管理層發言
Ladies and gentlemen, thank you for standing by, and welcome to The Honest Company's Second Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising that your hand has been raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Chris Mandeville, Vice President of Investor Relations at The Honest Company. Please go ahead.
Good afternoon, and thank you for joining our Second Quarter 2026 conference call. With me today are Carla Vernon, our Chief Executive Officer, and Curtiss Bruce, our Chief Financial and Operating Officer. Before we begin, I will remind you that our remarks today include forward-looking statements subject to risks and uncertainties. We do not undertake any obligation to update these statements, and actual results may differ materially. For a detailed discussion of these factors, please refer to our Safe Harbor statements in today's earnings materials and our recent SEC filings. We will also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measure are included in our earnings release and accompanying presentation, which are available at investors.honest.com. Finally, please note that all consumption data included in our remarks today, unless otherwise noted, will reflect Circana MULO plus measured channel data for the 13 weeks ended 06/28/2026, as compared to the prior year. And with that, I will turn the call over to Carla.
Thank you, Chris. Before I share our results for the second quarter of 2026, I want to welcome Chris in his new role as Vice President of Investor Relations.
While I have already been with The Honest Company for the last two earnings calls, I am thrilled to have officially joined the company.
And now I am pleased to share our results for the second quarter of 2026, which reflect the continued strength and momentum of our business. We achieved strong organic revenue growth of nearly 7% and our highest profit margins in the history of The Honest Company with underlying adjusted gross margins of 43.8% and underlying adjusted EBITDA margins of 9.8%. Given our sound first-half execution and confidence in the path ahead, we are raising our full-year outlook. These Q2 results are the product of ongoing structural improvements to our business and the team's continued commitment to operational excellence. Importantly, this strengthened financial foundation provides us with additional horsepower to accelerate investments in support of all three of our strategic pillars: brand maximization, margin enhancement, and operating discipline. Looking specifically at our first pillar, brand maximization, this quarter clearly showcased the power of our strategy. We are encouraged by our momentum as we scale our broad collection of cleanly formulated and sustainably designed Honest products. In addition to our top-line results, our overall consumption growth was up nearly 8%. This growth continued to be volume-led and significantly outpaced the 2% growth in our comparative categories. Our vision to scale Honest is grounded in two important consumer truths. The first key consumer truth is the resonance of our Honest standard. Our portfolio is formulated without 3,500 ingredients of concern that we choose not to use in our products. These high standards mean our products meet the high expectations of modern consumers who want clean formulation, excellent product performance, and joyful design in their personal care. The second key consumer truth is the broad appeal of Honest across households of all ages and stages. While we are often recognized for our wonderful portfolio of baby products, today, over half of our households have no kids at all. Our strength across household types is an important driver of scaling the Honest brand through our brand maximization strategy. Today, 89% of households in the United States do not have any children under the age of seven, and 75% of all U.S. households have no children at all. We continue to see progress in scaling Honest across a broad range of households. This quarter, our household penetration of 8.1% improved 100 basis points, with nearly two-thirds of that growth coming from no-kid households. This growth gives us material evidence that more households are embracing Honest each year. In addition to this excellent progress, we are encouraged by the significant runway we see across our growth platforms. To put that opportunity into perspective, in baby personal care, key branded competitors hold household penetration anywhere from two to six times greater than we do. And in all-purpose wipes, larger brands have as much as five to seven times our household penetration. Let me share a closer look at how this momentum is being driven across our businesses, beginning with our wipes portfolio. Our total wipes portfolio delivered consumption growth of 26% versus comparative category growth of 2%. Our extensive wipes platform crosses several categories and uses. With such wide-ranging collections of wipes, Honest offers a variety of benefits that appeal to a broad range of household types. Our collections include our Clean Conscious Wipes, which are the #1 natural baby wipe brand and grew 16% this quarter; our flushable wipes, which grew more than 200% in Q2, making us the fastest-growing branded player in the segment; and our sanitizing wipes, which grew 55% in Q2 and are the second-largest hand sanitizing wipes brand in the category. These wipes businesses are all significantly outpacing the growth of their respective categories, and each delivers on the Honest standard of clean formulation, strong product performance, and joyful design. This year, our flushable wipes entered the spotlight with a new campaign that speaks to the category in an elegant yet irreverent style that is candid in a way that only Honest can be. In fact, our groundbreaking campaign, "It Is Time to Get Honest," drove significant viral engagement, delivering well over three billion media impressions