The Honest Company, Inc.

Q1 2021 Earnings Conference Call


spk_0: they a break you put that it by welcome to the the other company first quarter two thousand and twenty one and in compact call at the time all good but not a little only mode after the pick up at the patient that will be a question an apathetic the ask a question during the test that you would be depressed got one on your telephone please be advised that that a red carpet has been recorded if you require any but i didn't sleep by start zero out now like the have a conference over to if i speak a great long can vice president finance and strategy thank you please go ahead
spk_1: and you can afternoon everyone thank you for joining us or fourth quarter that we're twenty twenty one cop info so you need today or the was chief executive officer and kelly kennedy chief financial officer the boy darn i like to remind you of are legal disclaimer that we will make them statement today that are bored looking within the meaning of the federal security one including statement about the outlook of our business and other matters reference in earnings release issued today these forward looking statements and while the number of bread and uncertainty that can cause actual results to differ materially please a burden for had the be filing as well as their earnings really issue today for a more detailed description of the risk factors that may have that are those please also note that these forward looking statements reflect hard thing is only ever the day of the call and we undertake no obligation to revive are publicly release the result of any revision to the for little thing in light of new information or future been also during the cold related got nongovernmental measure which the john or gap result to eliminate the impact of their nine of you'll find additional information regarding the non governmental measure and a reconciliation of these non gaap to get measured in today's financial results earnings really allied brought up of the call in all the available on the investor release infection or what by adding that been on in stockholm with that on from the called over to nick let's on good afternoon everyone we're excited to speak with you on our first call a public company honest is dedicated to providing safe clean effect of products to consumers around the world and becoming a public company represented as significant milestone as it further empowered or t to driver mission and of inspiring everyone loved living consciously i wanna thank the entire honest organization for their dedication and passion to our business and mission their contributions lead to are successful offering and position as well to execute our strategy going forward
spk_2: and you saw an earnings release we're off to a strong start with double digit top line growth and solid progress against our strategic initiatives
spk_1: these initiatives focus on broadening awareness introducing grapefruit product innovation increasing our digital and reach help residents and continuing our commitment to it's cheap before sure the highlights the corner for those new to the on a story i'll take a moment not one what makes our company uniquely positioned to drive good growth in the near and long term first and foremost where did you a native mission to and brand where a leading lifestyle brand and clean baby beauty impersonal care with top rankings across three team loyalty drivers and 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 mps course while formulating according to our on a standard and know list avoiding over twenty five hundred chemicals materials which is not to use our brand promises top always strive to provide clean sustainable effective in thoughtfully design products for consumers
spk_3: second
spk_1: we're focus on disrupting large consumer categories the total adjustable market for categories of diapers and wipes skin impersonal karen household and this is estimated to be a hundred and thirty billion with seventeen billion representing the clean and natural market in those categories importantly the clean a natural market is projected to grow in the high single digits three twenty twenty five six times the rate of the conventional market giving us the unique advantage as we create products are attractive consumer categories where focused on three key differentiator just to give us a competitive advantage number one were focus on driving marketing innovation to crease consumer awareness of our products since inception we brought our brand in deep in our consumer relationships through our content community and commerce strategy as we educate and entertain and bill long lasting consumer connections
spk_2: with over forty three million followers on social media
spk_1: these relationships with our consumers and former product development and allow us to move faster to bring new improved products to market
spk_4: number two
spk_1: 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 as allowed us to diversify our revenue across prada categories and to drive a creative innovation through our past evasion process and number three are integrated army channel proche drive discovery and accessibility in allows us to efficiently scale our business while making us ignostic to the channel or consumer chooses to shop in fact or cells are balanced with fifty five percent transacted digitally and forty five percent at retail and twenty twenty now let's put it towards you won twenty twenty one results are to accomplishments reflect the continued execution of our strategy against these key priorities number one starting with marketing innovation we continue to expand brand awareness consumer touch points to the use a t marketing campaigns that leverage our content needed in commerce private plane inspiring authentic dialogue in creating lasting connections were able to drive forty two percent growth in our skin impersonal care of business this is a strategic focus for us as more than one third of new honest dot com consumers enter through or skin and personal care products when you highlight once you campaign that we launched in she won our morning routine campaign feature jessica alba showcasing a variety of morning routines for the whole family emphasizing the versatility of our personal care offering through multiple white status the content underscored the brought of personal care public line by utilizing a solution sat afford hero personal care items or shampoo and body wash conditioner face and body lotion and conditioning the tingler we engaged are honest community by watching it coming in comprehensive campaign you know as paid media and was supported by strategic and points or gifting and features in bringing and publications the campaign had a total reach of over ninety million impressions across social media influence or present a media gordo our consumer gauge been strategy we created you solution oriented content drug advocacy for on his community and ultimately generated commerce for unique honest dotcom solution science around the morning routine campaign this is just one example of how we leaned into marketing innovation to drive for teacher growth in that order for incremental marketing investment
