The Honest Company, Inc. · NASDAQ:HNST
The Honest — Q3 2024 Earnings Presentation
36 slides from The Honest's earnings presentation, Nov 12, 2024
Slide 1: Investor Strategic Update 2024
Investor Strategic Update 2024 Updated Post Q3 2024 Earnings
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains certain forward-looking statements within the meaning Market data and industry information used through this presentation are based on of the federal securities laws, including statements about the outlook of our management's knowledge of the ind
Slide 3: A modern CPG company poised for growth
A modern CPG company poised for growth Strengthened Modern brand Dynamic Scalable growth financial leadership and foundation culture 2
Slide 4: Our story
Our story • Founded in 2012 with the goal to create a new personal care company with clean ingredients and sustainability at its core • The portfolio resonated with a new generation of families 3
Slide 5: Our story: mission
Our story The Honest Company is a personal care company on a mission to challenge ingredients, ideals and industries so people can protect who they love. 4
Slide 6: The Honest Standard
Our story Since 2012 we have channeled this mission into action: We call this The Honest Standard Ingredients Ideals Industries Raising the bar on Breaking the mold on the Driving change that ingredient formulation status quo and revitalizing creates a ripple effect ideals strong enough to reshape i
Slide 7: A higher standard of clean
Our story A higher standard of clean Number of ingredients not 1 Clean ingredients permitted in products We ban 3,500+ ingredients 3,500+ • No parabens • No sulfates 2 In-house labs • No phthalates • No synthetic fragrances We use innovative, proprietary • No petro-derived emollients ~2,000 formulas
Slide 8: One powerful brand capable of spanning aisles
Our story One powerful brand capable of spanning aisles Honest is a Branded House Conventional CPG: House of Brands Category 1 Category 2 Category 3 Category 4 Category 1 Category 2 Category 3 Category 4 Brand Brand Brand Brand 1 2 3 4 7
Slide 9: Our portfolio
Our portfolio 2023 Revenue (%) Total: $344 M 26% 63% 11% Diapers Skin & Household & Wipes Personal Care & Wellness Source: 2023 Full Year Financials & 10-K 8
Slide 10: Our portfolio: category leadership
Our portfolio All product #1 segments growing share1 natural1 brand in baby care #1 Fastest growing wipes brand4 climate-pledge friendly Household penetration mascara on Amazon5 growing at 13% Top ranked Oprah’s Favorite Things6: purpose-driven personal care “Fam Jams” 4 Year CAGR3 4 years in a row
Slide 11: The next Honest chapter
The next Honest chapter 2021 2023 2023–2024 Today The Honest New management Transformation Sharing our vision Company IPO team in place Initiative is for continued underway; scaling across bearing early categories and fruit channels 10
Slide 12: Strengthened financial foundation
Strengthened financial foundation 11
Slide 13: Honest is on a transformation journey
Strengthened financial foundation Honest is on a transformation journey 2023 2024 2025+ Transform Transform & Strengthen Accelerate Brand Maximization – leverage brand to drive growth through innovation & improved marketing Margin Enhancement – expand margins through mix and cost savings activities
Slide 14: Transformation Initiative delivered stronger 2023
Strengthened financial foundation Transformation Initiative delivered stronger 2023 Brand Maximization Margin Enhancement Operating Discipline +10% +600 bps $42M Revenue growth via units & pricing1 YoY Q4 gross margin3 Inventory reduction1 +6% +$11M High-performing Year end retail distribution2 prac
Slide 15: Gross margin & OpEx Improvement
Strengthened financial foundation Gross margin & OpEx Improvement Quarterly Gross Margin (%) 32% 34% 28% 27% 24% Operating Expense % of Sales (%) 47% 43% 43% 41% 32% Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Source: Company Financials: 10-Q and 10-K 14
Slide 16: Achieved Adj. EBITDA profitability
Strengthened financial foundation Achieved Adj. EBITDA profitability $4.3 Quarterly Adj. EBITDA ($ in M) ($1.1) ($4.1) ($10.3) Q1 2023 Q2 2023 Q3 2023 Q4 2023 Source: Company Financials: 10-Q and 10-K 15
Slide 17: 2023 financial summary
Strengthened financial foundation 2023 financial summary 2023 Results Revenue Growth +10% vs. 2022 + 600 bps YoY Gross Margin % Q4 2023 Adj. EBITDA +$11M vs. 2022 Positive Cash Flow +$18M in 2023 Debt $0M year-end 2023 Source: 2023 Full Year Financials & 10-K 16
