The Honest Company (NASDAQ: HNST), a digitally native,
mission-driven brand focused on leading the clean lifestyle
movement, today reported financial results for the three and nine
months ended September 30, 2022.
Highlights:
- Third quarter revenue growth was 2% in the quarter. Revenue
growth was negatively impacted by 8 percentage points due to a
prior-year Skin and Personal Care rotational program with a key
club retailer that did not repeat this year.
- Third quarter consumption of Honest products grew 6%(1)
- Accelerated growth in Household and Wellness category by
integrating Honest Baby Clothing® into our lifestyle platform
- Gross margin of 30.3% reflected a 30 basis point improvement
versus the second quarter of 2022
- Updates full year 2022 revenue outlook for key digital
customer’s inventory adjustments (lowering weeks of supply);
maintains full year Adjusted EBITDA(2) outlook, reflecting positive
Adjusted EBITDA in the fourth quarter
- 2023 first-half revenue outlook of 7% to 10% growth versus the
first-half of 2022
____________
(1) According to independent third-party data. Reflects retail
consumption for diapers, wipes, baby personal care, skin care and
cosmetics items in total.(2) We do not provide guidance for the
most directly comparable GAAP measure, net loss, and similarly
cannot provide a reconciliation between our adjusted EBITDA outlook
and net loss without unreasonable effort due to the unavailability
of reliable estimates for certain components of net 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.
“I’m delighted with our Honest team’s execution against our
strategic priorities. In an uncertain macro environment, our brand
and go-to-market strategies continue to resonate with the consumer.
Our strong consumption and market share gains at retail have led to
incremental distribution with both new and existing customers. We
continue to make our products accessible to more consumers, while
building brand awareness, household penetration and brand loyalty,”
said Chief Executive Officer Nick Vlahos.
“Despite persistent cost inflation, economic pressure on the
consumer and tighter inventory management by retailers, strong
consumption of Honest products within our categories speaks to
consumers’ desire to purchase clean and natural products, which
gives us confidence in our growth plans as we enter 2023.”
Third Quarter Results
This press release includes non-GAAP financial measures. See
“Use of Non-GAAP Financial Measures” at the end of this press
release for more information.
Revenue increased 2% to $85 million for the
third quarter of 2022 compared to the third quarter of 2021.
Revenue growth in the quarter was negatively impacted by 8
percentage points due to a prior-year Skin and Personal Care
rotational program with a key club retailer that did not repeat
this year. Growth was driven by 115% revenue growth in Household
and Wellness, 3% revenue growth in Diapers and Wipes, offset by a
13% revenue decrease in Skin and Personal Care.
Third Quarter
2022 Revenue by Product
Category
|
For the three months ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
% change |
|
(Unaudited, in
thousands, except percentages) |
|
|
|
Diapers and Wipes |
$ |
55,222 |
|
$ |
53,847 |
|
3 |
|
% |
Skin and Personal Care |
|
21,992 |
|
|
25,375 |
|
(13 |
) |
|
Household and Wellness |
|
7,366 |
|
|
3,429 |
|
115 |
|
|
Total Revenue |
$ |
84,580 |
|
$ |
82,651 |
|
2 |
|
% |
Revenue by product category was as follows:
- Diapers and Wipes:
- Revenue from Diapers and Wipes (65% of total third quarter 2022
revenue) increased 3% in the third quarter of 2022 compared to the
third quarter of 2021. Growth was seen across all key retail
customers, driven by larger-size offerings, price increases, as
well as initial shipments to support expansion into new
distribution. Honest consumption outpaced category growth in
Diapers and Wipes, increasing 6% vs. overall category growth of
3%(1). Wipes were particularly strong, with growth in tracked
channels(1) more than double the overall category, driven by
alternate use of wipes beyond diapering.
- Skin and Personal Care:
- Revenue from Skin and Personal Care (26% of total third quarter
2022 revenue) decreased 13% in the third quarter of 2022 compared
to the third quarter of 2021. Revenue was negatively impacted by 25
percentage points due to a prior-year Skin and Personal Care
rotational program with a key club retailer that did not repeat
this year. Overall revenue in the third quarter of 2022 was
supported by innovation in our beauty business with the launch of
fresh flex concealer and extreme volume mascara and the launch of
baby personal care products with a new retail customer. Growth in
the category was balanced following price increases in the first
half of 2022, as sales and volume grew across both Skin and
Personal Care.
