The Honest Company, Inc.

Good day and thank you for standing by. Welcome to the Honest Company first quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, to Sung Kim, Vice President, Finance and Strategy. Thank you, please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us for our first quarter fiscal year 2021 conference call. Joining me today are Nick Flores, Chief Executive Officer, and Kelly Kennedy, Chief Financial Officer. Before we start, I would like to remind you of our legal disclaimer that we will make certain statements today that are forward-looking within the meaning of the federal securities law, including statements about the outlook of our business and other matters referenced in our earnings release issue today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings as well as our earnings release issued today for a more detailed description of the risk factors that may affect our results. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Also, During this call, we may discuss non-GAAP financial measures, which adjust our GAAP results to eliminate the impact of certain items. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in today's financial results earnings release. A live broadcast of this call is also available on the investor relations section of our website at investors.honest.com. With that, I'll turn the call over to Nick.

Thanks, An. Good afternoon, everyone. We're excited to speak with you on our first call as a public company. Honest is dedicated to providing safe, clean, and effective products to consumers around the world, and becoming a public company represented a significant milestone as it further empowered our team to drive our mission of inspiring everyone to love living consciously. I want to thank the entire Honest organization for their dedication and passion to our business and mission. Their contributions led to our successful offering and position as well to execute our strategy going forward. As you saw in our earnings release, we're off to a strong start with double digit top line growth and solid progress against our strategic initiatives. These initiatives focus on broadening awareness, introducing breakthrough product innovation, increasing our digital and retail presence, and continuing our commitment to ESG. Before I share the highlights of the quarter, for those new to The Honest Story, I'll take a moment and outline what makes our company uniquely positioned to drive good growth in the near and long term. First and foremost, we're a digitally native mission-driven brand, We're a leading lifestyle brand in clean baby, beauty, and personal care with top rankings across three key loyalty drivers in our product categories, better for you credibility, expressive brand personality, and functional excellence. Our products have garnered strong ratings and reviews across categories with industry-leading NPS scores while formulating according to our honest standard and no list. avoiding over 2,500 chemicals and materials we choose not to use. Our brand promises to always strive to provide clean, sustainable, effective, and thoughtfully designed products for our consumers. Second, we're focused on disrupting large consumer categories. The total addressable market for our categories of diapers and wipes, skin and personal care, and household and wellness is estimated to be $130 billion, with $17 billion representing the clean and natural market in those categories. Importantly, the clean and natural market is projected to grow in the high single digits through 2025, six times the rate of the conventional market, giving us a unique advantage. As we create products in our attractive consumer categories, we're focused on three key differentiators to give us a competitive advantage. Number one, we're focused on driving marketing innovation to increase consumer awareness of our products. Since inception, we've grown our brand and deepened our consumer relationships through our content, community, and commerce strategy as we educate and entertain and build long-lasting consumer connections with over 43 million followers on social media. These relationships with our consumers inform our product development and and allow us to move faster to bring new and improved products to market. Number two, we have built a high-performance in-house product development team with a proven track record of bringing breakthrough, award-winning products to market. This capability has allowed us to diversify our revenue across product categories and to drive a creative innovation through our cost-divation process. And number three, our integrated omnichannel approach drives discovery and accessibility and allows us to efficiently scale our business while making us agnostic to the channel our consumer chooses to shop. In fact, our sales are balanced with 55% transacted digitally and 45% at retail in 2020. Now let's pivot to our Q1 2021 results. Our Q1 accomplishments reflect the continued execution of our strategy against these key priorities. Number one, starting with marketing innovation, we continue to expand brand awareness and consumer touch points through the use of key marketing campaigns that leverage our content, community, and commerce strategy. By inspiring authentic dialogue and creating lasting connections, we were able to draw 42% growth in our skin and personal care business. This is a strategic focus for us as more than one-third of new honest.com consumers enter through our skin and personal care products. Let me highlight one key campaign that we launched in Q1. Our morning routine campaign featured Jessica Alba showcasing a variety of morning routines for the whole family. emphasizing the versatility of our personal care offering through multiple life stages. The content underscored the breadth of personal care product line by utilizing a solution set of four hero personal care items, our shampoo and body wash, conditioner, face and body