The Honest Company (NASDAQ: HNST), a personal care company
dedicated to creating clean- and sustainably-designed products,
today reported fourth quarter and full year 2023 financial results
for the period ended December 31, 2023.
“Our fourth quarter results demonstrate the benefit
that our Transformation Initiative has had on the business. Our
clear focus on Brand Maximization, Margin Enhancement, and
Operating Discipline has enabled us to achieve both positive Net
Income and positive Adjusted EBITDA,” said Chief Executive Officer,
Carla Vernón. “These achievements are a reflection of our Honest
team’s tenacity and commitment to drive shareholder value. I am
confident in our long-term strategy and look forward to continuing
to bring clean, effective and trustworthy products to our
categories. This mission, grounded in our unique and rigorous
Honest Standard, serves an enduring and important role for our
growing Honest community.”
“Our team’s work executing against our
Transformation Initiative over the last 12 months has helped us to
successfully build a strong financial foundation,” said Chief
Financial Officer, Dave Loretta. “As a result, we achieved
double-digit revenue growth for the fourth quarter, while also
improving gross margin and reducing operating expenses. At the same
time, we improved our balance sheet, more than doubling our
year-end cash position. Our 2024 outlook emphasizes profitable
growth and showcases the confidence we have in the long-term
strategy and financial future of Honest.”
This press release includes non-GAAP financial
measures. See “Use of Non-GAAP Financial Measures” at the end of
this press release for more information. The Honest Company may
also be referred to as the “Company” “we” “us” or “our” in this
press release.
Fourth Quarter Results(All
comparisons are versus the fourth
quarter of
2022)
Revenue increased 10% to $90
million, driven by growth in the Digital channel, volume growth and
the benefit of price increases.
Revenue by Product Category
|
For the three months ended December 31, |
|
2023 |
|
2022 |
|
% change |
(Unaudited, in thousands, except percentages) |
|
|
Diapers and Wipes |
$ |
57,347 |
|
|
$ |
50,017 |
|
|
|
15 |
% |
Skin and Personal Care |
|
21,356 |
|
|
|
22,783 |
|
|
|
(6 |
) |
Household and Wellness |
|
11,561 |
|
|
|
9,059 |
|
|
|
28 |
|
Total Revenue |
$ |
90,264 |
|
|
$ |
81,859 |
|
|
|
10 |
% |
________________
- Diapers and Wipes:
Revenue from Diapers and Wipes increased 15% driven by new
distribution, price increases and strong sales velocity in
wipes.
- Skin and Personal
Care: Revenue from Skin and Personal Care decreased 6%
largely due to exiting distribution in low-margin channels. This
was partially offset by strong consumption growth in baby personal
care.
- Household and
Wellness: Revenue from Household and Wellness increased
28% reflecting strong performance of the baby clothing
business.
Revenue by Channel
|
For the three months ended December 31, |
|
2023 |
|
2022 |
|
% change |
(Unaudited, in thousands, except percentages) |
|
|
|
|
Digital |
$ |
45,367 |
|
|
$ |
35,490 |
|
|
|
28 |
% |
Retail |
|
44,897 |
|
|
|
46,369 |
|
|
|
(3 |
) |
Total Revenue |
$ |
90,264 |
|
|
$ |
81,859 |
|
|
|
10 |
% |
|
For the three months ended December 31, |
|
2023 |
|
2022 |
(As a percentage of revenue) |
|
|
|
Digital |
|
50 |
% |
|
|
43 |
% |
Retail |
|
50 |
% |
|
|
57 |
% |
Total Revenue |
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
Digital revenue increased 28%
compared to the fourth quarter of 2022 driven by volume growth.
Retail revenue decreased 3%
compared to the fourth quarter of 2022 due to exiting distribution
in low-margin channels.
Gross margin was 33.5% compared to
27.5% in the fourth quarter of 2022. Gross margin increased by 600
basis points compared to the fourth quarter of 2022. The drivers of
gross margin improvement included cost savings and price
increases.
Operating expenses decreased $6
million compared to the fourth quarter of 2022.
Net income was $1 million compared
to net loss of $13 million in the fourth quarter of 2022.
Adjusted EBITDA was $4 million and
included $0.2 million in costs related to the Transformation
Initiative. See the reconciliation of adjusted EBITDA, a non-GAAP
financial measure, to net income (loss) in the table at the end of
this press release.
