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 $294.1 million and reported revenue of $371.3 million, down 1.9% year-over-year, driven by strategic exits from Honest.com fulfillment, apparel, and Canadian business.

• Adjusted gross margin improved to 38.7% (+50 bps YoY), and adjusted EBITDA reached $21.8 million, in line with guidance.

• Ended 2025 with $89.6 million in cash, no debt, and authorized a $25 million share repurchase program.

• Household penetration reached an all-time high of 7.6%, up by 1.7 million households year-over-year.

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

Financial highlights

• Full year 2025 organic revenue grew 5.3% YoY to $294.1 million, while reported revenue declined 1.9% to $371.3 million due to strategic exits.

• Adjusted gross margin was 38.7% for 2025; GAAP gross margin was 33.3%, down from 38.2% in 2024 due to inventory write-downs and tariffs.

• Net loss for 2025 was $15.7 million, mainly from restructuring costs; adjusted net income was $8.3 million.

• Adjusted EBITDA for 2025 was $21.8 million, down from $25.9 million in 2024; Q4 adjusted EBITDA was $3.8 million.

• Free cash flow improved to $13.6 million, with cash and equivalents at $89.6 million at year-end 2025.

Outlook and guidance

• 2026 reported revenue expected to decline 16–18% to $306–$312 million due to strategic exits; organic revenue growth projected at 4–6%.

• Adjusted gross margin expected in the low 40% range for 2026, with adjusted EBITDA guidance of $20–$23 million.

• Sequential improvement in organic growth anticipated throughout 2026, with H2 benefiting from supply chain efficiencies.

• Guidance incorporates continued diaper category challenges and ongoing macroeconomic pressures.