- Household and Wellness:
- Revenue from Household and Wellness (9% of total third quarter
2022 revenue) increased 115% in the third quarter of 2022 compared
to the third quarter of 2021, primarily driven by the integration
of a curated collection of Honest Baby Clothing into our lifestyle
platform. As we strive to build this category, we converted our
Honest Baby Clothing offerings from a licensing agreement to a
supplier services agreement, which resulted in recognizing sales
revenue of Honest Baby Clothing. This enables us to leverage our
Honest.com platform and support cross-marketing, gifting and baby
registry opportunities across the entire portfolio.
______________________
(1) According to independent third-party data. Reflects retail
consumption for diapers and wipes.
Third Quarter
2022 Revenue by Channel
|
For the three months ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
% change |
|
(Unaudited, in
thousands, except percentages) |
|
|
|
|
|
Digital |
$ |
33,782 |
|
$ |
39,114 |
|
(14 |
) |
% |
Retail |
|
50,798 |
|
|
43,537 |
|
17 |
|
|
Total Revenue |
$ |
84,580 |
|
$ |
82,651 |
|
2 |
|
% |
|
For the three months ended September 30, |
|
2022 |
|
|
2021 |
|
(Unaudited, as a percentage of
revenue) |
|
|
|
Digital |
40 |
% |
|
47 |
% |
Retail |
60 |
% |
|
53 |
% |
Total Revenue |
100 |
% |
|
100 |
% |
Digital revenue decreased 14% as compared to
the third quarter of 2021, driven by a key digital customer’s
inventory reduction in the third quarter of 2022 and the timing of
shipments related to its national promotion event compared to last
year. Consumption at this retailer remained strong, increasing 20%
in the quarter as compared to the third quarter of 2021.
Additionally, we made a strategic choice to significantly reduce
digital media spending in the face of higher advertising costs,
which impacted revenue in the digital channel. Those funds were
shifted to higher return opportunities, such as shopper marketing,
to support our retail expansion this quarter.
Retail revenue increased 17% behind
double-digit growth within our five largest customers in the Retail
channel. In particular, revenue increased 16% at Target during the
third quarter of 2022, supported by our 83rd consecutive week of
year-over-year point-of-sales growth, and the launch of diapers,
wipes, and personal care into over 2,500 Walmart stores.
Gross margin was 30.3% in the third quarter of
2022, a 30 basis point sequential improvement versus the second
quarter of 2022.Gross margin declined 570 basis points versus the
third quarter of 2021, driven by higher product costs, including
inbound freight, transportation, fulfillment and warehouse
expenses, and increased trade promotion spend, partially offset by
the benefit of price increases and cost savings.
Operating expenses increased $3 million in the
third quarter of 2022 compared to the third quarter of 2021,
including costs attributed to a $1.5 million product donation of
sanitizing products and $1.6 million in legal fees related to
securities litigation claims. Excluding these costs, operating
expenses were about flat versus the third quarter of 2021 and
in-line with expectations. Marketing expenses were over 14% of
sales, supporting brand growth and Retail channel expansion.
Net loss for the third quarter of 2022 was $12
million compared to a net loss of $5 million in the third quarter
of 2021.
Adjusted EBITDA for the third quarter of 2022
was negative $5.6 million, which was not adjusted for the $1.5
million expense related to product donations. See the
reconciliation of adjusted EBITDA, a non-GAAP financial measure, to
net loss in the table at the end of this press release.
We ended the third quarter of 2022 with $41 million in cash,
cash equivalents and short-term investments and no debt on our
balance sheet. The majority of our cash investment this quarter
reflected an increase in inventory to support our strategic
expansion plans, including retail distribution into over 2,500
Walmart stores, as well as our purchase of inventory supporting the
Honest Baby Clothing business. We believe the Company’s increased
investment in working capital is sufficient to support the future
growth of the business.