Full Year Results (All comparisons
are versus full year 2022)
Revenue of $344 million increased
10%, surpassing the Company’s outlook range. This was driven by new
distribution and price increases in the Retail channel, along with
strong double-digit consumption growth in our Digital channel.
Digital channel revenue increased 20% and our Retail channel
revenue increased 2%.
Revenue by Product Category
|
For the year ended December 31, |
|
2023 |
|
2022 |
|
% change |
(In thousands, except percentages) |
|
|
|
|
|
Diapers and Wipes |
$ |
218,263 |
|
|
$ |
200,429 |
|
|
|
9 |
% |
Skin and Personal Care |
|
88,104 |
|
|
|
89,316 |
|
|
|
(1 |
) |
Household and Wellness |
|
37,998 |
|
|
|
23,906 |
|
|
|
59 |
|
Total Revenue |
$ |
344,365 |
|
|
$ |
313,651 |
|
|
|
10 |
% |
Revenue by Channel
|
For the year ended December 31, |
|
2023 |
|
2022 |
|
% change |
(In thousands, except percentages) |
|
|
|
|
|
|
|
Digital |
$ |
169,015 |
|
|
$ |
141,403 |
|
|
|
20 |
% |
Retail |
|
175,350 |
|
|
|
172,248 |
|
|
|
2 |
|
Total Revenue |
$ |
344,365 |
|
|
$ |
313,651 |
|
|
|
10 |
% |
|
For the year ended December 31, |
|
2023 |
|
2022 |
(As a percentage of revenue) |
|
|
|
Digital |
|
49 |
% |
|
|
45 |
% |
Retail |
|
51 |
% |
|
|
55 |
% |
Total Revenue |
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
Gross margin decreased
approximately 20 basis points to 29.2%. Notably, gross margin saw
sequential improvement across each quarter of the year as the
Company’s Transformation Initiative improved gross margin by 930
basis points from the first quarter to the fourth quarter of
2023.
Operating expenses decreased $3
million or 2% compared to full year of 2022.
Net loss was $39 million compared
to net loss of $49 million during the full year of 2022.
Adjusted EBITDA was negative $11
million and included $9 million in costs related to the
Transformation Initiative, compared to negative $23 million for the
full year 2022. See the reconciliation of adjusted EBITDA, a
non-GAAP financial measure, to net income (loss) in the table at
the end of this press release.
See “Transformation Initiative” in the table at the
end of this press release for more details on the Transformation
Initiative costs.
Balance Sheet and Cash Flow
The Company ended the fourth quarter of 2023 with
$33 million in cash, cash equivalents and short-term investments,
an increase of $18 million versus the prior year 2022, reflecting
disciplined management of working capital. Inventory was reduced by
36%, or $42 million versus the prior year 2022, which was
significantly ahead of the Company’s initial target of a $20
million reduction in inventory in 2023. This inventory reduction
has been achieved while supporting a 10% increase in revenue
compared to the year ended December 31, 2022. The Company had no
debt on the balance sheet as of December 31, 2023.
Net cash provided by operating activities was $19
million for the year ended December 31, 2023, a $96 million
improvement compared to net cash used in operating activities of
$76 million for the year ended December 31, 2022.
Long-Term Financial Algorithm
In fiscal year 2024, the Company expects to
steadily improve its operating results by expanding distribution,
improving velocities and penetration, and managing costs. The
Company’s updated strategic plan is grounded in its Transformation
Initiative Pillars, which set the building blocks for long-term
value creation. Beyond 2024, the Company expects to realize revenue
growth of 4% to 6% annually and continued Adjusted EBITDA margin
expansion.
Additional information on the Company’s updated
strategic plans and long-term financial algorithm can be found in
its Investor Presentation on its Investor Relations website at
http://investors.honest.com.
2024 Outlook
In fiscal year 2024, the Company expects to
continue driving benefits from its three Transformation Initiative
Pillars of Brand Maximization, Margin Enhancement, and Operating
Discipline. Brand Maximization is focused on generating revenue
growth from continued focus on distribution, innovation, and
marketing effectiveness. The Company expects its initiatives to
drive Margin Enhancement through ongoing cost savings activities
which will contribute to a continued strengthening of the Company’s
financial foundation and improved profitability. The Company’s
Operating Discipline is focused on managing working capital and
operating expenses, while building a culture that emphasizes
executional excellence and discipline. Therefore, the Company
expects the following financial outlook for the full fiscal year
2024:
- Net revenue growth of low-to-mid
single digit percentage. Included in the revenue outlook is a
softer first half of 2024 compared to the second half of 2024.
