Honest Company, Inc.

Previous wording

Our omnichannel presence seeks to meet consumers wherever they want to shop, balancing deep consumer connection with broad convenience and availability. Since our launch, we have built a well-integrated omnichannel presence by expanding our product availability, including the launch of strategic partnerships with Target, Amazon and Walmart in 2014, 2017 and 2022, respectively. We expect beyond 2025, we will transition away from Honest.com as a shipping and fulfillment channel, while maintaining Honest.com as a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase through our leading retailers and their websites, and third-party ecommerce sites. Our integrated omnichannel presence provides meaningful benefits to our consumers which we believe are not easily replicated by our competitors.

Current wording

Our omnichannel presence seeks to meet consumers wherever they want to shop, balancing deep consumer connection with broad convenience and availability. Since our launch, we have built a well-integrated omnichannel presence by expanding our product availability, including the launch of strategic partnerships with Target, Amazon and Walmart in 2014, 2017 and 2022, respectively. We are transitioning away from Honest.com as a shipping and fulfillment channel, while maintaining Honest.com as a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase through our leading retailers and their websites, and third-party ecommerce sites with the last order shipment expected to occur on December 28, 2025. Our integrated omnichannel presence provides meaningful benefits to our consumers which we believe are not easily replicated by our competitors.

Previous wording

In 2023, we executed a broad-based Transformation Initiative designed to build the Honest brand and drive growth in higher-margin areas of the portfolio, strengthen our cost structure, drive focus on the most productive areas of our business, deliver greater impact from brand-building investments, and improve executional excellence across the enterprise. The restructuring element of the Transformation Initiative was substantially completed by December 31, 2023.

Current wording

In 2023, we executed a broad-based Transformation Initiative designed to build the Honest brand and drive growth in higher-margin areas of the portfolio, strengthen our cost structure, drive focus on the most productive areas of our business, deliver greater impact from brand-building investments, and improve executional excellence across the enterprise. The restructuring element of the Transformation Initiative was substantially completed during 2023.

Previous wording

•Pricing strategy as a driver of revenue is also a component of Brand Maximization. This includes the ongoing benefit of pricing increases across the majority of our product portfolio in 2022 and 2023.

Current wording

•Pricing strategy as a driver of revenue is also a component of Brand Maximization.

Previous wording

•Focusing our resources on North America, which included the exit of our low-margin business in Europe and Asia.

Current wording

•Focusing our resources on the United States, which included the exit of our low-margin business in Europe, Asia and, most recently, Canada in 2025.

Previous wording

•Exiting low-margin elements of the cleaning and sanitization business in 2023.

Current wording

•Exiting low-margin elements of the cleaning and sanitization business in 2023; and apparel in 2025.

Previous wording

•Re-directing resources to accelerate cost savings, including optimization of our contract manufacturing strategies, reduced shipping and logistic costs, and product costs.

Current wording

•Re-directing resources to accelerate cost savings, including optimization of our contract manufacturing strategies, optimization of our supply chain footprint and inventory management, along with leveraging technology to improve systems, reduced shipping and logistic costs, and product costs.

Previous wording

•Realigning resources to reflect the prioritization of higher-margin opportunities, including strategic shift away from our lower margin channels, including our direct-to-consumer (“DTC”) business.

Current wording

•Realigning resources to reflect the prioritization of higher-margin opportunities, including strategic shift away from our lower margin channels, including our direct-to-consumer (“DTC”) business in 2025.

Previous wording

The core of our growth strategy centers around increasing physical availability of our products through expanded stores, doors, aisles, shelves and facings. While we have made significant progress in our distribution gains, we are still under indexed compared to competition. Our partnerships with leading third-party retail platforms and national retailers have broadened our consumer reach, raised our brand awareness and enhanced our margins through operating leverage. With the higher costs of shipping and fulfillment activities related to our DTC business and other related costs, we will continue to shift our focus and investments towards more efficient and scalable distribution models with our current retail and digital customers. As we move forward beyond 2025, we will transition away from Honest.com as a shipping and fulfillment channel, while ensuring the site remains a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase offsite. We expect that our transition from Honest.com as a shipping and fulfillment channel will negatively impact revenue in 2026 and will enable improved gross margin in future years. We will continue to pursue partnerships with a wide variety of retailers, including mass retailers, online retailers, club retailers, grocery stores, drugstores and specialty retailers. Our ability to execute this strategy will depend on a number of factors, such as competitive dynamics and retailers’ satisfaction with the sales and profitability of our products, channel shifts of their customers, and their own supply chain, order timing, and inventory needs, which may fluctuate from period to period. For example, we experienced distribution losses with two of our largest retail customers on certain diaper SKUs mainly related to these retailers' footprint changes for certain product categories overall and a shift to more exclusive non-gendered prints with one of these retailers, which has impacted our revenue in 2025 and we expect will negatively impact our diaper revenue in the future.

