The Honest Company, Inc. (HNST) Earnings

Management highlights

- Brought sharpened focus to right to win categories and channels, delivered organic revenue growth of 3.9%. - Adjusted gross margin of 43.5% was strongest in history, year-over-year gross margin expansion of 480 basis points. - Brand maximization strategy led to 8.3% consumption growth, significantly ahead of comparative category average. - Wipes portfolio saw consumption growth near 25%, personal care collection 16% growth, diaper consumption decline moderated. - Launched marketing campaigns for flushable wipes and Toy Story personal care collection.

Guidance

- Reported revenue declines of 18% to 16% due to strategic exits. - Organic revenue growth of 4% to 6% in line with long-term goal. - Adjusted gross margins in the low 40s. - Adjusted EBITDA of $20 million to $23 million. - Reiterated full-year outlook with these expectations.

Segment performance

Wipes: Q1 total wipes portfolio delivered consumption growth of nearly 25%. All-purpose baby wipes consumption grew 14%, honest flushable wipes and sensitive skin safe wipes delivered over 200% consumption growth in Q1. Personal care: Q1 personal care collection delivered consumption growth of 16%, became number two brand across total baby personal care. Diaper: Consumption declines in diapers moderated to negative 9.6% in Q1 from 18.3% in Q4 2025, but broader diaper category remains competitive.

Risks & headwinds

- Macro-economic uncertainties. - Highly competitive and promotional environment in diaper category. - Impact of tariffs on margin.

Analyst Q&A

• Q: Hi, good evening, and thank you very much for the questions here. First question for me, I just want to talk a little bit about the reiterated guidance...

  A: Yeah, good evening, Aaron. This is Curtis. We are certainly pleased with the revenue growth in Q1. It represents a very good start to the year and in line with our expectation. And so we're equally pleased with the consumption of 8% growth as well. And that was on our higher growth, higher margin portfolios and wipes and personal care. As you think about the full year, We're just reiterating our guidance, right? We are still expecting to be able to deliver on the 4% to 6% organic growth. We don't have any concerns coming out of the quarter that there was any dislocation in revenue performance and the consumption performance.

• Q: Second question for me is in terms of marketing spend, some uptick there sequentially to about $14 million. Maybe talk about some of the strategies that you have...

  A: Hey, Aaron, we really believe that marketing is a force multiplier here at Honest, and it has always been an important piece of the fabric. of building this powerful brand. We think we got a strategic advantage because ever since our beginning, we've been very brand forward, very consumer forward. And we know that this investment we're making in marketing is going to be a very powerful driver of this improved awareness that's key to our growth strategy. As you know, we have the success we've demonstrated on household penetration gains have been very balanced across our products and our consumer types and that's because we've been very intentional as we allowed ourselves to be more focused coming out of powering honest growth that degree of focus is allowing us to point our marketing dollars and our marketing strategies strongly towards our key categories In this quarter, what you've already seen is we kicked off a fantastic marketing campaign against our flushable wipes business. You remember in my comments, we are now the fourth largest brand in flushable wipes, and we delivered more than 200% consumption growth in the quarter. And we just about four weeks ago started kicking off a very groundbreaking campaign. You can see some images from that campaign in our investor slide presentation. Our social media feed as always, but this campaign really takes a different approach than other flushable brands in the category. We are living up to our name of being honest, right? And we've got these really glamorous, beautiful women talking about the role that a flushable wipe plays in their life and why they love our particularly soft and plush and cleanly formulated wipes. So we've got that campaign off to a very strong start and it includes a social media lens where we've got mega influencers across different demographics. Also what we have going now is, as I mentioned, our Toy Story 2 launch behind our new portfolio of kid personal care kicked off as Pixar began the early initial rounds of driving buzz against that movie. That movie launches in June, so we're really just getting into the window where our own awareness driving of that portfolio is heating up as well as Disney's. We've got some other great stuff planned for later in the year that I look forward to coming back and talking to you about. Yeah, Erin, let me just reiterate it and maybe add on to Carla's comment. So we definitely believe that brand building is a strategic advantage for us here. We're going to continue to invest in marketing as we look to strengthen the business and create a sustainable growth platform. This is why it was so important for us to execute Powering Honest Growth. The gross margin acceleration, the gross margin expansion is really the fuel that we need in order to continue to invest in marketing to have a long-term sustainable business.