- Positive Adjusted EBITDA(1) in the
low-single digit to mid-single digit millions range.
____________
(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 fourth
quarter and full year 2023 results is scheduled for today,
March 6, 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/BI77ecc70fde724e5487adfb3a71311230,
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, including statements regarding our future
results of operations or financial condition, business strategy and
plans and objectives of management for future operations, 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 the following:
- our expectations regarding our
revenue, cost of revenue, operating expenses, gross margin,
adjusted EBITDA and other operating results, including as a result
of the Transformation Initiative, in particular with respect to our
full year 2024 outlook and long-term financial algorithm, including
our underlying assumptions;
- our expectations regarding the
benefits of the Transformation Initiative, including the annualized
benefits;
- our expectation that Transformation
Initiative will continue to drive benefits from its three
Transformation Initiative Pillars of Brand Maximization, Margin
Enhancement, and Operating Discipline and will set the building
blocks for long-term value creation;
- our ability to achieve or sustain
our profitability;
- our ability to focus on keeping the
Honest community of consumers at the center of what we do;
- our ability to deliver
sustainably-designed products that meet our Honest community’s
expectations and lead category growth;
- our ability to aggressively manage our
working capital;
- that strong momentum in our business,
continued strong results in tracked channels, consumer acceptance
of prior and future price increases, value of the Honest brand and
retail expansion are expected to offset rising consumer economic
pressure and uncertainty;
- our ability to offset the high
inflationary environment, including commodity prices, labor costs,
input cost and transportation cost inflation;
- our ability to drive innovation,
maintain cost discipline, expand our distribution footprint, enter
new categories, and execute our pricing and cost-reduction
strategies to position Honest for long-term growth, including as
part of the Transformation Initiative;
- our ability to execute our strategy
to deliver sustained long-term growth and profitability, including
as part of the Transformation Initiative;
- our brand building and expansion with
retail and digital customers;
- the effect of macroeconomic factors,
such as public health crises, supply chain disruptions and
inflation on our business and the global economy, including our
costs and expenses;
- our continued revenue growth and
margin improvement;
- our ability to capture outsized growth
that is increasingly profitable and addresses the needs of modern
consumers; and
- our ability to capture distribution
opportunities with our best-selling “hero” items.
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 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, 2022,
filed with the Securities and Exchange Commission on March 16,
2023, and Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2023, June 30, 2023 and September 30, 2023, respectively,
filed with the Securities and Exchange Commission on May 9, 2023,
August 8, 2024, and November 8, 2023, respectively, 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. Honest products are available via Honest.com, third-party
ecommerce customers and approximately 51,000 retail locations
across the United States and Canada. Based in Los Angeles, CA, the
Company’s mission, to inspire everyone to love living consciously,
is driven by its values of transparency, trust, sustainability and
a deep sense of purpose around what matters most to its consumers:
their health, their families and their homes. For more information
about the Honest Standard and the Company, please visit
www.honest.com.