Current wording

As of December 31, 2025, we will no longer utilize Honest.com as a shipping and fulfillment channel, while ensuring the site remains a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase offsite. Our transition from Honest.com as a shipping and fulfillment channel has negatively impacted Honest.com revenue throughout 2025 as we are not focusing marketing efforts in this channel. We expect it will negatively impact revenue upon cessation at the end of the year; however, we also expect that it will enable improved gross margin in future years. We will continue to pursue partnerships with a wide variety of retailers, including mass retailers, online retailers, club retailers, grocery stores, drugstores and specialty retailers. Our ability to execute this strategy will depend on a number of factors, such as competitive dynamics and retailers’ satisfaction with the sales and profitability of our products, channel shifts of their customers, and their own supply chain, order timing, and inventory needs, which may fluctuate from period to period. For example, we experienced distribution losses with two of our largest customers on certain diaper SKUs mainly related to these retailers' footprint changes for certain product categories overall and a shift to more exclusive non-gendered prints with one of these retailers, which has impacted our revenue in 2025 and we expect will negatively impact our diaper revenue in the future.

Previous wording

There has been and continues to be an adverse impact on global economic conditions, specifically inflationary pressures, which has adversely affected our supply chain in regards to cost of revenue. We have experienced and anticipate continued increases in product costs and labor costs due to inflationary pressures, which has in the past and could continue to hamper our ability to drive margin expansion. In addition, past and current tariffs have increased, and may continue to increase, the cost of raw materials, components and finished goods, which has adversely impacted our operational expenses, and may negatively impact our ability to source our finished goods and components. We have taken measures to bolster key aspects of our supply chain and mitigate the impact of tariffs, such as creating an agile supply chain, ensuring sufficient inventory to support our continued growth, minimizing lead times for raw materials, and implementing a robust cost-savings program, as part of our tariff mitigation strategy. If we are not successful in our attempts to bolster our supply chain and mitigate the impact of tariffs, our product and fulfillment costs may increase and our business, financial condition, results of operations and prospects could be adversely affected. Additionally, we have experienced purchase price increases from our third-party manufacturers in the past and could face escalation of purchase costs and cost of revenue in the future. In 2025, we have agreed to increased purchase costs from our diaper manufacturer and received requests to renegotiate purchase costs from other third-party manufacturers. As a result, we expect those increased purchase costs to negatively impact our cost of revenue in 2025.

Current wording

There has been and continues to be an adverse impact on global economic conditions, specifically inflationary pressures, which has adversely affected our supply chain in regards to cost of revenue. We have experienced and anticipate continued increases in product costs and labor costs due to inflationary pressures, which has in the past and could continue to hamper our ability to drive margin expansion. In addition, past and current tariffs have increased, and may continue to increase, the cost of raw materials, components and finished goods, which has adversely impacted our operational expenses, and may negatively impact our ability to source our finished goods and components. We have taken measures to bolster key aspects of our supply chain and mitigate the impact of tariffs, such as creating an agile supply chain, ensuring sufficient inventory to support our continued growth, minimizing lead times for raw materials, and implementing a robust cost-savings program, as part of our tariff mitigation strategy. If we are not successful in our attempts to bolster our supply chain and mitigate the impact of tariffs, our product and fulfillment costs may increase and our business, financial condition, results of operations and prospects could be adversely affected. For example, the fluctuation in tariff rates during the nine months ended September 30, 2025 and the ongoing uncertainty of those rates, has primarily impacted our wipes product costs during this period, and may in the future impact our ability to forecast the tariff impacts on our cost of revenue. As part of our Powering Honest Growth, we are also taking action to optimize our supply chain footprint and inventory management, along with leveraging technology to improve systems.