and increasing awareness of the Honest brand across a broader community. In addition to meeting the high standard for product quality, our flushable wipes packaging is designed to be a room accessory that is both elegant and unapologetic. The collection is gaining strong traction online and across brick-and-mortar retailers, including our recent addition into the feminine care aisle at CVS. Building on this momentum, we see greater things ahead: expanding distribution, increasing product offerings, and driving greater brand awareness for our flushable wipes. The strong Q2 performance of our wipes business also benefited from our three-pronged strategy to maximize tentpole merchandising events such as Amazon Prime Day. While strong consumer deal events can be treated as a one-time boost to sales, our team partners closely with retailers to ensure that we leverage these events to introduce our full Honest assortment to new shoppers, build recurring subscriptions, and increase brand discovery. We saw this working to great success across Prime Day, with 58% of the visitors to our Honest storefront being entirely new to the Honest brand. Our team has great plans to build on these early relationships to earn lasting loyalty across our full collection of Honest products. Now turning to personal care. In Q2, our personal care portfolio grew 19%, outpacing the category's 5% growth rate. We design our personal care products to bring genuine joy and happiness to everyday routines. For some members of our Honest community, that means utilizing rich, beautifully authentic touches like the naturally derived soothing lavender in our signature baby personal care collection. And for the members of our community with the most sensitive skin, it means providing products that are gentle yet effective and often fragrance free. By delivering on both preferences seamlessly, we maintained our position as the #2 brand in total baby personal care. Earlier this year, the Honest brand made its debut into the big-kid aisle, welcoming us into a new set of homes. The launch of our kid-friendly personal care lineup was timed in coordination with the Toy Story 5 movie premiere and in partnership with Pixar's media campaign. The film, which debuted 30 years after the original movie, delivered the biggest global opening weekend in Pixar history. The magic of brands like Pixar and Honest is that they unlock the power of multigenerational appeal. Our Toy Story collection, which launched earlier this year at Walmart and Amazon, is getting ready to greet new families in the food channel, starting with retailers including each and select Ahold Delhaize banners. More than ever, Honest is expanding to meet consumers with products they love, wherever they shop. Before concluding my remarks, it is important to acknowledge that the strong results in the quarter include a dampening effect from our diaper business. Current headwinds and shifting consumer dynamics appear to be structural for the diaper category, with most national brands experiencing declines. While our diaper business is navigating these same pressures, we remain committed to providing families with a diaper offering that meets the expectations of the Honest standard for quality, performance, and joy. Because of the importance of families with babies, we are pleased to announce a new strategic partnership allowing the Honest brand to maintain its important place in baby and family-friendly apparel. Through a new licensing agreement with an industry-leading apparel manufacturer, Honest will transition back to an outbound licensing approach for this category. We are glad that families will have the Honest standard available to them when choosing bedding and baby apparel for their newest little ones. As you can see, we are energized about the strength of the Honest brand across all the segments we serve. Three-and-a-half years ago, we began what was a necessary transformation to build a more powerful Honest brand and Honest company. We are now a fundamentally stronger enterprise built on a durable foundation. The evidence of our progress is clear across an array of metrics. First, we are more strategically focused. We have intentionally shifted our revenue mix towards our higher-growth and higher-margin wipes and personal care platforms, which now represent over 70% of our revenue. Second, we are more growth driven. Since 2022, we have delivered an 11% consumption growth CAGR. And third, we are more structurally profitable. Our second-quarter underlying adjusted gross margin of 44% is 1,500 basis points higher than in 2022. These gains have allowed us to make considerable progress towards operating a virtuous cycle for profitable growth. But our convictions are not simply based on metrics. Honest was founded to be more than a disruptor brand. We were built to bring the world a modern personal care company that delivers on a standard built for the modern era. Transformation alone is not the finish line. Our ongoing goal is to achieve true scale. With great intention and clarity, we have identified right-to-win categories where we are leading and delivering exactly what today's modern households need. And we have executed year in and year out with strict financial discipline. As we scale operationally, many of the important things about The Honest Company have not changed. Our team of Honest Butterflies is an intense team of builders that pairs passion and vision with a focused approach to execution. Every product we create upholds our rigorous guiding principles. It is this joy, commitment, and uncompromising quality that makes Honest unique and meaningful to households of all types. And this is the true heartbeat giving the Honest brand both relevance and power. With that, I will now turn the call over to Curtiss to provide more details on our Q2 financial results and walk through our raised full-year outlook.
