The Honest Company (HNST) Q4 2025 earnings summary

Executive summary

• Achieved 2025 financial results in line with updated guidance, with organic revenue up 5.3% to $294M and reported revenue down 1.9% to $371.3M, driven by strategic exits from direct-to-consumer, apparel, and Canadian businesses to focus on core categories.

• Adjusted EBITDA reached $21.8M for 2025, with margin momentum and cash increasing to $89.6M, ending the year with no debt.

• Board authorized a $25M share repurchase program, reflecting confidence in the business transformation and long-term growth.

• Launched Transformation 2.0, focusing on higher-margin categories and delivering $10–15M in annual cost savings, with $30–35M in up-front costs.

• Initiated warehouse consolidation and expanded partnerships, including new product innovations and entry into the big kid aisle.

Financial highlights

• Full year 2025 organic revenue grew 5.3% year-over-year, while reported revenue declined 1.9% due to strategic exits; Q4 organic revenue grew 0.7% to $71.3M.

• Adjusted gross margin for 2025 was 38.7%, up 50 bps year-over-year, while GAAP gross margin was 33.3%, down due to inventory write-downs and tariffs.

• Net loss for 2025 was $15.7M, mainly from restructuring costs, but adjusted net income was $8.3M, a $14.4M improvement year-over-year.

• Adjusted EBITDA for 2025 was $21.8M, down from $25.9M in 2024.

• Free cash flow improved to $13.6M, with cash and equivalents at $89.6M at year-end.

Outlook and guidance

• 2026 reported revenue expected to decline 16–18% to $306–312M due to business exits, but organic revenue growth projected at 4–6%.

• Adjusted gross margins anticipated in the low 40% range for 2026.

• Adjusted EBITDA guidance for 2026 is $20M–$23M, with sequential improvement and supply chain efficiencies expected.

• Margin expansion to be driven by warehouse consolidation and operational improvements in H2 2026.