10q10k10q10k.net

What changed in Honest Company, Inc.'s 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of Honest Company, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+505 added−533 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-26)

Top changes in Honest Company, Inc.'s 2025 10-K

505 paragraphs added · 533 removed · 400 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

47 edited+9 added−38 removed23 unchanged
Biggest changeOur commitment to environmental mindfulness shows up through our product development, packaging processes and in many parts of our business on a daily basis. For example, the cartons used in our baby personal care line are environmentally-friendly, Forest Stewardship Council (“FSC”)-certified, and made from 100% recycled, PCW (pre/post consumer waste) materials.
Biggest changeFor example, the cartons used in our baby personal care line are environmentally-friendly, Forest Stewardship Council (“FSC”)-certified, and/or made from 100% recycled, PCW (pre/post consumer waste) materials. 100% of our full-size baby personal care bottles are recyclable or include recycled materials and we are regularly looking to increase the amount of post-consumer resin in our components.
Our distribution network includes two warehouses in Nevada and Pennsylvania, respectively, with retail and DTC fulfillment capabilities and value-added services operated by National Distribution Centers, LLC, or NFI, and GEODIS Logistics LLC, or GEODIS, respectively. The warehouse in Las Vegas is a state-of-the-art facility leased by Honest with a focus on automated large scale DTC fulfillment.
Our distribution network includes two warehouses in Nevada and Pennsylvania, respectively, with retail fulfillment capabilities and value-added services operated by National Distribution Centers, LLC, or NFI, and GEODIS Logistics LLC, or GEODIS, respectively. The warehouse in Las Vegas is a state-of-the-art facility leased by Honest with a focus on automated large scale retail fulfillment.
Our supply chain team manages these 5 relationships and processes and, with the support of our innovation team, researches materials, components and equipment, approves and manages purchasing plans, and oversees product fulfillment. The primary raw materials and components of our products include responsibly sourced, plant-based fluff pulp in our diapers and plant-based substrate in our baby wipes, among other materials.
Our supply chain team manages these relationships and processes and, with the support of our innovation team, researches materials, components and equipment, approves and manages purchasing plans, and oversees product fulfillment. The primary raw materials and components of our products include responsibly sourced, plant-based fluff pulp in our diapers and plant-based substrate in our baby wipes, among other materials.
These laws and regulations principally relate to the ingredients or components, proper labeling, advertising, packaging, marketing, manufacture, registration, safety, shipment and disposal of our products. Our cosmetic, over-the-counter drugs, food (vitamins/dietary supplements) and cleaning products are subject to regulation by the Food and Drug Administration, or the FDA.
These laws and regulations principally relate to the ingredients or components, proper labeling, advertising, packaging, marketing, manufacture, registration, safety, shipment and disposal of our products. Our cosmetic, over-the-counter drugs, food (vitamins/dietary supplements) and cleansing products are subject to regulation by the Food and Drug Administration, or the FDA.
Additionally, we are, or may become, subject to various U.S. federal and state consumer protection laws which require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data.
Additionally, we are subject to various U.S. federal and state consumer protection laws which require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data.
We believe that consumers' need for clean products will continue to grow in years to come and as consumers become more knowledgeable about clean credentials and our Honest Standard.
We believe that consumers' need for sensitive skin products and clean products will continue to grow in years to come and as consumers become more knowledgeable about clean credentials and our Honest Standard.
In the event the FDA identifies false or misleading labeling or unsanitary conditions or otherwise a failure to comply with FDA requirements, we may be required by a regulatory authority or we may independently decide to conduct a recall or marke t withdrawal of our product or to make changes to our manufacturing processes or product formulations or labels.
In the event the FDA identifies false or misleading labeling or unsanitary conditions or otherwise a failure to comply with FDA requirements, we may be required by a regulatory authority or we may independently decide to conduct a recall or market withdrawal of our product or to make changes to our manufacturing processes or product formulations or labels.
The labeling of cosmetic prod ucts is also subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations. Cosmetics are not subject to pre-market approval by the FDA, however certain ingredients, such as color additives, must be pre-authorized.
The labeling of cosmetic products is also subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations. Cosmetics are not subject to pre-market approval by the FDA, however certain ingredients, such as color additives, must be pre-authorized.
Since the start of our relationship with Baby2Baby and other partners in 2012, we have donated more than 36 million family personal care, feminine care, clean beauty products and other essentials to those in need and our compassionate team has volunteered over 20,500 hours giving back to our communities and providing disaster relief.
Since the start of our relationship with Baby2Baby and other partners in 2012, we have donated more than 44 million family personal care, feminine care, clean beauty products and other essentials to those in need and our compassionate team has volunteered over 20,800 hours giving back to our communities and providing disaster relief.
As of December 31, 2024, we had a total of 164 employees, all who are full-time, as well as a limited number of temporary employees and consultants. We believe small changes in the right direction start ripple effects that have the potential to change entire industries and how products are made.
As of December 31, 2025, we had a total of 174 employees, all who are full-time, as well as a limited number of temporary employees and consultants. We believe small changes in the right direction start ripple effects that have the potential to change entire industries and how products are made.
The cGMP regulations under MoCRA are to be proposed by October 2025. If a product is intended for use in the diagnosis, cure, mitigation, treatment or prevention of a disease condition or to affect the structure or function of the human body, the FDA will regulate the product as a drug.
The cGMP regulations under MoCRA are yet to be proposed by FDA. 6 If a product is intended for use in the diagnosis, cure, mitigation, treatment or prevention of a disease condition or to affect the structure or function of the human body, the FDA will regulate the product as a drug.
We believe that certain historical leading brands that have produced products in these categories for decades generally focus on single categories and offer products made with conventional ingredients that are less aligned with increasing consumer preference for clean and natural solutions.
We believe that certain historical leading brands that have produced products in these categories for decades generally focus on single categories and offer products made with conventional ingredients that are less aligned with increasing consumer preference for clean and naturally-derived ingredients.
Such obligations may include, without limitation, the Federal Trade Commission Act, the Telephone Consumer Protection Act of 1991, the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003, the California Consumer Privacy Act of 2018 (“CCPA”), the Canadian Personal Information Protection and Electronic Documents Act, Canada’s Anti-Spam Legislation, the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”), the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”), the ePrivacy Directive, and the Payment Card Industry Data Security Standard (“PCI DSS”).
Obligations related to personal data include and may in the future include, without limitation, the Federal Trade Commission Act, the Telephone Consumer Protection Act of 1991, the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003, the California Consumer Privacy Act of 2018 (“CCPA”), the Canadian Personal Information Protection and Electronic Documents Act, Canada’s Anti-Spam Legislation, the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”), the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”), the ePrivacy Directive, various US state comprehensive consumer privacy laws, and the Payment Card Industry Data Security Standard (“PCI DSS”).
Our corporate social responsibility efforts provide opportunities for employees to give back to communities in need through volunteerism and donation matching. The Honest Company provides an Employee Assistance Program (EAP) at no cost to employees to support emotional well-being and a fitness reimbursement through Husk Wellness (formerly Global Fit Rewards) to encourage a healthy lifestyle for Honest employees.
Our corporate social responsibility efforts provide opportunities for employees to give back to communities in need through volunteerism and donation matching. The Honest Company provides an Employee Assistance Program (EAP) at no cost to employees to support emotional well-being and a fitness reimbursement to encourage a healthy lifestyle for Honest employees.
These items are available at investors.honest.com under News and Events. 9 Information relating to corporate governance at Honest, including the Company’s Code of Business Conduct and Ethics, the Honest Company Corporate Governance Guidelines and Committee charters for the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee, is available at investors.honest.com under Corporate Governance or https://investors.honest.com/corporate-governance/douments-charters.
Information relating to corporate governance at Honest, including the Company’s Code of Business Conduct and Ethics, the Honest Company Corporate Governance Guidelines and Committee charters for the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee, is available at investors.honest.com under Corporate Governance or https://investors.honest.com/corporate-governance/douments-charters.
Our partnership with March of Dimes helps fund research, advocacy and service programs addressing maternal and infant mortality with critical healthcare and support. Through this partnership, in 2024 we have donated more than $0.7 million, reaching more than an estimated 8 million mothers with health education and programs to support the organization, including its new Mom and Baby Action Network.
Our partnership with March of Dimes helps fund research, advocacy and service programs addressing maternal and infant mortality with critical healthcare and support. Since this partnership, we have donated more than $0.8 million and reached more than an estimated 402,000 mothers in 2025 with health education and programs to support the organization, including its new Mom and Baby Action Network.
We believe this includes a best-in-class social media strategy, a deep creator/ influencer network, and a highly strategic approach to paid media.
We believe this includes a best-in-class social media and influencer marketing strategy and a highly strategic approach to paid media.
We have an extensive line of bath and body care products for babies, as well as adult facial care products designed for a range of skin types and concerns, many of which are certified by trusted experts and institutions, including the National Eczema Association. Our ingredients and formulas are toxicologist-audited for potential health concerns.
We have an extensive collection of personal care products for everyone from babies to adults, as well as adult facial care products designed for a range of skin types and concerns, many of which are certified by trusted experts and institutions, including the National Eczema Association. Our ingredients and formulas are toxicologist-audited for potential health concerns.
We maintain a NO List™ of over 3,500 chemicals and materials we will not formulate with, including parabens, sulfate surfactants, phthalates, formaldehyde donors and synthetic fragrances. We have an in-house toxicologist and an eco-toxicologist with in-depth audit protocols. Our in-house R&D team selects ingredients with care.
That’s why we ri gorously test and research every product. We maintain a NO List™ of over 3,500 chemicals and materials we will not formulate with, including parabens, phthalates, formaldehyde donors and synthetic fragrances. We have an in-house toxicologist and an eco-toxicologist with in-depth audit protocols. Our in-house R&D team selects ingredients with care.
We work closely with our charity partners, including Baby2Baby, to help provide children and families across the country with the basic essentials and resources they need to live healthy lives.
Community impact is also very important to us. We work closely with our charity partners, including Baby2Baby, to help provide children and families across the country with the basic essentials and resources they need to live healthy lives.
Select competitors of our skin and personal care products include Kenvue Inc. (maker of Johnson’s Baby and Aveeno), The Clorox Company (parent company of Burt’s Bees, Inc.), Unilever PLC (maker of Shea Moisture), Estée Lauder Inc., L’Oréal S.A. and Pacifica Beauty LLC. Select competitors of our baby clothing include Carter's Inc.
Select competitors of our skin and personal care products include Kimberly-Clark Corporation (pending acquiror of Kenvue Inc.), The Clorox Company (parent company of Burt’s Bees, Inc.), Unilever PLC (maker of Shea Moisture), Estée Lauder Inc., L’Oréal S.A. and Pacifica Beauty LLC.
Our current products that are intended to treat acne and skin care products with sun protection factor, or SPF, are considered over-the-counter, or OTC, drug products by the FDA. Our OTC products are subject to regulation through the FDA’s “monograph” system which specifies, among other things, permitted active drug ingredients and their concentrations.
Our current products that are intended to soothe diaper rash and skin care products with colloidal oatmeal are considered over-the-counter, or OTC, drug products by the FDA. Our OTC products are subject to regulation through the FDA’s “monograph” system which specifies, among other things, permitted active drug ingredients and their concentrations.
Below is our ACV weighted distribution for the 13-week period ended: 4 Our Growth Strategy The core of our growth strategy centers around increasing physical availability of our products through expanded stores, doors, aisles, shelves and facings. While we have made significant progress in our distribution gains, we are still under-indexed compared to competition.
Our Growth Strategy The core of our growth strategy centers around increasing physical and digital availability of our products, including through expanded stores, doors, aisles, shelves and facings. While we have made significant progress in our distribution gains, we are still under-indexed compared to competition.
We also increase availability of our products to more consumers through our leading retailers and their websites and Honest.com. Our strategic retail partnerships with leading omnichannel retailers sell our products through brick and mortar stores and on their own websites. Our retail partnerships expand brand awareness and product availability , creating meaningful marketing efficiencies as we continue to scale.
We have retail partnerships with leading retailers that sell our products through brick and mortar stores and on their own websites. Our retail partnerships expand brand awareness and product availability , creating meaningful marketing efficiencies as we continue to scale.
Our Industry Our product-level point of sale consumption growth in 2024 significantly outpaced the category in wipes and baby personal care.
Our Industry Our product-level point of sale consumption growth in 2025 significantly outpaced the category in wipes and baby personal care, while decline in point of sale consumption for diapers in 2025 also outpaced the category .
Based on independent third-party consumption data for the 52 weeks ended January 5, 2025 , the point of sale consumption growth for the clean and natural products of Honest wipes and baby personal care grew 25% and 16%, respectively, significantly outpacing the products in the industry as a whole which declined in wipes and baby personal care of 3% and 1%, respectively.
Based on independent third-party consumption data for the 52 weeks ended January 4, 2026 , the point of sale consumption growth for wipes and baby personal care was 31% and 12%, respectively, and point of sale consumption for diapers declined 15%, each significantly outpacing the products in the industry as a whole which grew in wipes and baby personal care of 5% and 3%, respectively, and declined in diapers of 1%.
These may involve user privacy, data protection, content, intellectual property, distribution, electronic contracts and other communications, automatically renewing product subscriptions, competition, protection of minors, consumer protection, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions and online payment services.
Additional obligations regarding privacy, data protection, content, intellectual property, distribution, electronic contracts and other communications, automatically renewing product subscriptions, competition, protection of minors, consumer protection, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions and online payment services continue to apply to our business.
Our omnichannel marketing strategy is focused on building a purpose driven brand with deep connection to the community of shoppers we serve. We take a modern marketing approach and are constantly innovating on new ways to reach and connect with our community.
Our marketing strategy is focused on building a purpose-driven brand with deep connection to the community of shoppers we serve. We apply a modern, data-driven marketing approach and continuously innovate, optimize and identify new ways to reach and connect with our community.
We seek to meet consumers wherever they want to shop, balancing deep consumer connection with broad convenience and availability. Our distribution strategy positions us for continued growth through our trusted brand and award-winning multi-category product offering.
Since our launch, we have cultivated deep trust around what matters most to our consumers: their health, their families and their homes. We seek to meet consumers wherever they want to shop, balancing deep consumer connection with broad convenience and availability. We believe our distribution strategy positions us for continued growth through our trusted brand and award-winning multi-category product offering.
We have over 100 EWG Verified™ SKUs across the organization, which are products that do not include EWG's chemicals of concern while also meeting their strict health-based guidelines. We conduct quality audits of our third-party manufacturing partners.
We have over 100 EWG Verified™ SKUs across the organization, which are products that do not include EWG's chemicals of concern while also meeting their strict health-based guidelines. We conduct quality audits of our third-party manufacturing partners. We require our third-party manufacturers to commit to follow our high standards of controlled documentation, cleaning and safety protocols, and laboratory controls.
Government Regulation Substantially all of our products are subject to regulation by the Consumer Product Safety Commission, or the CPSC, the EPA, and the Federal Trade Commission, or the FTC, as well as various other federal, state, local and foreign regulatory authorities.
Our diapers feature an innovative design that uses less material than our previous diaper innovation. Government Regulation Substantially all of our products are subject to regulation by the Consumer Product Safety Commission, or the CPSC, the EPA, and the Federal Trade Commission, or the FTC, as well as various other federal, state, local and foreign regulatory authorities.