spk_2: second we introduce product innovation with strong consumer response during the quarter reintroduce breakthrough innovation in diapers and wipes we launched our clean conscience diaper that delivers improvements in performance
spk_1: sustainability and margin with regards to performance or new diaper features advanced wheat production a new what it's indicator and product features designed for every stage of a child development in addition to the improve performance features the clean conscience diapers also or most sustainable diaper yet our diapers continue to feature sustainably harvested totally corrine free flop pulp and a one hundred percent plant based bakshi we were able to further improve the sustainability and environmental impact of this offering by moving to a more efficient diaper design the uses less material in the diaper and one hundred percent posts consumer recycled cardboard in our paper boxes finally in addition to improve performance and sustainability are very proud achieve improve margins on her diaper do two or more efficient fiber 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 are pleased dilemma brother probe past other digital and retail channels as are integrated ami channel strategy continues to accelerate digital and retail share of shelf this quarter we deliver double digit revenue growth on top of thirty six percent growth and que one twenty twenty are to your stack is forty eight percent friends
spk_5: overall
spk_1: we have seen increase consumer willingness to get back into stores as consumer behavior in response club in nineteen pandemic changes and have seen a channel shift in an acceleration in revenue growth within our reach health channel we're well position with our army channel strategy to capture this breath as evidenced by our reach a route and que one twenty twenty one significant white space opportunity still exist expand our on shop presence and the depths of our product offering with new and existing retail partners for example in que one twenty twenty one we increase both are toward penetration and are sort been on beauty and target increasing from roughly nine hundred stores to over twelve hundred stores with skincare and color now sitting in an integral it shall set in the media in total we had at approximately ten additional items to work or target beauty set i'm fortunate of kelly and want to take a moment to reiterate our commitment to as cheap 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 and all that we do from developing products designed to be safe to working hand in hand with archery partners to serve doesn't need to breaking diversity inclusion were emissions are great real and meaningful impact in the first quarter we launched several breaker initiatives that deepen our commitment to offering environmentally friendly products in addition to the launch of our claim conscious diaper we were also proud to launch are conscious cleaning essentials a sustainable solution that seeks to reduce waste without compromising on effectiveness according to our estimates approximately six hundred 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 run a wage here the essentials collection peters reusable strict sprayed top models along with cleaning concentrates for bathroom glass and serve as cleaning in addition to reducing plastic waste the light we concentrate plods cut down on the mountain water shipped around the country providing us with an opportunity to lower our carbon footprint consumer response has been strong and were inspired by the impact that simple sustainable changes can make regarding social impact very proud of our partnership with archer will partner baby the baby since inception we've now donated over twenty five million products making an impact with individuals and families in need as it relates to or governance operates in may replace to welcome james white and seasons until late or board of directors mr white brings nearly thirty years of professional experience in the cpg retail industries emissions really brings more than twenty five years of experience in the finance
spk_2: sector across industries
spk_1: the back me bring to honest will help ensure we continue to reflect the needs and wants of our consumers and the communities we serve and all that we do with these two new additions we're very proud of aboard that is fifty six percent people of color and thirty three percent women in summary we believe we have built the foundation for on us to continue to grow as a reading clean and natural long as brand we continue to capitalize on are strong contact community and commerce platform to drive good growth across product categories and all consumer touch points we are pleased with are strong start to the here and believe are well positioned to continue to advance or strategic or the plan i like to turn the call over to kelly kennedy our chief financial officer to run yorkers are the results in more detail
spk_6: basically met and welcome everyone and delighted with the keep trying and share our strong art for the fiscal year a cheating a thing of highest revenue quarter the company history reflecting double digit revenue growth diverted the first quarter twenty twenty it's proponents reflect upon ever met his arrival of ram and a successful implementation of our city get priority by article a walk into our financial results and he'd be writers and it were