• Q: Hi, good afternoon. Thanks for taking my questions. In the past, I think the classical brand discovery was talked about through diapers and then expanding through the broader categories that you guys offer...

  A: Wonderful. I'll give that a try. So you are right, Anna. We are at our all-time highest household penetration, which is such an affirmation that we have picked categories where consumers love what we have. and where our portfolios are very expandable across demographics and across types. A few things drive that. I've talked a lot about the fact that the largest percent of households in America are not, in fact, the littlest baby households, but they are both those bigger kid households and the households, you know, like my own, my daughter's about to go off to college, where maybe there was a kid in the household and there isn't anymore, as well as households where maybe there were never any children in the household. And what we found is that the benefit of Honest, which is that clean formulation, sensitive skin safe, that is relevant not just for babies, right? That is relevant. We know that a degree of adults describing themselves as having sensitive skin is as high as 50% to 70% based on certain research. So Honest products that we make have been relevant to a broader set of households for a while. we already sell more than a half of our, or excuse me, more than half of our consumers are already in these households. What we're doing now is really putting the strategy and product innovation roadmap together with that consumer base and making sure we talk to them. So this Flushables Wipe campaign that I just talked to you about is a great example. We are talking to adults about why they will love Honest products. And that is really a new form of expanded investment And we're seeing it work because, of course, those businesses are the growth of those businesses is outpacing the pressures we're seeing in the diaper category. So we feel really good about what that shift in mix and shift in focus has done for our business model.

• Q: Thank you, everyone, and good afternoon. Amazing story about your mom. So, Carl, I was just hoping, and Curtin, to talk about, like, competitive environment we hear in general...

  A: Great to hear from you, Andrea. Let me begin with the diaper portion first, and then I'll move on to the new product and distribution learning and our approach to that. So, yes. We agree. The diaper category is under an enormous amount of pressure. That pressure is multifaceted, as we know, with macroeconomic pressures facing consumers, along with just increased competitive landscape that is more heated up than we've seen it in previous years. For us, where we feel encouraged is that as we modeled our diaper business, we knew it was important to get past these distribution losses. now that we are really lapping those distribution losses that we've been talking to you about, and we saw our own declines cut in half, then that told us that as we've been looking at the category, things are playing out according to what we've built into the model and according to what we expected. With that said, we know that those baby households are important. And so we think we show up differently than most of the other brands in the baby aisle and the baby category, because we have the power of a single brand that applies broadly across even when just in the baby set with great meaning because people trust our products to really do what they say. And as we are seeing, there are places where people feel that is very important and worth it to them, right? And that is because I think that clean trust we've always had We love to think it has to do with also our beautiful design. They're beautiful products to use, as we know, as well as making sure that they deliver on their sensitive skin friendly benefits. So we've got the power of a brand that can press multiple different ways in the aisle. That's why we're still seeing our growth is offsetting those declines that we're managing in diapers. When I think about new products and distribution, I guess I'll pick up on that same storyline, which is the Honest brand was always built broadly, even from its beginning. What we have learned is that as we bring the brand into things like kid personal care, adult flushable wipes, hand sanitizing wipes, makeup remover wipes, trial and travel, we are finding the brand is a fit no matter what, we take it to new spaces in the store, we take it to new rooms in anybody's household, we take it to new consumers. That does come with the need to invest in each of those categories. We have to show up and talk to that consumer group in that particular category against that job to be done. And that's why you've seen that the team has built a financial model that allows us to go after these higher margin categories while reinvesting. And then let me just add, because we're talking about innovation, and we're certainly pleased with the start to Q1, particularly around the innovation. But our 2026 plan and our 2026 guidance on organic revenue was really balanced. It was innovation, velocity, and distribution. And so this was not a singular one-driver plan. So we are still very confident in our ability to deliver with the success that we have with innovation and the distribution that went into the market in Q1.