Business Highlights:
- Retail consumption across all baby categories equaled
or outpaced category growth based on third-party
consumption data for the 12 weeks ended October 2, 2022 versus
October 3, 2021. Honest’s diaper, wipes and baby personal care
products consumption grew 2%, 14%, and 7%, respectively, equaling
or outpacing the category, where diapers grew 2%, wipes grew 4%,
while baby personal care declined 3%.
- Completed innovation launches in 2022
- Concealer line with 16 shades focusing on multi-use skin
benefit was introduced in the second quarter
- Clearing skin line, focusing on treating acne with cleanser,
serum and spot treatment was introduced exclusively at Ulta and
Honest.com in the third quarter
- New volumizing clean mascara available in multiple large
retailers launched in the third quarter
- New wellness supplement line, focusing on sleep, stress,
immunity and hair health in-store at GNC and online at Honest.com
was introduced in the third quarter
- Omnichannel distribution with key strategic
partners
- Honest products launched on walmart.com in the second quarter,
followed by national in-store expansion at Walmart of diapers,
wipes, and select personal care products in over 2,500 stores
- Launched Ulta distribution in over 600 locations across the
United States in the second quarter
- Launched supplements and other personal care items online and
in-store with GNC in the third quarter
- Launched the Honest brand internationally with SuperOrdinary, a
leading distribution partner in the Asian beauty market available
on Tmall starting in the third quarter
- Expanding distribution with new and existing strategic
partners, Publix, BJs and Shoppers Drug Mart, in the second half of
2022
Full Year 2022 Outlook
Revenue
- Updates full year 2022 revenue outlook to be in the range of
$310 to $315 million, reflecting inventory adjustments (reducing
weeks of supply) at a key digital customer
Adjusted EBITDA(1)
- Full year 2022 Adjusted EBITDA outlook remains within our range
of negative $10 million to negative $20 million, closer to the
higher-end of the range (negative $20 million), reflecting positive
Adjusted EBITDA in the fourth quarter
____________________
(1) We do not provide guidance for the most directly comparable
GAAP measure, net loss, and similarly cannot provide a
reconciliation between our adjusted EBITDA outlook and net loss
without unreasonable effort due to the unavailability of reliable
estimates for certain components of net 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.
We continue to expect basic and diluted shares outstanding to be
approximately 92 million.
We expect stock-based compensation, depreciation and
amortization and legal expense to be approximately $6 million in
aggregate in the fourth quarter.
Preliminary 2023 Outlook - First Half
Revenue
Our first half of 2023 revenue outlook reflects 7 percent to 10
percent growth over the first half of 2022. This takes into account
the retail distribution expansion that occurred in the second half
of 2022 and a new round of price increases on select diapers,
wipes, and personal care items effective in the middle of December
2022, balanced by uncertainty in US consumer spending and continued
tight inventory management by retailers. As 2023 progresses, we
anticipate lapping significant distribution gains, including
pipeline shipments, as well as revenue from integrating the Honest
Baby Clothing business, both of which occurred in the back half of
2022.
We expect to provide a more detailed 2023 outlook, including
gross margin and Adjusted EBITDA for the first half of 2023, during
our fourth quarter earnings call in March 2023.