spk_1: my remarks one that adjusted non gaap result
spk_6: you can find reconciliation able to get financial in our earnings really
spk_1: first quarter revenue told eighty one million a twelve percent increase over to the one twenty twenty admit highlighted isn't uncommon thirty six percent growth which represents two years that would prevent pop linebacker
spk_6: now diving to the key fighters by product added way
spk_1: charged with typewritten what
spk_6: the category decrease two percent as we transition to are clean conscience cipher and last week salaries and in diapers and white related to complete nineteen pnc building in the first quarter a twenty twenty of no type or growth with positive and key one behind our new i lines of an offset by the decrease in wasn't as we laugh consumer stock the here and key one twenty twenty eight hundred and something there for the last probably and invade sixteen or diaper business with up thirteen percent while the overall market that find one percent
spk_1: a personal care good forty two percent driven by failed on him from our incremental investment in digital marketing and expanded distribution with our retail partner
spk_6: we end up in meaningfully and marketing innovation behind our skin and personal care products you somebody innovative campaign that nick highlighted earlier
spk_1: and we were also able to withstand distribution point without a retail partners at a target during the first quarter we were able to reduce or legacy beauty inventory is us in a great position for the beauty we launch launching a into three a twenty twenty one
spk_6: obviously the features treat free packaging across the line while achieving significant margin encouragement
spk_1: original care thought strong road even as compared to the first quarter and twenty twenty when revenue grew sixty two percent where's that the first quarter of two thousand and nineteen
spk_6: i'll hold the well it's good fifty three percent fueled by or standardization and disinfecting products that we introduced in the second half of twenty one while we were still able to be significant growth in helpful and wellness we're starting to be helpful than retailers deep south thanet of a scientific that the price as more consumers to come back and eat it and returned to their pre the vaccine now for a result or channel
spk_1: he told channel revenue crete to percent to forty two point five million
spk_6: on a few years back faith that growth with twenty five percent
spk_1: we kill channel revenue increased twenty five percent to thirty eight point six million week to your stats from with eighty three for that
spk_6: i'll find out like me telegraph with aided by a strong me down in thor traffic as that and a little the earth increasingly returns and it's or something
spk_1: he also benefited from expanded distribution the sale of our existing beauty inventory as well as promotional and merchandising events with partners like target hopefully and retail versa gross profit increase two point six million to twenty eight point four million primarily due to increased rabbit as a percentage of revenue growth martin achieved and thirty five percent for the quarter this compares to thirty six percent include one of twenty twenty which benefited from the lower levels of trade them as retailers pulled back on events during the pandemic overall input costs are higher and he won a twenty twenty one vs t y twenty twenty including higher transportation and break cause given record levels of cost inflation is is a focus area for us and twenty twenty one we have a number consternation innocent wanting in twenty twenty one including a clean conscience diaper which launched think the one and are up cutting pvv states that launches into three we will continue to evaluate the input cost environment to ensure that our productivity plans are sufficient thought that current in inflation level total operating expenses increase seven point five million versus he wanted twenty twenty primarily driven by increasing doesn't support growth as well as increased cost of operating the public company we adopted an incremental five point five million in marketing and aren't the or the one twenty twenty as we supported the accelerated growth of our skin and personal therapists at the launch of our new clean conscience diaper and inducted in our upcoming innovation pipeline adjusted even after the first quarter of twenty twenty one was roughly break them
spk_6: the couple of items to do it on the balance sheet we ended a quarter in a healthy position with if the eight million a task restricted cash and short term investment with know that on balance sheet i just wanted to note that this is before the impact of the i feel proceeds which will be reflected in the second quarter as evidence fire double digit growth and he wanted twenty twenty one and or twenty twenty results we continue to feel good about our strategy and gross profit often something really strong and we continue to be extremely proud of our deep connection with consumers are award winning products and are on channel approach we believe these different leaders continue to position honest person that both now and into the future
spk_1: we want to reinforce or long term target first consistent double digit pipeline growth over the next few years
spk_6: that is ongoing gross margin expansion with a path to forty five for that long term and third improved either felt profitability with the long term target of twenty percent
spk_1: with that i'll turn the call over to the operator to begin mcewen a portion of the call
spk_0: thank you as a reminder to ask a question you really depressed or one on your telephone the with your your question please post the bounty due to the ever the time we ask that you plead limit yourself to one question and won't follow up at with you for further questions please thereby while week a barbecue and a roster i go up requests and comes from the lineout stuff would think the from jeffery we've got it
spk_7: thank you good afternoon everyone our question as a thunder business momentum if kill your neck you could talk a little bit about what you're thinking cute to that i think it would be helpful to to rationalize the lap to covert last year in the queue to quarter or anything we should be aware of in the base from a compare ability perspective