Our strategic plan is grounded in our Transformation Initiative Pillars, which set the building blocks for long-term value creation. Beyond 2024, the Company expects to realize revenue growth of 4% to 6% annually and continued Adjusted EBITDA margin expansion.
We expect to substantially complete the actions under Powering Honest Growth by December 31, 2026. 4 Our strategic plan is grounded in our Transformation Pillars, which set the building blocks for long-term value creation. We expect to realize revenue growth of 4% to 6% annually and continued Adjusted EBITDA margin expansion.
Our Clean Conscious TM wipes are compostable and plant-based, made with over 99% water and gentle on sensitive skin.
Our Clean Conscious® wipes are compostable and plant-based, made with over 99% water and designed to protect delicate skin.
As a result of global pandemics or other macroeconomic trends, we and our distribution partners have in the past experienced and may in the future experience some supply-related disruptions to the operations of our fulfillment centers. Competition The markets in which we operate are highly competitive and rapidly evolving, with many new brands and product offerings emerging in the marketplace.
As a result of global pandemics or other macroeconomic trends, we and our distribution partners have in the past experienced and may in the future experience some supply-related disruptions to the operations of our fulfillment centers.
Our Products and Product Categories Our Chief Executive Officer, as the chief operating decision maker, organizes the Company, manages resource allocations, and measures performance on the basis of one operating segment. We offer an array of personal care products, including diapers, wipes and adult facial care (including skin and color cosmetics).
Our Products and Product Categories Our Chief Executive Officer, as the chief operating decision maker, organizes the Company, manages resource allocations, and measures performance on the basis of one operating segment. We offer an array of cleanly-formulated and sustainably-designed products, including a portfolio of wipes and a personal care collection for everyone from babies to adults, as well as diapers.
Item 1. Business Overview Of Business The Honest Company (the “Company,” which may also be referred to as “we,” “us” or “our”) is a personal care company dedicated to creating cleanly-formulated and sustainably-designed products . Our commitment to our core values, continual innovation and engaging our community has differentiated and elevated our brand and our products.
Item 1. Business Overview of Business Founded in 2012, The Honest Company (the “Company,” or “Honest,” or which may also be referred to as “we,” “us” or “our”) is a personal care company dedicated to creating cleanly-formulated and sustainably-designed products for everyone from babies to adults.
Accordingly, investors should monitor our website and corporate LinkedIn account in addition to our SEC filings and public webcasts.
Accordingly, 7 investors should monitor our website and corporate LinkedIn account in addition to our SEC filings and public webcasts. These items are available at investors.honest.com under News and Events.
Since our launch, we have built a well-integrated omnichannel presence by expanding our product availability, including the launch of strategic partnerships with Target, Amazon and Walmart in 2014, 2017 and 2022, respectively , as well as distribution with many other retailers nationwide .
Our distribution strategy positions us for continued growth through our trusted brand and award-winning multi-category product offerings. Since our launch, we have expanded our product availability, including the launch of strategic partnerships with Target, Amazon and Walmart in 2014, 2017 and 2022, respectively , as well as distribution with many other retailers nationwide .
We believe that given consumers’ growing focus on their health and wellness, reducing waste and promoting social impact, we are well-positioned to continue to take market share from these legacy brands. Our Purpose-Driven Organization We are a personal care company on a mission to challenge ingredients, ideals , and industries so people can protect more of what they love.
We believe that given consumers’ growing focus on their health and wellness, reducing waste and promoting social impact, we are well-positioned to continue to take market share from these legacy brands.
As we move forward beyond 2025, we will gradually transition away from Honest.com as a shipping and fulfillment channel, while ensuring the site remains a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase offsite.
Effective December 31, 2025, we have transitioned away from Honest.com as a shipping and fulfillment channel, while maintaining Honest.com as a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase through our leading retailers and their websites, and third-party ecommerce sites.
Accordingly, we are, and may in the future become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy, security, and protection.
The FDA may change the regulations as to any product category, requiring a change in labeling, product formulation or analytical testing. We are also subject to a number of data privacy and security obligations, including U.S. federal, state, local and foreign laws, regulations, guidance, and industry standards .
We compete based on various product attributes including clean formulation, sustainability, effectiveness and design, as well as our ability to establish direct relationships with our consumers through Honest.com. We believe that we compete favorably across these factors taken as a whole.
Select competitors of our diapers include Kimberly-Clark Corporation (maker of Huggies diapers and Cottonelle wipes) and Procter & Gamble Company (maker of Pampers, Pampers Pure, Luvs and Charmin). We compete based on various product attributes including clean formulation, sustainability, effectiveness and design. We believe that we compete favorably across these factors taken as a whole.
Additionally, these partnerships support our differentiated value proposition by making our products conveniently available in the many places where our consumer shops. We maintain direct relationships with our consumers via our flagship digital platform, Honest.com, which allows us to influence brand experience and better understand consumer preferences and behavior.
Additionally, these retail partnerships support our differentiated value proposition by making our products conveniently available in the many places where our consumer shops.
This includes the USDA’s BioPreferred® Program for biobased content, the National Eczema Association’s Seal of Acceptance, Environmental Working Group ( “EWG” ) Verified™, Green Seal®, the NSF/ANSI 305 standards set by Quality Assurance International, OEKO-TEX® STANDARD 100 and the Global Organic Textile Standard for organic cotton in our Honest baby clothing and bedding.
We meet the requirements of many independent organizations or certification authorities for several of our products. This includes the USDA’s BioPreferred® Program for biobased content, the National Eczema Association’s Seal of Acceptance, the IWSFG standard for flushable wipes, Environmental Working Group ( “EWG” ) Verified™ and OEKO-TEX® STANDARD 100.
We use cleanly-formulated and safe ingredients designed for the whole family, including many naturally-derived ingredients that, most-importantly, are effective. Primary components of our diapers include responsibly sourced, plant-based fluff pulp and other plant-derived materials. Our diapers have an extensive modern and efficient design that uses less material.
Primary components of our diapers include responsibly sourced, plant-based fluff pulp and other plant-derived materials. Our diapers have an extensive modern and efficient design that uses less material. Our Distribution Strategy We seek to meet consumers wherever they want to shop, balancing deep consumer connection with broad convenience and availability.
Many of these laws and regulations are still evolving and being tested in courts, and could be interpreted in ways that could harm our business.
Many of these obligations are evolving and becoming increasingly stringent, and could be interpreted and applied in ways that could harm our business. In the ordinary course of our business, we process personal (including, at times, sensitive) data.
We call this the “Honest Standard” and it drives our standard for quality across the three dimensions below. Ingredients, Ideals, Industries We believe that consumers should never have to worry about the safety of the products they bring into their home. That’s why we rigorously test and research every product.
Our Purpose-Driven Organization The Honest Standard is our rigorous set of guiding principles that helps shape every step of product innovation and development, reflecting our ongoing dedication to safety, transparency and integrity. We believe that consumers should never 5 have to worry about the safety of the products they bring into their home.
Removed
Since our launch in 2012, we have been dedicated to developing clean, sustainable, effective and thoughtfully designed products. By doing so with transparency, we have cultivated deep trust around what matters most to our consumers: their health, their families and their homes.
Added
By combining thoughtful design with science-based innovation, we deliver personal care products for everyone from babies to adults, spanning categories across wipes, personal care, diapers, and beauty. Our commitment to our core values, continual innovation and engaging our community has differentiated and elevated our brand and our products.
Removed
We also offer baby clothing made with organic cotton, family flushable wipes, sanitizing wipes and hand sanitizer made with plant-based ingredients. Our Integrated Omnichannel Presence Our omnichannel presence seeks to meet consumers wherever they want to shop, balancing deep consumer connection with broad convenience and availability.
Added
We use cleanly-formulated and safe ingredients designed for the whole family, including many naturally-derived ingredients that, most importantly, are effective. We also offer a portfolio of wipes, including all-purpose wipes, flushable wipes in both toddler and adult variations, sanitizing wipes, and make-up remover wipes.
Removed
Our website showcases the entirety of our product portfolio, excluding baby apparel, offers exclusive products and services including our subscription service, houses branded content featured on product detail pages and our blog, and facilitates new product feedback.
Added
On October 30, 2025, our Board of Directors approved Transformation 2.0: Powering Honest Growth (“Powering Honest Growth”) which builds upon our original Transformation Pillars of Brand Maximization, Margin Enhancement and Operating Discipline.
Removed
In addition to shopping for our products a la carte, consumers have the option to subscribe to our popular diapers and wipes bundle subscription.
Added
Powering Honest Growth is aimed at improving simplicity, focus and profitability, which includes exiting certain lower margin, non-strategic categories and channels, including exiting Honest.com fulfillment and apparel, as well as exiting retail and online stores in Canada, optimizing our cost structure by rightsizing selling, general and administrative expenses, and implementing supply chain efficiencies.
Removed
All-commodity volume ( “ACV” ) is the measurement of a product’s distribution weighted by the overall dollar retail sales attributable to the retail location distributing such product; a retail location would be counted as having sold the product or product group if at least one unit of the product was scanned for sale within the relevant time period.
Added
As part of Powering Honest Growth, i n December 2025, we notified GEODIS, pursuant to the terms of the contract, that we are terminating the agreement with them for the Pennsylvania warehouse use and services effective June 30, 2026. Following June 30, 2026, we will only be operating with the Nevada warehouse.
Removed
This metric provides a measurement of retail penetration that takes into account the importance of selling through retail locations with higher overall retail sales volumes, and as a result we believe that our competitors generally use the same measurement.
Added
Competition The markets in which we operate are highly competitive and rapidly evolving, with many new brands and product offerings emerging in the marketplace. We face significant competition from both established, well-known legacy c onsumer packaged goods, or CPG players and emerging DTC brands.
Removed
For the 13-weeks ended January 5, 2025, in total we had approximately 83 points ACV in national multi-outlet stores, as compared with 84 points for the 13-weeks ended January 7, 2024, primarily driven by product and store mix changes at our key retailers.
Added
Select competitors of our wipes include ZURU Edge Limited (maker of Millie Moon and Rascals), WaterWipes UC, DUDE Wipes, Inc., Edgewell Personal Care Company (maker of Wet Ones wipes) and other private label brands.
Removed
With the higher costs of shipping and fulfillment activities related to our direct-to-consumer (“DTC”) business and other related costs, we will continue to shift our focus and investments towards more efficient and scalable distribution models with our current retail and digital customers.
Added
Our commitment to environmental mindfulness shows up through our product development, packaging processes and in many parts of our business on a daily basis.
Removed
Throughout 2023 and 2024, we made meaningful progress across our Transformation Initiative Pillars of Brand Maximization, Margin Enhancement, and Operating Discipline, including delivering cost savings throughout our supply chain, optimizing our marketing spend to maximize impact, emphasizing best-selling items, and exiting the Asian, European, and portions of our sanitization business, while building a culture that emphasizes executional excellence and discipline.
Added
As applicable, these laws require us to include specific disclosures and afford individuals certain rights regarding their personal data. Data protection obligations impact our business and ability to provide our products and services and create potential liability for non-compliance.
Removed
In addition, we continued our improved working capital position, including our discipline in inventory management and we executed price increases that supported Brand Maximization, recognizing the value Honest provides consumers. In fiscal year 2024, we improved our operating results by expanding gross margin, leveraging operating expenses and generating positive Adjusted EBITDA.
Removed
We face significant competition from both established, well-known legacy c onsumer packaged goods, or CPG players and emerging DTC brands. Select competitors of diapers and wipes include Kimberly-Clark Corporation (maker of Huggies and Cottonelle), Procter & Gamble Company (maker of Pampers, Pampers Pure, Luvs and Charmin), WaterWipes UC and other private label brands.
Removed
We meet the requirements of many independent organizations or certification authorities for several of our products.
Removed
We require our third-party manufacturers to commit to follow our high standards of controlled documentation, cleaning and safety protocols, and laboratory controls. 6 Community impact is also very important to us.
Removed
Our Honest.com shipping cartons are 100% PCR cardboard. 100% of our baby personal care bottles are recyclable or include recycled materials and we are regularly looking to increase the amount of post-consumer resin in our components. Our diapers feature an innovative design that uses less material than our previous diaper innovation.
Removed
The FDA may change the regulations as to any product category, requiring a change in labeling, product formulation or analytical testing. 7 We are subject to regulation by the CPSC under the Consumer Product Safety Act, the Flammable Fabrics Act, the Poison Prevention Packaging Act, the Federal Hazardous Substances Act, and other laws enforced by the CPSC.
Removed
These statutes and the related regulations establish safety standards and bans for consumer products. The CPSC monitors compliance of consumer products under its jurisdiction through market surveillance and has the authority to conduct product safety related inspections of establishments where consumer products are manufactured, held, or transported.
Removed
The CPSC has the authority to require the recall of noncompliant products or products containing a defect that creates a substantial risk of injury to the public. The CPSC may seek civil and criminal penalties for regulatory noncompliance under certain circumstances.
Removed
CPSC regulations also require manufacturers of consumer products to report to the CPSC certain types of information regarding products that fail to comply with applicable regulations, that contain a defect which could create a substantial product hazard, or that create an unreasonable risk of serious injury or death.
Removed
Certain state laws also address the safety of consumer products and mandate reporting requirements, and noncompliance may result in penalties or other regulatory action. The USDA enforces federal standards for organic production and use of the term “organic” on product labeling.
Removed
These laws prohibit a company from selling or labeling products as organic unless they are produced and handled in accordance with the applicable federal law. The FTC, FDA, USDA, EPA, and other government authorities also regulate advertising and product claims regarding the characteristics, quality, safety, performance and benefits of our products.
Removed
These regulatory authorities typically require a safety assessment of the product and reasonable basis to support any factual marketing claims. What constitutes a reasonable basis for substantiation can vary widely from market to market, and there is no assurance that our efforts to support our claims will be considered sufficient.
Removed
The most significant area of risk for such activities relates to improper or unsubstantiated claims about the composition, use, efficacy and safety of our products and their environmental impacts.
Removed
If we cannot adequately support safety or substantiate our product claims, or if our promotional materials make claims that exceed the scope of allowed claims for the classification of the specific product, the FDA, FTC or other regulatory authority could take enforcement action, impose penalties, require us to pay monetary consumer redress, require us to revise our marketing materials or stop selling certain products and require us to accept burdensome injunctions, all of which could harm our business, reputation, financial condition and results of operations.
Removed
In addition, the FTC regulates the use of endorsements and testimonials in advertising as well as relationships between advertisers and social media influencers pursuant to principles described in the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, or the Endorsement Guides.

… 14 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

229 edited+52 added−63 removed435 unchanged
Biggest changeOur strategic initiatives, including as part of the Transformation Initiative, to reduce our costs could have long-term adverse effects on our business, financial condition, results of operations and prospects, could result in total costs and expenses that are greater than expected, and we may not realize the operational or financial benefits from such actions.
Biggest changeThe failure to realize benefits from our updated strategy, which may be due to our inability to execute plans, global or local economic conditions, geopolitical instability, competition, changes in our industry and the other risks described herein, could have an adverse effect on our business, financial condition, results of operations and prospects. 9 Our strategic initiatives, including as part of the Transformation Initiative and Powering Honest Growth, to reduce our costs could have short and long-term adverse effects on our business, financial condition, results of operations and prospects, could result in total costs and expenses that are greater than expected, and we may not realize the operational or financial benefits from such actions.
