you, operator, and thank you all for joining us. Last quarter, we told you we expected the first quarter to represent the revenue trough for the year. This quarter's results came in as we expected. Net revenue grew 1% sequentially to $36.6 million. Adjusted EBITDA was $0.5 million, our third consecutive quarter of positive Adjusted EBITDA. Operating cash flow was positive $1.3 million, proving that we are delivering on the plan we set out at the beginning of the year. We saw progress across many elements of the business last quarter. Net revenue per order grew 6% year-over-year. We launched an updated subscription experience that enhances the customer journey in reordering essentials. We continued to drive structural improvements to our unit economics, including efficiencies from our updated outbound shipping strategy, which improved our outbound shipping costs in the second quarter.

That progress is happening against the backdrop of a much larger opportunity. The 57 million conscientious consumers we serve aren't just choosing a lifestyle. They're making a health decision every time they choose what comes into their home, including what they put in their bodies. A dish soap, a lotion, a cleaning spray with synthetic chemicals or microplastics is a small exposure on its own. A vitamin or supplement with unverified sourcing carries the same kind of risk. That's the problem Grove exists to solve, and it's why we hold the products we carry across home, personal care, vitamins, minerals, supplements, as a few examples, to a higher bar, including thousands of banned ingredients. The most stringent standard we know of in the industry. As we deepen our customer experience and continue to expand our focus on human health, that standard is what guides every decision we make.

We are making progress toward translating that opportunity into durable, profitable growth. The durable business model is built on trust, and that trust is validated in a recent Grove survey from February of 2026 of approximately 1,000 Grove customers showing that nine out of ten trust Grove more than Amazon and mass retailers to sell safe and healthy products. Which I believe is the most important data point to support our moat as the trusted destination for conscientious consumers. As we have done throughout this transformation, we are organizing our progress around the same four strategic pillars, and I want to walk through each of them. Starting with sustainable profitability. We delivered Adjusted EBITDA of $0.5 million in the second quarter or a 1.3% margin, our third consecutive quarter of positive Adjusted EBITDA.

Operating expenses were down 27% year-over-year, reflecting the structural headcount reductions we described last quarter and the lower shipping costs from our updated carrier strategy. We remain disciplined on expenses as we continue our transformation and balance top and bottom-line performance. The next pillar is balance sheet strength. We ended the quarter with $11.4 million in cash equivalents, and restricted cash, up from $10.4 million at the end of the first quarter. Operating cash flow was positive $1.3 million, reflecting a decrease in inventory along with non-cash items, more than offsetting our net loss for the quarter. The discipline we've applied across the business is what's made it possible to manage this transformation over the last several quarters. We are comfortable with our liquidity position to fund the plan we've laid out this year. The third pillar is revenue growth.

Net revenue of $36.6 million was down 16.9% year-over-year, but up 1% quarter-over-quarter. D2C revenue declined slightly quarter-over-quarter, while total net revenue grew, driven by growth in our non-D2C channels, including Amazon and QVC. We are also seeing continued progress growing D2C net revenue per order built on the category expansion work we've done over the past three years. Expanding a bit more on category expansion, we recently launched drop ship capabilities. This lets us further expand selection into new categories without the inventory ownership costs of traditional vendor relationships, an important lever as we broaden assortment while maintaining balance sheet discipline. We launched with two brands this past week, but plan to expand into larger format categories, including mattresses and air filtration and water purification systems. Natural extensions of our platform that help customers make healthier choices throughout their home.

We'll share more detail on the pace and scope of this expansion in future quarters. In addition, our revenue is stabilizing as we move further past last year's e-commerce platform migration and the pullback in advertising investment we made in prior years. As we accelerate that investment, we're holding a high bar on payback periods, earning growth through an improved customer experience that drives repeat orders. We continued to invest with discipline through the second quarter. As the customer experience improvements strengthen retention and unit economics, we're planning to take a more full funnel approach to acquisition, not just performance channels, but upper funnel investments that builds broader brand awareness. We expect disciplined increases through the rest of the year as these improvements support new customer acquisition. Next, as promised last quarter, we delivered a meaningfully improved subscription experience during the second quarter.

Subscriptions are core to our business, present in more than 80% of orders. Unlike subscription models built around a single item, ours lets customers build and adjust their entire basket of household essentials delivered on a cadence that works for them. Not seven separate packages, but one seamless shopping experience for the products their home and family needs. We believe this experience will be a meaningful driver of retention and loyalty going forward. Lastly, we continue to build out our presence in other online channels like Amazon, expanding our own brand business without cannibalizing our D2C platform. We believe there's a substantial addressable market of Amazon shoppers looking for the same kind of curated, trustworthy brands like our Grove brand, and we've seen other mission-driven brands build meaningful scale on the platform, which reinforces our conviction.

It's still early, and we're watching closely to make sure this is additive to the business. This is one of the areas we'll be leaning into as part of our second half strategy, and we'll share more as it develops. Our fourth and final pillar is human and environmental health. You may have noticed that we flipped the order of human and environmental health because we are continuing to focus more on human health. At Grove, our mission has always been to create and curate products for healthier homes and a healthier planet, and we are leaning further into the human at the center of that promise because human and environmental health are inseparable. The same ingredients that burden the planet too often end up in our homes and in our bodies. That conviction drives a strict curation protocol. Every product we carry is screened against a higher bar.

Thousands of banned ingredients spanning hormone disruptors, microplastics, respiratory irritants, skin and allergy triggers, and hidden contaminants. It is the most stringent standard we know of in the industry. Consumers are moving in the same direction. A recent survey of 1,000 people indicated that 90% of consumers say they are concerned about microplastics and 86% are ready for action, especially from companies. You will see Grove more and more focused on enabling customers to build a healthier home for the people they love. During the quarter, we also released our 2025 annual sustainability report, advancing our leadership in plastic reduction and human health standards. A few data points from the report. First, 2025 marked a new company low plastic intensity score of 0.9 pounds per $100 of net revenue. Since 2020, Grove has surpassed 18.7 million pounds of nature-bound plastic collected through rePurpose Global.

While customers purchasing plastic-reducing products have helped avoid over 8.5 million pounds of plastic to date. Together, these four pillars remain our guiding principles, and they're building the foundation for Grove's next chapter: durable, profitable growth. Finally, I want to acknowledge Tom's transition. As we previously disclosed, Tom will be leaving Grove on August 16th to pursue a new opportunity. Tom has been instrumental to the progress we've discussed today, including our expense and balance sheet discipline in recent quarters that's positioned us for long-term growth. We're grateful for his contributions and wish him well. Our search for his successor is underway and we'll provide updates as appropriate. I will turn it over to Tom to review our financial results for the second quarter in more detail.