The Honest Company Reports Fourth Quarter and Full Year 2024 Financial Results
The Honest Company (NASDAQ: HNST) reported strong Q4 and full year 2024 results, achieving record quarterly revenue of $100 million, up 11% year-over-year. The company's Q4 gross margin expanded 530 basis points to 39%, though it recorded a net loss of less than $1 million compared to $1 million net income in the previous year.
For full year 2024, revenue increased 10% to $378 million, with gross margin expanding 900 basis points to 38.2%. The company reduced its net loss significantly from $39 million to $6 million and achieved its first full year of positive Adjusted EBITDA as a public company at $26 million. The company ended Q4 with $75 million in cash and no debt.
Looking ahead to 2025, The Honest Company expects revenue growth of 4-6% and Adjusted EBITDA between $27-30 million, aligning with its long-term financial algorithm.
The Honest Company (NASDAQ: HNST) ha riportato risultati solidi per il quarto trimestre e l'intero anno 2024, raggiungendo un fatturato trimestrale record di 100 milioni di dollari, in aumento dell'11% rispetto all'anno precedente. Il margine lordo del quarto trimestre dell'azienda è aumentato di 530 punti base, raggiungendo il 39%, anche se ha registrato una perdita netta di meno di 1 milione di dollari rispetto a un utile netto di 1 milione di dollari nell'anno precedente.
Per l'intero anno 2024, il fatturato è aumentato del 10% a 378 milioni di dollari, con un margine lordo in espansione di 900 punti base, arrivando al 38,2%. L'azienda ha ridotto significativamente la sua perdita netta da 39 milioni a 6 milioni di dollari e ha raggiunto il suo primo anno completo di EBITDA rettificato positivo come società pubblica, pari a 26 milioni di dollari. L'azienda ha chiuso il quarto trimestre con 75 milioni di dollari in contante e senza debiti.
Guardando al 2025, The Honest Company prevede una crescita del fatturato del 4-6% e un EBITDA rettificato tra 27 e 30 milioni di dollari, in linea con il suo algoritmo finanziario a lungo termine.
The Honest Company (NASDAQ: HNST) reportó resultados sólidos para el cuarto trimestre y el año completo 2024, logrando un ingreso trimestral récord de 100 millones de dólares, un aumento del 11% en comparación con el año anterior. El margen bruto del cuarto trimestre de la compañía se expandió en 530 puntos base al 39%, aunque registró una pérdida neta de menos de 1 millón de dólares en comparación con una ganancia neta de 1 millón de dólares en el año anterior.
Para el año completo 2024, los ingresos aumentaron un 10% a 378 millones de dólares, con un margen bruto que se expandió en 900 puntos base al 38,2%. La compañía redujo significativamente su pérdida neta de 39 millones a 6 millones de dólares y logró su primer año completo de EBITDA ajustado positivo como empresa pública, alcanzando los 26 millones de dólares. La compañía cerró el cuarto trimestre con 75 millones de dólares en efectivo y sin deudas.
Mirando hacia 2025, The Honest Company espera un crecimiento de ingresos del 4-6% y un EBITDA ajustado entre 27 y 30 millones de dólares, alineándose con su algoritmo financiero a largo plazo.
더 호너스트 컴퍼니 (NASDAQ: HNST)는 2024년 4분기 및 전체 연도 실적을 발표하며, 분기 매출이 1억 달러로 기록적인 성과를 올렸고, 이는 전년 대비 11% 증가한 수치입니다. 회사의 4분기 총 마진은 39%로 530bp 증가했지만, 전년 100만 달러의 순이익에 비해 100만 달러 미만의 순손실을 기록했습니다.
2024년 전체 연도 매출은 3억 7800만 달러로 10% 증가했으며, 총 마진은 38.2%로 900bp 확장되었습니다. 회사는 순손실을 3900만 달러에서 600만 달러로 크게 줄였고, 상장 기업으로서 첫 번째 연도에 조정된 EBITDA가 2600만 달러로 긍정적이었습니다. 회사는 4분기를 7500만 달러의 현금과 무부채로 종료했습니다.
2025년을 바라보며, 더 호너스트 컴퍼니는 4-6%의 매출 성장을 예상하고 있으며, 조정된 EBITDA는 2700만에서 3000만 달러 사이로, 장기 재무 알고리즘과 일치합니다.