Our vendor agreements with Target, Amazon and Walmart do not include a term or duration as sales under each vendor agreement are generally made on a purchase order basis.
Our vendor agreements with Amazon, Target and Walmart do not include a term or duration as sales under each vendor agreement are generally made on a purchase order basis.
The loss of Target, Amazon and Walmart or any other large customer, the reduction of purchasing levels or the cancellation of any business from Target, Amazon or Walmart or any other large customer for an extended length of time could negatively impact our sales and ability to achieve or maintain profitability.
The loss of Amazon, Target and Walmart or any other large customer, the reduction of purchasing levels or the cancellation of any business from Amazon, Target or Walmart or any other large customer for an extended length of time could negatively impact our sales and ability to achieve or maintain profitability.
An increase in our marketing and advertising efforts may not maintain our current reputation or lead to increased brand awareness. In addition, since 2022 the industry experienced an increased in paid advertising which impacted our ability to cost-effectively drive traffic to Honest.com.
An increase in our marketing and advertising efforts may not maintain our current reputation or lead to increased brand awareness. In addition, since 2022 the industry experienced an increase in paid advertising which impacted our ability to cost-effectively drive traffic to Honest.com.
Our operating results have been negatively impacted by increases in the costs of manufacturing our products, and we have no guarantees that costs will not continue to rise. For example, some of our contracts with third-party manufacturers have clauses that trigger good faith renegotiation of purchase costs in the case of significant raw material cost escalation.
Our operating results have been negatively impacted by increases in the costs of manufacturing our products, and we have no guarantees that costs will not continue to rise. For example, some of our contracts with third-party manufacturers have clauses that trigger good faith renegotiation of purchase costs in the case of significant raw material cost escalation.
In 2016, multiple class action lawsuits were filed against us claiming that we misled buyers about ingredients in our laundry detergent, dish soap and multi-surface cleaner. In 2017, we settled these class action lawsuits by agreeing to marketing or reformulating changes and a settlement fund of $1.6 million.
In 2016, multiple class action lawsuits were filed against us claiming that we misled buyers about ingredients in our laundry detergent, dish soap and multi-surface cleaner. In 2017, we settled these class action lawsuits by agreeing to marketing or reformulating changes and a settlement fund of $1.6 million.
We may also rely on vendors to process payment card data, and those vendors may be subject to PCI DSS, and our business may be negatively affected if our vendors are fined or suffer other consequences as a result of PCI DSS noncompliance.
We also rely on vendors to process payment card data, and those vendors may be subject to PCI DSS, and our business may be negatively affected if our vendors are fined or suffer other consequences as a result of PCI DSS noncompliance.
We rely on information technology networks and systems and data processing (some of which are managed by third-parties) to market, sell and deliver our products and services, to fulfill orders, to collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share (which we collectively refer to as Process or Processing) personal information, sensitive, confidential or proprietary information, financial information and other information (which we collectively refer to as sensitive information), to manage a variety of business processes and activities, for financial reporting purposes, to operate our business, process orders and to comply with regulatory, legal and tax requirements (which we collectively refer to as Business Functions).
We rely on information technology networks and systems and data processing (some of which are managed by third-parties) to market, sell and deliver our products and services, to fulfill orders, to collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share personal information, sensitive, confidential or proprietary information, financial information and other information (which we collectively refer to as sensitive information), to manage a variety of business processes and activities, for financial reporting purposes, to operate our business, process orders and to comply with regulatory, legal and tax requirements (which we collectively refer to as Business Functions).
Our quarterly operating results may fluctuate for a variety of reasons, many of which are beyond our control, including: • fluctuations in revenue due to consumer and customer demand, including as a result of adverse economic and market conditions driven by the challenging macroeconomic environment, the seasonality of market transactions and fluctuations in sales and inflationary pressures; • inflation in key input costs, including the cost to import products, transportation, labor and warehouse costs; • increased costs of the components and raw materials that go into making our products; • the amount and timing of our operating expenses; • our success in attracting new and maintaining relationships with existing retail and ecommerce partners, as well as any price concessions they may demand or promotional activities they participate in; • our success in executing on our strategy and the impact of any changes in our strategy; • the timing and success of product launches, including new products that we may introduce; • the efficiency of our marketing efforts; • disruptions in our supply chain, the ability of our third-party manufacturers to produce our products, ability of our distributors to distribute our products, or disruptions, delays, or increased costs in our shipping arrangements; • disruptions or defects in our technology platform, such as privacy or data security breaches, errors in our software or other incidents that impact the availability, reliability, or performance of our platform; • the impact of competitive developments and our response to those developments; • fluctuations in inventory and working capital; • our ability to manage our business and future growth; and • our ability to recruit and retain employees.
Our quarterly operating results may fluctuate for a variety of reasons, many of which are beyond our control, including: • fluctuations in revenue due to consumer and customer demand, including as a result of adverse economic and market conditions driven by the challenging macroeconomic environment, the seasonality of market transactions and fluctuations in sales and inflationary pressures; • inflation in key input costs, including the cost to import products and tariff costs, transportation, labor and warehouse costs; • increased costs of the components and raw materials that go into making our products; • the amount and timing of our operating expenses; • our success in attracting new and maintaining relationships with existing retail and ecommerce partners, as well as any price concessions they may demand or promotional activities they participate in; • our success in executing on our strategy and the impact of any changes in our strategy; • the timing and success of product launches, including new products that we may introduce; • the efficiency of our marketing efforts; • disruptions in our supply chain, the ability of our third-party manufacturers to produce our products, ability of our distributors to distribute our products, or disruptions, delays, or increased costs in our shipping arrangements; • disruptions or defects in our technology platform, such as privacy or data security breaches, errors in our software or other incidents that impact the availability, reliability, or performance of our platform; • the impact of competitive developments and our response to those developments; • fluctuations in inventory and working capital; • our ability to manage our business and future growth; and • our ability to recruit and retain employees.
For example, in December 2009, the FTC substantially revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising, or “Endorsement Guides,” to eliminate a safe harbor principle that formerly recognized that 31 advertisers could publish consumer testimonials that conveyed truthful but extraordinary results from using the advertiser’s product as long as the advertiser clearly and conspicuously disclosed that the endorser’s results were not typical.
For example, in December 2009, the FTC substantially revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising, or “Endorsement Guides,” to eliminate a safe harbor principle that formerly recognized that advertisers could publish consumer testimonials that conveyed truthful but extraordinary results from using the advertiser’s product as long as the advertiser clearly and conspicuously disclosed that the endorser’s results were not typical.
In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act, or CCPA, the Telephone Consumer Protection Act, or TCPA, the Controlling the Assault of Non-Solicited Pornography And Marketing Act, or CAN-SPAM, other state and federal laws relating to privacy and data security, and other similar laws (e.g., wiretapping laws).
In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act, or CCPA, the Telephone Consumer Protection Act, or TCPA, the Controlling the Assault of Non-Solicited Pornography And 31 Marketing Act, or CAN-SPAM, other state and federal laws relating to privacy or data security, and other similar laws (e.g., wiretapping laws).
Among these changes could be a reduction in the number of clean consumer products that consumers purchase where there are alternatives, given that many products in this category often have higher retail prices than do their conventional counterparts. 18 Further, the product categories in which we operate are subject to changes in consumer preference, perception and spending habits.
Among these changes could be a reduction in the number of clean consumer products that consumers purchase where there are alternatives, given that many products in this category often have higher retail prices than do their conventional counterparts. Further, the product categories in which we operate are subject to changes in consumer preference, perception and spending habits.
If we fail to retain talented senior management and other key personnel, or if we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and results of operations could be adversely affected. Use of social media and influencers may adversely affect our reputation or subject us to fines or other penalties.
If we fail to retain talented senior management and other key personnel, or if we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and results of operations could be adversely affected. 17 Use of social media and influencers may adversely affect our reputation or subject us to fines or other penalties.
Our services and operations, including several of our fulfillment centers, customer service centers, data centers and corporate offices are located in California, Nevada and Pennsylvania, and other areas and cross dock facilities that are vulnerable to damage or interruption from natural disasters, power losses, telecommunication failures, terrorist attacks, human errors, break-ins and similar events.
Our services and operations, including several of our fulfillment centers, customer service centers, data centers and corporate offices are located in California, Minnesota, Nevada and Pennsylvania, and other areas and cross dock facilities that are vulnerable to damage or interruption from natural disasters, power losses, telecommunication failures, terrorist attacks, human errors, break-ins and similar events.
Class action litigation, other legal claims and regulatory enforcement actions could subject us to liability for damages, civil and criminal penalties and other monetary and non-monetary liability and could otherwise adversely affect our reputation, business, financial condition, results of operations and prospects. We operate in a highly regulated environment with constantly evolving legal and regulatory frameworks.
Class action litigation, other legal claims and regulatory enforcement actions could subject us to liability for damages, civil and criminal penalties and other monetary and non-monetary liability and could otherwise adversely affect our reputation, business, financial condition, results of operations and prospects. 29 We operate in a highly regulated environment with constantly evolving legal and regulatory frameworks.
In 2022, a class action lawsuit was filed against us alleging that our plant-based claim on certain wipes products was deceptive to purchasers. While the case was ultimately resolved, the cost of defending the lawsuit was significant. 32 We have also been the subject of litigation claiming our labels contain inaccurate or misleading information.
In 2022, a class action lawsuit was filed against us alleging that our plant-based claim on certain wipes products was deceptive to purchasers. While the case was ultimately resolved, the cost of defending the lawsuit was significant. We have also been the subject of litigation claiming our labels contain inaccurate or misleading information.
If we are unable to in any such annual report assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets or other sources of funds and our stock price may be adversely affected.
If we are 44 unable to assert in any such annual report that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets or other sources of funds and our stock price may be adversely affected.
Competitive pressures or other factors could cause us to lose market share, which may require us to lower prices, increase marketing expenditures, or increase the use of discounting or promotional campaigns, each of which would adversely affect our margins and could result in a decrease in our operating results and ability to achieve or maintain profitability.
Competitive pressures or other factors could cause us to lose market share, which may require us to lower prices, increase marketing expenditures, or increase the use of discounting or promotional campaigns, 11 each of which would adversely affect our margins and could result in a decrease in our operating results and ability to achieve or maintain profitability.
If we are unable to generate adequate revenue growth and manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or maintain profitability. 20 We have a limited operating history at our current scale, which may make it difficult to evaluate our business and future prospects.
If we are unable to generate adequate revenue growth and manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or maintain profitability. We have a limited operating history at our current scale, which may make it difficult to evaluate our business and future prospects.
In addition, the costs we may incur in defending against any investigations stemming from our or our employees’ or representatives’ improper actions could be significant. Moreover, any actual or alleged corruption or sanctions concerns in our supply chain could carry significant reputational harm, including negative publicity, loss of goodwill, and decline in share price.
In addition, the costs we may incur in defending against 40 any investigations stemming from our or our employees’ or representatives’ improper actions could be significant. Moreover, any actual or alleged corruption or sanctions concerns in our supply chain could carry significant reputational harm, including negative publicity, loss of goodwill, and decline in share price.
We cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs. 47 Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
We cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs. Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
The imposition by state governments of sales tax collection obligations on out-of-state retailers in jurisdictions where we do not currently collect sales taxes, whether for prior years or prospectively, could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could have an adverse effect on our business, financial condition, results of operations and prospects. 24 We may seek to grow our business through acquisitions of, or investments in, new or complementary businesses, facilities, technologies or products, or through strategic alliances, and the failure to successfully manage or execute these acquisitions, investments or alliances, or to integrate them with our existing business, could have an adverse effect on us.
The imposition by state governments of sales tax collection obligations on out-of-state retailers in jurisdictions where we do not currently collect sales taxes, whether for prior years or prospectively, could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could have an adverse effect on our business, financial condition, results of operations and prospects. 22 We may seek to grow our business through acquisitions of, or investments in, new or complementary businesses, facilities, technologies or products, or through strategic alliances, and the failure to successfully manage or execute these acquisitions, investments or alliances, or to integrate them with our existing business, could have an adverse effect on us.
The inability to import personal data to the United States could significantly and negatively impact our business operations, limiting our ability to collaborate with parties that are subject to European and other data privacy and security laws; or requiring us to increase our personal data processing capabilities and infrastructure in Europe and/or elsewhere at significant expense.
The inability to import personal data to the United States or other jurisdictions could significantly and negatively impact our business operations, limiting our ability to collaborate with parties that are subject to European and other data privacy and security laws; or requiring us to increase our personal data processing capabilities and infrastructure in Europe and/or elsewhere at significant expense.
The negative covenants include, among others, limitations on our and certain of our subsidiaries’ abilities to, in each case subject to certain exceptions: • make restricted payments including dividends and distributions on, redemptions of, repurchases or retirement of our capital stock; • make certain intercompany distributions; • incur additional indebtedness and issue certain types of equity; • sell assets, including capital stock of subsidiaries; • enter into certain transactions with affiliates; 23 • incur liens; • enter into fundamental changes including mergers and consolidations; • make investments, acquisitions, loans or advances; • create negative pledges or restrictions on the payment of dividends or payment of other amounts owed from subsidiaries; • make prepayments or modify documents governing material debt that is subordinated with respect to right of payment; • engage in certain sale leaseback transactions; • change our fiscal year; and • change our lines of business.
The negative covenants include, among others, limitations on our and certain of our subsidiaries’ abilities to, in each case subject to certain exceptions: • make restricted payments including dividends and distributions on, redemptions of, repurchases or retirement of our capital stock; • make certain intercompany distributions; • incur additional indebtedness and issue certain types of equity; 21 • sell assets, including capital stock of subsidiaries; • enter into certain transactions with affiliates; • incur liens; • enter into fundamental changes including mergers and consolidations; • make investments, acquisitions, loans or advances; • create negative pledges or restrictions on the payment of dividends or payment of other amounts owed from subsidiaries; • make prepayments or modify documents governing material debt that is subordinated with respect to right of payment; • engage in certain sale leaseback transactions; • change our fiscal year; and • change our lines of business.
If our products are not delivered in a timely fashion or are damaged or lost during the delivery process, our consumers could become dissatisfied and cease shopping on our site or retailer or third-party ecommerce sites, which could have an adverse effect on our business, financial condition, operating results and prospects.
If our products are not delivered in a timely fashion or are damaged or lost during the delivery process, our consumers could become dissatisfied and cease shopping on retailer or third-party ecommerce sites, which could have an adverse effect on our business, financial condition, operating results and prospects.
In 2016 multiple class action lawsuits were filed against us claiming that we misled buyers about ingredients in our laundry detergent, dish soap and multi- 29 surface cleaner. In 2022, a class action lawsuit was filed against us alleging that our plant-based claim on certain wipes products was deceptive to purchasers.
In 2016 multiple class action lawsuits were filed against us claiming that we misled buyers about ingredients in our laundry detergent, dish soap and multi-surface cleaner. In 2022, a class action lawsuit was filed against us alleging that our plant-based claim on certain wipes products was deceptive to purchasers.
Data privacy and information security has become a significant issue in the United States, countries in Europe, and in many other countries in which we operate and where we offer our products and services. The legal and regulatory framework for privacy and security issues is rapidly evolving and is expected to increase our compliance costs and exposure to liability.
Data privacy and information security has become a significant issue in the United States, countries in Europe, and in many other countries in which we operate or where we offer our products and services. The legal and regulatory framework for privacy and security issues is rapidly evolving and is expected to increase our compliance costs and exposure to liability.