Thank you, Carla, and good afternoon, everyone. As you just heard, Q2 was a significant milestone that clearly validates our trajectory and highlights the robust results generated when our strategic focus meets disciplined execution. Let's dive into how that performance materialized across our metrics, starting with the top line. Second quarter reported revenue was $83.3 million, a decrease of 10.9% compared to the prior year period. This reflects the impact of strategic powering Honest growth and our diaper revenue declines, which were partially offset by our continued strength in wipes and personal care. On an organic basis, revenue increased 6.7%, reflecting the momentum we continue to see in our higher-growth, higher-margin wipes and personal care platforms. Our Q2 reported gross margin came in at 48.4%. On an adjusted basis, gross margin was 50.1%, an improvement of 970 basis points. This expansion includes a $6.6 million tariff refund and dilution from our apparel liquidation. Excluding these two items, our underlying margin was 43.8%, an improvement of approximately 340 basis points. This was driven by favorable product mix and operational improvements, including earlier-than-expected realization of supply chain savings. Total operating expenses decreased by $4.1 million to $30.8 million, highlighting progress made to rightsize our SG&A. Within this, we strategically increased marketing by nearly 20%. This step-up in spend, focused heavily on our wipes and personal care platforms, was designed to capitalize on our momentum heading into the second half of the year. This targeted allocation of capital supports our ongoing focus on driving household penetration, which remains our primary catalyst for sustaining long-term growth. Net income for the quarter was $10.7 million compared to $3.9 million in the prior year period. Adjusted EBITDA was $14.5 million, yielding an adjusted EBITDA margin of 17.3%. To understand our true underlying profitability, it is important to exclude the one-time tariff refund and apparel liquidation. When doing so, our underlying adjusted EBITDA margin of 9.8% expanded by approximately 160 basis points and marked an all-time high for the company. Our asset-light operating model continues to provide exceptional financial flexibility. We ended the quarter with $105.9 million in cash and cash equivalents and zero debt. Free cash flow was $35.3 million for the first six months of the year, a substantial improvement compared to negative free cash flow of $3.8 million in the prior year period. This was primarily driven by increased earnings, continued working capital improvements, and our asset-light operating model. While we do expect a timing benefit regarding inventory to partially reverse in the second half of the year, we maintain a distinct line of sight to further long-term working capital improvement. Year to date, we have repurchased 5.6 million shares for $18.7 million at an average price of $3.35 per share. At the end of the quarter, $6.3 million remained under our existing share repurchase authorization. These actions underscore our commitment to balancing aggressive reinvestment in our growth initiatives with returning value to our shareholders. Our strong execution in the first half of the year, which drove our top-line momentum and structural margin enhancements, gives us the confidence to raise our outlook. The tariff refunds provide additional flexibility and fuel for our strategic initiatives. We plan to aggressively reinvest these dollars now to accelerate household penetration and build a stronger Honest foundation for 2027 and beyond. With that context, our raised full-year 2026 outlook is as follows: reported revenue in the range of $319 million to $325 million, which now includes an approximate $10 million benefit from apparel inventory liquidation revenue; organic revenue growth of 5% to 7%, up from 4% to 6%, reflecting accelerated momentum in the second half versus the first half of the year; adjusted gross margin to land in the mid-forties, up from the low-forties, as we expect a continuation of robust year-over-year expansion driven by favorable mix and supply chain efficiencies; and adjusted EBITDA of $23 million to $25 million, up from $20 million to $23 million. Lastly, please assume our new apparel licensing agreement will be immaterial to our 2026 results. As I wrap up, I want to reiterate how pleased we are with our strong execution through the first half of the year. Our record underlying profitability and robust free cash flow generation prove that our financial model is fundamentally stronger today than ever before. With our pristine balance sheet, structural margin improvement, and strategic reinvestment of our tariff refund, we have the fuel needed to confidently fund our next phase of profitable growth. With that, I will turn it back to Carla for final remarks.