The Honest Company (NASDAQ: HNST) a annoncé de solides résultats pour le quatrième trimestre et l'année complète 2024, atteignant un chiffre d'affaires trimestriel record de 100 millions de dollars, en hausse de 11 % par rapport à l'année précédente. La marge brute du quatrième trimestre de l'entreprise a augmenté de 530 points de base pour atteindre 39 %, bien qu'elle ait enregistré une perte nette de moins de 1 million de dollars par rapport à un bénéfice net de 1 million de dollars l'année précédente.
Pour l'année complète 2024, le chiffre d'affaires a augmenté de 10 % pour atteindre 378 millions de dollars, avec une marge brute en hausse de 900 points de base à 38,2 %. L'entreprise a considérablement réduit sa perte nette de 39 millions à 6 millions de dollars et a réalisé sa première année complète d'EBITDA ajusté positif en tant qu'entreprise publique, atteignant 26 millions de dollars. L'entreprise a terminé le quatrième trimestre avec 75 millions de dollars en espèces et sans dettes.
En regardant vers 2025, The Honest Company prévoit une croissance des revenus de 4 à 6 % et un EBITDA ajusté entre 27 et 30 millions de dollars, s'alignant sur son algorithme financier à long terme.
The Honest Company (NASDAQ: HNST) hat starke Ergebnisse für das vierte Quartal und das gesamte Jahr 2024 gemeldet und einen Rekordumsatz von 100 Millionen US-Dollar erzielt, was einem Anstieg von 11% im Vergleich zum Vorjahr entspricht. Die Bruttomarge des Unternehmens im vierten Quartal stieg um 530 Basispunkte auf 39%, obwohl ein Nettoverlust von weniger als 1 Million US-Dollar im Vergleich zu einem Nettogewinn von 1 Million US-Dollar im Vorjahr verzeichnet wurde.
Für das gesamte Jahr 2024 stieg der Umsatz um 10% auf 378 Millionen US-Dollar, wobei die Bruttomarge um 900 Basispunkte auf 38,2% anstieg. Das Unternehmen reduzierte seinen Nettoverlust erheblich von 39 Millionen auf 6 Millionen US-Dollar und erzielte im ersten vollen Jahr als börsennotiertes Unternehmen ein positives bereinigtes EBITDA von 26 Millionen US-Dollar. Das Unternehmen schloss das vierte Quartal mit 75 Millionen US-Dollar in bar und ohne Schulden ab.
Für 2025 erwartet The Honest Company ein Umsatzwachstum von 4-6% und ein bereinigtes EBITDA zwischen 27 und 30 Millionen US-Dollar, was mit seinem langfristigen Finanzalgorithmus übereinstimmt.
- Record quarterly revenue of $100M, up 11% YoY
- Gross margin expanded 900 bps to 38.2% in 2024
- First full year of positive Adjusted EBITDA ($26M)
- Strong cash position of $75M with zero debt
- Digital customer consumption increased 32%
- Net loss improved by $33M year-over-year
- Q4 net loss of $1M vs $1M net income in prior year
- Operating expenses increased $11M in Q4
- Full year net loss of $6M
- Operating expenses up $12M (8%) for full year
Insights
The Honest Company (HNST) has delivered exceptional financial results for Q4 and full-year 2024, demonstrating a successful turnaround strategy. Q4 revenue hit a record $100 million (+11% YoY), while full-year revenue grew 10% to $378 million, exceeding guidance and showing accelerating momentum.
The most impressive metric is the dramatic gross margin expansion - up 530 basis points to 38.8% in Q4 and 900 basis points to 38.2% for the full year. This level of margin improvement is rare in consumer products and suggests fundamental improvements in HNST's business model rather than temporary cost-cutting. The company has restructured its supply chain and optimized pricing while maintaining volume growth, indicating they've found the sweet spot for their premium positioning.
HNST achieved its first full year of positive Adjusted EBITDA (
Market performance is particularly encouraging - HNST's tracked channel consumption grew 7% while competitive categories declined 2%, indicating market share gains. Digital performance is even stronger with 35% consumption growth at their largest digital customer (likely Amazon), suggesting strong brand resonance with online consumers.
However, the increase in operating expenses (+770 basis points as percentage of revenue) warrants attention, particularly the legal expenses driving SG&A increases. This could represent either one-time costs or ongoing litigation issues not fully explained in the release.