Webcast and Conference Call Information
A webcast and conference call to discuss third quarter 2022
results is scheduled for today, November 10, 2022, at 9:00
a.m. Pacific time/12:00 p.m. Eastern time. Those interested in
participating in the conference call by phone, please go to this
link
https://register.vevent.com/register/BI7f92dc6796f048f2bb7dfd9d2bad9f3e,
and you will be provided with dial in details. To avoid delays, we
encourage participants to dial into the conference call fifteen
minutes ahead of the scheduled start time. A live webcast of the
conference call will be available online at:
https://investors.honest.com. A replay of the webcast will remain
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, including statements regarding our future
results of operations or financial condition, business strategy and
plans and objectives of management for future operations, are
forward-looking statements. 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 the following:
- our expectations regarding our revenue, cost of revenue,
operating expenses, gross margin, adjusted EBITDA and other
operating results, in particular with respect to our full year 2022
and first half of 2023 outlook, including the anticipated strength
of our businesses and capabilities in the fourth quarter of 2022
and with respect to the first half of 2023 as well as the
challenges expected in the second half of 2023;
- our strategic initiatives and
priorities, including the timing, focus and cadence of our
marketing, innovation, and distribution and costovation
strategies;
- that strong momentum in our business, continued strong results
in tracked channels, consumer acceptance of prior price increases,
and recent retail expansion are expected to offset rising consumer
uncertainty and tighter inventory management by retailers;
- that our full ownership of the baby clothing business will
enable growth by leveraging Honest.com to support cross-marketing
opportunities across the entire Honest portfolio, retail
distribution and digital expansion, and operational
efficiency;
- our ability to offset the high inflationary environment,
including commodity prices, labor costs, input cost and
transportation cost inflation with price increases, productivity or
investing in digital capabilities and a growing revenue base;
- our ability to drive innovation, maintain cost discipline,
invest in digital capabilities, expand our distribution footprint,
and execute our pricing strategies to position Honest for long-term
growth;
- our planned innovation and expected plans for new distribution
in the future;
- our belief that consumer demand for
natural and clean products will continue to outpace conventional
offerings, and that Honest is poised to capture this modern
consumer through its omnichannel business model;
- our expectation that we will return
to revenue growth during the fourth quarter of 2022 as we introduce
new innovation, expand with new strategic retail partners and
improve the digital experience on Honest.com;
- our ability to implement our
strategy to deliver sustained long-term growth;
- that our strategy will continue to
deliver behind pricing actions, reflecting the health of our brand,
distribution gains, and tight cost management;
- that our investments in innovation
and digital capability will fuel long-term growth;
- our expansion with retail and digital customers;
- our ability to bring new products to market and to identify and
successfully launch new category adjacencies;
- anticipated trends, growth rates, and challenges in our
business and in the markets in which we operate;
- the effect of COVID-19 or other public health crises or
macroeconomic factors on our business and the global economy,
including shifting consumer demand between our Digital and Retail
channels and the impact from supply chain disruptions;
- our continued revenue growth through our omnichannel strategy
and ability to capture growth in whitespace opportunities in the
Retail channel;
- expectations regarding consumer demand and the timing and
amount of orders from key customers; and
- our ability to achieve or sustain our profitability.
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 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, 2021, filed
with the Securities and Exchange Commission on March 28, 2022, and
Quarterly Reports on Form 10-Q for the quarters ended March 31,
2022 and June 30, 2022, respectively, filed with the Securities and
Exchange Commission on May 13, 2022 and August 12, 2022,
respectively, 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 mission-driven,
digitally-native brand focused on leading the clean lifestyle
movement, creating a community for conscious consumers and seeking
to disrupt multiple consumer product categories. Since its launch
in 2012, Honest has been dedicated to creating thoughtfully
formulated, safe and effective personal care, beauty, baby and
household products, which are available via Honest.com, third-party
ecommerce customers and approximately 50,000 retail locations
across the United States, Canada and Europe. Based in Los Angeles,
CA, the Company’s mission, to inspire everyone to love living
consciously, is driven by its values of transparency, trust,
sustainability and a deep sense of purpose around what matters most
to its consumers: their health, their families and their homes. For
more information about the Honest Standard and the Company, please
visit www.honest.com.