spk_6: that's are all pick that thank you for the question that and you know obviously think he wanted to be lot of momentum in the business
spk_1: in a we're seeing phrase you know the far with ability visibility the tracks on his data we we look at iraq
spk_6: and for really underlying the shift in something in a were here you'll be hearing a lot about a specific details of detail as as the economy first open and strengthen on and so this shift for off with kind of creating and volatility and your as an example you thought he was or retail business represented forty eight percent of our of our total business and he was
spk_1: one in twenty twenty one was a year that was forty three percent on and and while that would typically in of going to be volatile the or business and quarter to quarter on here this course between a benefit of what we're currently thing or business right now really and consumption l p thing shipments on the we do want to highlight kind of think about your business right now on that this could have a potentially material impact on the quarter back on it happening real real time you were in the where the little more quarter on is something that we're monitoring of we we have a significant digital of band that takes place at the end of a quarter and settle you know kind of a lot of our eyes than and and kind of visibility to i'm coming out of this event and are trend here you obviously we always manage burn on the long term underlying consumption remains really strong and we're not getting specific quarterly guided by certainly a trend that we want to give some of his ability to and and will be getting back together your not be able to share he had a lot more on about the business and kind of the result kind of of this at a major event that happened a bit of artwork
spk_7: okay that's good didn't nickel package a follow up question on beauty and skin care of eat at a lot about target of an illustration of the white space opportunity but that that category seems to be a real important power driver of the model for tackle up but about where you think you are in terms of the skew assortment brat opportunity to build out those for brand experience of like you talked about at target where are you with them of your other retail partners in i really have a thing that opportunity to grow that sleeve of the business
spk_1: yeah princeton for the question isn't the one in of the way we look at it is first and foremost you we're really pleased with the strength that were saying women for do experiences with it was on number two year olds over the digital perspective that you were good skin and the pollution there was olds and forty two percent growth and ritual down and beauty not were saying exhilaration within them sort of the business so we're seeing it as the a nice mix between little cosmetic in the cold or is filled with skin start was the surgical been out of here in california you know i want the newest or was it was with my mouse episodes were males more and more some are starting to see the consumer on start to gravitate up more and more to are mixed a people on the cosmetic as well as on the inside or we're seeing is from a distribution and minnesota and still point is in different retail so for example target assholes his own home is another example as well as our results internationally we do again do list last quarter resources to was about twenty three percent room
spk_2: quarter or worse is definitely the doubt that were driving around distribution and the digital his balls with physical skill and we're starting to see i see them to repeat and as my we see that the results his you ones as forty two percent has sixty three percent a year ago in as you know over hundred
spk_1: was percent on the stack basis so the lot of the opportunity still with a lot of good moments of his you look at the results coming out of few one in as good position as well when you think about the beauty restage which is gonna hit ensues reeves because as a reminder that's going to be not only from okay packaging perspective this hundred percent repackaging that we're thrilled about when they would have improvements around the business is already doing extremely well but also importantly new products we have a new daily defense collection of the introduces was a new washed into serums or initiative romances innovation perspective so
spk_8: a lot there and then problem with that it is roughly about eight hundred basis points of gross margin expansion has been to take place against an issue when you look at
spk_9: great thank you
spk_0: he said
spk_6: thank you i saw a next question comes from the line of when the mickelson from city we've got it
spk_1: thanks and actually kelly elena to go back and just just pure a little bit more about what you were just saying in that line of questioning about how consumption is outpacing shit man on and you got that big on digital promotion coming up at the end of the month so i'm just trying to understand are you
spk_6: you worried about having out of stock on is there a chance that you would know doubt promotion bike how's everything working from a supply chain just wanted to to really understand if there was the refs that either are at the time it up promotion or at the retail level bear with it's fans you couldn't sell the and
spk_10: a great friends i'm glad you asked the follow up when the it is not morning good inventory physician what we're seeing really is around this shift and we're seeing on a retail partner where they are shipment are not reflective of the underlying assumption sell in a we mentioned volatility can find the time you know
spk_6: from quarter to quarter we can see shit sometimes it goes in our favor sometimes because the other direction on and right now what we're seeing in the business is a civic to i'm kind of the shift between digital retail and one of our partners on essential leave me alone i'm managing your working capital
