Honest Company Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2023

OR

For the transition period from to

Commission File Number:001-40378

(Exact Name of Registrant as Specified in its Charter)

Securities registered pursuant to section 12(g) of the Act: _Common Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes☐ No ☒

The aggregate market value of the shares of common stock held by non-affiliates of the Registrant, based on the closing price of the Registrant’s shares of common stock on the Nasdaq Global Select Market on June 30, 2023, was approximately $111,687,173.

As of March 4, 2024, the registrant had 95,892,996 shares of common stock, $0.0001 par value per outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement relating to the 2024 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the Registrant’s fiscal year ended December 31, 2023.

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act")) about us and our industry that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, those set forth in Part I, Item 1A, “Risk Factors,” and other factors set forth in other parts of this Annual Report on Form 10-K. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. These forward-looking statements include, but are not limited to, statements concerning the following:

•our expectations regarding our revenue, cost of revenue, operating expenses, gross margin, adjusted EBITDA and other operating results, including as a result of the Transformation Initiative;

•our expectations regarding the costs, impacts and benefits of the Transformation Initiative;

•our strategic initiatives and priorities, including our Transformation Initiative pillars of Brand Maximization, Margin Enhancement, and Operating Discipline ;

•our ability to achieve or sustain our profitability;

•our ability to offset the high inflationary environment, including commodity prices, labor costs, input cost and transportation cost inflation;

•our ability to execute our strategy to deliver sustained long-term growth and profitability, including as part of the Transformation Initiative;

•the effect of macroeconomic factors, such as public health crises, supply chain disruptions and inflation on our business and the global economy, including our costs and expenses;

•economic conditions, including a potential recession and inflationary pressures and their impact on consumer spending, inventory management by customers and our operating results;

•expectations regarding consumer demand and the timing and amount of orders from key customers;

•our continued revenue growth and margin improvement;

•our ability to effectively manage our growth;

•the costs and success of our marketing efforts, our focus on building a purpose-driven brand with deep connection to the community of shoppers we serve and our ability to maintain, protect and enhance our brand;

•our ability to maintain and increase consumer awareness, increase market share in our product categories, or promote new products;

•our investments in innovation and digital capabilities to fuel growth and our ability to innovate on new ways to reach and connect with our community;

•our belief that consumers’ need for clean products will continue to grow and that we are well-positioned to continue to take market share from legacy brands;

•our ability to acquire new consumers and successfully retain existing consumers, including their level of spend with us;

•our expansion with retail and digital customers;

•our ability to retain new distribution partners;

•our ability to bring new products to market or to successfully enter new markets;

•our commitment to bringing our Honest Standard, as further described herein, to new products and new categories where we believe there is a need for a higher standard for clean personal care;

•anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;

•our practices, commitments and performance related to environmental, social and governance (ESG) matters;

•future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;

•our ability to effectively manage our inventory and maintain sufficient inventory to satisfy customer demands and meet revenue targets;

•our ability to liquidate excess inventory related to drops in consumer demand for our products, product discontinuations or product restages;

•our ability to gauge consumer trends and changing consumer preferences;

•our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;

•our ability to obtain, maintain, protect and enforce our intellectual property rights and any costs associated therewith;

•our ability to compete effectively with existing competitors and new market entrants;

•our ability to identify and complete acquisitions that complement and expand our reach and platform;

•the financial condition of, and our relationships with, our suppliers, manufacturers, distributors and retailers;

•the ability of our suppliers and manufacturers to comply with safety, environmental or other laws or regulations;

•our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the United States, such as the U.S. Food and Drug Administration governmental regulation and state regulation; and in other jurisdictions where we elect to do business;

•outcome of legal or administrative proceedings;

•the growth rates of the markets in which we compete; and

•our mission to challenge ingredients, ideals, andindustries so people can protect more of what they love.

Risk Factors Summary

Investing in our common stock involves substantial risks. The risks described in the section titled “Risk Factors” may cause us to not realize the full benefits of our strengths or to be unable to successfully execute all or part of our strategy. Some of the more significant risks include the following:

•Our past growth may not be indicative of our future growth and we may not be able to effectively manage our future growth or evaluate our future prospects. If we fail to effectively manage our future growth or evaluate our future prospects, our business could be adversely affected.

•Our quarterly operating results may fluctuate, which could cause our stock price to decline.

•Our future success depends, in part, on our ability to achieve our long-term strategy.

•Consolidation of retail customers, the loss of a significant retail or third-party ecommerce customer or a significant change in such customers' historical purchasing patterns has in the past and could in the future negatively impact our sales and ability to achieve or maintain profitability.

•We may not be able to compete successfully in our highly competitive market.

•If we fail to cost-effectively acquire new consumers or retain our existing consumers, our business could be adversely affected. Our sales and profit are dependent upon our ability to expand our existing consumer relationships and acquire new consumers.

•We are increasingly dependent on information technology and our ability to process data in order to operate and sell our products, and if we (or our third parties) are unable to protect against software and hardware vulnerabilities, service interruptions, data corruption, cyber-based attacks, ransomware or security breaches, or if we fail to comply with our commitments and assurances regarding the privacy and security of such data, we could experience adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions to our business operations; interruptions in our ability to provide our goods and services exposure to liability; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.

•Pandemics or disease outbreaks and overall macroeconomic trends have had and may continue to have an adverse effect on our business, financial condition, results of operations and prospects.

•Our strategic initiatives, including as part of the Transformation Initiative, to reduce our costs could have long-term adverse effects on our business, financial condition, results of operations and prospects, could result in total costs and expenses that are greater than expected, and we may not realize the operational or financial benefits from such actions.

•We must expend resources to maintain consumer awareness of our brand, build brand loyalty and generate interest in our products. Our marketing strategies and channels will evolve and shifts in our marketing strategies and efforts may or may not be successful.

•Our brand and reputation may be diminished due to real or perceived quality, safety, efficacy or environmental impact issues with our products, which could have an adverse effect on our business, financial condition, results of operations and prospects.

•Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel, including our founder and Chief Creative Officer, Jessica Warren and her name and Likeness Agreement, and our Chief Executive Officer, Carla Vernón.

•We have a history of net losses and we may not be able to achieve or maintain profitability in the future.

•Our business may be adversely affected if we are unable to provide our consumers with a technology platform that is able to respond and adapt to rapid changes in technology.

•A disruption in our operations could have an adverse effect on our business.

•Our business, including our costs and supply chain, is subject to risks associated with sourcing, manufacturing, warehousing, distribution and logistics, and the loss of any of our key suppliers or logistical service providers could negatively impact our business.

•We rely on third-party suppliers, manufacturers, retail and ecommerce customers and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.

•Health and safety incidents or advertising inaccuracies or product mislabeling may have an adverse effect on our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings.

•Increasing scrutiny and evolving expectations from stakeholders with respect to our ESG practices, performance, commitments and disclosures may impact our reputation, increase our costs and impact our access to capital.

•International trade disputes and the U.S. government’s trade policy could adversely affect our business.