LOS ANGELES-- The Honest Company (NASDAQ: HNST), a personal care company dedicated to creating clean- and sustainably-designed products, today reported financial results for the three months ended March 31, 2024.

'Our first quarter results demonstrate our strong start to 2024. Our clear focus on profitability, delivering sales growth and achieving record gross margin of 37% as a public company is attributable to continued execution of our Transformation Pillars of Brand Maximization, Margin Enhancement and Operating Discipline,' said Chief Executive Officer, Carla Vernon. 'These Pillars are deeply rooted in our operating practices and remain an enduring strategic element supporting our revenue growth and ongoing cost structure improvements in the first quarter. With our robust financial results to start the year and growth in consumer demand for Honest products, we are reaffirming our full year 2024 financial outlook.'

First Quarter Results

(All comparisons are versus the first quarter of 2023)

Our Transformation Pillars of Brand Maximization, Margin Enhancement, and Operating Discipline have each contributed meaningfully to our first quarter results.

For the three months ended March 31,

2024	 	 	 	2023	 	 	Change

(In thousands, except percentages) 

Revenue	 		$86,217	 	 	$83,388	 	 	$2,829
Gross margin	 	 	37.0%	 	 	24.2%	 	 	12.8%
Operating expenses	 	$33,197	 	 	$38,860	 	 	$(5,663	)
Net loss	 			$(1,403	)	 	$(18,867)	 	$17,464
Adjusted EBITDA(1)	 	$2,642	 	 	$(10,334)	 	$12,976

Revenue increased 3% to $86 million compared to the first quarter of 2023 driven by an increase in revenue from baby apparel, wipes and baby personal care. Our growth was supported by our Transformation Pillar of Brand Maximization that drove distribution gains and strong velocities. Total tracked channel consumption(2) for the Company grew 7% compared to the categories down 1%.

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

(2) According to independent third-party tracked channel consumption data. Reflects consumption for diapers, wipes, baby personal care, skin care and cosmetics items for latest 12 weeks ended March 24, 2024.

Gross margin was 37.0% compared to 24.2% in the first quarter of 2023. Gross margin increased by 1,275 basis points compared to the first quarter of 2023 driven by execution of our Margin Enhancement Transformation Pillar, which included lower transportation costs, price increases, efficient trade spending, and lower product and fulfillment costs.

Operating expenses decreased $6 million compared to the first quarter of 2023 due to continuing execution of our Operating Discipline Transformation Pillar. Operating expenses as a percentage of revenue decreased 810 basis points compared to the first quarter of 2023. Selling, general & administrative expenses as a percentage of revenue declined 496 basis points compared to the first quarter of 2023.

Net loss was $1 million, compared to a net loss of $19 million in the first quarter of 2023.

Adjusted EBITDA(1) was positive $3 million compared to negative $10 million in the first quarter of 2023. This represents the Company's second consecutive quarter of positive adjusted EBITDA.

(1) See the reconciliation of adjusted EBITDA, a non-GAAP financial measure, to net 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 first quarter 2024 with $34 million in cash, cash equivalents and short-term investments, an increase of $22 million versus the first quarter of 2023, reflecting disciplined management of working capital. The Company had no debt on the balance sheet as of March 31, 2024.

Net cash provided by operating activities was $336 thousand, compared to net cash used in operating activities of $3 million for the first quarter of 2023.

Reaffirms 2024 Financial Outlook

The Company is reaffirming its financial outlook for the full fiscal year 2024 for revenue and Adjusted EBITDA. For 2024, the Company continues to expect:

Net revenue growth of low-to-mid single digit percentage.

Positive Adjusted EBITDA(1) in the low-single digit to mid-single digit millions range.

We remain confident in our long-term strategy beyond 2024 of 4% to 6% annual revenue growth and continued Adjusted EBITDA margin expansion. Additional information on the Company's strategic plans can be found in its Investor Presentation on the Company's Investor Relations website at http://investors.honest.com.

(1) We do not provide guidance for the most directly comparable GAAP measure, net loss, and similarly cannot provide a reconciliation between our adjusted EBITDA outlook and net loss without unreasonable effort due to the unavailability of reliable estimates for certain components of net 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 first quarter 2024 results is scheduled for today, May 8, 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/BI1c23ecdf483947929a00c199699896fc 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. 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 and long-term financial algorithm; our ability to achieve or sustain profitability; momentum in our business; our ability to execute on, and the continued benefits of, our Transformation Pillars of Brand Maximization, Margin Enhancement, 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.

The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled 'Risk Factors' in the Annual Report, on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 8, 2024, and subsequent filings with the Securities and Exchange Commission. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release or the earnings call referencing this press release. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that contain 'we believe' and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this press release. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this press release and the earnings call referencing this press release relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

About The Honest Company

The Honest Company (NASDAQ: HNST) is a personal care company dedicated to creating clean- and sustainably-designed products spanning categories across diapers, wipes, baby personal care, beauty, apparel, household care and wellness. Founded in 2012, the Company is on a mission to challenge ingredients, ideals, and industries through the power of the Honest brand, the Honest team, and the Honest Standard. Honest products are available via Honest.com, leading online retailers and approximately 49,000 retail locations across the United States and Canada. For more information about the Honest Standard and the Company, please visit www.honest.com.

The Honest Company, Inc.

Condensed Consolidated Statements of Comprehensive Loss: see full results at:

https://investors.honest.com/news-releases/news-release-details/honest-company-reports-first-quarter-2024-results

Investor Contacts:

Elizabeth Bouquard

ebouquard@thehonestcompany.com

Investor Inquiries:

investors@thehonestcompany.com

Media Contact:

Jennifer Kroog Rosenberg

jrosenberg@thehonestcompany.com

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