Previous wording

We believe in the power of our omnichannel distribution model. We believe consumers value the flexibility in terms of where and when they choose to purchase Honest products. We also believe that consumers research their personal care ingredients and recognize the quality of Honest products, knowing that there are over 3,500 chemicals and materials that we choose not to formulate with.

Current wording

We believe in the power of our omnichannel distribution model. We believe consumers value the flexibility in terms of where and when they choose to purchase Honest products. We also believe that consumers research their personal care ingredients and recognize the quality of Honest products, knowing that there are over 3,500 chemicals and materials that we choose not to formulate with. Given changing macroeconomic conditions, we also believe that consumers have changed their shopping behaviors and have become more price sensitive when purchasing products in some of our product categories, including diapers.

Previous wording

Inventory is reflected at net realizable value which includes a reserve for excess inventory. We estimate reserve requirements based on current and forecasted demand, including the ability to liquidate excess inventory and estimated liquidation value. Depending on future consumer behavior in relation to the macroeconomic environment or otherwise and related aging of inventory, among other factors, we have in the past and expect to incur in the future additional inventory write-downs, customer returns or incur donation expense or disposal costs as we reduce excess inventory. As part of our efforts to mitigate the impact of tariffs, we increased our inventory on hand during the first half of 2025 to potentially delay the impact of incremental tariffs during 2025.

Current wording

Inventory is reflected at net realizable value which includes a reserve for excess inventory. We estimate reserve requirements based on current and forecasted demand, including the ability to liquidate excess inventory and estimated liquidation value. Depending on future consumer behavior in relation to the macroeconomic environment or otherwise and related aging of inventory, among other factors, we have in the past and expect to incur in the future additional inventory write-downs, customer returns or incur donation expense or disposal costs as we reduce excess inventory. As part of our efforts to mitigate the impact of tariffs, we increased our inventory on hand during the first half of 2025 to delay the impact of incremental tariffs during 2025. In connection with Powering Honest Growth, we expect additional inventory write-downs specifically related to our Supplier Services Agreement (defined below), Honest.com and supply chain optimization.

Previous wording

Selling, general and administrative expenses consist primarily of personnel costs, principally for our selling and administrative functions. These include personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses. Selling, general and administrative expenses also include technology expenses; professional fees, including audit and legal expenses; donation expenses including overhead and tariffs; facility costs, including insurance, utilities and rent relating to our headquarters; third-party service fees related to our supplier services agreement for Honest baby clothing, our baby apparel business; and, depreciation and amortization expenses. We expect our general and administrative expenses to decrease as a percentage of revenue as we continue to grow our business and organizational capabilities and efficiencies. We have incurred and expect in the future to continue to incur additional third-party professional fees related to compliance obligations as a public company.

Current wording

Selling, general and administrative expenses consist primarily of personnel costs, principally for our selling and administrative functions. These include personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses. Selling, general and administrative expenses also include technology expenses; professional fees, including audit and legal expenses; donation expenses including overhead and tariffs; facility costs, including insurance, utilities and rent relating to our headquarters; third-party service fees related to our Supplier Services Agreement for Honest baby clothing, our apparel business; and, depreciation and amortization expenses. We expect our general and administrative expenses to decrease as a percentage of revenue as we continue to grow our business and organizational capabilities and efficiencies. We have incurred and expect in the future to continue to incur additional third-party professional fees related to compliance obligations as a public company.

Previous wording

Marketing expenses include costs related to our branding initiatives, retail customer marketing activities, point of purchase displays, targeted online advertising through sponsored search, display advertising, email and influencer marketing campaigns, market research, content production, consumer insights research, and other public relations and promotional initiatives. Given higher costs in digital marketing and increased retail distribution, we have shifted the focus of our marketing spend towards supporting retail marketing programs and top of funnel marketing activities. We will continue to invest in marketing initiatives in our best-selling products with key retailers, as well as expand brand awareness, introduce new product innovation across multiple product categories and implement new marketing strategies. As we launch new products, we expect to make marketing investments to build brand awareness, drive trial and set the foundation for future revenue growth.

