Earning Date, Transcript Summary & Report

Record Financial Performance: We delivered strong results in both the quarter and the full year, reaching new financial milestones in the history of our company and exceeding our guidance.

Revenue and Margin Growth: For the full year of 2024, we delivered revenue of $378 million, which was up 10% year-over-year and our gross margins expanded 900 basis points to 38%.

Positive Adjusted EBITDA Achievement: We also delivered our first full year of positive adjusted EBITDA as a public company.

Revenue and Household Growth: Our revenue is up 10% and our household penetration has reached 7%, representing more than a 20% increase in the number of households using Honest products since we went public in 2021.

Wipes Portfolio Expansion: Our wipes portfolio grew in strength and scale this year, with our Clean Conscious Wipes becoming the number-one natural wipes brand across the country.

Wipes Velocity and Repeat Growth: In Q4, our wipes velocities were up 17% and repeat was up 26% for the year.

Sensitive Skin Collection Growth: Our sensitive skin collection nearly doubled in consumption with year-over-year growth of 96%.

Brand Impressions Surge: Our marketing campaign increased Honest's brand impressions by more than 150% quarter-over-quarter, achieving six times the industry engagement benchmarks on key social media platforms.

Gross Margin Expansion: We expanded gross margin 900 basis points to 38% for the year, driven by strong revenue management and significant cost-saving projects.

Double-Digit Revenue Growth: We achieved double-digit revenue growth of 11% for the fourth quarter and 10% for the full year through expanded distribution, velocity gains, and product innovation.

Gross Margin Improvement: Our gross margin in the fourth quarter was 39%, up 530 basis points versus last year, primarily driven by cost savings and efficiencies.

Positive Adjusted EBITDA Growth: Adjusted EBITDA for the fourth quarter was positive $9 million compared to $4 million for the prior year fourth quarter, and we achieved full year positive adjusted EBITDA of $26 million, exceeding our original outlook.

Cash Position Improvement: We ended the quarter with $75 million in cash, an increase of $43 million at the end of last year due to continued discipline in managing working capital.

Free Cash Flow Improvement: Our free cash flow for the full year was $1 million, representing a significant improvement since we announced our transformation pillars in spring of 2023.

Expense Increase Analysis: Total expenses increased by $11 million in Q4 compared to last year, primarily driven by an increase in selling, general and administrative expenses, and retail marketing expenses.

Rising SG&A Expenses: Selling, general, and administrative expenses as a percentage of revenue increased over 510 basis points, mainly driven by non-reoccurring legal costs.

Increased Marketing Expenses: Marketing expenses increased by $3.5 million from the prior year fourth quarter to 11.3% of revenue, indicating a significant rise in spending without a clear return on investment.

Diaper Category Challenges: The diaper category remains a soft spot for the company, indicating challenges in a key product line.

Shipping Channel Transition: The company plans to gradually transition away from Honest.com as a shipping and fulfillment channel, which may impact direct consumer engagement and sales.

Legal Costs Impacting Profitability: Despite achieving positive adjusted EBITDA, the company still faced significant non-reoccurring legal costs, which could affect future profitability.

Modest Revenue Growth Outlook: The outlook for 2025 includes only modest revenue growth expectations of 4% to 6%, which may not meet investor expectations for more aggressive growth.