Thank you, Curtiss. Before we move to Q&A, I want to express my deep gratitude to our incredible team of Honest Butterflies. Their passion and dedication are the true driving force behind the business performance results we shared today. As we look ahead, we will continue to deliver on our evergreen strategic pillars of brand maximization, margin enhancement, and operating discipline. By combining disciplined execution with our unwavering commitment to the Honest standard, we are unlocking the true vision of a modern personal care company. We enter the second half of the year well positioned to build on our momentum, deliver on our raised 2026 outlook, and continue creating long-term shareholder value. With that, I now turn it over to the operator to open the line for questions.
分析師問答
Certainly. As a reminder, to ask a question, please press 11 on your telephone. Wait for your name to be announced. To withdraw your question, please press 11 again. We ask that you please limit yourself to one question and one follow-up. One moment, please. Our first question comes from the line of Aaron Grey with Alliance Global Partners.
Hi. Good evening, and thank you very much for taking my questions. First, just on the guidance — quick clarification on the profit guidance. Should we assume that the tariff is not included in the full-year guide because I see the two adjusted EBITDA numbers, one including tariff and one not including it for the quarter? And secondly, in line with that for profitability in the back half, if we take some assumptions on profitability versus what we saw in Q2, it seems like it could come down with some assumed either marketing or SG&A spend based off the gross margin guide. I would love to get some color in terms of what you are expecting for marketing in the back half, and if you are seeing the ROI that you would have expected with the increased marketing that we have seen in the first half of the year. Thanks.
Good evening, Aaron. Let me clarify the adjusted gross margin guidance. Our adjusted gross margin does include both the favorable impact of the tariffs and also the depressing impact of the liquidation of the apparel on the full year. So that adjusted gross margin includes both. I think what is important to remember is the underlying performance. Again, as we think about Q2, underlying gross margin year to date was 44%. We continue to expect that our underlying gross margin performance will be stronger in the second half than in the first half. The definition for adjusted has not changed from one quarter to the next and remains the same as you reflect on what the guidance is. On marketing, we will be investing — as the remarks said — we started off with marketing investment against both wipes and personal care. We will continue to focus on those two categories to drive additional household penetration in the second half. It will be a step-up both in dollars and on a percent basis. I also want to highlight that the investments we will be making in the second half are broader than marketing. We will be investing in capabilities to help us scale the business more effectively and efficiently as we move forward. You will see those investments come through the SG&A line.
Let me add how our spending is working. I am feeling really good. For the quarter, consumption was up 8%, and the trajectory of our business performance has been strong over the past three years. One of the things unique about this year is that, for the first time, we did marketing in different ways and on different things than we have done before. In the first half of the year, we supported a big launch into the big-kid aisle with the Toy Story/Pixar launch, where we benefited from being included in some of Disney's own marketing for the movie as well as our marketing tied to the movie. We are feeling really good about how those businesses kicked off in the first half. We also launched the flushable wipes campaign I mentioned, and there are images in our investor presentation that illustrate that. Supporting flushable wipes is a new kind of marketing spending for us because, as I have been saying, Honest has strength across three different types of households: baby households, big-kid households (which is where Toy Story is aimed), and households with no kids at all. Our flushable wipes allow us to cascade across all those households. This campaign was the first time Honest ran a national, broad campaign directly to adult consumers for this brand at this level, and you can see that it is working in our household penetration gains. More than half of our households have no kids, and the larger part of the 100 basis-point household penetration increase we saw in the quarter came from no-kid households. This was really the first time we did big national campaign spending against those households. Lastly, we also launched a broad portfolio-covering campaign that we call "The Mother of All Standards," which is a strong new campaign that will allow us to reach more households with upper-funnel marketing in the back half.