Current wording

Marketing expenses include costs related to our branding initiatives, retail customer marketing activities, point of purchase displays, targeted online advertising through sponsored search, display advertising, email and influencer marketing campaigns, market research, content production, consumer insights research, and other public relations and promotional initiatives. Given higher costs in digital marketing and increased retail distribution, we have shifted the focus of our marketing spend towards supporting retail marketing programs and top of funnel marketing activities. We will continue to invest in marketing initiatives in our best-selling products with key retailers, as well as expand brand awareness, introduce new product innovation across multiple product categories and implement new marketing strategies. As we launch new products, we expect to make marketing investments to build brand awareness, encourage first-time use and set the foundation for future revenue growth.

Previous wording

Comparison of the Three and Six Months Ended June 30, 2025 and 2024

Current wording

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

Previous wording

Revenue was $93.5 million for the three months ended June 30, 2025, as compared to $93.0 million for the three months ended June 30, 2024. The increase of $0.4 million, or 0.4%, was primarily due to an increase in retail revenue (including an $8.4 million increase in wipes revenue, partially offset by a decrease in diaper revenue and adult facial care revenue (including skin care and cosmetics) of $3.3 million and $2.5 million, respectively), offset by a decline in Honest.com revenue.

Current wording

Revenue was $283.3 million for the nine months ended September 30, 2025, as compared to $278.5 million for the nine months ended September 30, 2024. The increase of $4.8 million, or 1.7%, was due to an increase in retail revenue of $12.8 million, offset by a decline in Honest.com revenue of $8.0 million. The increase in retail revenue was driven by a $22.6 million increase in wipes revenue and a $3.0 million increase in baby personal care revenue, partially offset by a decrease in diaper revenue primarily related to distribution losses, the lapping of certain retailer promotional events, changes in consumer shopping behavior, adult facial care (including skin care and cosmetics) revenue and baby apparel revenue of $9.2 million, $3.4 million and $0.9 million, respectively.

Previous wording

Cost of revenue was $115.3 million for the six months ended June 30, 2025, as compared to $111.8 million for the six months ended June 30, 2024. The increase of $3.5 million, or 3.1%, was primarily driven by sales volume growth and tariff costs, partially offset by a change in inventory reserves. Cost of revenue as a percentage of revenue decreased by 190 basis points compared to the six months ended June 30, 2024.

Current wording

Cost of revenue was $58.1 million for the three months ended September 30, 2025, as compared to $60.8 million for the three months ended September 30, 2024. The decrease of $2.8 million, or 4.5%, was primarily driven by a decrease in product costs due to sales volume decline, partially offset by tariff costs. Cost of revenue as a percentage of revenue increased by 140 basis points compared to the three months ended September 30, 2024.

Previous wording

Cost of revenue was $55.7 million for the three months ended June 30, 2025, as compared to $57.4 million for the three months ended June 30, 2024. The decrease of $1.7 million, or 3.0%, was primarily driven by a change in inventory reserves, partially offset by tariff costs. Cost of revenue as a percentage of revenue decreased by 212 basis points compared to the three months ended June 30, 2024.

Current wording

Cost of revenue was $173.4 million for the nine months ended September 30, 2025, as compared to $172.6 million for the nine months ended September 30, 2024. The increase of $0.8 million, or 0.4%, was primarily driven by tariff costs, partially offset by a change in inventory reserves. Cost of revenue as a percentage of revenue decreased by 78 basis points compared to the nine months ended September 30, 2024.

Previous wording

Gross profit was $37.8 million for the three months ended June 30, 2025, as compared to $35.6 million for the three months ended June 30, 2024. The increase of $2.1 million, or 6.0%, was primarily related to a change in inventory reserves, partially offset by an increase in tariff costs.

Current wording

Gross profit was $34.5 million for the three months ended September 30, 2025, as compared to $38.4 million for the three months ended September 30, 2024. The decrease of $3.9 million, or 10.2%, was primarily related to a decline in sales volume and an increase in tariff costs, partially offset by lower trade spend and favorable product mix.

Previous wording

Gross profit was $75.4 million for the six months ended June 30, 2025, as compared to $67.5 million for the six months ended June 30, 2024. The increase of $7.9 million, or 11.7%, was primarily related to sales volume growth, supply chain cost savings and change in inventory reserves, partially offset by an increase in tariff costs.