Investor Contacts: Steve Austenfeld
saustenfeld@thehonestcompany.com
Elizabeth Bouquardebouquard@thehonestcompany.com
Investor
Inquiries:investors@thehonestcompany.com
Media Contact: Jennifer Kroog
Rosenbergjrosenberg@thehonestcompany.com
The Honest Company,
Inc.Condensed Consolidated Statements of
Comprehensive Loss(Unaudited)(in thousands, except share
and per share amounts)
|
For the three months endedSeptember 30, |
|
For the nine months endedSeptember 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
84,580 |
|
|
$ |
82,651 |
|
|
$ |
231,792 |
|
|
$ |
238,258 |
|
Cost of revenue |
|
58,963 |
|
|
|
52,892 |
|
|
|
161,984 |
|
|
|
153,177 |
|
Gross profit |
|
25,617 |
|
|
|
29,759 |
|
|
|
69,808 |
|
|
|
85,081 |
|
Operating expenses |
|
|
|
|
|
|
|
Selling, general and administrative |
|
23,491 |
|
|
|
18,568 |
|
|
|
63,068 |
|
|
|
65,356 |
|
Marketing |
|
12,140 |
|
|
|
13,687 |
|
|
|
38,121 |
|
|
|
41,868 |
|
Research and development |
|
1,725 |
|
|
|
2,092 |
|
|
|
5,643 |
|
|
|
6,082 |
|
Total operating expenses |
|
37,356 |
|
|
|
34,347 |
|
|
|
106,832 |
|
|
|
113,306 |
|
Operating loss |
|
(11,739 |
) |
|
|
(4,588 |
) |
|
|
(37,024 |
) |
|
|
(28,225 |
) |
Interest and other income
(expense), net |
|
(29 |
) |
|
|
(526 |
) |
|
|
657 |
|
|
|
(1,362 |
) |
Loss before provision for
income taxes |
|
(11,768 |
) |
|
|
(5,114 |
) |
|
|
(36,367 |
) |
|
|
(29,587 |
) |
Income tax provision |
|
20 |
|
|
|
22 |
|
|
|
60 |
|
|
|
67 |
|
Net loss |
$ |
(11,788 |
) |
|
$ |
(5,136 |
) |
|
$ |
(36,427 |
) |
|
$ |
(29,654 |
) |
Net loss per share
attributable to common stockholders: |
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.13 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.40 |
) |
|
$ |
(0.33 |
) |
Weighted-average shares used
in computing net loss per share attributable to common
stockholders: |
|
|
|
|
|
|
|
Basic and diluted |
|
92,460,987 |
|
|
|
90,397,409 |
|
|
|
92,020,423 |
|
|
|
64,399,183 |
|
|
|
|
|
|
|
|
|
Other comprehensive income
(loss) |
|
|
|
|
|
|
|
Unrealized gain (loss) on short-term investments, net of taxes |
|
37 |
|
|
|
10 |
|
|
|
(42 |
) |
|
|
(96 |
) |
Comprehensive loss |
$ |
(11,751 |
) |
|
$ |
(5,126 |
) |
|
$ |
(36,469 |
) |
|
$ |
(29,750 |
) |
The Honest Company,
Inc.Condensed Consolidated Balance
Sheets(Unaudited)(in thousands, except share and per share
amounts)
|
September 30, 2022 |
|
December 31, 2021 |
|
September 30, 2021 |
|
|
|
|
|
|
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
$ |
24,087 |
|
|
$ |
50,791 |
|
|
$ |
27,666 |
|
Short-term investments |
|
16,744 |
|
|
|
42,388 |
|
|
|
62,678 |
|
Accounts receivable, net |
|
38,871 |
|
|
|
31,784 |
|
|
|
31,654 |
|
Inventories |
|
100,278 |
|
|
|
75,668 |
|
|
|
77,858 |
|
Prepaid expenses and other current assets |
|
14,435 |
|
|
|
13,165 |
|
|
|
13,777 |
|
Total current assets |
|
194,415 |
|
|
|
213,796 |
|
|
|
213,633 |
|
Operating lease right-of-use
asset |
|
31,486 |
|
|
|
— |
|
|
|
— |
|
Property and equipment,
net |
|
14,891 |
|
|
|
52,952 |
|
|
|
53,888 |
|
Goodwill |
|
2,230 |
|
|
|
2,230 |
|
|
|
2,230 |
|
Intangible assets, net |
|
387 |
|
|
|
440 |
|
|
|
458 |
|
Other assets |
|
4,951 |
|
|
|
3,179 |
|
|
|
4,151 |
|
Total assets |
$ |
248,360 |
|
|
$ |
272,597 |
|
|
$ |
274,360 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
$ |
30,703 |
|
|
$ |
28,743 |
|
|
$ |
31,178 |
|
Accrued expenses |
|
29,968 |
|
|
|
19,003 |
|
|
|
17,280 |
|
Deferred revenue |
|
781 |
|
|
|
731 |
|
|
|
816 |
|
Total current liabilities |
|
61,452 |
|
|
|
48,477 |
|
|
|
49,274 |
|
Long term liabilities |
|
|
|
|
|
Lease financing obligation, net of current portion |
|
— |
|
|
|
37,527 |
|
|
|
37,758 |
|
Operating lease liabilities, net of current portion |
|
31,790 |
|
|
|
— |
|
|
|
— |
|
Other long-term liabilities |
|
33 |
|
|
|
7,487 |
|
|
|
7,843 |
|
Total liabilities |
|
93,275 |
|
|
|
93,491 |
|
|
|
94,875 |