Cash flow from operations declined to
The 2025 guidance of 4-6% revenue growth appears conservative given 2024's 10% growth, suggesting management is being prudent or anticipating headwinds. Their mention of tariff impacts on China and Mexico sourcing indicates potential margin pressure that could offset some operational improvements.
Overall, HNST has successfully executed its transformation strategy, establishing a sustainable path to profitability while growing market share in the competitive clean personal care segment.
The Honest Company's 2024 results reveal a remarkable transformation from a struggling clean products brand to a business with genuine competitive advantages in the premium personal care segment. Their 7% consumption growth against a category decline of 2% represents significant market share capture, likely at the expense of both traditional CPG players and other clean/sustainable brands.
The standout metric is their digital channel performance - 35% consumption growth at their largest digital customer indicates Honest has cracked the code on e-commerce for personal care products. This digital strength provides a significant competitive advantage as consumers increasingly migrate online for replenishment purchases. Their success spans multiple categories (baby apparel, wipes, baby personal care), suggesting the brand has transcended its initial diaper-focused identity.
The 900 basis point gross margin expansion appears structural rather than temporary, driven by three complementary factors: (1) strategic pricing reflecting brand strength, (2) supply chain optimization reducing transportation and fulfillment costs, and (3) favorable product mix shift toward higher-margin categories. This margin profile now rivals premium beauty brands rather than typical mass CPG companies.
However, the rising operating expenses (+770 basis points in Q4) represent a concerning countertrend, particularly the legal expenses driving SG&A increases. This suggests potential regulatory or compliance issues that could create headwinds beyond what's reflected in guidance.
The divergence between improved EBITDA but decreased operational cash flow (
Their 2025 guidance of 4-6% revenue growth suggests management sees normalization after 2024's exceptional performance. The explicit mention of tariff impacts on China and Mexico sourcing indicates vulnerability in their supply chain that could pressure margins if not effectively managed.
Looking ahead, Honest must balance premium positioning against potential consumer spending constraints, particularly as their customer base expands beyond affluent early adopters. Their transformation appears largely successful but still requires execution discipline to maintain momentum in an increasingly competitive clean products landscape.
Achieves Record Quarterly Revenue of
Expands Quarterly Gross Margin 530 Basis Points to
LOS ANGELES, Feb. 26, 2025 (GLOBE NEWSWIRE) -- The Honest Company (NASDAQ: HNST), a personal care company dedicated to creating cleanly-formulated and sustainably-designed products, today reported fourth quarter and full year 2024 financial results for the period ended December 31, 2024.
Fourth Quarter 2024 Financial Highlights Compared to Prior Year Period:
- Revenue of
$100 million increased11% - Gross margin of
39% expanded 530 basis points - Net loss of less than
$1 million , compared to net income of$1 million - Adjusted EBITDA(1) of
$9 million improved by$4 million
2024 Financial Highlights Compared to Prior Year:
- Revenue of
$378 million increased10% - Gross Margin of
38% expanded 900 basis points - Net loss of
$6 million improved by$33 million - Adjusted EBITDA(1) of
$26 million improved by$37 million - Cash Balance of
$75 million with no debt
“Our Q4 and full year 2024 financial results demonstrate that our strategy, which focuses on the disciplined execution of our Transformation Pillars of Brand Maximization, Margin Enhancement and Operating Discipline, is working. In 2024, we achieved record results ahead of our outlook with revenue growth of
| For the three months ended December 31, | For the year ended December 31, | ||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||||
| Revenue | 99,836 | 90,264 | 10.6 | % | 378,340 | 344,365 | 9.9 | % | |||||||||||
| Gross margin | 38.8 | % | 33.5 | % | 530 | bps | 38.2 | % | 29.2 | % | 900 | bps | |||||||
| Operating expenses | 39,795 | 29,100 | 10,695 | 150,988 | 139,441 | 11,547 | |||||||||||||
| Net income (loss) | (811 | ) | 1,144 | (1,955 | ) | (6,124 | ) | (39,238 | ) | 33,114 | |||||||||
| Adjusted EBITDA(1) | 8,541 | 4,250 | 4,291 | 25,858 | (11,242 | ) | 37,100 | ||||||||||||
| Net income (loss) margin | (0.8 | ) | % | 1.3 | % | (210 | ) | bps | (1.6 | ) | % | (11.4 | ) | % | 980 | bps | |||
| Adjusted EBITDA Margin(1) | 8.6 | % | 4.7 | % | 390 | bps | 6.8 | % | (3.3 | ) | % | 1010 | bps | ||||||
Fourth Quarter Results
(All comparisons are versus the fourth quarter 2023)
Revenue increased
______________
(1) See the reconciliation of adjusted EBITDA and adjusted EBITDA Margin, non-GAAP financial measures, to net income (loss) and net income (loss) margin in the table under “Use of Non-GAAP Financial Measures” below in this press release.