spk_1: that guy out at okay and that is not and a worry that gosh maybe they're gonna see to carry on his diapers or something like that there's nothing untoward or anything we should be worried about in terms of that relationship no i i would say this is an extremely to teach relationship and you know we had on you know be will be getting some great prominence ending i'm working with them on as well you know just behind the band an event that we've done kind of in past years but again we're leading into it i'm and we're really excited it's just that it's
spk_6: not represented an overall any the underlying on typically we've seen replenishment follow this event on and defining it's is at the end of our quarter for with time different than offended attacks understood okay i really appreciate that clarification that's very helpful and then begin or maybe for you neck i have question just about a competitive environment you know some of your competitors have announced price increases i'm on the baby care side a and you as me start to see those higher prices may be show up on
spk_11: on shelf over the next couple a months
spk_6: get impacts your pricing at all i mean obviously you're how premium price generally but the you intend to keep the same price gap i eat raise your prices as well or do you think that the more compelling proposition because the price gap would be a large if you don't raise prices just how do you think about sort of the up the last the city of demand for ah
spk_1: his diapers
spk_2: depending on what the competitive pricing environment is like thank you
spk_1: yeah think your wendy couple things on our number one i would think about it this way so the conscious diaper that we just introduced into one really started to hit the market kind of the second past ah of to one and you put it on marketing investment we put in about an incremental five million dollars of marketing order in really driven against a conscious diaper initiative is the walls or skin personal care businesses kind of benefit a disproportionately from that standpoint so by introducing out in the market with the features that we reference you know this is the most sustainable piper as we are cat you know the comparison vs kind of when we then it's with look to continue to improve our from an innovation perspective what was starting to see the market behind that investment in that new product against orally but kidding the markets it wasn't a see our share start to pick up my track perspective settle at the start of the order share certain this look at all outlet i arrived on lula data of the last four weeks or ushers it's not about a one point four and the diaper starting order it was sitting at about one point two so we like the fact that we're starting to in a see share sir to pick up and then importantly what we're seeing now is from a category perspective and kelly reference best in a we've seen of out over the last all weeks about thirteen percent growth purses the category declining at one percent so we liked the position that were in because coupled with that in the second part of the past and around input costs remember this initiative was also a cost of asians are not only a product improvement or us from an enemy asian perspective but we also picked up additional gross margin on this products so was a margin ah when for us also that second component they are referencing that we're looking at we understand that there are yeah some of these ah you know manufacturers have taken prize were closely monitoring know the input costs austin kind of that all chilly that sits in the market right now right now when you look at our plans we have sufficiency around productivity and this conservation that were driving both you know in our paper business in the second half it'll be our duty restage that i referenced earlier but it's one that we're taking a very close walk out ah right now
spk_12: like the fact that the conscious tiber at we've introduced it in our starting take a little bit a share with got a lot of momentum from that standpoint what's gonna be important is to really understand and see where the cost structure is going gonna sit moving forward around you know some with inflation that everyone saying and were monitoring that right now and
spk_13: again today we have sufficiency within our plans as it pertains to mitigation but out something of a bazooka
spk_0: during that very helpful thank you
spk_14: thank you thank you when thank you and next question comes from the line of lawrence grant that from guggenheim please go ahead
spk_1: hey good money and good morning everyone on that thanks for for the throw school nine the country a good job so i do ever and perea question about that your comments you made in your in your prayer rock or you press release and are getting just three point four million dollars and enough guess i'm care you sodini a quarter i'm just want to understand is a key is it on top of what's your plan or charity or he did something that's was already plan and and really when you say in exchange for future market the interest for fish and credits i'm not really like to understand it's a bit more you can thanks sure i'll take that wanna give your contacts always part of the plan ah so when you see at that level of innovation and the cadence that you see from on us that we continue to introduce in a very rapid pace ah we have in this example legacy and inventory optionally three point four million dollars on the we partnered with active international on to the able to prior to this coupon restage to be able to sell through that inventory the good news there is that inventory or is being sold at the creative gross margin to rear of the company atlantic he won and so that's a positive to are also putting our outside of me are warehouses getting this product move through the system to position the new product that we're going to be bringing in and be able to start staging our inventories so as it is a benefit the second part of that question is around really the credit component in the way this works is we have marketing products as well as transportation ah and and how we use those are is really against current digital media partners that are already part of our the honest ah go to market it as well as install visual merchandising vendors that we used says we start the transitions ah this project in the marketplace we have both the marketing component is was the installer component with current vendors that we can utilize those individual credits again so ah it's a strategic play for us it's part of our transition plan