Such mandatory disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. Further, the SEC has adopted new rules that require us to provide greater disclosures around our cybersecurity risk management, strategy, and governance and reactive issues (e.g., security incidents).
Such mandatory disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. Further, the SEC has adopted rules that require us to provide greater disclosures around our cybersecurity risk management, strategy, and governance and reactive issues (e.g., security incidents).
The effectiveness of these agreements are important as some of our formulations have been 40 developed by or with our suppliers and manufacturers. However, we may fail to enter into confidentiality agreements with all parties who have access to our trade secrets or other confidential information.
The effectiveness of these agreements are important as some of our formulations have been developed by or with our suppliers and manufacturers. However, we may fail to enter into confidentiality agreements with all parties who have access to our trade secrets or other confidential information.
Additionally, in 2024, we exited selling certain products with a drug store customer and we experienced distribution losses with two of our largest retail customers on certain diaper SKUs, which has impacted our revenue and we expect will negatively impact our diaper revenue in the future.
Additionally, in 2024, we exited selling certain products with a drug store customer and in 2024 and 2025 we experienced distribution losses with two of our largest retail customers on certain diaper SKUs, which has impacted our revenue and we expect will negatively impact our diaper revenue in the future.
Moreover, social media platforms and other digital advertising platforms have increased the costs of digital advertising which has made such marketing less cost effective and partially led us to shift our advertising budget toward retail channels, and in turn reduced the number of visits to our website and social media channels.
Social media platforms and other digital advertising platforms have increased the costs of digital advertising which has made such marketing less cost effective and partially led us to shift our advertising budget toward retail channels, and in turn reduced the number of visits to our website and social media channels.
Furthermore, our reliance on suppliers and manufacturers outside of the United States, the number of third parties with whom we transact and the number of jurisdictions to which we sell complicates our efforts to comply with customs duties and excise taxes; any failure to comply could adversely affect our business.
Furthermore, our reliance on suppliers and manufacturers outside of the United States, the number of third parties with whom we transact and the number of jurisdictions to which we sell complicates our efforts to comply with customs duties, tariffs and excise taxes; any failure to comply could adversely affect our business.
If we are unable to realize the anticipated savings and efficiencies of our strategic initiatives, or if they result in unintended consequences, then our operating and financial results would be adversely affected and could differ materially from our expectations.
If we are unable to realize the anticipated savings and efficiencies of our strategic initiatives, or if they result in unintended negative consequences, then our operating and financial results would be adversely affected and could differ materially from our expectations.
Further, our third-party manufacturers, suppliers and retail and ecommerce customers may: • have economic or business interests or goals that are inconsistent with ours; • take actions contrary to our instructions, requests, policies or objectives; • be unable or unwilling to fulfill their obligations under relevant purchase orders or manufacturing or supply agreements, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, and to comply with applicable regulations, including those regarding the safety and quality of products; 27 • have financial difficulties; • encounter raw material or labor shortages; • encounter increases in raw material or labor costs which may affect our procurement costs; • encounter difficulties with proper payment of custom duties or excise taxes; • disclose our confidential information or intellectual property to competitors or third parties; • engage in activities or employ practices that may harm our reputation; and • work with, be acquired by, or come under control of, our competitors.
Further, our third-party manufacturers, suppliers and retail and ecommerce customers may: • have economic or business interests or goals that are inconsistent with ours; • take actions contrary to our instructions, requests, policies or objectives; 25 • be unable or unwilling to fulfill their obligations under relevant purchase orders or manufacturing or supply agreements, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, and to comply with applicable regulations, including those regarding the safety and quality of products; • have financial difficulties; • encounter raw material or labor shortages; • encounter increases in raw material or labor costs which may affect our procurement costs; • encounter difficulties with proper payment of custom duties, tariffs or excise taxes; • disclose our confidential information or intellectual property to competitors or third parties; • engage in activities or employ practices that may harm our reputation; and • work with, be acquired by, or come under control of, our competitors.
Fluctuations in our quarterly operating results and the price of our common stock may be particularly pronounced in the current economic environment due to the uncertainty caused by inflation and other macroeconomic factors and consumer and customer spending patterns.
Fluctuations in our quarterly operating results and the price of our common stock may be particularly pronounced in the current economic environment due to the uncertainty caused by inflation, tariffs and other macroeconomic factors and consumer and customer spending patterns.
The success of our products depends on a number of factors including our ability to accurately anticipate changes in market demand and consumer preferences, our ability to differentiate the quality of our products from those of our competitors, and the effectiveness of our marketing and advertising campaigns for our products.
The success of our products depends on a number of factors including our ability to accurately anticipate changes in market demand and consumer preferences, our ability to differentiate the quality of our products from those of our competitors, 16 and the effectiveness of our marketing and advertising campaigns for our products.
Increasing scrutiny and evolving expectations from stakeholders with respect to our ESG practices, performance, commitments and disclosures may impact our reputation, increase our costs and impact our access to capital. We may be subject to stakeholder scrutiny related to our Environmental, Social, Governance ( “ESG” ) practices, commitments, performance and disclosures.
Scrutiny and evolving expectations from stakeholders with respect to our ESG practices, performance, commitments and disclosures may impact our reputation, increase our costs and impact our access to capital. We may be subject to stakeholder scrutiny related to our Environmental, Social, Governance ( “ESG” ) practices, commitments, performance and disclosures.
Any material disruption of our networks, systems or data processing activities, or those of our third parties, could disrupt our ability to provide our products and services, and to undertake, and cause a material adverse impact to, our Business Functions and our business, reputation and financial condition.
Any material disruption of our networks, systems or data processing activities, or those of our third parties, could disrupt our ability to provide our products and services and cause a material adverse impact to, our Business Functions and our business, reputation and financial condition.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if such licenses are available, we may be required to pay the licensor substantial royalties or other fees.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if such licenses are available, we may be required to pay the licensor substantial 38 royalties or other fees.
All of our employees are at-will employees, meaning that they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be 19 extremely difficult to replace.
All of our employees are at-will employees, meaning that they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace.
Even if we believe a claim is covered by insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.
Even if we believe a 30 claim is covered by insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.
Our success, and our ability to increase revenue and achieve profitability, depend in part on our ability to cost-effectively acquire new consumers, retain existing consumers and keep existing consumers engaged so that they continue to purchase our 13 products.
Our success, and our ability to increase revenue and achieve profitability, depend in part on our ability to cost-effectively acquire new consumers, retain existing consumers and keep existing consumers engaged so that they continue to purchase our products.
We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or intellectual property rights. We further rely on confidentiality agreements to protect our intellectual property rights.
We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or intellectual property rights. 37 We further rely on confidentiality agreements to protect our intellectual property rights.
Developments in labor and employment law and any unionizing efforts by employees could have an adverse effect on our business, financial condition, results of operations and prospects. 37 We face the risk that Congress, federal agencies or one or more states could approve legislation or regulations significantly affecting our businesses and our relationship with our employees and other individuals providing valuable services to us, such as our influencers.
Developments in labor and employment law and any unionizing efforts by employees could have an adverse effect on our business, financial condition, results of operations and prospects. 34 We face the risk that Congress, federal agencies or one or more states could approve legislation or regulations significantly affecting our businesses and our relationship with our employees and other individuals providing valuable services to us, such as our influencers.
For example, a few of our retail customers filed for bankruptcy in 2023, which has impacted the timing of payment, the ability for us to collect amounts due to us and impacted our gross margin due to markdowns.
For example, a few of our retail customers filed for bankruptcy in 2023, which impacted the timing of payment, the ability for us to collect amounts due to us and impacted our gross margin due to markdowns in 2023.
Extortion payments may alleviate the negative impact of a 38 ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
If we fail to comply with any of the obligations under our license agreements or the Mutual Separation Agreement with Jessica Warren, including not selling licensed products after the agreed timeframe, we may be required to pay damages, dispose of licensed products, increase our reserves for licensed products that cannot be sold, and the licensor may have the right to terminate the license, which could adversely impact our business, financial condition and result of operations.
If we fail to comply with any of the obligations under our license agreements or the Mutual Separation Agreement with Jessica Alba, including not selling licensed products after the agreed timeframe, we may be required to pay damages, dispose of licensed products, increase our reserves for licensed products that cannot be sold, and the licensor may have the right to terminate the license, which could adversely impact our business, financial condition and result of operations.
Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance.
Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. Certain of these state laws allow for statutory fines for noncompliance.
If and as we become subject to new data privacy laws, the risk of enforcement action against us could increase because we may become subject to additional obligations, and the number of individuals or entities that can initiate actions against us may increase (including individuals, via a private right of action, and state actors) and these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, and the third parties upon whom we rely.
If and as we become subject to new data privacy laws, the risk of enforcement action against us increases because we may become subject to additional obligations, and the number of individuals or entities that can initiate actions against us increases (including individuals, via a private right of action, and state actors) and these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, and the third parties upon whom we rely.
Other countries have also passed or are considering passing laws requiring local data residency and/or restricting the international transfer of data. 35 Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA standard contractual clauses (SCCs), the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.
Other countries have also passed or are considering passing laws requiring local data residency and/or restricting the international transfer of data. 32 Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA standard contractual clauses (SCCs), the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.
Additionally, we may not be able to hire new employees quickly enough to meet our needs or retain our existing employees in the face of competitive hiring trends.
Additionally, we may not be able to hire new employees quickly enough to meet our needs or retain our existing employees in the 8 face of competitive hiring trends.
It has also initiated tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other types of goods.
It has also initiated 39 tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other types of goods.
Any significant disruption resulting from global pandemics or similar events on a large scale or over a prolonged period of time could cause significant delays and disruption to our business until we would be able to resume normal business operations or shift to other third-party vendors, negatively affecting our revenue and other financial results, which would adversely affect our business, financial condition, results of operations and prospects.
Any significant disruption resulting from geopolitical conflict, global pandemics or similar events on a large scale or over a prolonged period of time could cause significant delays and disruption to our business until we would be able to resume normal business operations or shift to other third-party vendors, negatively affecting our revenue and other financial results, which would adversely affect our business, financial condition, results of operations and prospects.
Further, many products that we sell carry or are advertised with claims as to their origin, ingredients or health, wellness, environmental or other benefits or attributes, including, by way of example, the use of the terms “natural”, “organic”, “clean”, “clean conscious”, “sustainable”, “compostable”, “plant-based” or “naturally derived,” or similar synonyms or implied statements relating to such benefits or attributes.
Further, many products that we sell carry or are advertised with claims as to their origin, ingredients or health, wellness, environmental or other benefits or attributes, including, by way of example, the use of the terms “natural”, “organic”, “clean”, “clean conscious”, “sustainable”, “compostable”, “plant-based”, “hypoallergenic” or “naturally derived,” or similar synonyms or 27 implied statements relating to such benefits or attributes.
Interruptions to or failures in these international and domestic transportation and delivery services have in the past prevented and could in the future prevent the timely or successful delivery of 22 our products.
Interruptions to or failures in these international and domestic transportation and delivery services have in the past prevented and could in the future prevent the timely or successful delivery of our products.
The market price of our common stock has been highly volatile and has fluctuated and declined substantially since our initial public offering (“IPO”) and may continue to fluctuate or decline as a result of a variety of factors, some of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition or results of operations; • variance in our financial performance from expectations of securities analysts; • changes in our projected operating and financial results; • announcements by us or our competitors of significant business developments, acquisitions or new offerings; • announcements or concerns regarding real or perceived quality or health issues with our products or similar products of our competitors; • adoption of new regulations applicable to our products and industry or the expectations concerning future regulatory developments; • our involvement in litigation; • future sales of our common stock by us or our stockholders; • changes in senior management or key personnel; • the trading volume of our common stock; and • changes in the anticipated future size and growth rate of our market.
The market price of our common stock has been highly volatile and has fluctuated and declined substantially since our initial public offering (“IPO”) and may continue to fluctuate or decline as a result of a variety of factors, some of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition or results of operations; • variance in our financial performance from expectations of securities analysts; • changes in our projected operating and financial results; • announcements by us or our competitors of significant business developments, acquisitions or new offerings; 41 • announcements or concerns regarding real or perceived quality or health issues with our products or similar products of our competitors; • adoption of new regulations applicable to our products and industry or the expectations concerning future regulatory developments; • our involvement in litigation; • future sales of our common stock by us or our stockholders; • changes in senior management or key personnel; • the trading volume of our common stock; • changes in strategy and restructuring activities; and • changes in the anticipated future size and growth rate of our market.
The markets in which we operate are highly competitive and rapidly evolving, with many new brands and product offerings emerging in the marketplace. We face significant competition from both established, well-known legacy CPG players and emerging natural brands. Numerous brands and products compete for limited shelf space in the retail channel, and for favorable positioning and promotion among ecommerce channels.
The markets in which we operate are highly competitive and rapidly evolving, with many new brands and product offerings emerging in the marketplace. We face significant competition from both established, well-known legacy CPG players and emerging clean brands. Numerous brands and products compete for limited shelf space in the retail channel, and for favorable positioning and promotion among ecommerce channels.
The recovery systems, security protocols, network protection mechanisms and other security measures that we have integrated into our systems, networks and physical facilities, which are designed to protect against, detect and minimize security breaches, may not be adequate to prevent or detect service interruption, system failure data loss or theft, or other material adverse consequences.
The recovery systems, security protocols, network protection mechanisms and other security measures that we have integrated into our systems, networks and physical facilities, which are designed to protect against, detect and minimize security breaches, may not be adequate to prevent or detect service interruption, system failure data loss or theft, or other material adverse events.
In addition, if we underestimate the demand for our products, our third-party manufacturers may not be able to produce products to meet our consumer or customer requirements, and this could result in delays in the shipment of our products and our ability to recognize 15 revenue, lost sales, as well as damage to our reputation and retailer and distributor relationships.
In addition, if we underestimate the demand for our products, our third-party manufacturers may not be able to produce products to meet our consumer or customer requirements, and this could result in delays in the shipment of our products and our 13 ability to recognize revenue, lost sales, as well as damage to our reputation and retailer and distributor relationships.
We have certain policies and/or programs, including with respect to responsible ingredients and sustainability, safety and health, human capital management, social performance and community relations, diversity and inclusion and/or supply chain code of conduct. Our stakeholders might be dissatisfied with these practices, commitments, performance and/or disclosures, or their adoption, implementation and success or lack thereof.
We have certain policies and/or programs, including with respect to responsible ingredients and sustainability, safety and health, human capital management, social performance and community relations, human capital and/or supply chain code of conduct. Our stakeholders might be dissatisfied with these practices, commitments, performance and/or disclosures, or their adoption, implementation and success or lack thereof.
Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline. 46 If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common stock could decline.
Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline. 43 If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common stock could decline.
These practices may be subject to increased challenges by class action plaintiffs. Our inability or failure to do so could result in adverse consequences, including class action litigation and mass arbitration demands. In addition, we are also subject to the Payment Card Industry Data Security Standard (“PCI DSS”).
Certain of these practices may be subject to increased challenges by class action plaintiffs. Our inability or failure to do so could result in adverse consequences, including class action litigation and mass arbitration demands. In addition, we are also subject to the Payment Card Industry Data Security Standard (“PCI DSS”).
