The Honest Company, Inc.

What they do

Founded in 2012, Honest develops and sells cleanly-formulated, sustainably-designed personal care products spanning wipes, personal care, diapers and beauty. Products reach consumers mainly through retail partnerships with Amazon, Target and Walmart as well as other brick-and-mortar and online retailers. As of December 31, 2025, the company stopped using Honest.com as a shipping and fulfillment channel, keeping it as a brand and product education site that directs shoppers to retailers.

Revenue drivers

• Wipes — Wipes are a growth platform cited as driving the second quarter 2026 Organic Revenue increase of 6.7%; the portfolio includes all-purpose, flushable, sanitizing and make-up remover wipes plus Clean Conscious compostable plant-based wipes.
• Personal care — Personal care products for babies and adults, including adult facial care, are the other stated growth driver behind Organic Revenue growth; some products carry National Eczema Association certification.
• Diapers — Diapers use responsibly sourced plant-based fluff pulp and are a reported drag on revenue, cited as declining in the second quarter 2026 and offsetting wipes and personal care growth.
• Exited categories and channels — Under Powering Honest Growth the company is exiting lower-margin, non-strategic categories and channels including Honest.com fulfillment, apparel as a seller of merchandise, and retail and online stores in Canada, which reduced reported second quarter 2026 revenue.

Recent performance

Second quarter 2026 revenue was $83.3 million, down 10.9% year over year, while Organic Revenue rose 6.7% to $80.2 million. Gross margin was 48.4%, up 800 bps, helped by tariff refunds, favorable mix and strategic exits; Underlying Adjusted Gross Margin was 43.8%, up 340 bps. Net income was $10.7 million, up $6.8 million, Underlying Adjusted EBITDA was $7.8 million at a 9.8% margin, and cash and equivalents were $105.9 million. Tracked channel consumption grew 7.7% versus 2.3% for comparative categories. Full year 2025 revenue was $371.3 million with a net loss of $15.7 million, and operating cash flow was $15.1 million.

Strategy

The company is executing Transformation 2.0: Powering Honest Growth, approved by the Board in October 2025, which builds on the earlier Transformation Pillars of Brand Maximization, Margin Enhancement and Operating Discipline. It is exiting lower-margin categories and channels including Honest.com fulfillment, apparel as a seller of merchandise, and Canadian retail and online stores, while rightsizing SG&A and pursuing supply chain efficiencies. Costs are expected to be approximately $28.0 million to $31.0 million through the first quarter of 2027, with about $26.3 million recognized to date. Annualized benefits are projected at roughly $14.0 million to $17.0 million, with cash costs of about $10.0 million to $13.0 million across 2026 and 2027. Growth efforts focus on expanding physical and digital availability through more stores, doors, shelves and facings plus data-driven marketing.

Risks

• Customer concentration — The company depends on major retail and third-party ecommerce customers such as Amazon, Target and Walmart, and consolidation or loss of a significant customer has hurt and could again hurt sales and profitability.
• Restructuring execution — The Transformation Initiative and Powering Honest Growth could have short and long-term adverse effects, cost more than expected, and may not deliver the operational or financial benefits targeted.
• Forecast accuracy — The company states it may be unable to accurately forecast revenue, gross margin or operating expenses and appropriately plan expenses.
• Growth management — Past growth has strained management, financial, operational and technological resources, and the company may fail to effectively manage future growth or evaluate future prospects.

Outlook

Management raised its full year 2026 financial outlook, citing accelerated Organic Revenue growth of 7%, consumption growth of nearly 8%, and record underlying margins in the second quarter. It expects annualized benefits of approximately $14.0 million to $17.0 million from Powering Honest Growth, with benefits already beginning in 2026. Restructuring costs of roughly $28.0 million to $31.0 million are expected to be recognized through the first quarter of 2027.