spk_14: and and up with isn't a good position as we talk about you know this new pt restaged that time ah as it pertains to que three the people start the police or to accelerate not only great innovation with the hundred percent free free packaging as well as the new items but also start the capture of the additional and
spk_0: incremental gross margin that were driving at about a hundred basis points against that initiative
spk_15: thanks i bet you don't think your emmett thanks
spk_16: thank you i saw a next question comes from the line of dana healthy from healthy advisory group please go ahead
spk_15: good afternoon everyone as you think about diapers and obviously that share that you've gained and and the growth in the first quarter and high that peak the market is they impressive how do you see the screen conscious diaper initiative going forward is that a margin enhancer kill and how you planning white they'll follow it and then just than another
spk_1: now on the duty restage what type of marketing investment you make their and of that continue to the balance of the yeah thank you yeah the first one had down thank you for the question and i would say on the conscious diaper is we've kind of doled out that innovation we do in a week we do this type of work when it comes to the performance and being a blood draws these key consumer to satisfy years and we've done this in a way now we're we're also in know increasing the margin structure against that business so it's got the right proposition for us because we talk about good growth always which is this consistency around not just driving top line but also the margin expansion components are that we on the business so that's rooted in the current proposition since the key for us will be as i referenced in our earlier in the earlier question will be maintaining the sufficiency within our consistent annual productivity plans and we have three your productivity plans will we drive against the business to really mitigate kind of the cost environmental not again is something that works for were closely looking at
spk_6: and an omelette kelly pick up on than the second for the question i think and you know everything about marketing and we think the right level for add a of and fourteen to seventeen percent of revenue range the of we did on have some great kind of marketing and leaned into marketing thing because the great innovation that we have
spk_15: i'm in a we will support the deal these days it's coming into three and will continue to be getting person can be just a great driver a rapid growth in you expect out of about half as well on a cell you know in a we think what it is the right place for marketing i'm in a and we will continue to been in it for me see the return on and see if dr hotline route and but you could expect for asked him how to stay with them in that guided range of a forty to seventy percent
spk_6: at think you this on the digital and meet ya channel growth did you see the digital piece of your retail partners
spk_1: accelerate and as much as he saw this store improvement comeback a what did you see his toys reopen on the digital performance of the retail channel now i don't i think you're right that i mentioned that earlier it's me think about kind of looking at digital versions retail it's helpful to look at two years that as well because we want to remind everyone that kobe kind of either that could they were friends with happened either into wine with all around and of shit on the consumer stop at the here and on and on there was a kind of it as wrote those will retail and cause it'll last longer and kids one of twenty twenty we good fifty percent and it will be twenty three percent the when you think about digital on a junior staff a we're seeing you have a significant shift for his mother half in a year ago on sale i'll give that a pixie trend that and stuff about earlier is merely the shift from digital back to be l on by again with me autism digital have some reason as well yeah built thing that i would or it was delivered retail partners on the visual assad yeah in twenty twenty eight aw really this migration out and canada in the twenty percent range
spk_2: more of it's a thirty percent flawless in want to be another business of they're doing but coupled with that as a lot of also like and collect pick up the taking place with in retail so it's not just the digital component but also the visitation as it pertains to the stores and that's where we're seeing more and more are both within our datasets and with the
spk_17: over strategic partners are kind of this people are more more gravitating towards the retail side though the good news is and that's where we're always strategy lead is that we have an army channels strategy that we built and that work gnostic when it comes to what consumers want to shop at in a honest are on break you want to shop amazon dot com
spk_0: the shop at target are you my shop at eighty be you have that opportunity with us and that's why i think we're well positioned as good look at you know based on where that consumer shops and consumers at the end of the day they don't shop channels they shop brands again and again so of opposition
spk_18: thank you i can i show and next question comes from the line of brian the line from bank of america please god hey i good afternoon everyone on just got a few quick ones related to to the channel one it's just i get following up on an earlier question with regards to the yeah i guess that the the shipments being behind consumption is that specific to our retail or to spread it spread across retail and a digital on and then the second question i had is when we're thinking about
spk_19: to handle agnostic by are agnostic by by towel going forward on margin
spk_6: i'm swimming that you know like that's true today as we think about the margin expansion that you're expecting over the next few years with that also with that relationship old meeting is i guess is that that the margin opportunity bigger in one channel versus the other or would you expect that even margins are expanding
