The Honest pany(HNST) - 2024 Q2 - Quarterly Results

Q2 2024 Earnings Release and Outlook The Honest Company reported strong Q2 2024 financial results, including record revenue and improved profitability, leading to an increased full-year outlook Second Quarter 2024 Financial Highlights The Honest Company reported record Q2 2024 revenue of $93 million, a 10% increase, with gross margin expanding and net loss narrowing - CEO Carla Vernón attributes the strong performance to the company's three Transformation Pillars: Brand Maximization, Margin Enhancement, and Operating Discipline[2] Q2 2024 Key Financial Metrics (vs. Q2 2023) | Metric (In millions) | Q2 2024 | Q2 2023 | Change (In millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $93.0 | $84.5 | $8.5 | 10.0% | | Gross Margin | 38.3% | 27.1% | +11.2 p.p. | N/A | | Net Loss | $(4.1) | $(13.4) | $9.3 | 69.6% improvement | | Adjusted EBITDA | $7.6 | $(4.1) | $11.7 | N/A | - Revenue growth was primarily driven by strong performance in the baby products and wipes portfolios, with tracked channel consumption growing 7% and outperforming comparative categories[2] - The 1,120 basis point increase in gross margin resulted from improvements across the entire cost structure, including supply chain and product costs, as well as price increases and efficient trade spending[3] - The company achieved its third consecutive quarter of positive adjusted EBITDA[4] Balance Sheet and Cash Flow As of June 30, 2024, the company maintained a healthy balance sheet with $37 million cash, no debt, and $3 million Q2 operating cash flow Key Balance Sheet and Cash Flow Items (Q2 2024) | Metric (In millions) | Value | Comparison Period | | :--- | :--- | :--- | | Cash and cash equivalents | $37 | Increase of $19 million vs. Q2 2023 | | Debt | $0 | As of June 30, 2024 | | Net cash from operating activities | $3 | For Q2 2024 | Updated Full Year 2024 Outlook The company raised its full-year 2024 outlook, anticipating higher revenue growth and increased Adjusted EBITDA due to strong first-half performance Full Year 2024 Outlook Comparison | Metric | Current Outlook | Prior Outlook | | :--- | :--- | :--- | | Revenue Growth (vs. FY 2023) | Mid-to-High Single Digit % | Low-to-Mid Single Digit % | | Adjusted EBITDA | $15 million to $18 million | Positive Low-Single Digit to Mid-Single Digit millions | Consolidated Financial Statements (Unaudited) This section provides the unaudited consolidated financial statements, detailing the company's comprehensive loss, balance sheet position, and cash flow activities Condensed Consolidated Statements of Comprehensive Loss Q2 2024 net loss was $4.1 million on $93.0 million revenue, a significant improvement, with six-month net loss narrowing Statement of Comprehensive Loss Summary | Metric (In millions, except per share data) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $93.0 | $84.5 | $179.3 | $167.9 | | Gross Profit | $35.6 | $22.9 | $67.5 | $43.1 | | Operating Loss | $(4.0) | $(13.4) | $(5.4) | $(32.0) | | Net Loss | $(4.1) | $(13.4) | $(5.5) | $(32.3) | | Net Loss Per Share | $(0.04) | $(0.14) | $(0.06) | $(0.34) | Condensed Consolidated Balance Sheets As of June 30, 2024, total assets were $200.2 million, with cash at $36.6 million and equity at $129.7 million Balance Sheet Summary | Account (In millions) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $36.6 | $32.8 | | Inventories | $73.7 | $73.5 | | Total current assets | $162.2 | $157.8 | | Total assets | $200.2 | $201.6 | | Liabilities & Equity | | | | Total current liabilities | $52.9 | $56.7 | | Total liabilities | $70.5 | $78.5 | | Total stockholders' equity | $129.7 | $123.1 | | Total liabilities and stockholders' equity | $200.2 | $201.6 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities for H1 2024 was $3.3 million, increasing cash by $3.8 million to $36.6 million at period end Cash Flow Summary for Six Months Ended June 30 | Cash Flow Activity (In millions) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3.3 | $3.8 | | Net cash (used in) provided by investing activities | $(0.1) | $4.5 | | Net cash provided by financing activities | $0.6 | $0.1 | | Net increase in cash and cash equivalents | $3.8 | $8.3 | | Cash and cash equivalents, end of period | $36.6 | $17.8 | Non-GAAP Financial Measures This section details the use and reconciliation of Adjusted EBITDA, a key non-GAAP financial measure used to assess the company's operational performance Use and Reconciliation of Adjusted EBITDA Adjusted EBITDA, a non-GAAP measure, reached $7.6 million in Q2 2024, a significant improvement from a $4.1 million loss in Q2 2023 - Adjusted EBITDA is calculated as net income (loss) excluding interest, taxes, depreciation & amortization, stock-based compensation, litigation fees, CEO/founder transition expenses, and restructuring expenses[21] - Management uses Adjusted EBITDA to assess business health, determine incentive compensation, and for internal planning, believing it facilitates more consistent historical performance comparisons[22] Reconciliation of Net Loss to Adjusted EBITDA | Line Item (In millions) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(4.1) | $(13.4) | $(5.5) | $(32.3) | | Depreciation and amortization | $0.7 | $0.7 | $1.4 | $1.3 | | Stock-based compensation | $8.9 | $6.4 | $11.4 | $10.2 | | Securities litigation expense | $1.3 | $1.8 | $1.7 | $3.0 | | Other adjustments | $0.8 | $0.5 | $1.2 | $3.2 | | Adjusted EBITDA | $7.6 | $(4.1) | $10.2 | $(14.4) |