|
Commitments and
contingencies |
|
|
|
|
|
Stockholders’ equity
(deficit) |
|
|
|
|
|
Preferred stock, $0.0001 par value, 20,000,000 shares authorized at
September 30, 2022 and December 31, 2021, none issued or
outstanding as of September 30, 2022 and December 31,
2021 |
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock, $0.0001 par value, 1,000,000,000 and 150,000,000
shares authorized at September 30, 2022 and December 31,
2021, respectively; 92,590,227 and 91,512,140 shares issued and
outstanding as of September 30, 2022 and December 31,
2021, respectively |
|
9 |
|
|
|
9 |
|
|
|
9 |
|
Additional paid-in capital |
|
582,396 |
|
|
|
570,794 |
|
|
|
562,109 |
|
Accumulated deficit |
|
(427,237 |
) |
|
|
(391,656 |
) |
|
|
(382,631 |
) |
Accumulated other comprehensive loss |
|
(83 |
) |
|
|
(41 |
) |
|
|
(2 |
) |
Total stockholders’ equity |
|
155,085 |
|
|
|
179,106 |
|
|
|
179,485 |
|
Total liabilities and stockholders’ equity |
$ |
248,360 |
|
|
$ |
272,597 |
|
|
$ |
274,360 |
|
The Honest Company,
Inc.Condensed Consolidated Statements of Cash
Flows(Unaudited)(in thousands)
|
For the nine months ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
Cash flows from
operating activities |
|
|
|
Net loss |
$ |
(36,427 |
) |
|
$ |
(29,654 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
Depreciation and amortization |
|
2,025 |
|
|
|
3,135 |
|
Stock-based compensation |
|
11,360 |
|
|
|
13,240 |
|
Other |
|
4,805 |
|
|
|
204 |
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable, net |
|
(7,087 |
) |
|
|
(8,859 |
) |
Inventories |
|
(24,609 |
) |
|
|
(1,188 |
) |
Prepaid expenses and other assets |
|
(3,228 |
) |
|
|
(7,552 |
) |
Accounts payable, accrued expenses and other long-term
liabilities |
|
7,604 |
|
|
|
(5,783 |
) |
Deferred revenue |
|
49 |
|
|
|
98 |
|
Operating lease liabilities |
|
(5,161 |
) |
|
|
— |
|
Net cash used in operating activities |
|
(50,669 |
) |
|
|
(36,359 |
) |
Cash flows from
investing activities |
|
|
|
Purchases of short-term investments |
|
(12,782 |
) |
|
|
(65,267 |
) |
Proceeds from sales of short-term investments |
|
— |
|
|
|
26,858 |
|
Proceeds from maturities of short-term investments |
|
38,219 |
|
|
|
9,862 |
|
Purchases of property and equipment |
|
(1,433 |
) |
|
|
(187 |
) |
Net cash provided by (used in) investing activities |
|
24,004 |
|
|
|
(28,734 |
) |
Cash flows from
financing activities |
|
|
|
Proceeds from initial public offering, net of underwriting
commissions and discounts |
|
— |
|
|
|
96,517 |
|
Taxes paid related to net share settlement of equity awards |
|
(37 |
) |
|
|
(565 |
) |
Dividends paid |
|
— |
|
|
|
(35,000 |
) |
Proceeds from exercise of stock options |
|
122 |
|
|
|
941 |
|
Payment of initial public offering costs |
|
— |
|
|
|
(5,477 |
) |
Proceeds from 2021 Employee Stock Purchase Plan |
|
157 |
|
|
|
— |
|
Payments on finance lease liabilities |
|
(281 |
) |
|
|
(857 |
) |
Net cash provided by (used in) financing activities |
|
(39 |
) |
|
|
55,559 |
|
Net decrease in cash and cash equivalents |
|
(26,704 |
) |
|
|
(9,534 |
) |
Cash and cash
equivalents |
|
|
|
Beginning of the period |
|
50,791 |
|
|
|
37,200 |
|
End of the period |
$ |
24,087 |
|
|
$ |
27,666 |
|
|
|
|
|
Supplemental
disclosures of noncash activities |
|
|
|
Equipment acquired under
capital lease obligations |
$ |
— |
|
|
$ |
105 |
|
Capital expenditures included
in accounts payable and accrued expenses |
$ |
92 |
|
|
$ |
27 |
|
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, which is a non-GAAP financial measure,
provide 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) the IPO bonuses in the second quarter of
2021, including associated payroll taxes and expenses, and
third-party costs associated with our IPO in 2021; and (6) in
certain periods, litigation and settlement fees associated with
certain non-ordinary course litigation.