lotion, and conditioning detangler. We engaged our honest community by launching a compelling and comprehensive campaign that utilized paid media and was supported by strategic influencer gifting and press features in premium publications. The campaign had a total reach of over 90 million impressions across social media, influencer, press, and paid media. According to our consumer engagement strategy, we created unique solution-oriented content drove advocacy for our honest community, and ultimately generated commerce through unique honest.com solution sets around the morning routine campaign. This is just one example of how we leaned into marketing innovation to drive strategic growth in the quarter through incremental marketing investment. Second, we introduced product innovation with strong consumer response. During the quarter, we introduced breakthrough innovation in diapers and wipes. We launched our Clean Conscious Diaper that delivers improvements in performance, sustainability, and margin. With regards to performance, our new diaper features advanced leak protection, a new wetness indicator, and product features designed for every stage of a child's development. In addition to the improved performance features, the Clean Conscious diapers also are most sustainable diaper yet. Our diapers continue to feature sustainably harvested, totally chlorine-free fluff pulp, and a 100% plant-based back sheet. We were able to further improve the sustainability and environmental impact of this offering by moving to a more efficient diaper design that uses less material in the diaper and 100% post-consumer recycled cardboard in our diaper boxes. Finally, in addition to improved performance and sustainability, we were very proud to achieve improved margins on our diaper due to our more efficient diaper design. Early consumer and marketplace response has been strong. Over the course of the year, we expect to release a consistent cadence of new product innovation. Third, we're pleased to deliver growth across both our digital and retail channels as our integrated omni-channel strategy continues to accelerate digital and retail share of shelf. This quarter, we delivered double-digit revenue growth on top of 36% growth in Q1 2020, Our two-year stock is 48% growth. Overall, we have seen increased consumer willingness to get back into stores as consumer behavior in response to the COVID-19 pandemic changes and have seen a channel shift and an acceleration in revenue growth within our retail channel. We're well-positioned with our omnichannel strategy to capture this growth as evidenced by our retail growth in Q1 2021. Significant white space opportunities still exist to expand our on-shelf presence and the depths of our product offering with new and existing retail partners. For example, in Q1 2021, we increased both our door penetration and our assortment on beauty at Target, increasing from roughly 900 stores to over 1,200 stores, with skincare and color now sitting in an integrated shelf set in the beauty aisle. In total, we added approximately 10 additional items to our core target beauty set. Before I turn it over to Kelly, I wanted to take a moment to reiterate our commitment to ESG, which has been part of our DNA since our founding. We have a deep sense of purpose and infuse the ethical values of transparency, sustainability, diversity, and inclusion in all that we do. From developing products designed to be safe to working hand-in-hand with our charity partners to serve those in need to embracing diversity and inclusion, we're on a mission to create real and meaningful impact. In the first quarter, we launched several breakthrough initiatives that have deepened our commitment to offering environmentally friendly products. In addition to the launch of our Clean Conscious Diaper, we were also proud to launch our Conscious Cleaning Essentials. a sustainable solution that seeks to reduce waste without compromising on effectiveness. According to our estimates, approximately 600 million household plastic bottles may end up in a landfill each year. As part of our effort to reduce the amount of single-use plastic thrown away each year, the essentials collection features reusable spray top bottles along with cleaning concentrates for bathroom, glass, and multi-surface cleaning. In addition to reducing plastic waste, the lightweight concentrate pods cut down on the amount of water shipped around the country, providing us with an opportunity to lower our carbon footprint. Consumer response has been strong, and we're inspired by the impact that simple, sustainable changes can make. Regarding social impact, we're very proud of our partnership with our charitable partner, Baby to Baby. Since inception, we've now donated over 25 million products, making an impact with individuals and families in need. As it relates to our governance efforts, in May, we're pleased to welcome James White and Susan Gentile to our Board of Directors. Mr. White brings nearly 30 years of professional experience in the CPG and retail industries, and Ms. Gentile brings more than 25 years of experience in the finance sector across industries. The background they bring to Honest will help ensure we continue to reflect the needs and wants of our consumers and the communities we serve in all that we do. With these two new additions, we are very proud of a board that is 56% people of color and 33% women. In summary, we believe we have built the foundation for Honest to continue to grow as a leading clean and natural wellness brand. We continue to capitalize on our strong content, community, and commerce platform to drive good growth across product categories and all consumer touch points. We are pleased with our strong start to the year and believe we are well positioned to continue to advance our strategic growth plan. I'd like to turn the call over to Kelly Kennedy, our Chief Financial Officer, to review our first quarter results in more detail.