Current wording

Gross profit was $109.9 million for the nine months ended September 30, 2025, as compared to $105.9 million for the nine months ended September 30, 2024. The increase of $4.0 million, or 3.8%, was primarily related to favorable product mix, lower trade spend and sales volume growth, partially offset by an increase in tariff costs.

Previous wording

Selling, general and administrative expenses were $20.4 million for the three months ended June 30, 2025, as compared to $26.4 million for the three months ended June 30, 2024. The decrease of $6.1 million, or 23.0%, was primarily due to a $6.2 million decrease in stock-based compensation expense due to the acceleration of restricted stock units (“RSUs”) held by our founder and former Chief Creative Officer in the three months ended June 30, 2024 and a $1.2 million decrease in legal expenses, partially offset by a increase in donation expense. Selling, general and administrative expenses as a percentage of revenue decreased 6.6% as compared to the three months ended June 30, 2024.

Current wording

Selling, general and administrative expenses were $59.1 million for the nine months ended September 30, 2025, as compared to $72.3 million for the nine months ended September 30, 2024. The decrease of $13.2 million, or 18.3%, was primarily due to a $6.2 million decrease in stock-based compensation expense and a $5.7 million decrease in legal expenses. Selling, general and administrative expenses as a percentage of revenue decreased 5.1% as compared to the nine months ended September 30, 2024.

Previous wording

Marketing expenses were $12.6 million for the three months ended June 30, 2025, as compared to $11.5 million for the three months ended June 30, 2024. The increase of $1.0 million, or 9.0%, was primarily due to a $1.6 million increase in retail marketing, partially offset by a decrease of $0.6 million in direct brand advertising. Marketing expenses as a percentage of revenue increased 1.1% as compared to the three months ended June 30, 2024.

Current wording

Marketing expenses were $14.8 million for the three months ended September 30, 2025, as compared to $13.2 million for the three months ended September 30, 2024. The increase of $1.6 million, or 12.3%, was primarily due to a $0.8 million increase in retail marketing and a $0.7 million increase in direct brand advertising. Marketing expenses as a percentage of revenue increased 2.7% as compared to the three months ended September 30, 2024.

Previous wording

Marketing expenses were $24.8 million for the six months ended June 30, 2025, as compared to $20.6 million for the six months ended June 30, 2024. The increase of $4.2 million, or 20.4%, was primarily due to a $3.1 million increase in retail marketing and a $1.0 million increase in direct brand advertising. Marketing expenses as a percentage of revenue increased 1.5% as compared to the six months ended June 30, 2024.

Current wording

Marketing expenses were $39.6 million for the nine months ended September 30, 2025, as compared to $33.8 million for the nine months ended September 30, 2024. The increase of $5.8 million, or 17.3%, was primarily due to a $3.9 million increase in retail marketing and a $1.8 million increase in direct brand advertising. Marketing expenses as a percentage of revenue increased 1.9% as compared to the nine months ended September 30, 2024.

Previous wording

Research and development expenses were $2.0 million for the three months ended June 30, 2025, as compared to $1.7 million for the three months ended June 30, 2024. Research and development expenses as a percentage of revenue increased 26 basis points as compared to the three months ended June 30, 2024.

Current wording

Research and development expenses were $1.7 million for the three months ended September 30, 2025, as compared to $1.7 million for the three months ended September 30, 2024.

Previous wording

Interest and other income (expense), net was net income of $1.8 million for the six months ended June 30, 2025, as compared to net expense of $82.0 thousand for the six months ended June 30, 2024. The increase of $1.9 million primarily relates to interest income earned on our money market account.

Current wording

Interest and other income (expense), net was net income of $0.6 million for the three months ended September 30, 2025, as compared to net income of $0.1 million for the three months ended September 30, 2024.

Previous wording

Interest and other income (expense), net was net income of $1.0 million for the three months ended June 30, 2025, as compared to net expense of $19.0 thousand for the three months ended June 30, 2024. The increase of $1.0 million primarily relates to interest income earned on our money market account.

Current wording

Interest and other income (expense), net was net income of $2.4 million for the nine months ended September 30, 2025, as compared to net income of $44.0 thousand for the nine months ended September 30, 2024. The increase of $2.3 million primarily relates to interest income earned on our money market account.