Investor
Contacts:
Elizabeth Bouquardebouquard@thehonestcompany.com
Investor
Inquiries:investors@thehonestcompany.com
Media
Contact: Jennifer
Kroog Rosenbergjrosenberg@thehonestcompany.com
|
The Honest
Company, Inc. Consolidated Statements of
Comprehensive Income (Loss)(in thousands, except share and
per share amounts) |
|
|
For the three months ended December
31,(Unaudited) |
|
For the year ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
Revenue |
$ |
90,264 |
|
|
$ |
81,859 |
|
|
$ |
344,365 |
|
|
$ |
313,651 |
|
Cost of revenue |
|
60,035 |
|
|
|
59,352 |
|
|
|
243,833 |
|
|
|
221,336 |
|
Gross profit |
|
30,229 |
|
|
|
22,507 |
|
|
|
100,532 |
|
|
|
92,315 |
|
Operating expenses |
|
|
|
|
|
|
|
Selling, general and administrative |
|
19,587 |
|
|
|
24,249 |
|
|
|
94,582 |
|
|
|
87,317 |
|
Marketing |
|
7,835 |
|
|
|
9,661 |
|
|
|
36,440 |
|
|
|
47,782 |
|
Restructuring |
|
101 |
|
|
|
— |
|
|
|
2,205 |
|
|
|
— |
|
Research and development |
|
1,577 |
|
|
|
1,352 |
|
|
|
6,214 |
|
|
|
6,996 |
|
Total operating expenses |
|
29,100 |
|
|
|
35,262 |
|
|
|
139,441 |
|
|
|
142,095 |
|
Operating income (loss) |
|
1,129 |
|
|
|
(12,755 |
) |
|
|
(38,909 |
) |
|
|
(49,780 |
) |
Interest and other income (expense), net |
|
15 |
|
|
|
214 |
|
|
|
(254 |
) |
|
|
871 |
|
Income (loss) before provision for income taxes |
|
1,144 |
|
|
|
(12,541 |
) |
|
|
(39,163 |
) |
|
|
(48,909 |
) |
Income tax provision |
|
— |
|
|
|
50 |
|
|
|
75 |
|
|
|
110 |
|
Net income (loss) |
$ |
1,144 |
|
|
$ |
(12,591 |
) |
|
$ |
(39,238 |
) |
|
$ |
(49,019 |
) |
Net income (loss) per share attributable to common
stockholders: |
|
|
|
|
|
|
|
Basic |
$ |
0.01 |
|
|
$ |
(0.14 |
) |
|
$ |
(0.42 |
) |
|
$ |
(0.53 |
) |
Diluted |
$ |
0.01 |
|
|
$ |
(0.14 |
) |
|
$ |
(0.42 |
) |
|
$ |
(0.53 |
) |
Weighted-average shares used in computing net income (loss) per
share attributable to common stockholders: |
|
|
|
|
|
|
|
Basic |
|
95,642,655 |
|
|
|
92,740,041 |
|
|
|
94,516,690 |
|
|
|
92,201,806 |
|
Diluted |
|
98,369,753 |
|
|
|
92,740,041 |
|
|
|
94,516,690 |
|
|
|
92,201,806 |
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
|
|
|
|
|
Unrealized gain on short-term investments, net of taxes |
|
— |
|
|
|
51 |
|
|
|
32 |
|
|
|
9 |
|
Comprehensive income (loss) |
$ |
1,144 |
|
|
$ |
(12,540 |
) |
|
$ |
(39,206 |
) |
|
$ |
(49,010 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Honest Company, Inc.Condensed
Consolidated Balance Sheets(in thousands, except share and
per share amounts) |
|
|
December 31, 2023 |
|
December 31, 2022 |
|
|
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
32,827 |
|
|
$ |
9,517 |
|
Short-term investments |
|
— |
|
|
|
5,650 |
|
Accounts receivable, net |
|
43,084 |
|
|
|
42,334 |
|
Inventories |
|
73,490 |
|
|
|
115,664 |
|
Prepaid expenses and other current assets |
|
8,371 |
|
|
|
15,982 |
|
Total current assets |
|
157,772 |
|
|
|
189,147 |
|
Operating lease right-of-use asset |
|
23,683 |
|
|
|
29,947 |
|
Property and equipment, net |
|
13,486 |
|
|
|
14,327 |
|
Goodwill |
|
2,230 |
|
|
|
2,230 |
|
Intangible assets, net |
|
309 |
|
|
|
370 |
|
Other assets |
|
4,141 |
|
|
|
4,578 |
|
Total assets |
$ |
201,621 |
|
|
$ |
240,599 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
22,289 |
|
|
$ |
24,755 |
|
Accrued expenses |
|
32,209 |
|
|
|
38,010 |
|
Deferred revenue |
|
2,212 |
|
|
|
815 |
|
Total current liabilities |
|
56,710 |
|
|
|
63,580 |
|
Long term liabilities |
|
|
|
Lease financing obligation, net of current portion |
|
— |
|
|
|
— |
|
Operating lease liabilities, net of current portion |
|
21,738 |
|
|
|
29,842 |
|
Other long-term liabilities |
|
34 |
|
|
|
817 |
|
Total liabilities |
|
78,482 |
|
|
|
94,239 |
|