We believe that our ability to compete successfully in this market depends upon many factors both within and beyond our control, including: • the size and composition of our consumer base; • the number of products that we offer and feature across our sales channels; • consumer demand for clean products developed with formulations and ingredients we use; • our information technology infrastructure; • the quality and responsiveness of our customer service; • our selling and marketing efforts; • the quality and price of the products that we offer; • the convenience of the shopping experience that we provide on our website; • our ability to distribute our products and manage our operations; and • our reputation and brand strength.
We believe that our ability to compete successfully in this market depends upon many factors both within and beyond our control, including: • the size and composition of our consumer base; • the number of products that we offer and feature across our sales channels; • consumer demand for clean products developed with formulations and ingredients we use; • our information technology infrastructure; • our selling and marketing efforts; • the quality and price of the products that we offer; • the convenience of the shopping experience that we provide on our website; • our ability to distribute our products and manage our operations; and • our reputation and brand strength.
Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel, and the loss of their services could have an adverse effect on our business, financial condition and results of operations. Jessica Warren departed as our Chief Creative Officer on April 9, 2024.
Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel, and the loss of their services could have an adverse effect on our business, financial condition and results of operations. Jessica Alba departed as our Chief Creative Officer on April 9, 2024.
Acquisitions, investments and other strategic alliances, including our supplier services agreement with Butterblu, involve numerous risks, including: • problems integrating the acquired business, facilities, technologies or products, including issues maintaining uniform standards, procedures, controls and policies; • risks associated with quality control and brand reputation; • unanticipated costs associated with acquisitions, investments or strategic alliances; • diversion of management’s attention from our existing business; • adverse effects on existing business relationships with suppliers, outsourced private brand manufacturing partners and retail and ecommerce partners; • risks associated with any dispute that may arise with respect to such strategic alliance; • risks associated with entering new markets in which we may have limited or no experience; • potential loss of key employees of acquired businesses; and • increased legal and accounting compliance costs.
Acquisitions, investments and other strategic alliances involve numerous risks, including: • problems integrating the acquired business, facilities, technologies or products, including issues maintaining uniform standards, procedures, controls and policies; • risks associated with quality control and brand reputation; • unanticipated costs associated with acquisitions, investments or strategic alliances; • diversion of management’s attention from our existing business; • adverse effects on existing business relationships with suppliers, outsourced private brand manufacturing partners and retail and ecommerce partners; • risks associated with any dispute that may arise with respect to such strategic alliance; • risks associated with entering new markets in which we may have limited or no experience; • potential loss of key employees of acquired businesses; and • increased legal and accounting compliance costs.
We implemented price increases that took effect in 2022 and 2023 and plan to implement additional price increases in the future as needed to offset input cost inflation. The implementation of these price increases are dependent on acceptance from our customers and accurate input of these pricing changes into our systems and our customers' systems.
We implemented price increases that took effect in 2022 and 2023 and plan to implement additional price increases in the future as needed to offset input cost inflation. The implementation of these price increases is dependent on acceptance from our customers and accurate input of these pricing changes into our systems and our customers' systems.
As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services.
As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights impacts our business and ability to provide our products and services.
For example, the CCPA applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to make specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights, such as those noted below.
For example, the CCPA applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to make specific disclosures in privacy notices and respond to requests of such individuals to exercise certain privacy rights, such as those noted below.
We may also expend significant resources or modify our business activities in an effort to protect against security incidents in the future. Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information technology systems and data.
We may also expend significant resources or modify our business activities in an effort to protect against security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information technology systems and data.
Additionally, we may choose to change one of our marketing or advertising partners, which may prove to be unsuccessful.
Additionally, we may choose to change 14 one of our marketing or advertising partners, which may prove to be unsuccessful.
Jessica Warren is a globally recognized Latina business leader, entrepreneur, advocate, actress, and New York Times bestselling author. We believe that the success of our brand has historically been based in part on our affiliation with Jessica Warren.
Jessica Alba is a globally recognized Latina business leader, entrepreneur, advocate, actress, and New York Times bestselling author. We believe that the success of our brand has historically been based in part on our affiliation with Jessica Alba.
Even as we try to manage our expenses and despite executing the Transformation Initiative , these efforts may be more costly than we expect and may not result in increased revenue or growth or margin improvements in our business in the future.
Even as we try to manage our expenses and despite executing the Transformation Initiative and Powering Honest Growth, these efforts may be more costly than we expect and may not result in increased revenue or growth or margin improvements in our business in the future.
Additional regulatory guidance has been released that seeks to imposes additional obligations on companies seeking to rely on SCCs, such as conducting transfer impact assessments to determine whether additional security measures are necessary to protect the at-issue personal data.
Additional regulatory guidance has been released that seeks to impose additional obligations on companies seeking to rely on SCCs, such as conducting transfer impact assessments to determine whether additional security measures are necessary to protect the at-issue personal data.
For example, in some cases, the Federal Trade Commission, or the FTC, has sought enforcement action where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser.
For example, in some cases, the Federal Trade Commission, or the FTC, has brought enforcement action where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser.
Similarly, if one or more of our suppliers or customers were to offer these incentives, including preferential pricing, to our competitors, our competitive advantage would be reduced, which could have an adverse effect on our business, financial condition, results of operations and prospects. 26 In 2023, we entered into an agreement with National Distribution Centers, LLC (“NFI”) that replaced GEODIS in providing services at our Las Vegas, Nevada fulfillment center.
Similarly, if one or more of our suppliers or customers were to offer these incentives, including preferential pricing, to our competitors, our competitive advantage would be reduced, which could have an adverse effect on our business, financial condition, results of operations and prospects. 24 In 2023, we entered into an agreement with National Distribution Centers, LLC, or NFI that replaced GEODIS in providing services at our Las Vegas, Nevada fulfillment center.
For example throughout 2023, we rolled-out mid-single digit price increases across approximately two-thirds of our product portfolio, including in diapers, wipes, skin and personal care products which has in the past and may in the future negatively impact consumer demand. To a lesser extent, in 2023, we rolled-out price increases on certain beauty and personal care products.
For example, throughout 2023, we rolled-out mid-single digit price increases across approximately two-thirds of our product portfolio, including in wipes, personal care and diaper products which has in the past and may in the future negatively impact consumer demand. To a lesser extent, in 2023, we rolled-out price increases on certain beauty and personal care products.
We rely on third-party suppliers, manufacturers, retail and ecommerce customers and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.
We rely on third-party suppliers, manufacturers, retail and ecommerce customers and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could adversely affect our business, harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.
Our DTC and ecommerce operations are critical to our business and our financial performance. Our website serves as an effective extension of our marketing strategies by exposing potential new consumers to our brand, product offerings and enhanced content.
Our ecommerce operations are critical to our business and our financial 36 performance. Our website serves as an effective extension of our marketing strategies by exposing potential new consumers to our brand, product offerings and enhanced content.
The U.S. government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements.
The U.S. government has adopted, and indicated its intent to continue to adopt, a new approach to trade policy, and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements.
Amongst other things, this would mean that, in the event of a violation of the GDPR affecting data subjects across the United Kingdom and the EEA, we could be investigated by, and ultimately fined by the United Kingdom Information Commissioner’s Office and the supervisory authority in each and every EEA member state where data subjects have been affected by such violation.
Amongst other things, this means that, in the event of a violation of the GDPR affecting data subjects across the United Kingdom and the EEA, we could be investigated by, and ultimately fined by the United Kingdom Information Commissioner’s Office and the supervisory authority in each and every EEA member state where data subjects have been affected by such violation.

… 264 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

15 edited+2 added−1 removed3 unchanged
Biggest changeThe CFO and Vice President of Technology work with the IT Systems & Cyber Security Manager to help the Company mitigate and remediate cybersecurity incidents of which they are notified. In addition, the Company’s incident response processes include reporting to the Audit Committee certain cybersecurity incidents.
Biggest changeOur cybersecurity incident response processes are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including our CFO and Vice President of Technology. The CFO and Vice President of Technology work with the Sr. Infrastructure & IT Operations Manager to help the Company mitigate and remediate cybersecurity incidents of which they are notified.
Additionally, we use third-party service providers to perform a variety of functions throughout our business, such as application providers and hosting companies. We have a vendor management program to manage cybersecurity risks associated with our use of these providers, which includes collecting a security questionnaire and relevant reports from such providers.
Additionally, we use third-party service providers to perform a variety of functions throughout our business, such as application providers and hosting companies. We have a vendor management program designed to manage cybersecurity risks associated with our use of these providers, which includes collecting a security questionnaire and relevant reports from such providers.
We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third-party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, customer information, our brand, and confidential information that is proprietary, strategic or competitive in nature (“Information Systems and Data”).
Cybersecurity Risk management and strategy We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third-party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, customer information, our brand, and confidential information that is proprietary, strategic or competitive in nature (“Information Systems and Data”).
Our Vice President of Technology and CFO are responsible for hiring appropriate personnel, helping to integrate cybersecurity risk considerations into the Company’s overall risk management strategy, and communicating key priorities to relevant personnel.
Our Vice President of Technology, SVP Enterprise Strategy and Technology, and CFO are responsible for hiring appropriate personnel, helping to integrate cybersecurity risk considerations into the Company’s overall risk management strategy, and communicating key priorities to relevant personnel.
In doing so, they administer our Enterprise Risk Management Program that identifies and assesses risks from cybersecurity threats by monitoring and evaluating our threat environment and the Company’s and industry’s risk profile using various methods including, for example, manual and automated tools, subscribing to reports and services that identify cybersecurity threats, conducting scans of potential threat environments, and conducting vulnerability assessments in order to identify vulnerabilities in our systems.
In doing so, they administer our Enterprise Risk Management Program that is designed to identify and assess risks from cybersecurity threats by monitoring and evaluating our threat environment and the Company’s and industry’s risk profile using various methods including, for example, manual and automated tools, subscribing to reports and services that identify cybersecurity threats, conducting scans of potential threat environments, and conducting vulnerability assessments in order to identify vulnerabilities in our systems.
Depending on the environment, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: maintaining a comprehensive incident response plan, conducting risk assessments, encrypting data, maintaining network security controls, access controls, physical security measures, and system monitoring tools, conducting employee training, performing periodic penetration testing, and maintaining cybersecurity insurance.
Depending on the environment, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: maintaining a comprehensive incident response plan, conducting risk assessments, encrypting data, maintaining network security controls, access controls, physical security measures, and system monitoring tools, conducting employee training, performing periodic penetration testing, and maintaining cybersecurity insurance. 45 Our assessment and management of material risks from cybersecurity threats are integrated into the Company’s overall risk management processes.
Risk Factors in this Annual Report on Form 10-K, including the risk factor titled, “We are increasingly dependent on information technology and our ability to process data in order to operate and sell products, and if our information technology systems or those third parties with whom we work or our data, are or were compromised, we could experience adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions to our business operations; interruptions in our ability to provide our goods and services exposure to liability; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.” Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function and the board of directors is responsible for overseeing the Company’s cybersecurity risk management processes, including oversight of mitigation of risks from cybersecurity threats.
Risk Factors in this Annual Report on Form 10-K, including the risk factor titled, “We are increasingly dependent on information technology and our ability to process data in order to operate and sell our products, and if we (or our information technology systems or those third parties with whom we work or our data, are or were compromised), are unable to protect against software and hardware vulnerabilities, service interruptions, data corruption, cyber-based attacks, ransomware or security breaches, or if we fail to comply with our commitments and assurances regarding the privacy and security of such data, we could experience adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions to our business operations; interruptions in our ability to provide our goods and services exposure to liability; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.” Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function and the board of directors is responsible for overseeing the Company’s cybersecurity risk management processes, including oversight of mitigation of risks from cybersecurity threats.
The Audit Committee of the board of directors is responsible for reviewing the Company's financial reporting of cybersecurity risks and incidents in accordance with SEC rules.
The Audit Committee of the board of directors is responsible for reviewing the Company's financial reporting of cybersecurity risks and incidents.
We have developed a Cybersecurity Program that is designed to continuously assess and improve the governance, identification, detection, and response of our critical systems; staying up-to-date with the most innovative technologies.
We have developed a Cybersecurity Program that is designed to assess and improve the governance, identification, detection, and response of our critical systems.
Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company management, including our Vice President of Technology who has over twenty years of experience in leading and operating a variety of technology functions and our IT Systems and Cyber Security Manager who has over eight years of experience in designing and implementing secure systems and networks, focused on information and data security.
Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company management, including our Vice President of Technology who has over twenty years of experience in leading and operating a variety of technology functions and our Sr.
Our Vice President of Technology and CFO are responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports. Our cybersecurity incident response processes are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including our CFO and Vice President of Technology.
Our Vice President of Technology, SVP Enterprise Strategy and Technology, and CFO are responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports.
Our assessment and management of material risks from cybersecurity threats are integrated into the Company’s overall risk management processes. For example, cybersecurity risk is addressed as a component of the Company’s Enterprise Risk Management Program with our Board of Directors, through the Audit Committee, maintaining oversight of cybersecurity risk management.
For example, cybersecurity risk is addressed as a component of the Company’s Enterprise Risk Management Program with our Board of Directors, through the Audit Committee, maintaining oversight of cybersecurity risk management. Our internal security team, in conjunction with our Sr.
The Audit Committee of the board of directors receives annual reports from the Vice President of Technology concerning the Company’s significant cybersecurity threats and risk and the processes the Company has implemented to address them. The Audit Committee also has access to various reports, summaries or presentations related to cybersecurity threats, risk and mitigation.
In addition, the Company’s incident response processes include reporting to the Audit Committee certain cybersecurity incidents. The Audit Committee of the board of directors receives periodic reports from the Vice President of Technology concerning the Company’s significant cybersecurity threats and risk and the processes the Company has implemented which are designed to address them.
There is also a business impact analysis involving all the critical business units, and their systems; not limited to information technology. 48 We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including, for example, third-party cybersecurity software providers, managed service providers and penetration testing firms.
We use third-party service providers to assist us from time to time in our efforts to identify, assess, and manage material risks from cybersecurity threats, including, for example, third-party cybersecurity software providers, managed service providers and penetration testing firms.
Our internal security team, in conjunction with our IT Systems and Cybersecurity Manager works with a third-party risk management company to perform an annual security risk assessment across our organization's systems and processes. This consists of an assessment against the latest National Institute of Standards and Technology (“NIST”) Cybersecurity Framework (“CSF”) 2.0, and its more than 200 controls.
Infrastructure & IT Operations Manager works with a third-party risk management company to perform a periodic security risk assessment across our organization's systems and processes against industry-recognized frameworks.
Removed
Item 1C. Cybersecurity Risk management and strategy The protection of our systems containing customer information, our brand, and its intellectual property and data is very important to us.
Added
Infrastructure & IT Operations Manager who has over eight years of experience in designing and implementing secure systems and networks, focused on information and data security.
Added
The Audit Committee also has access to various reports, summaries or presentations related to cybersecurity threats, risk and mitigation. 46

Item 2. Properties

Properties — owned and leased real estate

2 edited+3 added−0 removed3 unchanged
Biggest changeOur Las Vegas, Nevada facility is operated by NFI and our Breinigsville, Pennsylvania facility is operated by GEODIS. In total, we have approximately 930,000 square feet of facility space that we leverage to fulfill DTC and retail orders. We believe that our current facilities are suitable and adequate to meet our current needs.
Biggest changeOur Las Vegas, Nevada facility is operated by NFI and our Breinigsville, Pennsylvania facility is operated by GEODIS. In total, we have approximately 930,000 square feet of facility space that we leverage to fulfill retail order and, until December 31, 2025, leveraged to fulfill DTC orders.