(2) According to Circana, Inc. tracked channel consumption data. Reflects consumption for diapers, wipes, cosmetics, and baby and adult personal care for the latest 13 weeks ended January 5, 2025.
(3) According to Fuelcomm, Inc. (“Stackline”) consumption data for the 13 weeks ended January 4, 2025.
Gross margin expanded 530 basis points to
Operating expenses increased
Net loss of
Adjusted EBITDA(1) was positive
________________
(1) See the reconciliation of adjusted EBITDA and Adjusted EBITDA Margin, non-GAAP financial measures, to net income (loss) and net income (loss) margin in the table under “Use of Non-GAAP Financial Measures” below in this press release.
Full Year Results
(All comparisons are versus full year 2023)
Revenue of
______________
(1) According to Circana, Inc. tracked channel consumption data. Reflects consumption for diapers, wipes, cosmetics, and baby and adult personal care for the latest 52 weeks ended January 5, 2025.
(2) According to Fuelcomm, Inc. (“Stackline”) consumption data for the 52 weeks ended January 4, 2025.
Gross margin expanded 900 basis points to
Operating expenses increased
Net loss improved
Adjusted EBITDA was positive
Balance Sheet and Cash Flow
The Company ended the fourth quarter of 2024 with
Net cash provided by operating activities was
2025 Outlook
As a reminder, the Company’s long-term financial algorithm consists of revenue growth of
Financial outlook for the full fiscal year 2025:
| Revenue | (versus Full Year 2024) |
| Adjusted EBITDA(1) | |
____________
(1) We do not provide guidance for the most directly comparable GAAP measure, net income (loss), and similarly cannot provide a reconciliation between our adjusted EBITDA outlook and net income (loss) without unreasonable effort due to the unavailability of reliable estimates for certain components of net income (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 2024 results is scheduled for today, February 26, 2025, at 1:45 p.m. Pacific time/4:45 p.m. Eastern time. Those interested in participating in the conference call by phone, please go to this link https://register.vevent.com/register/BI3db3ccffd8534f6eb0db9bc8e8b734bd, 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 2025; our expectations under our long-term financial algorithm and growth strategy; our ability to achieve or sustain profitability and continue generating positive cash flow; continued positive momentum in our business and strength of the Honest brand; our ability to continue to benefit from 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 cleanly-formulated 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. For more information about the Honest Standard and the Company, please visit www.honest.com.
Investor Contacts:
Elizabeth Bouquard
ebouquard@thehonestcompany.com
Investor Inquiries:
investors@thehonestcompany.com
Media Contact:
Brenna Israel Mast
bisrael@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, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Revenue | $ | 99,836 | $ | 90,264 | $ | 378,340 | $ | 344,365 | |||||||
| Cost of revenue | 61,070 | 60,035 | 233,683 | 243,833 | |||||||||||
| Gross profit | 38,766 | 30,229 | 144,657 | 100,532 | |||||||||||
| Operating expenses | |||||||||||||||
| Selling, general and administrative | 26,766 | 19,587 | 99,044 | 94,582 | |||||||||||
| Marketing | 11,315 | 7,835 | 45,093 | 36,440 | |||||||||||
| Restructuring | — | 101 | — | 2,205 | |||||||||||
| Research and development | 1,714 | 1,577 | 6,851 | 6,214 | |||||||||||
| Total operating expenses | 39,795 | 29,100 | 150,988 | 139,441 | |||||||||||
| Operating income (loss) | (1,029 | ) | 1,129 | (6,331 | ) | (38,909 | ) | ||||||||
| Interest and other income (expense), net | 237 | 15 | 282 | (254 | ) | ||||||||||
| Income (loss) before provision for income taxes | (792 | ) | 1,144 | (6,049 | ) | (39,163 | ) | ||||||||
| Income tax provision | 19 | — | 75 | 75 | |||||||||||
| Net income (loss) | $ | (811 | ) | $ | 1,144 | $ | (6,124 | ) | $ | (39,238 | ) | ||||
| Net income (loss) per share attributable to common stockholders: | |||||||||||||||
| Basic | $ | (0.01 | ) | $ | 0.01 | $ | (0.06 | ) | $ | (0.42 | ) | ||||
| Diluted | $ | (0.01 | ) | $ | 0.01 | $ | (0.06 | ) | $ | (0.42 | ) | ||||
| Weighted-average shares used in computing net income (loss) per share attributable to common stockholders: | |||||||||||||||
| Basic | 104,883,136 | 95,642,655 | 100,245,394 | 94,516,690 | |||||||||||