Commitments and contingencies |
|
|
|
Stockholders’ equity |
|
|
|
Preferred stock, $0.0001 par value, 20,000,000 shares authorized at
December 31, 2023 and 2022, none issued or outstanding as of
December 31, 2023 and 2022 |
|
— |
|
|
|
— |
|
Common stock, $0.0001 par value, 1,000,000,000 shares authorized at
December 31, 2023 and 2022; 95,868,421 and 92,907,351 shares
issued and outstanding as of December 31, 2023 and 2022,
respectively |
|
9 |
|
|
|
9 |
|
Additional paid-in capital |
|
602,198 |
|
|
|
586,213 |
|
Accumulated deficit |
|
(479,068 |
) |
|
|
(439,830 |
) |
Accumulated other comprehensive loss |
|
— |
|
|
|
(32 |
) |
Total stockholders’ equity |
|
123,139 |
|
|
|
146,360 |
|
Total liabilities and stockholders’ equity |
$ |
201,621 |
|
|
$ |
240,599 |
|
|
|
|
|
|
|
|
|
The Honest Company, Inc.Condensed
Consolidated Statements of Cash Flows |
|
|
For the year ended December 31, |
|
2023 |
|
2022 |
|
2021 |
Cash flows from operating activities |
|
|
|
|
|
Net loss |
$ |
(39,238 |
) |
|
$ |
(49,019 |
) |
|
$ |
(38,679 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
2,740 |
|
|
|
2,753 |
|
|
|
4,146 |
|
Stock-based compensation |
|
15,804 |
|
|
|
15,078 |
|
|
|
16,847 |
|
Other |
|
6,257 |
|
|
|
6,345 |
|
|
|
311 |
|
Changes in assets and liabilities: |
|
|
|
|
|
Accounts receivable, net |
|
(750 |
) |
|
|
(10,550 |
) |
|
|
(8,989 |
) |
Inventories |
|
42,174 |
|
|
|
(39,996 |
) |
|
|
1,001 |
|
Prepaid expenses and other assets |
|
8,005 |
|
|
|
(4,358 |
) |
|
|
(6,114 |
) |
Accounts payable, accrued expenses and other long-term
liabilities |
|
(9,347 |
) |
|
|
10,396 |
|
|
|
(6,691 |
) |
Deferred revenue |
|
1,396 |
|
|
|
83 |
|
|
|
14 |
|
Operating lease liabilities |
|
(7,688 |
) |
|
|
(7,007 |
) |
|
|
— |
|
Net cash provided by (used in) operating activities |
|
19,353 |
|
|
|
(76,275 |
) |
|
|
(38,154 |
) |
Cash flows from investing activities |
|
|
|
|
|
Purchases of short-term investments |
|
— |
|
|
|
(12,782 |
) |
|
|
(65,267 |
) |
Proceeds from sales of short-term investments |
|
— |
|
|
|
— |
|
|
|
27,394 |
|
Proceeds from maturities of short-term investments |
|
5,683 |
|
|
|
49,362 |
|
|
|
29,470 |
|
Purchases of property and equipment |
|
(1,838 |
) |
|
|
(1,617 |
) |
|
|
(220 |
) |
Purchases of intangible assets |
|
(10 |
) |
|
|
— |
|
|
|
— |
|
Net cash provided by (used in) investing activities |
|
3,835 |
|
|
|
34,963 |
|
|
|
(8,623 |
) |
Cash flows from financing activities |
|
|
|
|
|
Proceeds from initial public offering, net of underwriting
commissions and discounts |
|
— |
|
|
|
— |
|
|
|
96,517 |
|
Dividends paid |
|
— |
|
|
|
— |
|
|
|
(35,000 |
) |
Proceeds from exercise of stock options |
|
4 |
|
|
|
122 |
|
|
|
5,730 |
|
Payment of initial public offering costs |
|
— |
|
|
|
— |
|
|
|
(5,477 |
) |
Taxes paid related to net share settlement of equity awards |
|
— |
|
|
|
(37 |
) |
|
|
(567 |
) |
Proceeds from ESPP |
|
176 |
|
|
|
256 |
|
|
|
291 |
|
Payments on finance lease liabilities |
|
(58 |
) |
|
|
(303 |
) |
|
|
(1,126 |
) |
Net cash provided by financing activities |
|
122 |
|
|
|
38 |
|
|
|
60,368 |
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
23,310 |
|
|
|
(41,274 |
) |
|
|
13,591 |
|
Cash, cash equivalents and restricted cash |
|
|
|
|
|
Beginning of the period |
|
9,517 |
|
|
|
50,791 |
|
|
|
37,200 |
|
End of the period |
$ |
32,827 |
|
|
$ |
9,517 |
|
|
$ |
50,791 |
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents and restricted
cash to the consolidated balance sheets |
|
|
|
|
|
Cash and cash equivalents |
$ |
32,827 |
|
|
$ |
9,517 |
|
|
$ |
50,791 |
|
Restricted cash, current |
|
— |
|
|
|
— |
|
|
|
— |
|
Restricted cash, non-current |
|
— |
|
|
|
— |
|
|
|
— |
|
