In This Article:
Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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The Honest Co Inc (NASDAQ:HNST) reported double-digit revenue growth of 13% year-over-year, reaching $97 million.
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Gross margin expanded by 170 basis points to 39%, indicating improved profitability.
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The company achieved positive net income of $3 million and an adjusted EBITDA margin of 7%, marking the sixth consecutive quarter of positive adjusted EBITDA.
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Household penetration increased to 7.3%, with a growth of 55 basis points compared to the previous year.
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The sensitive skin portfolio grew by 35% year-over-year, driven by new product launches and increased consumer demand.
Negative Points
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The diaper portfolio faced headwinds due to a distribution change at a key retailer, impacting sales.
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There was a modest deceleration in business momentum as the company exited the quarter.
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The company anticipates headwinds in the diaper business in Q2 due to the rollout of a new diaper product.
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Tariff-related headwinds, particularly from imports from China, pose a challenge to cost management.
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The company experienced a $3 million one-time inventory adjustment related to a strategic diaper renovation.
Q & A Highlights
Q: Can you quantify the shipping timing impact in Q1 and how it affects Q2 and the rest of the year? A: Carla Vernon, CEO: In Q1, we saw some pull forward of shipments, mainly attributable to Amazon, which will bleed out in the second half. We expect the first half of the year to stay on guidance due to this blend. Dave Loretta, CFO, added that the pull forward accounts for a 5% point difference between our revenue growth of 13% and consumption growth of 8% in Q1.
Q: What are your marketing plans for 2025, and how should we think about marketing as a percentage of sales? A: Carla Vernon, CEO: We plan to continue investing in innovation, marketing, and brand building. Our Q1 revenue was up 13%, driven by unit growth, not pricing. We aim to support the launch of our new diaper and expand our wipes business into new retailers and aisles, maintaining strong marketing investments.
Q: Can you unpack the deceleration noted exiting Q1 and into Q2? A: Carla Vernon, CEO: The deceleration was isolated to our diaper performance at Target, where consumption was down 4%. In contrast, our rest-of-market performance showed nearly 20% consumption growth. The diaper category is under pressure, and changes in our diaper selection at Target contributed to this deceleration.