spk_1: you're still sort of agnostic whether it's digital a retail thank you bye for the follow up question i have and he has the i'm pregnant we were mentioned earlier on his visit to the digital channel the as it relates to thinking about the margin between right now the relatively in mine i'm and with back that to continue over the next few years to be not materially different in the longer term we do think there is an opportunity as we leverage the been that and leverage the fifth call within our digital channel ah that
spk_20: we would be able to expand on the margins in the longer term you a better in the digital channels sale on but we're being a week we do feel right now a pretty well balanced between the two only been expected to continue over the next you hear it on the he would have to look farther out the just you know had him you know one to two years to see as a
spk_0: new on material difference between the margin structure digital versus a top
spk_21: okay great thank you
spk_1: right thank you i saw a next question come from a line of large and pine from loop capital please go i thanks for taking my question and i wanted to talk a little bit about your international opportunity which which i think management has acknowledged as is very significant but that it's longer term how would he get started there and and what's on deck for you to do in the next couple of years and in terms of international growth or thank you for the question or a couple things on this one when it comes to international to the we've already you know represents about two percent of our business and twenty twenty on what we have done in international we haven't didn't even a double on businesses of the ears we have a defining flags we've been very strategic a methodical so when you take a walk got reporters were reintroduced ran with ah was doing was in europe in a reference to the her the the consumption threatens says retains because you want to do list of books for he three percent of as an example of it would have build this business and a methodical when when it comes to it are driving both the digital size of the business with portland like do list as well as you know that that the retail side and example also is in a cold beauty in the uk is another strategic partner of ours in the sky
spk_11: and personal care space so number one you'll see as be you know methodical and going deeper and wider in the geography is that we've already filled out because we got awareness behind our marketing investments we started to see the repeat again where an hour early innings as it pertains to international and then
spk_1: we're going to continue to dry strategically what we do here which is based on an only child component or the here going to see through the retailer partnerships that we've established and as been look at you know the rest of this year and eastern what game you know further out on your to see us continue to build off kind of that for you know and those principles that we established and twenty twenty in a moving forward so i hope think is you because you some concepts some nick if i can can try to summarize that it sounds like you're going you expect to move partner by partner rather than geography by geography so even though some of the markets in asia look very kind eyes you'd rather find the right partner and then take it from there is that a reasonable assessment can have seen a lot over the years were businesses in a good challenge is in a when they don't have the right kind of beachhead from a partnership perspective cause localization is so important especially when you're a young brand are like ours so being very strategic are have the right alignment
spk_22: it's from a partnership perspective in a principal round really building something together because there's added value for both parties and the examples that we love reached in europe are both partners like our digital capabilities are content community and former strategies are those are enablers for them
spk_23: or as well as the initiatives right innovation in the cadence we have around clean beauty that actually works so we put those things together that's how we will continue to approach as far as we look at europe and one and then because we are talking strategically and we shared broader strategy in the future will go into
spk_0: greater detail ah with other geography is
spk_24: thank you and you july thank you yeah i try next question comes from the line out your at the sarah from jp morgan please gap i think you saw on i have a question on the submission and then a follow up on on grass marching on the this business side if you can and break down the twelve percent growth you had in the quarter how much was to seduce and the last see leaving the same doris art and or south and and price makes and then i close the case on the gross margin commenters you think you mean sin the console type of being a creative to morning and and and not contributing and she'll i think half of the quarter ah and also the one hundred basis points benefit on we staging in cute she so is it's wondering if we should be prepared for more impact than gross mine
spk_25: zane in cute to against the key one so sequentially on or up is increasing clyde the center make steady a seen from online so wholesale i'm also being a negative any specific it's a that if you can play five one commentary kelly you're saying that the shipments trading
spk_1: consumption in particular and visit though is that something is specifically to this customer which may be putting a lot more emphasis on you on the retail side so basically increasing and i'm thinking of that of that one that you are online and you're nodding in store
spk_6: is that something that has happened so you're gaining more the space son and a physical stores and then that's gonna be sustained because of that because it stays in you kneel on in in store yeah i when a lot there has been