This lease provides us with an option to extend it for up to two consecutive periods of five years each.
This lease provides us with an option to extend it for an additional five years.
Added
This lease provides us with an option to extend it for up to two consecutive periods of five years each. We also lease a corporate office located at 3033 Excelsior Boulevard #575, Minneapolis, Minnesota, where we occupy approximately 4,500 square feet of office space pursuant to a lease that expires in April 2031.
Added
As part of Powering Honest Growth, in December 2025, we notified GEODIS, pursuant to the terms of the contract, that we are terminating the agreement with them for the Pennsylvania warehouse use and services effective June 30, 2026. Following June 30, 2026, we will only be operating with the Nevada warehouse.
Added
We believe that our current facilities are suitable and adequate to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed1 unchanged
Biggest changeSee Note 10 , “ Commitments and Contingencies, ” to the financial statements contained in this report for a discussion of legal proceedings that are incorporated by reference into this Item 3. Item 4. Mine Safety Disclosures. Not applicable. 50 PART II
Biggest changeSee Note 10 , “ Commitments and Contingencies, ” to the financial statements contained in this report for a discussion of legal proceedings that are incorporated by reference into this Item 3. Item 4. Mine Safety Disclosures Not applicable. 47 PART II
Although the outcome of these and other claims cannot be predicted with certainty, we do not believe the ultimate resolution of the current 49 matters will have a material adverse effect on our business, financial condition, results of operations or cash flows.
Although the outcome of these and other claims cannot be predicted with certainty, we do not believe the ultimate resolution of the current matters will have a material adverse effect on our business, financial condition, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed4 unchanged
Biggest changeOther than the 2021 Dividend, we have not declared or paid cash dividends on our capital stock, and we do not anticipate declaring or paying any cash dividends other than the 2021 Dividend in the foreseeable future.
Biggest changeOther than the 2021 Dividend, we have not declared or paid cash dividends on our capital stock, and we do not anticipate declaring or paying any cash dividends in the foreseeable future.
The 2023 Credit Facility contains restrictions on our ability to pay dividends. Comparative Stock Performance Graph Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item. Recent Sales of Unregistered Equity Securities None. Use of Proceeds None. Issuer Purchases of Equity Securities None.
The 2023 Credit Facility contains restrictions on our ability to pay dividends. Comparative Stock Performance Graph Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item. Recent Sales of Unregistered Equity Securities None. Use of Proceeds None. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 48
Holders of Record As of February 21, 2025, we had approximately 98 holders of record of our common stock. Certain shares are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.
Holders of Record As of February 20, 2026, we had approximately 96 holders of record of our common stock. Certain shares are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

102 edited+39 added−31 removed45 unchanged
Biggest changeBecause of these limitations, when evaluating our performance, you should consider adjusted EBITDA alongside other financial measures, including our revenue, net income (loss) and other results stated in accordance with GAAP. 62 The following table presents a reconciliation of net loss, the most directly comparable financial measure stated in accordance with GAAP, to adjusted EBITDA, for each of the periods presented: For the year ended December 31, (In thousands) 2024 2023 Reconciliation of Net Loss to Adjusted EBITDA Net loss $ (6,124) $ (39,238) Interest and other (income) expense, net (282) 254 Income tax provision 75 75 Depreciation and amortization 2,843 2,740 Stock-based compensation (1) 15,675 15,804 Securities litigation expense 12,440 4,703 CEO, CFO and founder/CCO transition expense (2) 858 2,075 Restructuring costs (3) — 2,205 Payroll tax expense related to stock-based compensation 373 140 Adjusted EBITDA $ 25,858 $ (11,242) ____________ (1) Includes accelerated equity awards related to prior separation agreements of an aggregate of $3.1 million with our former CEO and CFO, respectively, during the year ended December 31, 2023.
Biggest changeBecause of these limitations, when evaluating our performance, you should consider Organic Revenue and Adjusted EBITDA alongside other financial measures, including our revenue, net income (loss) and other results stated in accordance with GAAP. 60 The following table presents a reconciliation of revenue, the most directly comparable financial measure stated in accordance with GAAP, to Organic Revenue, for each of the periods presented: For the year ended December 31, (In thousands) 2025 2024 Reconciliation of Revenue to Organic Revenue Revenue $ 371,317 $ 378,340 Less revenue from: Apparel 38,483 46,204 Honest.com 35,338 48,558 Canada 3,351 4,310 Organic Revenue $ 294,145 $ 279,268 The following table presents a reconciliation of net loss, the most directly comparable financial measure stated in accordance with GAAP, to Adjusted EBITDA, for each of the periods presented: For the year ended December 31, (In thousands) 2025 2024 Reconciliation of Net Loss to Adjusted EBITDA Net loss $ (15,686) $ (6,124) Interest and other (income) expense, net (2,979) (282) Income tax provision 204 75 Depreciation and amortization 2,901 2,843 Stock-based compensation 10,512 15,675 Securities litigation expense 1,292 12,440 Executive officer transition expense (1) 1,166 858 Restructuring-related costs (2) 23,996 — Payroll tax expense related to stock-based compensation 415 373 Adjusted EBITDA $ 21,821 $ 25,858 ____________ (1) For the year ended December 31, 2025, this includes separation, bonus and recruiting costs related to our Chief Financial Officer transition.
While each of these factors presents significant opportunities for us, they also pose important challenges that we must successfully address to enable us to sustain the growth of our business and improve our operations while staying true to our mission, including those discussed below and in the section of this Annual Report on Form 10-K titled “Item 1A.
While each of these factors presents significant opportunities for us, they also pose important challenges that we must successfully address to enable 50 us to sustain the growth of our business and improve our operations while staying true to our mission, including those discussed below and in the section of this Annual Report on Form 10-K titled “Item 1A.
Material Cash Requirements We lease warehouse and office facilities under operating and finance lease agreements. We have unconditional purchase commitments for software service subscriptions, advertising services and certain other services. S ee Note 10, “Commitments and Contingencies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information on our purchase obligations.
Material Cash Requirements We lease warehouse and office facilities under operating lease agreements. We have unconditional purchase commitments for software service subscriptions, advertising services and certain other services. S ee Note 10, “Commitments and Contingencies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information on our purchase obligations.
We account for revenue contracts with customers by applying the following steps in accordance with Accounting Standard Codification, or ASC, 606, Revenue from Contracts with Customers : • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, we satisfy a performance obligation 63 We elected an accounting policy to record all shipping and handling costs as fulfillment costs.
We account for revenue contracts with customers by applying the following steps in accordance with Accounting Standard Codification, or ASC, 606, Revenue from Contracts with Customers : • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, we satisfy a performance obligation We elected an accounting policy to record all shipping and handling costs as fulfillment costs.
In addition, we believe we have been able to achieve some operational and marketing efficiency as part of cost savings in connection with our Brand Maximization Transformation Pillar. Ability to Execute Increasing Physical Availability The core of our growth strategy centers around increasing physical availability of our products through expanded stores, doors, aisles, shelves and facings.
In addition, we believe we have been able to achieve some operational and marketing efficiency as part of cost savings in connection with our Brand Maximization Transformation Pillar. Ability to Execute Increasing Physical and Digital Availability The core of our growth strategy centers around increasing physical and digital availability of our products through expanded stores, doors, aisles, shelves and facings.
Our gross margin may in the future fluctuate from period to period based on a number of factors, including commodity costs, manufacturing costs, warehousing and transportation rates, the promotional environment in the marketplace, the mix of products we sell, the channel through which we sell our products, and innovation initiatives we undertake in each product category, among other factors.
Our gross margin may in the future fluctuate from period to period based on a number of factors, including commodity costs, manufacturing costs, warehousing and transportation rates, the promotional environment in the marketplace, the mix of products 53 we sell, the channel through which we sell our products, and innovation initiatives we undertake in each product category, among other factors.
We recognize a liability or a reduction to accounts receivable, and reduce revenue based on the estimated amount of credits that will be claimed by customers. An allowance is recorded as a reduction to accounts receivable if the customer can deduct the program amount from the outstanding invoice.
We recognize a liability or a reduction to accounts receivable, and reduce revenue based on the estimated 62 amount of credits that will be claimed by customers. An allowance is recorded as a reduction to accounts receivable if the customer can deduct the program amount from the outstanding invoice.
Our ability to attract new consumers will depend on, among other things, the efficacy of our marketing efforts, our ability to successfully produce products that are free of defects and communicate the value of those products as cleanly-formulated and sustainably-designed and effective and the competing offerings of our competitors.
Our ability to attract new consumers will depend on, among other things, the efficacy of our marketing efforts, our ability to successfully produce products that are free of defects, our ability to communicate the value of those products as cleanly-formulated, sustainably-designed and effective, and the offerings of our competitors.
Our continued focus on research and development will be central to attracting and retaining consumers in the future. Our ability to successfully develop, market and sell new products will depend on a variety of factors, including our continued investment in innovation.
Our continued focus on research and development will be central to attracting and retaining 51 consumers in the future. Our ability to successfully develop, market and sell new products will depend on a variety of factors, including our continued investment in innovation.
Operating Expenses Our operating expenses consist of selling, general and administrative, marketing and research and development expenses. Selling, General and Administrative Selling, general and administrative expenses consist primarily of personnel costs, principally for our selling and administrative functions. These include personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses.
Operating Expenses Our operating expenses consist of selling, general and administrative, marketing, restructuring and research and development expenses. Selling, General and Administrative Selling, general and administrative expenses consist primarily of personnel costs, principally for our selling and administrative functions. These include personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses.
We also have availability under our 2023 Credit Facility, which was not drawn as of December 31, 2024. 2023 Credit Facility In January 2023, we entered into a first lien credit agreement (the “2023 Credit Facility”), with JPMorgan Chase Bank, N.A., as administrative agent and lender, and the other lenders party thereto, which provides for a $35.0 million revolving credit facility that matures on April 30, 2026.
We also have availability under our 2023 Credit Facility, which was not drawn as of December 31, 2025. 2023 Credit Facility In January 2023, we entered into a first lien credit agreement (the “2023 Credit Facility”), with JPMorgan Chase Bank, N.A., as administrative agent and lender, and the other lenders party thereto, which provides for a $35.0 million revolving credit facility that matures on April 30, 2026.
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.
We believe that Organic Revenue and 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.
Selling, general and administrative expenses also include technology expenses; professional fees, including audit and legal expenses; donation expenses including overhead and tariffs; facility costs, including insurance, utilities and rent relating to our headquarters; third-party service fees related to our supplier services agreement for Honest baby clothing, our baby apparel business; and, depreciation and amortization expenses.
Selling, general and administrative expenses also include technology expenses; professional fees, including audit and legal expenses; donation expenses including overhead and tariffs; facility costs, including insurance, utilities and rent relating to our headquarters; third-party service fees related to our Supplier Services Agreement for Honest baby clothing, our apparel products; and, depreciation and amortization expenses.
Marketing Marketing expenses include costs related to our branding initiatives, retail customer marketing activities, point of purchase displays, targeted online advertising through sponsored search, display advertising, email and influencer marketing campaigns, market research, content production and other public relations and promotional initiatives.
Marketing Marketing expenses include costs related to our branding initiatives, retail customer marketing activities, point of purchase displays, targeted online advertising through sponsored search, display advertising, email and influencer marketing campaigns, market research, content production, consumer insights research, and other public relations and promotional initiatives.
We leverage proprietary consumer insights and best-in-class analytics to guide our omnichannel strategy and inform our marketing spend optimization. Our future success depends in part on our ability to effectively attract consumers on a cost-efficient basis and achieve efficiencies in our operations.
We leverage proprietary consumer insights and best-in-class analytics to guide our distribution strategy and inform our marketing spend optimization. Our future success depends in part on our ability to effectively attract consumers on a cost-efficient basis and achieve efficiencies in our operations.
We expect our general and administrative expenses to decrease as a percentage of revenue as we continue to grow our business and organizational capabilities and efficiencies. We expect in the future to incur additional third-party professional fees related to compliance obligations as a public company.
We expect our general and administrative expenses to decrease as a percentage of revenue as we continue to grow our business and organizational capabilities and efficiencies. We have incurred and expect in the future to continue to incur additional third-party professional fees related to compliance obligations as a public company.
Failure to do so, unless waived by the lenders under the 2023 Credit Facility pursuant to its terms, as amended, would result in an event of default under the 2023 Credit Facility. As of December 31, 2024, we are in compliance with all covenants under the 2023 Credit Facility.
Failure to do so, unless waived by the lenders under the 2023 Credit Facility pursuant to its terms, as amended, would result in an event of default under the 2023 Credit Facility. As of December 31, 2025, we are in compliance with all covenants under the 2023 Credit Facility.
Risk Factors.” Operational and Marketing Efficienc y To grow our business, we intend to continue to improve our operational and marketing efficiency, which includes attracting new consumers, increasing community engagement and improving fulfillment and distribution operations. Our marketing model is inclusive of a best-in-class modern approach across paid, owned, and earned marketing channels.
Risk Factors.” Operational and Marketing Efficienc y To grow our business, we intend to continue to improve our operational and marketing efficiency, which includes attracting new consumers, increasing community engagement and connection with our brand, and improving fulfillment and distribution operations. Our marketing model is inclusive of a best-in-class modern approach across paid, owned, and earned marketing channels.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in Item 7.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found in Item 7.
Transformation Initiative In 2023, we executed a broad-based Transformation Initiative designed to build the Honest brand and drive growth in higher-margin areas of the portfolio, strengthen our cost structure, drive focus on the most productive areas of our business, deliver greater impact from brand-building investments, and improve executional excellence across the enterprise.
Transformation 2.0: Powering Honest Growth In 2023, we executed a broad-based Transformation Initiative designed to build the Honest brand and drive growth in higher-margin areas of the portfolio, strengthen our cost structure, drive focus on the most productive areas of our business, deliver greater impact from brand-building investments, and improve executional excellence across the enterprise.
Non-cash adjustments primarily consisted of stock-based compensation of $15.7 million, amortization of operating Right-Of-Use ("ROU") assets of $6.4 million and depreciation and amortization of $2.8 million.
Non-cash adjustments primarily consisted of stock-based compensation of $15.7 million, amortization of operating ROU assets of $6.4 million and depreciation and amortization of $2.8 million.
We have made significant investments in our product development capabilities and plan to continue to do so in the future. We believe our rigorous approach to product innovation has helped redefine and grow the clean and natural product categories in which we operate.
We have made significant investments in our product development capabilities and plan to continue to do so in the future. We believe our rigorous approach to product innovation has helped redefine and grow the clean and naturally-derived product categories in which we operate.
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.
In addition, our use of Adjusted EBITDA and Organic Revenue 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.
For direct-to-consumer, retail and third-party ecommerce sales, we offer credits in the form of discounts, which are recorded as reductions in revenue and are allocated to products on a relative basis based on their respective standalone selling price.
For retail and third-party ecommerce (and prior to December 31, 2025, for direct-to-consumer sales), we offer credits in the form of discounts, which are recorded as reductions in revenue and are allocated to products on a relative basis based on their respective standalone selling price.
All of these factors are difficult to predict considering the rapidly evolving landscape as the Company continues to expect a variable operating environment going forward. Supply Chain Disruptions There has been and continues to be an adverse impact on global economic conditions, specifically inflationary pressures, which has adversely affected our supply chain in regards to cost of sales.