• Q: Thank you, everyone, and good afternoon. Amazing story about your mom. So, Carl, I was just hoping, and Curtin, to talk about, like, competitive environment we hear in general...

  A: Great to hear from you, Andrea. Let me begin with the diaper portion first, and then I'll move on to the new product and distribution learning and our approach to that. So, yes. We agree. The diaper category is under an enormous amount of pressure. That pressure is multifaceted, as we know, with macroeconomic pressures facing consumers, along with just increased competitive landscape that is more heated up than we've seen it in previous years. For us, where we feel encouraged is that as we modeled our diaper business, we knew it was important to get past these distribution losses. now that we are really lapping those distribution losses that we've been talking to you about, and we saw our own declines cut in half, then that told us that as we've been looking at the category, things are playing out according to what we've built into the model and according to what we expected. With that said, we know that those baby households are important. And so we think we show up differently than most of the other brands in the baby aisle and the baby category, because we have the power of a single brand that applies broadly across even when just in the baby set with great meaning because people trust our products to really do what they say. And as we are seeing, there are places where people feel that is very important and worth it to them, right? And that is because I think that clean trust we've always had We love to think it has to do with also our beautiful design. They're beautiful products to use, as we know, as well as making sure that they deliver on their sensitive skin friendly benefits. So we've got the power of a brand that can press multiple different ways in the aisle. That's why we're still seeing our growth is offsetting those declines that we're managing in diapers. When I think about new products and distribution, I guess I'll pick up on that same storyline, which is the Honest brand was always built broadly, even from its beginning. What we have learned is that as we bring the brand into things like kid personal care, adult flushable wipes, hand sanitizing wipes, makeup remover wipes, trial and travel, we are finding the brand is a fit no matter what, we take it to new spaces in the store, we take it to new rooms in anybody's household, we take it to new consumers. That does come with the need to invest in each of those categories. We have to show up and talk to that consumer group in that particular category against that job to be done. And that's why you've seen that the team has built a financial model that allows us to go after these higher margin categories while reinvesting. And then let me just add, because we're talking about innovation, and we're certainly pleased with the start to Q1, particularly around the innovation. But our 2026 plan and our 2026 guidance on organic revenue was really balanced. It was innovation, velocity, and distribution. And so this was not a singular one-driver plan. So we are still very confident in our ability to deliver with the success that we have with innovation and the distribution that went into the market in Q1.

• Q: Hey, Carla. Hey, Curtis. Thanks for taking my questions here. Just quickly for modeling purposes, last quarter you mentioned guiding to organic growth, improving sequentially throughout the year...

  A: Yeah, Owen, it's a good question. We are pleased with our start, both on net revenue and on consumption. That was the sequential improvement that we talked about, and so that's in line with our expectations. We are still very confident in our ability to deliver the annual guidance, but we're not offering any updates on the cadence.

• Q: And then secondly for me, what early reads are you seeing from some of those newer product launches, like the sensitive rich cream, scented wipes, and hydro rich cream, just in terms of, you know, potential velocity and repeats...

  A: A lot of those items launched into one. And so often in my experience, Owen, it is still early to have a true velocity run rate on new items like that. What becomes important is making sure that the shelf sets are all settled in so that we really have a clean read on that data and then driving that awareness. What I would really anchor us on is that In almost any category where you look at Honest, our household penetration is so low that each of these new products really gives us an opportunity to reach into a new household and introduce the brand. So for example, you brought up some of our baby items, Sensitive Rich Cream, and that is in our personal care portfolio. Our personal care portfolio is still only at 2% household penetration. Whereas what we see in brands that have been around the category longer, we see those with anywhere from five to seven times as much penetration as we have. So as we continue to make our way in these categories, drive familiarity with the awareness that the honest brand is there, we feel very, very confident that there is so much runway from our loyal consumers as we continue to drive that growth.