The Honest Company Reports Strong Third Quarter 2024 Results and Raises Full Year Outlook

Achieves Record Revenue of $99 million, an Increase of 15% from Prior Year Quarter

Delivers Positive Net Income, an Increase of $8 million from Prior Year Quarter

Expands Gross Margin 710 Basis Points to 39% Versus Prior Year Quarter

Raises Full Year 2024 Revenue and Adjusted EBITDA Outlook

LOS ANGELES, Nov. 12, 2024 (GLOBE NEWSWIRE) -- The Honest Company $(HNST)$, a personal care company dedicated to creating cleanly-formulated and sustainably-designed products, today reported financial results for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

"Our strong third quarter results are a clear reflection of the power of the Honest brand and the strength of the Honest team that has executed our strategy and Transformation Initiative with discipline and excellence. Our ability to grow profitably is evidenced in our results -- with double digit revenue growth reaching an all-time high, significant expansion in gross margin, and positive net income for the period," said Chief Executive Officer, Carla Vernón. "We are confident that our long-term growth strategy will continue to allow us to scale across our categories, meeting the growing consumer demand for cleanly-formulated and sustainably-designed products across our portfolio. With our recent performance, continued positive momentum, and overall strength of the Honest brand going into the final quarter of the year, we are again raising our full year financial outlook."

Third Quarter Results

(All comparisons are versus the third quarter of 2023)

 
                           For the three months ended September 30, 
                    ------------------------------------------------------ 
                         2024                  2023          Change 
                    -------------       ------------------  -------- 
(In thousands, except 
percentages) 
      Revenue        $     99,237        $     86,169           15.2% 
      Gross margin           38.7%               31.6%           710   bps 
      Operating 
       expenses      $     38,339        $     35,197       $  3,142 
      Net income 
       (loss)        $        165        $     (8,098)      $  8,263 
      Adjusted 
       EBITDA(1)     $      7,079        $     (1,056)      $  8,135 
      Net income 
       margin                 0.2%                 NM             NM 
      Adjusted 
       EBITDA 
       Margin(1)              7.1%                 NM             NM 
 

Revenue increased 15% to $99 million compared to $86 million, driven by strong performance across our baby products and wipes portfolios. Tracked channel consumption(2) for the Company grew 9.3% outperforming the comparative categories which were down 2.4% in the same period. Consumption(3) for the Company's products at the Company's largest digital customer increased 19%.

______________

(1) See the reconciliation of adjusted EBITDA and adjusted EBITDA Margin, a non-GAAP financial measure, to net income (loss) in the table under "Use of Non-GAAP Financial Measures" below in this press release.

(2) According to Circana, Inc. tracked channel consumption data. Reflects consumption for diapers, wipes, baby personal care, skin care and cosmetics items for the latest 13 weeks ended September 29, 2024.

(3) According to Fuelcomm, Inc. ("Stackline") consumption data for our largest digital customer for the 13 weeks ended September 28, 2024.

Gross margin expanded 710 basis points to 38.7% compared to 31.6%. This growth was primarily driven by improvements across most of the cost structure, including supply chain and product cost efficiencies, as well as efficient trade spend.

Operating expenses increased $3 million to $38 million, reflecting a decrease of 221 basis points, as a percentage of revenue. The Company continues to maintain expense discipline across the enterprise with selling, general & administrative expenses as a percentage of revenue decreasing 441 basis points, partially offset by increased investment in retail marketing to drive our Brand Maximization pillar.

Net income increased $8 million to $165 thousand compared to a net loss of $8 million. Increased net revenue and expansion in gross margin more than offset increased operating expenses to deliver positive net income in the quarter.

Adjusted EBITDA(1) was positive $7 million compared to negative $1 million. This represents the Company's fourth consecutive quarter of positive adjusted EBITDA.

________________

(1) See the reconciliation of adjusted EBITDA and Adjusted EBITDA Margin, a non-GAAP financial measure, to net income (loss) in the table under "Use of Non-GAAP Financial Measures" below in this press release.

Balance Sheet and Cash Flow

The Company ended the third quarter of 2024 with $53 million in cash and cash equivalents, a sequential increase of $17 million from the second quarter of 2024 and an increase of $30 million compared to the third quarter of 2023. The Company had no debt on its balance sheet as of September 30, 2024.

Net cash provided by operating activities was $18 million for the first nine months of 2024, compared to $9 million in the prior year period.

Updated Full Year 2024 Outlook

Based on strong performance in the first three quarters of the year, we are increasing our full year 2024 outlook for both revenue and Adjusted EBITDA.

 
                           Current Outlook           Prior Outlook (as of Q2 
                                                              2024) 
     Revenue              High Single Digit          Mid-to-High Single Digit 
                      percentage growth (versus     percentage growth (versus 
                           Full Year 2023)               Full Year 2023) 
Adjusted EBITDA(1)    $20 million to $22 million    $15 million to $18 million 
                                range                         range 
 

____________

(1) We do not provide guidance for the most directly comparable GAAP measure, net income (loss), and similarly cannot provide a reconciliation between our adjusted EBITDA outlook and net income (loss) without unreasonable effort due to the unavailability of reliable estimates for certain components of net income (loss), including interest and other (income) expense, net, and the respective reconciliations. These items are not within our control and may vary greatly between periods and could significantly impact our financial results calculated in accordance with GAAP.

Webcast and Conference Call Information

A webcast and conference call to discuss third quarter 2024 results is scheduled for today, November 12, 2024, at 1:30 p.m. Pacific time/4:30 p.m. Eastern time. Those interested in participating in the conference call by phone, please go to this link https://register.vevent.com/register/BI05f7626bb1a14d23b819b1fec89c6138 and you will be provided with dial in details. A live webcast of the conference call will be available online at: https://investors.honest.com or https://edge.media-server.com/mmc/p/tt3gkzq2. A replay of the webcast will be available on the Company's website for one year.

Forward-Looking Statements

This press release and earnings call referencing this press release contain forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this press release are forward-looking statements. Such statements may address the Company's expectations regarding revenue, profit margin or other future financial performance and liquidity, other performance measures and cost savings, strategic initiatives and future operations or operating results. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue, " "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will" or "would" or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning our expectations regarding future results of operations and financial condition, including our revenue and adjusted EBITDA outlook for 2024; our ability to achieve or sustain profitability and generate positive cash flow; continued positive momentum in our business and strength of the Honest brand; our ability to execute on, and the continued benefits of, our Transformation Pillars of Brand Maximization, Margin Enhancement, and our long-term growth strategy and Operating Discipline; and other business strategies, plans and objectives of management for future operations.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this press release and the earnings call referencing this press release primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results.

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November 12, 2024 16:15 ET (21:15 GMT)