All of these factors are difficult to predict considering the rapidly evolving landscape as we continue to expect a variable operating environment going forward. Supply Chain Disruptions There has been and continues to be an adverse impact on global economic conditions, specifically tariffs and inflationary pressures, which has adversely affected our supply chain in regards to cost of revenue.
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 reflect tax payments that may represent a reduction in cash available to us; and (6) does not include certain non-ordinary cash expenses that we do not believe are representative of our business on a steady-state basis, such as CEO, CFO and founder/CCO transition expenses and restructuring expenses in connection with the Transformation Initiative.
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 reflect tax payments that may represent a reduction in cash available to us; and (6) it does not include certain non-ordinary cash expenses that we do not believe are representative of our business on a steady-state basis, such as executive officer transition expenses.
Customer demand for our products may change based on price increases. 54 Consumer Preferences We believe in the power of our omnichannel distribution model. We believe consumers value the flexibility in terms of where and when they choose to purchase Honest products.
Customer demand for our products may change based on price increases. Consumer Preferences We believe consumers value the flexibility in terms of where and when they choose to purchase Honest products.
We will need to generate sufficient cash from operations or raise additional capital to meet our long-term working capital and capital expenditure needs.
We will need to generate sufficient cash from operations or may need to raise additional capital to meet our long-term working capital and capital expenditure needs in the future.
Refer to Note 8, "Credit Facilities," included in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information on the 2023 Credit Facility. 60 Cash Flows The following table summarizes our cash flows for the periods presented: For the year ended December 31, (In thousands) 2024 2023 Net cash provided by operating activities $ 1,541 $ 19,353 Net cash provided by (used in) investing activities $ (530) $ 3,835 Net cash provided by financing activities $ 41,597 $ 122 Operating Activities Our largest source of operating cash is from the sales of our products to our consumers and customers.
Refer to Note 8, "Credit Facilities," included in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information on the 2023 Credit Facility. 58 Cash Flows The following table summarizes our cash flows for the periods presented: For the year ended December 31, (In thousands) 2025 2024 Net cash provided by operating activities $ 15,121 $ 1,541 Net cash used in investing activities $ (1,510) $ (530) Net cash provided by financing activities $ 535 $ 41,597 Operating Activities Our largest source of operating cash is from the sales of our products to our consumers and customers.
For the year ended December 31, 2024, the commitment fee incurred was immaterial. As of December 31, 2024, there were $2.5 million outstanding letters of credit and $30.4 million available to be drawn upon. As of December 31, 2024, there was no outstanding balance under the 2023 Credit Facility.
For the year ended December 31, 2025, the commitment fee incurred was immaterial. As of December 31, 2025, there were $1.5 million outstanding letters of credit and $31.6 million available to be drawn upon. As of December 31, 2025, there was no outstanding balance under the 2023 Credit Facility.
The 2023 Credit Facility contains restrictions on our ability to pay dividends. Non-GAAP Financial Measure We prepare and present our consolidated financial statements in accordance with GAAP. However, management believes that adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance.
The 2023 Credit Facility contains restrictions on our ability to pay dividends. Non-GAAP Financial Measures We prepare and present our consolidated financial statements in accordance with GAAP. However, management believes that Organic Revenue and Adjusted EBITDA, which are non-GAAP financial measures, provide investors with additional useful information in evaluating our performance.
Our annual estimated tax rate differed from the U.S. federal statutory rate of 21% primarily as a result of a valuation allowance against deferred tax assets, stock-based compensation, state taxes, nondeductible executive compensation and other permanent differences.
Income Tax Provision We are subject to federal and state income taxes in the United States. Our annual estimated tax rate differed from the U.S. federal statutory rate of 21% primarily as a result of a valuation allowance against deferred tax assets, stock-based compensation, state taxes, nondeductible executive compensation and other permanent differences.
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.
In particular, we believe that the use of Organic Revenue and Adjusted EBITDA are helpful to our investors as they are measures 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.
We have experienced and anticipate continued increases in product costs and labor costs due to inflationary pressures and higher transportation costs from ocean container delivery, which has in the past and could continue to hamper our ability to drive margin expansion.
We have experienced and anticipate continued increases in product costs due to inflationary pressures, which has in the past and could continue to hamper our ability to drive margin expansion.
Research and Development Expenses For the year ended December 31, 2024 2023 $ change % change (In thousands, except percentages) Research and development $ 6,851 $ 6,214 $ 637 10.3 % Research and development expenses were $6.9 million for the year ended December 31, 2024, as compared to $6.2 million for the year ended December 31, 2023.
Research and Development Expenses For the year ended December 31, 2025 2024 $ change % change (In thousands, except percentages) Research and development $ 7,347 $ 6,851 $ 496 7.2 % Research and development expenses were $7.3 million for the year ended December 31, 2025, as compared to $6.9 million for the year ended December 31, 2024.
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) litigation and settlement fees associated with certain non-ordinary course securities litigation claims; (6) Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO") and founder and former Chief Creative Officer ("CCO") transition expenses and (7) restructuring expenses in connection with the Transformation Initiative.
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) litigation and settlement fees associated with certain non-ordinary course securities litigation claims; (6) executive officer transition expenses; and (7) restructuring-related expenses in connection with Powering Honest Growth.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on March 8, 2024. Overview The Honest Company, Inc.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2025.
Selling, general and administrative expenses as a percentage of revenue decreased 1.3% as compared to the year ended December 31, 2023.
Selling, general and administrative expenses as a percentage of revenue decreased 4.8% as compared to the year ended December 31, 2024.
Changes in cash flows related to operating assets and liabilities primarily consisted of a $43.5 million decrease in inventory, an $8.0 million decrease in prepaid expenses and other assets due to timing of payments, and a $1.4 million increase in deferred revenue, offset by $9.3 million in lower accounts payable and accrued expenses driven by lower inventory purchases due to our disciplined inventory management, a $7.7 million use of cash due to operating lease obligations and a $0.7 million increase in accounts receivable.
Changes in cash flows related to operating assets and liabilities primarily consisted of a $11.2 million decrease in accounts payable and accrued expenses due to timing of payments, a $8.9 million use of cash due to operating lease obligations, a $7.5 million increase in inventory and a $0.4 million decrease in deferred revenue, partially offset by a $10.2 million decrease in accounts receivable and a $3.6 million decrease in prepaid expenses and other assets due to timing of payments.
The change had no effect on our results of operations or timing of revenue recognition. 55 Cost of Revenue Cost of revenue includes the purchase price of merchandise sold to customers, inbound and outbound shipping and handling costs, freight and duties, shipping and packaging supplies, credit card processing fees and warehouse fulfillment costs incurred in operating and staffing warehouses, including rent.
Cost of Revenue Cost of revenue includes the purchase price of merchandise sold to customers, inbound and outbound shipping and handling costs, freight and duties, shipping and packaging supplies, credit card processing fees and warehouse fulfillment costs incurred in operating and staffing warehouses, including rent.
Net cash used in investing activities of $0.5 million for the year ended December 31, 2024 was due to the purchase of property and equipment of $0.5 million.
Investing Activities Our primary use of investing cash is property and equipment. Net cash used in investing activities of $1.5 million for the year ended December 31, 2025 was due to the purchase of property and equipment.
We have taken measures to bolster key aspects of our supply chain, such as ensuring sufficient inventory to support our continued growth, minimizing lead times for raw materials, and implementing a robust cost-savings program, as part of our Operating Discipline Transformation Pillar.
We have taken measures to bolster key aspects of our supply chain and mitigate the impact of tariffs, such as creating an agile supply chain, ensuring sufficient inventory to support our continued growth, minimizing lead times for raw materials, and implementing a robust cost-savings program, as part of our tariff mitigation strategy.
The increase of $0.6 million, or 10.3% is consistent with our focus on continued innovation.
The increase of $0.5 million, or 7.2% is consistent with our focus on continued innovation.
We also believe that consumers research their personal care ingredients and recognize the quality of Honest products, knowing that there are over 3,500 chemicals and materials that we choose not to formulate with. Inventory Inventory is reflected at net realizable value which includes a reserve for excess inventory.
We also believe that consumers research their personal care ingredients and recognize the quality of Honest products, knowing that there are over 3,500 chemicals and materials that we choose not to formulate with.
For awards that vest based on continued service, stock-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards.
Stock-Based Compensation We recognize stock-based compensation expense for employees and non-employees based on the grant-date fair value of stock awards over the applicable service period. For awards that vest based on continued service, stock-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards.
Operating Expenses Selling, General and Administrative Expenses For the year ended December 31, 2024 2023 $ change % change (In thousands, except percentages) Selling, general and administrative $ 99,044 $ 94,582 $ 4,462 4.7 % Selling, general and administrative expenses were $99.0 million for the year ended December 31, 2024, as compared to $94.6 million for the year ended December 31, 2023.
Operating Expenses Selling, General and Administrative Expenses For the year ended December 31, 2025 2024 $ change % change (In thousands, except percentages) Selling, general and administrative $ 79,510 $ 99,044 $ (19,534) (19.7) % Selling, general and administrative expenses were $79.5 million for the year ended December 31, 2025, as compared to $99.0 million for the year ended December 31, 2024.
Comparison of the Year Ended December 31, 2024 and 2023 Revenue For the year ended December 31, 2024 2023 $ change % change (In thousands, except percentages) Revenue $ 378,340 $ 344,365 $ 33,975 9.9 % Revenue was $378.3 million for the year ended December 31, 2024, as compared to $344.4 million for the year ended December 31, 2023.
Comparison of the Year Ended December 31, 2025 and 2024 Revenue For the year ended December 31, 2025 2024 $ change % change (In thousands, except percentages) Revenue $ 371,317 $ 378,340 $ (7,023) (1.9) % Revenue was $371.3 million for the year ended December 31, 2025, as compared to $378.3 million for the year ended December 31, 2024.
The increase of $8.7 million, or 23.7%, was primarily due to a $5.9 million increase in retail marketing, a $1.5 million increase in marketing agency fees and $0.5 million increase in photo and video production fees. Marketing expenses as a percentage of revenue increased 1.3% as compared to the year ended December 31, 2023.
The increase of $6.1 million, or 13.5%, was primarily due to a $4.9 million increase in retail marketing, a $0.9 million increase in direct brand advertising and a $0.9 million increase in marketing agency fees. Marketing expenses as a percentage of revenue increased 1.9% as compared to the year ended December 31, 2024.
Net cash provided by operating activities of $19.4 million for the year ended December 31, 2023 was primarily due to a net increase in cash related to changes in operating assets and liabilities of $35.2 million, and non-cash adjustments of $23.4 million, offset by a net loss of $39.2 million.
Net cash provided by operating activities of $15.1 million for the year ended December 31, 2025 was primarily due to non-cash adjustments of $45.0 million, offset by a net decrease in cash related to changes in operating assets and liabilities of $14.2 million and a net loss of $15.7 million.
Even though our growth strategy aims to boost sales across products by increasing total distribution, we intend to prioritize growth in products with attractive margin characteristics, including wipes, and leverage our brand equity and consumer insights to extend into new products. 53 Ability to Grow Our Brand Awareness Our brand is integral to the growth of our business and is essential to our ability to engage and stay connected with the growing clean products consumer market.
Even though our growth strategy aims to boost sales across products by increasing total distribution, we intend to prioritize growth in products with attractive margin characteristics, including wipes and personal care, and leverage our brand equity and consumer insights to extend into new products.
At the same time, changes in macro-level trends, including as a result of global pandemics, changing consumer attitudes or behavior or other macroeconomic conditions, such as inflation, tariffs or supply chain disruptions, have resulted and could in the future result in fluctuations in our operating results.
At the same time, changes in macro-level trends, including as a result of changing consumer attitudes or behaviors or other macroeconomic conditions (such as inflation, tariffs, supply chain disruptions, trade disputes, foreign exchange volatility, geopolitical uncertainty, financial market instability and any resulting recession or slowed economic growth), have resulted and could in the future result in fluctuations in our operating results.
Net cash provided by financing activities of $41.6 million for the year ended December 31, 2024 primarily consisted of proceeds from the exercise of stock options and proceeds from the 2021 Employee Stock Purchase Plan ("2021 ESPP"), partially offset by principal payments of financing lease obligations.
Net cash provided by financing activities of $0.5 million for the year ended December 31, 2025 primarily consisted of proceeds from the exercise of stock options and proceeds from the 2021 Employee Stock Purchase Plan (“2021 ESPP”).
Prolonged unfavorable economic conditions, including as a result of global pandemics, changing consumer attitudes or behavior or other macroeconomic conditions, such as inflation, tariffs or supply chain disruptions, have had and may continue to have an adverse effect on our sales and profitability.
Prolonged unfavorable economic conditions, including as a result of changing consumer attitudes or behaviors or other macroeconomic conditions (such as inflation, tariffs, supply chain disruptions, trade disputes, foreign exchange volatility, geopolitical uncertainty, financial market instability and any resulting recession or slowed economic growth), have had and may continue to have an adverse effect on our sales, margins and profitability.
Based in Los Angeles, California, our research and development team, including chemists, an in-house toxicologist and an eco-toxicologist, develops innovative cleanly-formulated products based on the latest green technology. At Honest, product innovation is top of mind. The improvement of existing products and the introduction of new products have been, and continue to be, integral to our growth.
Based in Los Angeles, California, our research and development team, including experts in chemistry and toxicology, develop innovative cleanly-formulated products. At Honest, product innovation is top of mind, including wipes pack size expansion and kids personal care. The improvement of existing products and the introduction of new products have been, and continue to be, integral to our growth.
Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
Additionally, we believe Organic Revenue is helpful to our investors as it adjusts for revenue sources that we exited in connection with Powering Honest Growth. Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with GAAP.
Organic Revenue and Adjusted EBITDA are financial measures that are not required by, or presented in accordance with GAAP.
Research and development expenses as a percentage of revenue increased 0.01% as compared to the year ended December 31, 2023. 59 Interest and Other Income (Expense), Net For the year ended December 31, 2024 2023 $ change % change (In thousands, except percentages) Interest income (expense), net $ 508 $ (269) $ 777 (288.8) % Other income (expense), net (226) 15 (241) (1,606.7) Interest and other income (expense), net $ 282 $ (254) $ 536 (211.0) % Interest and other income (expense), net was income of $0.3 million for the year ended December 31, 2024, as compared to expense of $0.3 million for the year ended December 31, 2023.
Research and development expenses as a percentage of revenue increased 0.2% as compared to the year ended December 31, 2024. 57 Interest and Other Income (Expense), Net For the year ended December 31, 2025 2024 $ change (In thousands, except percentages) Interest income (expense), net $ 2,403 $ 508 $ 1,895 Other income (expense), net 576 (226) 802 Interest and other income (expense), net $ 2,979 $ 282 $ 2,697 Interest and other income (expense), net was net income of $3.0 million for the year ended December 31, 2025, as compared to net expense of $0.3 million for the year ended December 31, 2024.
Restructuring Expenses For the year ended December 31, 2024 2023 $ change % change (In thousands, except percentages) Restructuring $ — $ 2,205 $ (2,205) 100.0 % Restructuring expenses were $2.2 million for the year ended December 31, 2023. Restructuring expenses are one of the elements of the Transformation Initiative.
Restructuring Expenses For the year ended December 31, 2025 2024 $ change % change (In thousands, except percentages) Restructuring $ 4,159 $ — $ 4,159 100.0 % Restructuring expenses are one of the elements of Powering Honest Growth.
