The Honest Company, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Honest Company's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference call over to Ms. Elizabeth Bucard, Senior Director, Investor Relations at the Honest Company. Please go ahead.

Good afternoon, everyone. Thank you for joining our second quarter 2024 conference call. Joining me today are Carla Vernon, our chief executive officer, and Dave Loretta, our chief financial officer. Before we start, I would like to remind you that we will make certain statements today that are forward-looking, within the meaning of the federal securities laws including statements about the outlook of our business and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our earnings release issued today, as well as our SEC filings, for a more detailed description of the risk factors that may affect our results. Please also note that these board-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 board-looking statements in light of new information or future events, except as required by law. Also, during this call, we will 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 the financial results section of today's earnings release. A live broadcast of this call is also available on the investor relations section of our website at investors.honest.com. And with that, I'll turn the call over to Carla.

Thanks, Elizabeth. Hello, everyone, and thank you for joining us today. As we exit the first half of 2024, I'm pleased to share that we achieved another quarter of improved financial results on both the top and bottom line, exceeding our expectations. This strong performance is evidence of our team's commitment to strengthening the financial foundation of the honest company while also accelerating the growth momentum of the honest brand. Our achievements in the second quarter illustrate that our transformation pillars of brand maximization, margin enhancement, and operating discipline are driving improved performance and a stronger financial foundation. In the quarter, Our results included four notable financial achievements. First, we delivered the highest quarterly revenue in the history of The Honest Company, with $93 million in sales, which was an increase of 10% year over year. Second, we achieved a gross margin of 38%, representing more than 1,100 basis points of growth year over year. Third, we improved our profitability by achieving positive adjusted EBITDA of $8 million, which is our third consecutive quarter of delivering positive adjusted EBITDA. And finally, in Q2, we saw our fifth consecutive quarter of positive cash flow. This strong performance and momentum for the first half of the year gives us confidence to increase our full year guidance for both revenue and adjusted EBITDA. Our success this quarter was broad-based across our portfolio and business model. In particular, the Honest brand is performing notably well in our baby personal care categories as the appeal of our clean and sustainably designed lotions, body washes, and bath products continues to grow. According to the National Center for Health Statistics, the presence of skin allergies among children has nearly doubled since 1997. Also, estimates by KBV research, as outlined in our investor presentation earlier this year, indicate that the market for sensitive skin care products is expected to be $80 billion by 2030, which is nearly double the market size today. These consumer trend indicators are well aligned with the high standards that Honest delivers in our clean and gentle products. For example, our newly relaunched fragrance-free sensitive skin collection not only fits these important trends, but its performance in the quarter is a great example of our brand maximization pillar. We doubled the revenue of our sensitive skin collection year over year, by expanding these items into all Target stores. And our sensitive skin shampoo plus body wash has become one of our top five selling baby items on Amazon this year. In addition to our clean product benefits, our community looks to Honest for our approach to sustainable design. The early success of our new milk carton style refills for our bubble bath and shampoo plus body wash products are proving to be a great solution in reducing the plastic footprint of our most loyal community members. These 32 ounce refills use 89% less plastic when swapped with three of our 10 ounce size bottles. And the milk carton style packaging allows them to be easy to pour. Having recently launched in Target and on Amazon, These new refills are off to a strong start. And for anyone who loves a good hot bubble bath, with these refills by your side, we give you permission to enjoy the bubbliest of spa moments as much as you want. Another key driver of our success this quarter is the strong alignment we have across our retailer partnerships. As you know, the Honest brand is a little over 13 years old this year. And we are celebrating the 10th anniversary of our original launch into Target stores. In fact, if you visit a Target store over the next two months, you'll see a festive collection of limited edition diapers and wipes featuring whimsical red and white prints. To bring this partnership to life, our community of content creators has been finding adorable ways to bring Anna's 10th Target birthday to life with trend-setting baby birthday parties, full of these limited edition wipes and diapers, along with matching decorations and party treats. We hope you'll check out our Amist social media channels on TikTok, Instagram, and Pinterest to be part of the birthday fun. Overall, our second quarter results are evidence that our transformation pillars are creating a stronger financial foundation and that we are well poised to advance our strategy to be in all the places that our community shops with the hero products they love in the formats they want. And now I'll turn it over to Dave to share the financial results of our second quarter and details on our updated financial outlook.