Previous wording

As of June 30, 2025, we had $72.1 million of cash and cash equivalents. Although we are dependent on our ability to generate sufficient cash flow from operations or raise capital to achieve our business objectives, we believe our existing cash and cash equivalents together with cash generated from operations will be sufficient to meet our short-term projected operations for the next 12 months from the date of issuance of our condensed consolidated financial statements. We will need to generate sufficient cash from operations or may need to raise additional capital to meet our long-term working capital and capital expenditure needs in the future. We also have availability under our 2023 Credit Facility, which was not drawn as of June 30, 2025.

Current wording

As of September 30, 2025, we had $71.5 million of cash and cash equivalents. Although we are dependent on our ability to generate sufficient cash flow from operations or raise capital to achieve our business objectives, we believe our existing cash and cash equivalents together with cash generated from operations will be sufficient to meet our short-term projected operations for the next 12 months from the date of issuance of our condensed consolidated financial statements. We will need to generate sufficient cash from operations or may need to raise additional capital to meet our long-term working capital and capital expenditure needs in the future. We also have availability under our 2023 Credit Facility, which was not drawn as of September 30, 2025.

Previous wording

In January 2023, we entered into a first lien credit agreement (the “2023 Credit Facility”), with JPMorgan Chase Bank, N.A., as administrative agent and lender, and the other lenders party thereto, which provides for a $35.0 million revolving credit facility that matures on April 30, 2026. The 2023 Credit Facility includes a sub-facility that provides for the issuance of letters of credit in an amount of up to $15.0 million at any time outstanding. Availability of the 2023 Credit Facility is based upon a borrowing base formula and periodic borrowing base certifications valuing certain of our accounts receivable and inventory as reduced by certain reserves. The 2023 Credit Facility includes an uncommitted accordion feature that allows for increases in the revolving commitment to as much as an additional $35.0 million, for up to $70.0 million in potential revolving commitment. The 2023 Credit Facility is subject to customary fees for loan facilities of this type, including a commitment fee based on the average daily undrawn portion of the 2023 Credit Facility. We recognize the commitment fee as incurred in interest and other income (expense), net in the condensed consolidated statements of comprehensive income (loss). For the three and six months ended June 30, 2025, the commitment fee incurred was immaterial. As of June 30, 2025, there were $1.6 million of outstanding letters of credit and $31.3 million available to be drawn upon. As of June 30, 2025, there was no outstanding balance under the 2023 Credit Facility.

Current wording

In January 2023, we entered into a first lien credit agreement (the “2023 Credit Facility”), with JPMorgan Chase Bank, N.A., as administrative agent and lender, and the other lenders party thereto, which provides for a $35.0 million revolving credit facility that matures on April 30, 2026. The 2023 Credit Facility includes a sub-facility that provides for the issuance of letters of credit in an amount of up to $15.0 million at any time outstanding. Availability of the 2023 Credit Facility is based upon a borrowing base formula and periodic borrowing base certifications valuing certain of our accounts receivable and inventory as reduced by certain reserves. The 2023 Credit Facility includes an uncommitted accordion feature that allows for increases in the revolving commitment to as much as an additional $35.0 million, for up to $70.0 million in potential revolving commitment. The 2023 Credit Facility is subject to customary fees for loan facilities of this type, including a commitment fee based on the average daily undrawn portion of the 2023 Credit Facility. We recognize the commitment fee as incurred in interest and other income (expense), net in the condensed consolidated statements of comprehensive income (loss). For the three and nine months ended September 30, 2025, the commitment fee incurred was immaterial. As of September 30, 2025, there were $1.5 million of outstanding letters of credit and $31.5 million available to be drawn upon. As of September 30, 2025, there was no outstanding balance under the 2023 Credit Facility.

Previous wording

Our largest source of operating cash is from the sales of our products to our consumers and customers. Our primary uses of cash from operating activities are for cost of revenue, selling, general and administrative expenses, marketing expenses and research and development expenses. We have in the three and six months ended June 30, 2025 and in the past generated negative cash flows from operating activities and have in the past supplemented working capital requirements through net proceeds from the sale and maturity of short-term investments.

Current wording

Our largest source of operating cash is from the sales of our products to our consumers and customers. Our primary uses of cash from operating activities are for cost of revenue, selling, general and administrative expenses, marketing expenses and research and development expenses. We have in the three and nine months ended September 30, 2025 and in the past generated negative cash flows from operating activities and have in the past supplemented working capital requirements through net proceeds from the sale and maturity of short-term investments.