spk_1: okay i'll be to all three and and the person and the latter actually belated because if we think about and a key one growth and and the sources of that of it was actually balance between velocity innovation that is to peace which is of course some of the power between our growth strategy with a compliment him work together on the t v you are quite as we're seeing some of the consumer behavior shift between vigil and me tell you know i do think that just create some volatility as in know had him as as people ramp up on you couldn't bear it he didn't get their inventory point and eleven for or book last the change in the man i think the to tomorrow related on you know as we go in unity cutesy we're seeing again a lot of odd to me uncomfortable lots of the in the be culture to that can be kind of that as you think about current trends in the business you know and velocity the little more heavily weighted what we're seeing today predominantly in a jail as it relates to the gross margin impact either we have as as nypd highlighted we have a really robust constitution on you has a key them in a with the introduction of the thing haunted by twenty one beauty we stage is ill and materially different on our overall margin structure
spk_6: although a growing a small the glowing piece of our overall business and me are are as we can and up with martin we're looking at the input costs versus the conservation that we have my ducks and right now they are they are enlightened and we're feeling ill happen ah good about our ability that you know as to deliver are gross margin structure i think when you put alluding to earlier is the that we have a level of inflation ill had anticipated in a we do have some contract that protected against some on you had convened have some in place in certain parts of our business but we're seeing them strong inflation
spk_24: and on in transportation on and phrase and that is an area that is were all standing with that conservation so i think as we go to the year will be coming back to let you know be anything different in august you know right now i'm either we chose on know the one thing that we can talk about as a driver of growth did pricing because it was really
spk_26: all your we didn't take any any big material pricing at this point we haven't announced that he tried thing we are really excited about some of the opportunity to how to grow our share of other people are you take their placing up and we're going to continue to evaluated we go through the year and keep an eye on him because inflation on an e
spk_0: no again at the at this moment on you know no additional action we feel is needed but we want to keep that and as an open option for us for the feature
spk_19: that's great thank you thank you
spk_1: thank you i laugh course it comes from the line of john and with them from william blair prove gap
spk_2: yeah hi thanks for taking my question and progress on the start
spk_1: nick and kelly i have a just a broad based question on customer acquisition you mentioned earlier i think nearly a third of the honest users are coming in through the skin and personal care the beauty franchise what is the right mix is it you know of customer acquisition by pra a category as you move the business forward over the next you know two to three to four years and added that influence your marketing kind of tactics and innovation taxes you move forward thanks the sort of question and so couple couple things on how to think about this and you know kind of give you some sense i'm inside as it pertains to you know honest are common and maybe zero in on under the skin and personal care component to that you know what we're seeing ah i'm in from an acquisition perspective versus twenty twenty and we reference this you know when we're together last we heard about and twenty twenty thirty four percent of of new consumers the came to honest dot com entered through the skin impersonal care what we saw in in in que one is about forty four per
spk_2: sad that entered through skin impersonal care and what's important areas were balancing obviously the investment profile ah accordingly and in what we're doing is and this is why we leverage kind of are honest on the analytics and been able to have really this idea around as were acquiring
spk_1: are we number one source and than specifically through on the stock on and then where are we turning around and tracking that second and third purchased from a dataset standpoint and when i mean by that is we look at then how do we appropriate the additional dollars to be able to continue to kind of fuel that that element from a strategy perspective or whether it's new acquisition or how do we monetize that consumer and that second or third item or within the marketplace not what we're seeing skin is that isn't personal care side of the business
spk_6: we're seeing sticky system is i'm starting to live ah over the past quarter you're seeing is in the resolves with the good graces interpersonal on based on that ah strategy from army channel perspective or kelly has been historical yeah you know everything about really bribing appeal of the honest branding we're looking at multiple levers really want there to be talent in her the club's my position across in are different products that were particularly focused and make mentioned as getting personal parents the other thing we wanted a highlight we continue to keep our eye on i kind of the overall metrics as it relates to in of jhangvi up with this and if balance between male female we thought and good progress in
spk_19: y twenty twenty one on and on both of those metrics jen need to killer i wouldn't nine percent on in in of our new era of our customers and twenty twenty of the fourteen percent likely one that's really exciting because it means we have more appeal and a broader audience and as well you know we we track with me
spk_27: we then had got a female focused round on but we are at the as we highlighted in his wake him he's really are trying to beat them appeal beyond any feel it appeal to the mail consumer as well and so are you know everything about marking thinking about play try to keep that's odd is that your much broader and
spk_0: the overall are percentage of a kind of our meal customer base my from eating percent to twenty in he won twenty one vs pride years i'm really excited about momentum working there as well and and will continue to track down and keep an eye and and that sort of that a key else is well balanced and were growing up the appeal on kind of o'clock or customer base
spk_1: get some super helpful thank you very much
spk_0: in san

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