Adjusted EBITDA is a financial measure that is not required by,
or presented in accordance with GAAP. We believe that adjusted
EBITDA, 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 is helpful
to our investors as it is a measure 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 is presented for supplemental informational
purposes only, has limitations as analytical tools and should not
be considered in isolation or as a substitute for financial
information presented in accordance with GAAP. Some of the
limitations of adjusted EBITDA include that (1) it does 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 does not reflect these capital expenditures; (3) it
does not consider the impact of stock-based compensation expense;
(4) it does not reflect other non-operating expenses,
including interest expense; (5) it does not include the IPO
bonuses, including associated payroll taxes and expenses, or
third-party costs associated with the preparation of the IPO;
(6) it does not reflect tax payments that may represent a
reduction in cash available to us; and (7) does not include
certain non-ordinary cash expenses that we do not believe are
representative of our business on a steady-state basis. In
addition, our use of adjusted EBITDA may not be comparable to
similarly titled measures of other companies because they may not
calculate adjusted EBITDA in the same manner, limiting its
usefulness as a comparative measure. Because of these limitations,
when evaluating our performance, you should consider adjusted
EBITDA alongside other financial measures, including our net income
(loss), revenue and other results stated in accordance with
GAAP.
The following table presents a reconciliation of net income
(loss), the most directly comparable financial measure stated in
accordance with GAAP, to adjusted EBITDA, for each of the periods
presented:
|
For the three months ended September 30, |
|
For the nine months ended September 30, |
(In thousands) |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Reconciliation of Net
Loss to Adjusted EBITDA |
|
|
|
|
|
|
|
Net loss |
$ |
(11,788 |
) |
|
$ |
(5,136 |
) |
|
$ |
(36,427 |
) |
|
$ |
(29,654 |
) |
Interest and other (income) expense, net |
|
29 |
|
|
|
526 |
|
|
|
(657 |
) |
|
|
1,362 |
|
Income tax provision |
|
20 |
|
|
|
22 |
|
|
|
60 |
|
|
|
67 |
|
Depreciation and amortization |
|
639 |
|
|
|
1,019 |
|
|
|
2,025 |
|
|
|
3,135 |
|
Stock-based compensation |
|
3,900 |
|
|
|
4,776 |
|
|
|
11,360 |
|
|
|
13,240 |
|
Securities litigation expense |
|
1,612 |
|
|
|
— |
|
|
|
2,607 |
|
|
|
— |
|
Related IPO and other transaction-related expenses(1) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,160 |
|
Payroll tax expense related to stock-based compensation |
|
14 |
|
|
|
123 |
|
|
|
81 |
|
|
|
135 |
|
Adjusted EBITDA |
$ |
(5,574 |
) |
|
$ |
1,330 |
|
|
$ |
(20,951 |
) |
|
$ |
445 |
|
___________________
(1) Includes IPO-related costs, including
transaction-related third-party expenses, which are generally
incremental costs incurred associated with the preparation of the
IPO.
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