Total cash, cash equivalents and restricted cash |
$ |
32,827 |
|
|
$ |
9,517 |
|
|
$ |
50,791 |
|
|
|
|
|
|
|
Supplemental disclosures of cash flow
information |
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
Interest |
$ |
1 |
|
|
$ |
8 |
|
|
$ |
1,797 |
|
Income Taxes |
|
116 |
|
|
$ |
101 |
|
|
$ |
76 |
|
Supplemental disclosures of noncash
activities |
|
|
|
|
|
Equipment acquired under capital lease obligations |
$ |
— |
|
|
$ |
— |
|
|
$ |
123 |
|
Capital expenditures included in accounts payable and accrued
expenses |
$ |
25 |
|
|
$ |
54 |
|
|
$ |
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Honest Company, Inc.Use of Non-GAAP
Financial Measures |
We prepare and present our condensed consolidated
financial statements in accordance with GAAP. However, management
believes that adjusted EBITDA, which is a non-GAAP financial
measure, provides investors with additional useful information in
evaluating our performance.
We calculate adjusted EBITDA as net income (loss),
adjusted to exclude: (1) interest and other (income) expense,
net; (2) income tax provision; (3) depreciation and
amortization; (4) stock-based compensation expense, including
payroll tax; (5) litigation and settlement fees associated with
certain non-ordinary course securities litigation claims; (6) CEO
and CFO transition expenses and (7) restructuring expenses in
connection with the Transformation Initiative.
Adjusted EBITDA is a financial measure that is not
required by, or presented in accordance with GAAP. We believe that
adjusted EBITDA, when taken together with our financial results
presented in accordance with GAAP, provides meaningful supplemental
information regarding our operating performance and facilitates
internal comparisons of our historical operating performance on a
more consistent basis by excluding certain items that may not be
indicative of our business, results of operations or outlook. In
particular, we believe that the use of adjusted EBITDA is helpful
to our investors as it is a measure used by management in assessing
the health of our business, determining incentive compensation and
evaluating our operating performance, as well as for internal
planning and forecasting purposes.
Adjusted EBITDA is presented for supplemental
informational purposes only, has limitations as an analytical tool
and should not be considered in isolation or as a substitute for
financial information presented in accordance with GAAP. Some of
the limitations of adjusted EBITDA include that (1) it does
not reflect capital commitments to be paid in the future;
(2) although depreciation and amortization are non-cash
charges, the underlying assets may need to be replaced and adjusted
EBITDA does not reflect these capital expenditures; (3) it
does not consider the impact of stock-based compensation expense;
(4) it does not reflect other non-operating expenses,
including interest expense; (5) it does not reflect tax
payments that may represent a reduction in cash available to us;
and (6) does not include certain non-ordinary cash expenses
that we do not believe are representative of our business on a
steady-state basis, such as CEO and CFO transition expenses and
restructuring expenses in connection with the Transformation
Initiative. In addition, our use of adjusted EBITDA may not be
comparable to similarly titled measures of other companies because
they may not calculate adjusted EBITDA in the same manner, limiting
its usefulness as a comparative measure. Because of these
limitations, when evaluating our performance, you should consider
adjusted EBITDA alongside other financial measures, including our
net income (loss), revenue and other results stated in accordance
with GAAP.