This includes the ongoing benefit of pricing increases across the majority of our product portfolio in 2022 and 2023. 2) Margin Enhancement • Focusing our resources on North America, which included the exit of our low-margin business in Europe and Asia. • Exiting low-margin elements of the cleaning and sanitization business in 2023. • Executing an inventory, or stock-keeping unit (“SKU”), rationalization program in 2023. • Re-directing resources to accelerate cost savings, including optimization of our contract manufacturing strategies, reduced shipping and logistic costs, and product costs. • Realigning resources to reflect the prioritization of higher-margin opportunities, including strategic shift away from our lower margin channels, including our direct-to-consumer (“DTC”) business . 3) Operating Discipline • Focusing on improving our executional excellence in how we operate as an enterprise. • Building a culture that emphasizes returns across growth drivers, including marketing, trade promotion, and innovation. • Managing working capital including the reduction of inventory.
We expect to continue driving benefits from the three Transformation Pillars of Brand Maximization, Margin Enhancement, and Operating Discipline: 1) Brand Maximization • Leveraging the strength of the Honest brand to drive growth through greater availability, expanded household penetration, product innovation, margin-accretive products, and marketing effectiveness. • Pricing strategy as a driver of revenue is also a component of Brand Maximization. 2) Margin Enhancement • Focusing our resources on the United States, which included the exit of our low-margin products in Europe and Asia in 2023 and, most recently, Canada in 2025. • Exiting low-margin elements of cleaning and sanitization products in 2023 and apparel in 2025. • Executing an inventory, or stock-keeping unit (“SKU”), rationalization program in 2023. • Re-directing resources to accelerate cost savings, including optimization of our contract manufacturing strategies, optimization of our supply chain footprint and inventory management, along with leveraging technology to improve systems, reduced shipping and logistic costs, and product costs. • Realigning resources to reflect the prioritization of higher-margin opportunities, including strategic shift away from our lower margin channels, including exiting our direct-to-consumer (“DTC”) channel in 2025 . 3) Operating Discipline • Focusing on improving our executional excellence in how we operate as an enterprise. • Building a culture that emphasizes returns across growth drivers, including marketing, trade promotion, and innovation. • Managing working capital including the reduction of inventory. • Rightsizing selling and general and administrative costs.
Research and Development Research and development expenses consist primarily of personnel-related expenses for our research and development team. Research and development expenses also include costs incurred for the development of new products, improvement in the quality of existing products and the development and implementation of new technologies to enhance the quality and value of products.
Research and development expenses also include costs incurred for the development of new products, improvement in the quality of existing products and the development and implementation of new technologies to enhance the quality and value of products. This includes the expense related to claims and clinical trials as well as formulation and packaging testing.
We are also committed to bringing our Honest Standard to new products where we believe there is a need for a higher standard for clean personal care. Overall Macro Trends We have strategically positioned ourselves to benefit from several macro trends related to changes in consumer behavior.
We are also committed to bringing our Honest Standard to new products where we believe there is a need for a higher standard for clean personal care. Overall Macro Trends We believe consumers’ increasing interest in cleanly-designed products and purpose-driven companies has contributed to higher demand for certain products, which we believe we are strategically positioned to benefit from.
The increase in retail customer revenue is primarily due to an increase in wipes revenue of $22.6 million, an increase in baby apparel revenue of $18.8 million and an increase in baby personal care revenue of $6.2 million, partially offset by a decline in adult facial care, including skin and color cosmetics, revenue of $4.5 million.
The increase in retail customer revenue is primarily due to an increase in wipes revenue of $27.6 million and an increase in baby personal care revenue of $6.7 million, partially offset by a decline in diaper revenue of $14.4 million primarily related to distribution losses, the lapping of certain retailer promotional events and changes in consumer shopping behavior, and a decline in adult facial care (including skin care and cosmetics) of $5.7 million.
(2) Includes sign-on bonus, relocation, legal and recruiting costs related to the appointment of our CEO, as well as separation costs related to the termination of our former founder and CCO and former CFO. (3) See Note 15 “Restructuring” in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for items included in restructuring expense.
For the year ended December 31, 2024, this includes separation costs related to the exit of our former founder and Chief Creative Officer. (2) See Note 15 “Restructuring” in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for items included in restructuring-related costs.
Marketing Expenses For the year ended December 31, 2024 2023 $ change % change (In thousands, except percentages) Marketing $ 45,093 $ 36,440 $ 8,653 23.7 % Marketing expenses were $45.1 million for the year ended December 31, 2024, as compared to $36.4 million for the year ended December 31, 2023.
Marketing Expenses For the year ended December 31, 2025 2024 $ change % change (In thousands, except percentages) Marketing $ 51,200 $ 45,093 $ 6,107 13.5 % Marketing expenses were $51.2 million for the year ended December 31, 2025, as compared to $45.1 million for the year ended December 31, 2024.
Results of Operations The following table sets forth our consolidated statements of comprehensive loss data for each of the periods indicated: For the year ended December 31, 2024 2023 (In thousands) Revenue $ 378,340 $ 344,365 Cost of revenue 233,683 243,833 Gross profit 144,657 100,532 Operating expenses Selling, general and administrative (1) 99,044 94,582 Marketing 45,093 36,440 Restructuring — 2,205 Research and development (1) 6,851 6,214 Total operating expenses 150,988 139,441 Operating loss (6,331) (38,909) Interest and other income (expense), net 282 (254) Loss before provision for income taxes (6,049) (39,163) Income tax provision 75 75 Net loss $ (6,124) $ (39,238) ______________ (1) Includes stock-based compensation expense as follows: For the year ended December 31, 2024 2023 (In thousands) Selling, general and administrative $ 15,105 $ 15,465 Research and development 570 339 Total $ 15,675 $ 15,804 57 The following table sets forth our consolidated statements of comprehensive loss data expressed as a percentage of revenue*: For the year ended December 31, 2024 2023 (as a percentage of revenue) Revenue 100.0 % 100.0 % Cost of revenue 61.8 70.8 Gross profit 38.2 29.2 Operating expenses Selling, general and administrative 26.2 27.5 Marketing 11.9 10.6 Restructuring — 0.6 Research and development 1.8 1.8 Total operating expenses 39.9 40.5 Operating loss (1.7) (11.3) Interest and other income (expense), net 0.1 (0.1) Loss before provision for income taxes (1.6) (11.4) Income tax provision — — Net loss (1.6) % (11.4) % * Amounts may not sum due to rounding.
We maintain a full valuation allowance for our federal and state deferred tax assets, including net operating loss carryforwards, as we have concluded that it is not more likely than not that the deferred tax assets will be realized. 54 Results of Operations The following table sets forth our consolidated statements of comprehensive loss data for each of the periods indicated: For the year ended December 31, 2025 2024 (In thousands) Revenue $ 371,317 $ 378,340 Cost of revenue 247,562 233,683 Gross profit 123,755 144,657 Operating expenses Selling, general and administrative (1) 79,510 99,044 Marketing 51,200 45,093 Restructuring 4,159 — Research and development (1) 7,347 6,851 Total operating expenses 142,216 150,988 Operating loss (18,461) (6,331) Interest and other income (expense), net 2,979 282 Loss before provision for income taxes (15,482) (6,049) Income tax provision 204 75 Net loss $ (15,686) $ (6,124) ______________ (1) Includes stock-based compensation expense as follows: For the year ended December 31, 2025 2024 (In thousands) Selling, general and administrative $ 9,734 $ 15,105 Research and development 778 570 Total $ 10,512 $ 15,675 55 The following table sets forth our consolidated statements of comprehensive loss data expressed as a percentage of revenue*: For the year ended December 31, 2025 2024 (as a percentage of revenue) Revenue 100.0 % 100.0 % Cost of revenue 66.7 61.8 Gross profit 33.3 38.2 Operating expenses Selling, general and administrative 21.4 26.2 Marketing 13.8 11.9 Restructuring 1.1 — Research and development 2.0 1.8 Total operating expenses 38.3 39.9 Operating loss (5.0) (1.7) Interest and other income (expense), net 0.8 0.1 Loss before provision for income taxes (4.2) (1.6) Income tax provision 0.1 — Net loss (4.2) % (1.6) % * Amounts may not sum due to rounding.
Subscriptions are cancellable at any time without penalty, and no amounts are collected from the consumer until products are shipped. Revenue is recognized when transfer of control to the consumer takes place, which is when the product is delivered to the carrier. Sales taxes collected from consumers are accounted for on a net basis and are excluded from revenue.
Revenue was recognized when transfer of control to the consumer took place, which is when the product was delivered to the carrier. Sales taxes collected from consumers were accounted for on a net basis and were excluded from revenue. Consumers could also purchase gift cards, which were recorded as deferred revenue at the time of purchase.
Cost of Revenue and Gross Profit For the year ended December 31, 2024 2023 $ change % change (In thousands, except percentages) Cost of revenue $ 233,683 $ 243,833 $ (10,150) (4.2) % Gross profit $ 144,657 $ 100,532 $ 44,125 43.9 % Cost of revenue was $233.7 million for the year ended December 31, 2024, as compared to $243.8 million for the year ended December 31, 2023.
Cost of Revenue and Gross Profit For the year ended December 31, 2025 2024 $ change % change (In thousands, except percentages) Cost of revenue $ 247,562 $ 233,683 $ 13,879 5.9 % Gross profit $ 123,755 $ 144,657 $ (20,902) (14.4) % Cost of revenue was $247.6 million for the year ended December 31, 2025, as compared to $233.7 million for the year ended December 31, 2024.
Excess and obsolete inventory reductions are determined based on assumptions about future demand and sales prices, estimates of the impact of competition, and the age of inventory.
Excess and obsolete inventory reductions are determined based on assumptions about future demand and sales prices, estimates of the impact of competition, and the age of inventory. If actual conditions are less favorable than those previously estimated by management, additional inventory write-downs could be required.
We expect our foreign currency gains and losses to be immaterial in 56 future periods but continue to fluctuate due to changes in both the volume of foreign currency transactions and foreign currency exchange rates. Income Tax Provision We are subject to federal and state income taxes in the United States.
Other income (expense), net consists of our foreign currency exchange gains, losses relating to transactions denominated in currencies other than the U.S. dollar and contingent gains. We expect our foreign currency gains and losses to be immaterial in future periods but continue to fluctuate due to changes in both the volume of foreign currency transactions and foreign currency exchange rates.
Payment terms vary among the retail and third-party ecommerce customers although terms generally include a requirement of payment within 30 to 45 days of product shipment. Direct-to-Consumer For direct sales to the consumer through our website, our performance obligation consists of the sale of finished goods to the consumer.
After the completion of the performance obligation, we have the right to consideration as outlined in the contract. Payment terms vary among the retail and third-party ecommerce customers although terms generally include a requirement of payment within 30 to 45 days of product shipment. Direct-to-Consumer Effective December 31, 2025, we no longer sell direct-to-consumer through the Company’s website.
In order to increase the share of wallet of our existing consumers and to attract new consumers, our brand has to maintain its trustworthiness and authenticity.
Ability to Grow Our Brand Awareness Our brand is integral to the growth of our business and is essential to our ability to engage and stay connected with the growing clean products consumer market. In order to increase the share of wallet of our existing consumers and to attract new consumers, our brand has to maintain its trustworthiness and authenticity.
Revenue is recognized when control of the promised goods is transferred to those customers at time of shipment or delivery, depending on the contract terms. After the completion of the performance obligation, we have the right to consideration as outlined in the contract.
Retail and Third-Party Ecommerce For retail and third-party ecommerce sales, our performance obligation consists of the sale of finished goods to retailers and third-party ecommerce customers. Revenue is recognized when control of the promised goods is transferred to those customers at time of shipment or delivery, depending on the contract terms.
We expect research and development expenses to increase in absolute dollars as we invest in the enhancement of our product offerings through innovation and the introduction of new adjacent product categories. Interest and Other Income (Expense), Net Interest income consists primarily of interest income earned on our short-term investments and our cash and cash equivalents balances.
Research and development expenses also include allocated depreciation and amortization and overhead costs. We expect research and development expenses to increase in absolute dollars as we invest in the enhancement of our product offerings through innovation and the introduction of new adjacent product categories.
Our revenue is recognized net of allowances for returns, discounts, credits and any taxes collected from customers.
Effective December 31, 2025, we no longer sell direct-to-consumer through the Company’s website. Our revenue is recognized net of allowances for returns, discounts, credits and any taxes collected from customers.
For the year ended December 31, 2024, we recorded an inventory write-down of $0.8 million, inclusive of overhead costs and tariffs, related to the termination of the Likeness Agreement, which is included in cost of revenue on the consolidated statements of comprehensive loss.
In connection with Powering Honest Growth, we recorded a discrete apparel inventory write-down of $15.9 million, inclusive of overhead costs and tariffs, related to the termination of our Supplier Services Agreement (defined below), which is included in cost of revenue on the consolidated statements of comprehensive loss.
The increase of $34.0 million, or 9.9%, was primarily due to an increase in retail customer revenue of $45.0 million, partially offset by a decrease in DTC revenue of $11.0 million.
The decrease of $7.0 million, or 1.9%, was primarily due to the discrete exits related to Powering Honest Growth of $21.9 million (inclusive of a decrease in DTC revenue of $13.2 million, a decrease in apparel revenue of $7.7 million and a decrease in Canada revenue of $1.0 million), partially offset by an increase in retail customer revenue (excluding apparel and Canada revenue) of $14.9 million.
With the higher costs of shipping and fulfillment activities related to our direct-to-consumer (“DTC”) business and other related costs, we will continue to shift our focus and investments towards more efficient and scalable distribution models with our current retail and digital customers.
Due to higher costs of shipping and fulfillment activities related to our DTC channel and other related costs, we no longer utilize Honest.com as a shipping and fulfillment channel or sell products through this channel as of December 31, 2025 and instead continue to shift our focus and investments towards more efficient and scalable distribution models with our current retail and digital customers.
Revenue Recognition We generate revenue through the sale of our products direct-to-consumer through the Company’s website, retail and third-party ecommerce customers, who resell the Company’s products through traditional brick and mortar retailers, who may also resell the Company’s products through their own online platforms.
Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. 61 Revenue Recognition We generate revenue through the sale of our products to retailers and third-party ecommerce customers, who resell the Company’s products through traditional brick and mortar retailers, who may also resell the Company’s products through their own online platforms.
In connection with the termination of the Likeness Agreement with Jessica Warren, as part of Ms. Warren's departure from her Chief Creative Officer position, after April 4, 2025 we are prohibited from selling existing inventory that uses certain specified licensed intellectual property on its packaging, which resulted in inventory write-offs and we anticipate will result in future inventory write-offs.
Alba's departure from her Chief Creative Officer position, after April 4, 2025 we have been prohibited from selling inventory that uses certain specified licensed intellectual property on its packaging, which resulted in additional immaterial inventory write-offs during the year ended December 31, 2025.
In addition, any loss of the relationship with Butterblu may negatively impact sales of our baby apparel, which will adversely affect our results of operations. Components of Results of Operations Revenue We generate revenue through the sale of our products through our leading retailers and their websites, third-party ecommerce sites and Honest.com.
In addition, the loss of the relationship with Butterblu negatively impacted apparel revenue and will negatively impact apparel revenue in the future, which may adversely affect our results of operations.

… 92 more changes not shown on this page.

Other HNST 10-K year-over-year comparisons