• Full Year Revenue: $378 million, up 10% year over year.
• Gross Margin: Expanded 900 basis points to 38% for the full year.
• Fourth Quarter Revenue: $100 million, up 11% year over year.
• Fourth Quarter Gross Margin: 39%, up 530 basis points from the previous year.
• Adjusted EBITDA: Positive for the full year, with $26 million, exceeding original outlook.
• Cash Position: Ended the quarter with $75 million in cash, an increase of $43 million from the previous year.
• Free Cash Flow: $1 million for the full year, despite $12 million in non-recurring legal costs.
• Household Penetration: Reached 7%, a 20% increase since going public in 2021.
• Repeat Rate: Increased by 32% for the year.
• Wipes Portfolio Growth: Q4 velocities up 17%, repeat rate up 26% for the year.
• Retail Channel Growth: Retail track channel consumption grew 7% in Q4.
• Amazon Performance: Consumption up 35% in Q4.
• 2025 Revenue Growth Outlook: Expected growth of 4 to 6%.
• 2025 Adjusted EBITDA Outlook: Expected to be in the range of $27 million to $30 million.

• Warning! GuruFocus has detected 2 Warning Sign with HNST.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Honest Co Inc (NASDAQ:HNST) achieved a record annual revenue of $378 million in 2024, marking a 10% year-over-year increase.
• Gross margins expanded by 900 basis points to 38%, the highest in the company's history.
• The company reported its first full year of positive adjusted EBITDA as a public company.
• Household penetration increased by over 20% since going public, with a repeat rate up by 32%.
• The Honest Co Inc (NASDAQ:HNST) expanded its distribution, particularly in key retailers like Walmart, where distribution points increased by 33%.

Negative Points

• The diaper category remains highly competitive and was a soft spot in the fourth quarter.
• Legal costs impacted operating expenses, although these are expected to decrease in 2025.
• The company plans to transition away from its direct-to-consumer channel, which may affect customer engagement.
• There are still significant areas of retail distribution, such as the dollar and club channels, where the company is not yet present.
• The company faces potential risks from tariffs related to product sourcing in China and Mexico.

Q & A Highlights

Q: Can you provide more details on the revenue growth guidance for 2025, especially regarding the first quarter compared to the full year? A: David Loretta, CFO: The first quarter of 2025 is expected to be on the higher end of our guidance range due to a softer first quarter in 2024. We anticipate more challenging comparisons in the latter half of the year due to strong retail events in 2024. However, we are confident in achieving our full-year guidance of 4 to 6% revenue growth.

Q: What are the potential growth opportunities in distribution for 2025? A: Carla Vernon, CEO: Distribution remains a key growth lever. In 2024, we saw a 2% increase in distribution, with significant gains in key products. There are still many opportunities, such as entering new channels like dollar and club stores, and expanding our presence in existing top retailers. We believe these opportunities will support our long-term growth algorithm of 4 to 6%.

Q: How should we think about the balance of volume, mix, and pricing in 2025? A: David Loretta, CFO: We expect a blend of distribution gains, velocity improvements, and favorable product mix to support our 2025 sales goals. While pricing increases contributed to 2024 growth, we anticipate continued benefits from product introductions and mix improvements in 2025.

Q: Can you elaborate on the gross margin outlook for 2025, considering the one-time benefits in 2024? A: David Loretta, CFO: While we don't expect another 900 basis point expansion, we anticipate continued margin improvement through sustainable cost savings, product mix, and channel efficiencies. Our gross margin is expected to remain in the 38 to 39% range, contributing to bottom-line growth.

Q: What is the strategy behind shifting away from the H1st website in favor of digital partners? A: David Loretta, CFO: The shift reflects changes in consumer behavior and the competitive advantages of our retail partners' digital platforms. Our own DTC channel has decreased from 25% to the low 10s of our revenue, and we aim to benefit from the scale and efficiency of retail distribution while ensuring a seamless transition.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.