- **Revenue decline**: Q3 2025 revenue down 7% to $93M, driven by diaper (-10%) and apparel underperformance.
- **Strategic exits**: Exiting honest.com, apparel, and Canada to focus on wipes, baby personal care, and diapers.
- **Diaper innovation**: New design reduces complaints by 21% YoY; $19.99 entry price point to address price sensitivity.
- **Financial outlook**: 2025 Adjusted EBITDA $21M-$23M; $8M-$15M annual savings from 2026.
- **Amazon growth**: Diaper sales up 3% YoY at Amazon, despite broader category decline.

**【CEO Summary Section】**
- Q3 2025 revenue declined 7% to $93 million, driven by underperformance in diapers (-10% consumption) and apparel, partially offset by strong growth in wipes (+24%) and baby personal care (+10%).
- Launched **Transformation 2.0**: Exiting lower-margin channels (honest.com, apparel, Canada) to focus on core categories (wipes, baby personal care, diapers).
- Introduced redesigned diapers with improved leak protection and comfort, reducing consumer complaints by 21% YoY. Implemented price adjustments (e.g., $19.99 entry point) to address macroeconomic price sensitivity.
- Amazon remains key growth driver, with diaper sales up 3% YoY despite broader category decline.

**【CFO Financial Commentary】**
- Q3 GAAP net income: $1 million; Adjusted EBITDA: $4 million (down $3.5M YoY due to lower add-backs).
- Gross margin: 37% (-140bps YoY) due to tariffs and volume deleverage.
- Operating expenses decreased $4M YoY, driven by SG&A reductions.
- **Transformation 2.0 costs**: $25M-$35M one-time expenses; $8M-$15M annual savings beginning 2026.
- 2025 Outlook: Full-year revenue -3% to flat (organic +4% to +6%); Adjusted EBITDA $21M-$23M.

**【Q&A Key Highlights】**
- **Transformation 2.0 rationale**: Simplify business model, focus on high-margin categories, and reduce complexity costs.
- **Diaper performance**: Amazon sales up 3% YoY, but Target declines due to SKU simplification and lapped promotions.
- **Competitive environment**: Diaper category down 2% YoY, with consumers shifting to low-cost brands; Honest's higher-margin wipes and personal care categories remain resilient.
- **Exit timeline**: honest.com, apparel, and Canada to wind down by end-2025; cost savings materialize in 2026.
- **Inventory management**: Higher levels due to tariff mitigation and new diaper transition; expects improved efficiency in 2026.

The Honest Company, Inc. (HNST) Q3 2025 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

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Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

HNST

HNST fundamentals

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