| Diluted | 104,883,136 | 98,369,753 | 100,245,394 | 94,516,690 | |||||||||||
| Other comprehensive loss | |||||||||||||||
| Unrealized gain on short-term investments, net of taxes | — | — | — | 32 | |||||||||||
| Comprehensive income (loss) | $ | (811 | ) | $ | 1,144 | $ | (6,124 | ) | $ | (39,206 | ) | ||||
| The Honest Company, Inc. Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts) | |||||||
| December 31, 2024 | December 31, 2023 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 75,435 | $ | 32,827 | |||
| Accounts receivable, net | 43,476 | 43,084 | |||||
| Inventories | 85,266 | 73,490 | |||||
| Prepaid expenses and other current assets | 9,741 | 8,371 | |||||
| Total current assets | 213,918 | 157,772 | |||||
| Operating lease right-of-use asset | 17,239 | 23,683 | |||||
| Property and equipment, net | 11,394 | 13,486 | |||||
| Goodwill | 2,230 | 2,230 | |||||
| Intangible assets, net | 235 | 309 | |||||
| Other assets | 2,377 | 4,141 | |||||
| Total assets | $ | 247,393 | $ | 201,621 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 22,807 | $ | 22,289 | |||
| Accrued expenses | 35,869 | 32,209 | |||||
| Deferred revenue | 1,213 | 2,212 | |||||
| Total current liabilities | 59,889 | 56,710 | |||||
| Long term liabilities | |||||||
| Operating lease liabilities, net of current portion | 13,197 | 21,738 | |||||
| Other long-term liabilities | — | 34 | |||||
| Total liabilities | 73,086 | 78,482 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity | |||||||
| Preferred stock, | — | — | |||||
| Common stock, | 11 | 9 | |||||
| Additional paid-in capital | 659,488 | 602,198 | |||||
| Accumulated deficit | (485,192 | ) | (479,068 | ) | |||
| Total stockholders’ equity | 174,307 | 123,139 | |||||
| Total liabilities and stockholders’ equity | $ | 247,393 | $ | 201,621 | |||
| The Honest Company, Inc. Condensed Consolidated Statements of Cash Flows | |||||||||||
| For the year ended December 31, | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | (6,124 | ) | $ | (39,238 | ) | $ | (49,019 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | 2,843 | 2,740 | 2,753 | ||||||||
| Stock-based compensation | 15,675 | 15,804 | 15,078 | ||||||||
| Amortization of operating ROU assets | 6,444 | 6,257 | 6,180 | ||||||||
| Other | 746 | (1,369 | ) | (558 | ) | ||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net | (378 | ) | (682 | ) | (10,836 | ) | |||||
| Inventories | (10,934 | ) | 43,475 | (38,987 | ) | ||||||
| Prepaid expenses and other assets | (1,437 | ) | 8,005 | (4,358 | ) | ||||||
| Accounts payable, accrued expenses and other long-term liabilities | 3,809 | (9,347 | ) | 10,396 | |||||||
| Deferred revenue | (998 | ) | 1,396 | 83 | |||||||
| Operating lease liabilities | (8,105 | ) | (7,688 | ) | (7,007 | ) | |||||
| Net cash provided by (used in) operating activities | 1,541 | 19,353 | (76,275 | ) | |||||||
| Cash flows from investing activities | |||||||||||
| Purchases of short-term investments | — | — | (12,782 | ) | |||||||
| Proceeds from maturities of short-term investments | — | 5,683 | 49,362 | ||||||||
| Purchases of property and equipment | (530 | ) | (1,838 | ) | (1,617 | ) | |||||
| Purchases of intangible assets | — | (10 | ) | — | |||||||
| Net cash provided by (used in) investing activities | (530 | ) | 3,835 | 34,963 | |||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from exercise of stock options | 41,453 | 4 | 122 | ||||||||
| Taxes paid related to net share settlement of equity awards | — | — | (37 | ) | |||||||
| Proceeds from 2021 ESPP | 163 | 176 | 256 | ||||||||
| Payments on finance lease liabilities | (19 | ) | (58 | ) | (303 | ) | |||||
| Net cash provided by financing activities | 41,597 | 122 | 38 | ||||||||
| Net increase (decrease) in cash and cash equivalents | 42,608 | 23,310 | (41,274 | ) | |||||||
| Cash and cash equivalents | |||||||||||
| Beginning of the period | 32,827 | 9,517 | 50,791 | ||||||||
| End of the period | $ | 75,435 | $ | 32,827 | $ | 9,517 | |||||
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 and adjusted EBITDA margin, non-GAAP financial measures, 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) Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO") and founder and former Chief Creative Officer ("CCO") transition expenses and (7) restructuring expenses in connection with the Transformation Initiative. The Company calculates adjusted EBITDA margin by dividing adjusted EBITDA by revenue.