Slide 18: YTD Q3 2024 Earnings Highlights
YTD Q3 2024 Earnings Highlights 17
Slide 19: Q1 2024 Earnings Highlights
Q1 2024 Earnings Highlights Q1 2024 Q1 2024 Results Revenue Growth +3% vs. Q1 2023 Gross Margin % +1,275 bps vs. Q1 2023 Adj. EBITDA +$3M vs. Q1 2023 Debt $0M as of Q1 2024 Reaffirmed 2024 Revenue and Adjusted EBITDA Outlook Source: Q1 2024 Financials & 10-K 18
Slide 20: Q2 2024 Earnings Highlights
Q2 2024 Earnings Highlights Q2 2024 Q2 2024 Results Revenue Growth +10% vs. Q2 2023 Gross Margin % + 1120 bps vs. Q2 2023 Adj. EBITDA +$12M vs. Q2 2023 Raised FY 2024 Revenue and Adjusted EBITDA Outlook Source: Q2 2024 Financials & 10-K 19
Slide 21: Q3 2024 Earnings Highlights
Q3 2024 Earnings Highlights Q3 2024 Q3 2024 Results Revenue Growth +15% vs. Q3 2023 Gross Margin % + 710 bps vs. Q3 2023 Adj. EBITDA +$8M vs. Q3 2023 Raised FY 2024 Revenue and Adjusted EBITDA Outlook Source: Q3 2024 Financials & 10-K 20
Slide 22: 2024 and long-term outlook
2024 and long-term outlook 21
Slide 23: 2024 guidance
2024 guidance FY24 Prior Outlook Updated FY24 Current Outlook +Mid-to-High Single Digit +High Single Digit Revenue percentage growth percentage growth Positive Adj. EBITDA Positive Adj. EBITDA Adjusted EBITDA ($20 million to $22 million ($15 million to $18 million range) range) Source: Q3 2024 Hones
Slide 24: Modern brand
Modern brand (@ HONEST
Slide 25: Consumers have new needs
Modern brand Consumers have Children (0-17) with a skin allergy the past 12 months over 3 year period1 (%) new needs 12% 10% 8% • Skin allergies among children have nearly doubled since 19971 6% 1997- 2000- 2003- 2006- 2009- 2012- 2015- 2018 1999 2002 2005 2008 2011 2014 2017 • 51% of consumers rese
Slide 26: Revolutionized baby care
Modern brand Revolutionized baby care Brought modern Launched organic Created baby spa Baby gifting Online designs to diaper apparel to match moments community category diapers 25
Slide 27: Scalable growth
Scalable growth (@ HONEST
Slide 28: Distribution expansion a focal point of growth
Scalable growth Distribution expansion a focal point of growth 1 Increasing Total Distribution Points reflects the most significant growth opportunity 2 Distribution remains underpenetrated relative to competition 3 Innovation supports our objective of increased availability 27
Slide 29: Widely available with room to grow
Scalable growth Widely available with room to grow Our retail partners today Multiple levels of opportunity .com Stores Doors Aisles Shelves Facings Innovation Source: 2023 Full Year Financials & 10-K 28 28
Slide 30: Large runway for growth into more doors
Scalable growth | Doors Large runway for growth into more doors 2023 year-end total doors selling Opportunity Honest ~51,000 ~60,000 Leading Competitor ~93,000 ~18,000 Source: Circana MULO data, last 12 weeks ending 12/31/23 29
Slide 31: Hero products under-distributed
Scalable growth | Facings Hero products under-distributed Max ACV % by SKU 89 84 87 Honest Key Competitor 69 35 19 19 24 Diapers Lavender Hydrogel 288 Ct. Size 1 Bubble Cream Wipes Club Box Bath Source: Circana MULO data, last 12 weeks ending 12/31/23 30
Slide 32: Opportunity for larger presence on shelf
Scalable growth | Facings Opportunity for larger presence on shelf Average products on shelf per store selling Honest 58 Key Competitor 28 13 11 3 5 Diapers Wipes Facial Skincare Source: Circana MULO data, last 12 weeks ending 12/31/23 31
Slide 33: The right leaders for the mission
Dynamic leadership & culture The right leaders for the mission Carla Vernón Chief Executive Officer Dave Loretta Chief Financial Officer Broadly experienced leadership team: 32
Slide 34: Reasons to invest
Long-term outlook Reasons to invest Business model transformed for profitability New leadership team Strong runway for growth Growing consumer need, large market potential Vibrant brand built for today’s family needs Proven success in omnichannel 33
Slide 35: Appendix
x< Append @) HONEST
Slide 36: Reconciliation of GAAP and Non-GAAP Financial Measures
Appendix Reconciliation of GAAP and Non-GAAP Financial Measures Adjusted EBITDA ($ millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Q2 2024 Q3 2024 Net income (loss) ($18.9) ($13.4) ($8.1) $1.1 ($39.2) ($1.4) ($4.1) $0.2 Interest and other (income) 0.2 0.0 0.1 (0.0) 0.3 0.0 0.0 (0.1) expens