The following table presents a reconciliation of
net income (loss), the most directly comparable financial measure
stated in accordance with GAAP, to adjusted EBITDA, for each of the
periods presented:
|
For the three months ended December 31, |
|
For the year ended December 31, |
(In thousands) |
2023 |
|
2022 |
|
2023 |
|
2022 |
Reconciliation of Net Income (Loss) to Adjusted
EBITDA |
|
|
|
|
|
|
|
Net income (loss) |
$ |
1,144 |
|
|
$ |
(12,591 |
) |
|
$ |
(39,238 |
) |
|
$ |
(49,019 |
) |
Interest and other (income) expense, net |
|
(15 |
) |
|
|
(214 |
) |
|
|
254 |
|
|
|
(871 |
) |
Income tax provision |
|
— |
|
|
|
50 |
|
|
|
75 |
|
|
|
110 |
|
Depreciation and amortization |
|
709 |
|
|
|
728 |
|
|
|
2,740 |
|
|
|
2,753 |
|
Stock-based compensation(1) |
|
1,911 |
|
|
|
3,722 |
|
|
|
15,804 |
|
|
|
15,078 |
|
Securities litigation expense |
|
379 |
|
|
|
977 |
|
|
|
4,703 |
|
|
|
3,583 |
|
CEO and CFO transition expense(2) |
|
2 |
|
|
|
5,766 |
|
|
|
2,075 |
|
|
|
5,766 |
|
Restructuring costs(3) |
|
101 |
|
|
|
— |
|
|
|
2,205 |
|
|
|
— |
|
Payroll tax expense related to stock-based compensation |
|
19 |
|
|
|
9 |
|
|
|
140 |
|
|
|
89 |
|
Adjusted EBITDA |
$ |
4,250 |
|
|
$ |
(1,553 |
) |
|
$ |
(11,242 |
) |
|
$ |
(22,511 |
) |
____________________
(1) Includes accelerated equity awards related to
prior separation agreements of an aggregate of $3.1 million
with our former CEO and CFO, respectively, during the year ended
December 31, 2023. Additionally, includes extension of
post-termination stock option exercise periods for certain former
executives, resulting in stock-based compensation expense of
$0.5 million during the year ended December 31, 2023.(2)
Includes sign-on bonus, relocation, legal, recruiting and
separation costs. (3) Refer to Transformation Initiative table
below for items included in restructuring expense.
The Honest Company, Inc.Transformation
Initiative |
|
(In millions) |
Q1 2023 |
|
Q2 2023 |
|
Q3 2023 |
|
Q4 2023 |
|
Total |
Restructuring costs(1) |
$ |
1.4 |
|
|
$ |
0.4 |
|
|
$ |
0.4 |
|
|
$ |
0.1 |
|
|
$ |
2.3 |
|
Other related costs(2) |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
0.5 |
|
|
$ |
— |
|
|
$ |
(0.1 |
) |
|
$ |
— |
|
|
$ |
0.4 |
|
Cost of revenue |
|
2.7 |
|
|
|
0.6 |
|
|
|
0.6 |
|
|
|
— |
|
|
|
3.9 |
|
Selling, general and administrative expense |
|
2.4 |
|
|
|
0.4 |
|
|
|
1.4 |
|
|
|
0.2 |
|
|
|
4.4 |
|
Subtotal |
$ |
5.6 |
|
|
$ |
1.0 |
|
|
$ |
1.9 |
|
|
$ |
0.2 |
|
|
$ |
8.7 |
|
Total Transformation Initiative-related costs: |
$ |
7.0 |
|
|
$ |
1.4 |
|
|
$ |
2.3 |
|
|
$ |
0.3 |
|
|
$ |
11.0 |
|
Non-cash costs |
|
|
|
|
|
|
|
|
$ |
7.2 |
|
Cash-related costs(3) |
|
|
|
|
|
|
|
|
$ |
3.8 |
|
The Company may incur other charges or cash
expenditures not currently contemplated that may occur as a result
of or in connection with the Transformation Initiative.
_____________
(1) Restructuring costs (reflected in Operating
Expenses) include employee-related costs, asset-related costs and
contract terminations related to exiting unprofitable geographical
locations.(2) Other Transformation Initiative-related costs include
product returns, chargebacks and markdowns recorded as a reduction
to revenue. Inventory reserves, write-downs or destruction costs as
a direct result of a restructuring in connection with
Transformation Initiative to exit certain products or locations are
recorded as cost of revenue. Selling, general and administrative
expenses include donation expense.(3) Of the total cash-related
costs, $3.5 million has been paid as of December 31, 2023.
Honest (NASDAQ:HNST)
Historical Stock Chart
From Apr 2024 to May 2024
Honest (NASDAQ:HNST)
Historical Stock Chart
From May 2023 to May 2024