The Honest Company, Inc. Q2 FY2025 earnings call

• Welcomed new Chief Financial Officer Curtiss Bruce, who brings experience from respected consumer products brands.
• Q2 2025 results: Revenue $93M, gross margin 40%, positive net income $4M, seventh consecutive quarter of positive adjusted EBITDA.
• Execution of transformation pillars: Brand maximization (e.g., new clean conscious diaper launch, flushable wipes expansion), margin enhancement (gross margin expansion), and operating discipline (healthy balance sheet with $72M cash and no debt).
• Tariff mitigation strategy: 3-pronged approach including agile annual plans, inventory management, and cost savings efforts.
• Loyalty metrics: Buy rate up over 600 basis points, repeat rate 32% (up 94 basis points), household penetration 7.2% (up 77 basis points).

In the second quarter of 2025, The Honest Company delivered revenue of $93 million. The gross margin grew 210 basis points to 40%. Positive net income of $4 million was achieved, an increase of $8 million year-over-year, marking the second consecutive quarter of positive net income. Adjusted EBITDA margin was 8%, the seventh consecutive quarter of positive adjusted EBITDA. Year-to-date, revenue grew 6% and net income increased by $13 million compared to the prior year. Consumption of Honest products grew 6% for the quarter, driven by unit growth of 8% and increased velocities by 21%. Diaper business had low double-digit consumption declines, but wipes business saw consumption up 35% year-over-year versus the category growth of 2%, and Baby Personal Care collection was the #1 natural baby personal care brand in the U.S. with consumption growth of 10% in the quarter, outpacing the category's 1% growth. Revenue contribution details aren't explicitly broken down by specific product segments beyond general category performance.

• Reaffirmed full year 2025 financial outlook: Net revenue growth 4%-6% year-over-year, adjusted EBITDA in range of $27M-$30M.
• H2 2025 impacts: Lapping large customer-specific promotional events, diaper assortment simplification at largest brick-and-mortar retailer, but offset by new distribution in H2 and increased marketing for new diaper launch.
• Tariff outlook: Now expect roughly $8M of gross tariff exposure in 2025, with tariff impacts seen in Q2, expected to step up in Q3, then moderate in Q4.

• Macro-economic challenges affecting consumers, which present ongoing uncertainties.
• Diaper assortment simplification at largest brick-and-mortar retailer causing low double-digit consumption declines, which need to be lapped.
• Tariff uncertainties with potential impacts on margins, as tariff exposure is higher than originally anticipated and dynamic policy changes.