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01/10 16:12
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary reflects several challenges: a decline in active customers, negative adjusted EBITDA, and a widening net loss. Despite some improvement in gross margin and advertising spend, the pullback in advertising and unresolved customer experience issues weigh heavily. The Q&A section highlights ongoing concerns about digital disruption, customer experience, and lack of clear guidance on resolving these issues. The negative sentiment from analysts further impacts the outlook, leading to an overall negative prediction for the stock price.
Revenue $43.7 million, down 0.7% sequentially and 9.4% year-over-year. The decline versus last year primarily reflects the effects of reduced advertising investment in prior periods, which led to a smaller active customer base entering 2025 as well as the friction from our eCommerce migration that began earlier this year.
Total Orders 619,000, a decline of 12.5% year-over-year. This decline is attributed to lower advertising investment in 2024 and prior years, resulting in fewer new customers and therefore fewer repeat orders, along with headwinds related to the e-Commerce migration.
Active Customers 660,000, down 7% versus the prior year. The decline is consistent with lower advertising investment in prior years and challenges from the e-Commerce migration.
DTC Net Revenue Per Order $66.76, nearly flat year-over-year, but increased 2.4% sequentially. The sequential improvement was driven by an increase in units per order and lower discounting activity.
Gross Margin 53.3%, up 30 basis points compared to 53% in the third quarter last year. The improvement reflects more targeted and improved promotional strategies, resulting in lower discounts, partially offset by a more favorable product mix.
Advertising Spend $3.2 million, an 11.8% increase year-over-year. Spend was higher in the first half of the quarter but reduced in the back half to preserve liquidity and drive profitability.
Product Development Expense $1.6 million, down 66.1% year-over-year. This decline reflects the decision to streamline the technology organization and lower amortization costs following the e-Commerce platform migration.
SG&A Expense $21.3 million, a 14% decrease versus the prior year. The reduction was driven by lower stock-based compensation, lower fulfillment costs from fewer orders, and broader cost optimization across the organization.
Adjusted EBITDA Negative $1.2 million or a negative 2.7% margin, compared to breakeven in the third quarter of 2024. The year-over-year decline reflects lower revenue, partially offset by cost structure improvements.
Net Loss Negative $3 million compared to negative $1.3 million in the prior year. The variance primarily reflects the absence of a noncash derivative gain of $7.8 million recorded in Q3 2024, partially offset by lower interest and operating expenses.
Cash, Cash Equivalents, and Restricted Cash $12.3 million, down from $14 million at the end of the second quarter, primarily reflecting the quarterly net loss, net of noncash adjustments.
eCommerce platform migration: Migration to Shopify to enable faster iteration, deeper personalization, and access to best-in-class tools for exceptional customer experience and stronger economics.
Third-party assortment expansion: Expanded third-party assortment by 50% year-over-year in brands and 61% in individual products, focusing on clean beauty, personal care, pantry, wellness, and baby categories.
AI and automation: Leaning into AI and automation to increase efficiency across the organization.
Customer experience challenges: Faced challenges in mobile app experience, subscriptions, and payments, impacting results.
Advertising strategy: Reduced advertising spend in September to preserve liquidity and profitability, with plans to scale once technology is optimized.
Cost optimization: Completed a reduction in force in November, expected to save $5 million annually, and reduced SG&A expenses by 14% year-over-year.
Gross margin improvement: Gross margin improved to 53.3%, up 30 basis points year-over-year due to better promotional strategies.
Adjusted EBITDA: Reported negative $1.2 million adjusted EBITDA, with plans for positive adjusted EBITDA in Q4 2025.
Strategic options evaluation: Evaluating acquisitions, partnerships, divestitures, and other options to accelerate scale and strengthen competitive position.
Environmental leadership: Became one of the first companies to measure and disclose AI-related carbon footprint through a partnership with Gravity Climate.
Customer Experience Challenges: The migration of the eCommerce platform has led to customer experience challenges, including issues with the mobile app, subscriptions, and payments, which have negatively impacted engagement, retention, and revenue.
Revenue Decline: Revenue declined 9.4% year-over-year and 0.7% quarter-over-quarter, reflecting reduced advertising investment and friction from the eCommerce migration.
Advertising Pullback: Advertising spend was reduced to preserve liquidity and profitability, which has contributed to a smaller active customer base and fewer repeat orders.
Headcount Reduction: A reduction in force was implemented to align costs with revenue levels, resulting in $5 million in annualized savings but also incurring severance costs in the near term.
Liquidity and Cash Flow Risks: Cash reserves decreased to $12.3 million, and the company is prioritizing cash flow and profitability over short-term revenue growth to maintain balance sheet stability.
Operational Efficiency Challenges: The company is relying on AI, automation, and technology to improve efficiency, but these initiatives require time and resources to yield results.
Competitive Pressures: The company faces skepticism about its ability to compete with digital giants like Amazon in the D2C marketplace.
Strategic Execution Risks: The company is undergoing a significant transformation, including platform migration and cost restructuring, which carries risks of execution delays or failures.
Revenue Guidance for 2025: Full-year revenue is expected to be $172.5 million to $175 million, at the lower end of the previously communicated guidance range of down approximately mid-single digit to low double-digit percentage points year-over-year. Fourth-quarter revenue is anticipated to remain roughly flat sequentially.
Adjusted EBITDA Guidance for 2025: Full-year adjusted EBITDA is expected to be within the guidance range of negative low single-digit millions to breakeven. Fourth-quarter adjusted EBITDA is expected to be positive, benefiting from reduced advertising spend and structural SG&A reductions.
Advertising Spend: Advertising spend will remain disciplined, with investments scaled only after core customer experience optimizations are completed and new cohorts meet payback and lifetime value hurdles.
Cost Structure Adjustments: A reduction in force completed in November is expected to deliver approximately $5 million in annualized savings. Near-term cash benefits will be offset by severance and related costs.
Technology and Customer Experience: The company is focused on optimizing its eCommerce platform, mobile app, and subscription experience over the next 1 to 2 quarters to improve customer engagement, retention, and lifetime value.
Strategic Options: The company is evaluating opportunities such as acquisitions, partnerships, divestitures, and other strategic options to accelerate its path to scale and strengthen its competitive position.
The selected topic was not discussed during the call.
The earnings call summary reflects several challenges: a decline in active customers, negative adjusted EBITDA, and a widening net loss. Despite some improvement in gross margin and advertising spend, the pullback in advertising and unresolved customer experience issues weigh heavily. The Q&A section highlights ongoing concerns about digital disruption, customer experience, and lack of clear guidance on resolving these issues. The negative sentiment from analysts further impacts the outlook, leading to an overall negative prediction for the stock price.
The earnings call highlights challenges like declining revenue, negative EBITDA, and market cap compliance issues, overshadowing slight sequential revenue growth and improved gross margins. The Q&A reveals concerns about revenue per order and unclear responses on sales breakdown. Despite improved marketing returns and cost-cutting, the negative financial metrics and competitive pressures indicate a likely negative stock reaction.
The earnings call reveals significant challenges: a revenue decline, negative adjusted EBITDA, and cash flow issues due to eCommerce platform transition and reduced customer base. Despite some positive guidance and efforts to mitigate tariff impacts, the lack of a share repurchase program and unclear management responses further dampen sentiment. The overall outlook suggests a negative stock price movement in the short term.
The earnings call reveals several concerning factors: missed EPS expectations, leadership instability, and challenges with the Shopify transition. Revenue growth is projected to be flat or declining, with no share buyback program to support stock price. Despite some operational improvements, the overall sentiment is negative due to uncertainties and competitive pressures in the market.
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