Thank you both, Curtiss and Carla. That is helpful. Second quick question on the apparel licensing and switching to licensing versus direct. I understand it is expected to be immaterial for 2026. Maybe just talk bigger picture about why you feel that is the right structure and setup for you and how you expect that segment will look for you in 2027 and beyond.
Yeah, Aaron. Let me take that. Our strategy as an enterprise is to be asset-light, and the licensing model really lives into our asset-light DNA. Licensing is a margin-accretive proposition, and so we are excited on all fronts about this new agreement.
We are excited to be in the apparel business for consumers who love the Honest brand — for babies, both clothes and bedding. This is an opportunity for us to do two things: participate in the category and do it in an asset-light, low-capital-intensive way. We are not going to speculate about the long-term impact today, but we are excited about the new partner and that this aligns with our strategy of being asset-light.
Thank you.
Our next question comes from the line of Dara Mohsenian with Morgan Stanley.
Hi, good afternoon. I have a couple of questions. First, following up on the reinvestment piece: you spoke about stepping up reinvestment and marketing, but could you say a bit more about where the incremental dollars are going and how you are prioritizing across not just marketing, but also innovation and distribution? Thank you.
Great question. The way to think about this is that our strategic investments map to the growth levers in our strategy. Our highest-growth, highest-margin platforms are wipes and personal care — and we are gaining share in both. We are winning and consumers are embracing the products we bring. Our wipes presence spans multiple segments: baby aisle all-purpose wipes, general adult aisle flushable wipes and sanitizing hand wipes, makeup remover wipes — so our wipes are very broad-based. In many cases, our wipes businesses have less than 2% household penetration, and our competitors have two to six times the household penetration we do. We have a lot of available households to reach across different wipes platforms, so brand awareness and consumer education about the Honest standard are priorities. With personal care, we are the #2 baby personal care brand and grew nearly 20% in the quarter. We will continue to fuel that leadership, recruit new households, and support repeat purchase. We are investing in marketing to make consumers aware of all we have to offer and to recruit new households, whether through streaming, social, or retail marketing. We'll tailor creative messages and media to reach the 75% of households with no kids and the 14% with big kids. Not all added investment in the back half is marketing. Our third strategic pillar is operating discipline. We are investing in technologies and supply chain capabilities to make us more efficient and integrated with retail partners. So spending will be across marketing and operational capabilities to support long-term scaling.
And maybe a quick one on diapers. The category is obviously very competitive. Anything you can share in terms of promotion and pricing dynamics you're seeing and how you are thinking about the environment from here? Thank you.
I'll take that in two parts: diapers specifically, and baby more broadly. First, the diaper category is challenged right now. We see it and others see it. What we are seeing appears structural and likely to be the dynamic for the foreseeable future. It is important to acknowledge that so we can manage the business wisely within our strategy of growing the top line faster than our categories and expanding profit faster than top-line growth. For diapers, we have been investing to bring a great diaper forward that delivers the Honest standard. We recently improved our diaper technology and want to ensure product performance, clean commitment, and the joyful styling that makes our diapers unique. We have also been investing in value positioning with retailers to align with the Honest brand. Looking at baby more broadly, we are winning: our all-purpose baby wipes are the #1 natural baby wipe in the category, up 16%; our baby personal care is up almost 20%; and with the licensing strategy, our soft organic baby onesies and bedding will continue to be available to families. Importantly, diapers are now less than 25% of our overall consumption. Wipes and personal care are now about 70% of Honest consumption, which offsets the dampening effect in diapers and supports our ability to raise guidance while continuing to grow top line and expand margins.