Adjusted EBITDA and adjusted EBITDA margin are financial measures that are not required by, or presented in accordance with GAAP. We believe that adjusted EBITDA and adjusted EBITDA margin, 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 and adjusted EBITDA margin are helpful to our investors as they are measures 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 and adjusted EBITDA margin are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented in accordance with GAAP. Some of the limitations of adjusted EBITDA and adjusted EBITDA margin include that (1) they do 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 and adjusted EBITDA margin do not reflect these capital expenditures; (3) they do not consider the impact of stock-based compensation expense; (4) they do not reflect other non-operating expenses, including interest expense; (5) they do not reflect tax payments that may represent a reduction in cash available to us; and (6) do 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, CFO and founder/CCO transition expenses and restructuring expenses in connection with the Transformation Initiative. In addition, our use of adjusted EBITDA and adjusted EBITDA margin may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA and adjusted EBITDA margin in the same manner, limiting their usefulness as comparative measures. Because of these limitations, when evaluating our performance, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial measures, including our revenue, net income (loss) and other results stated in accordance with GAAP.
The following table presents a reconciliation of net income (loss) and net income (loss) margin, the most directly comparable financial measures stated in accordance with GAAP, to adjusted EBITDA and adjusted EBITDA margin, for each of the periods presented:
| For the three months ended December 31, | For the year ended December 31, | |||||||||||||||
| (In thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDA | ||||||||||||||||
| Net income (loss) | $ | (811 | ) | $ | 1,144 | $ | (6,124 | ) | $ | (39,238 | ) | |||||
| Interest and other (income) expense, net | (237 | ) | (15 | ) | (282 | ) | 254 | |||||||||
| Income tax provision | 19 | — | 75 | 75 | ||||||||||||
| Depreciation and amortization | 711 | 709 | 2,843 | 2,740 | ||||||||||||
| Stock-based compensation(1) | 2,083 | 1,911 | 15,675 | 15,804 | ||||||||||||
| Securities litigation expense | 6,681 | 379 | 12,440 | 4,703 | ||||||||||||
| CEO, CFO and founder/CCO transition expense(2) | — | 2 | 858 | 2,075 | ||||||||||||
| Restructuring costs(3) | — | 101 | — | 2,205 | ||||||||||||
| Payroll tax expense related to stock-based compensation | 95 | 19 | 373 | 140 | ||||||||||||
| Adjusted EBITDA | $ | 8,541 | $ | 4,250 | $ | 25,858 | $ | (11,242 | ) | |||||||
| Revenue | $ | 99,836 | $ | 90,264 | $ | 378,340 | $ | 344,365 | ||||||||
| Net income margin | (0.8 | ) | % | 1.3 | % | (1.6 | ) | % | (11.4 | ) | % | |||||
| Adjusted EBITDA margin | 8.6 | % | 4.7 | % | 6.8 | % | (3.3 | ) | % | |||||||
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(1) Includes accelerated equity awards related to prior separation agreements of an aggregate of
(2) Includes sign-on bonus, relocation, legal and recruiting costs related to the appointment of our CEO, as well as separation costs related to the termination of our former founder and CCO and former CFO.
(3) Restructuring costs include employee and asset-related costs and contract terminations.
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