Our next question comes from the line of Anna Glaessgen with B. Riley Securities.
Hi, good afternoon. Thanks for taking my questions. I'd like to touch on distribution. In the past, you disclosed ACV and the number of doors you were in, but it got a little complicated between categories. Could you update us where you sit today in terms of distribution and how much expanded door growth could support growth ahead? Thanks.
Yes, Anna — it's a great question. Distribution is complicated for us because each category plays in aisles with very different distribution dynamics. A great distribution picture for flushable lifestyle wipes looks very different than for trial or travel products or baby. To simplify our messaging and provide a more uniform measure, we've been focusing on household penetration as a better holistic indicator across all channels, including e-commerce. Household penetration gives a clearer view of the collective business as we become more effective online and in retail. As I mentioned earlier, household penetration for the whole brand is 8.1%, up 100 basis points year over year. But when you break it apart by platform, the differences are dramatic. For example, in baby personal care, we are #2 in the category with less than 3% household penetration, while competitors have six times our household reach. Every percentage point we add in baby personal care is worth roughly $25 million to $30 million in annual sales. For flushable wipes, we have less than 1% household penetration and are already the fourth-largest flushable wipes brand. So there is a very large runway in many of these categories. Household penetration is a unifying metric that accounts for online and offline distribution and helps us communicate our opportunity more clearly.
That's super helpful, Carla. A quick follow-up on SG&A: there's a pretty big step down year over year and sequentially, and given the investments in the back half it seems like SG&A will step back up. Was there anything that shifted from Q2 to Q3 or anything to keep in mind there? Thanks.
Great question, Anna. The Q2 performance reflects the execution of our Powering Honest Growth initiative in the front half. As you look at the second half, we are planning investments in marketing and SG&A capabilities to set us up for sustained long-term scaling, so you will see SG&A step up from the lower level in Q2. Overall, we're pleased with the results and expect the investments to support continued growth and efficiency improvements.
Our next question comes from the line of Owen Rickert with Northland Capital Markets.
Hi, Carla. Hi, Curtiss. Thanks for taking my questions. First, how much of the second-quarter organic growth acceleration was driven by distribution gains versus velocity improvement? Is that mix shifting in any one direction, and how durable of a signal is that?
What I would tell you is that we came into this year expecting sequential improvement in organic revenue from Q1 to Q2. We were gaining distribution in Q1 and expected that to take hold and begin to accelerate in Q2 and through the balance of the year. That's what we saw in Q2: distribution gains plus continued momentum in our personal care and wipes portfolios. So the growth is a combination of distribution taking hold and improved velocity.
Owen, one thing we've discussed previously is how we sync our innovation schedule with retailers' reset schedules, especially in brick-and-mortar, to maximize return. Typically, we get innovation out earlier in the year and then focus on planting those roots: improving velocity, awareness, trial, and leveraging tent-pole merchandising events like Target Circle Week and Amazon Prime Day. We make sure innovation is ready for those periods with high visibility. The consistency of our consumption numbers indicates this is durable, foundational momentum and not a short-lived spike.
Got it. Lastly, the Powering Honest Growth costs are winding down, and you had a much smaller restructuring credit this quarter than I expected. Are we essentially through all of the P&L noise related to Powering Honest Growth?
Let me recognize the team executing Powering Honest Growth. We will deliver more savings and less cost than our previous guidance. From a completion standpoint, we are live in our consolidated warehouse and have executed the warehouse consolidation, seeing some of those savings in Q2. We are largely through the program costs but not completely finished. We're very pleased with the result and the impact on structural profitability.
Thank you.
I am showing no further questions. I will now turn the call back over to CEO Carla Vernon for closing remarks.
I just want to take this opportunity once again to echo what Curtiss said: we thank our teams. This has been incredible, powerful work. If you have any interest in more answers, there is a great presentation on our investors.honest.com website, and we look forward to talking to you all next quarter.
Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.