Previous wording

Net cash used in operating activities of $3.7 million for the six months ended June 30, 2025 was primarily due to a net decrease in cash related to changes in operating assets and liabilities of $22.9 million, partially offset by non-cash adjustments of $12.1 million and net income of $7.1 million. Non-cash adjustments for accounts receivable reserves, inventory reserves and utilization of marketing credits are included in "other" in the accompanying condensed consolidated statements of cash flows. Cash used in operating activities primarily consisted of a $11.4 million increase in inventory, a $6.5 million decrease in accounts payable and accrued expenses due to timing of payments, a $4.2 million use of cash due to operating lease obligations, and a $1.6 million increase in accounts receivable, partially offset by a $1.0 million decrease in prepaid expenses and other assets. Non-cash adjustments primarily consisted of stock-based compensation of $5.1 million, amortization of operating Right-of-Use (“ROU”) assets of $3.3 million, and depreciation and amortization of $1.5 million.

Current wording

Net cash used in operating activities of $4.2 million for the nine months ended September 30, 2025 was primarily due to a net decrease in cash related to changes in operating assets and liabilities of $29.4 million, partially offset by non-cash adjustments of $17.3 million and net income of $7.9 million. Non-cash adjustments for accounts receivable reserves, inventory reserves, donation expense and utilization of marketing credits are included in "other" in the accompanying condensed consolidated statements of cash flows. Net cash used in operating activities primarily consisted of a $15.1 million decrease in accounts payable and accrued expenses due to timing of payments, a $10.8 million increase in inventory, a $6.4 million use of cash due to operating lease obligations, and a $0.3 million decrease in deferred revenue, partially offset by a $2.7 million decrease in prepaid expenses and other assets. Non-cash adjustments primarily consisted of stock-based compensation of $7.5 million, amortization of operating Right-of-Use (“ROU”) assets of $5.0 million, depreciation and amortization of $2.2 million and other items such as the marketing credits mentioned above.

Previous wording

Net cash provided by operating activities of $3.3 million for the six months ended June 30, 2024 was primarily due to non-cash adjustments of $18.4 million, partially offset by a net loss of $5.5 million and a net decrease in cash related to changes in operating assets and liabilities of $9.7 million. Non-cash adjustments primarily consisted of stock-based compensation of $11.4 million, amortization of operating ROU assets of $3.2 million, utilization of marketing credits of $1.5 million and depreciation and amortization of $1.4 million. Cash used in operating activities primarily consisted of a $4.0 million use of cash due to operating lease obligations and a $3.6 million decrease in accounts payable and accrued expenses.

Current wording

Net cash provided by operating activities of $18.4 million for the nine months ended September 30, 2024 was primarily due to non-cash adjustments of $23.9 million and a net decrease in cash related to changes in operating assets and liabilities of $0.2 million, partially offset by a net loss of $5.3 million. Non-cash adjustments primarily consisted of stock-based compensation of $13.6 million, amortization of operating ROU assets of $4.8 million, depreciation and amortization of $2.1 million and utilization of marketing credits of $1.6 million. Net cash used in operating activities primarily consisted of a $6.1 million use of cash due to operating lease obligations, a $2.7 million increase in inventory, partially offset by a $6.6 million decrease in accounts receivable and a $3.6 million increase in accounts payable and accrued expenses driven by timing of payments to vendors.

Previous wording

Net cash used in investing activities of $0.1 million for the six months ended June 30, 2025 was due to purchases of property and equipment.

Current wording

Net cash used in investing activities of $0.3 million for the nine months ended September 30, 2025 was due to purchases of property and equipment.

Previous wording

Net cash used in investing activities of $0.1 million for the six months ended June 30, 2024 was due to purchases of property and equipment.

Current wording

Net cash used in investing activities of $0.2 million for the nine months ended September 30, 2024 was due to purchases of property and equipment.

Previous wording

Net cash provided by financing activities of $0.5 million for the six months ended June 30, 2025 consisted primarily of $0.4 million of proceeds from stock option award exercises.

Current wording

Net cash provided by financing activities of $0.5 million for the nine months ended September 30, 2025 consisted primarily of $0.4 million of proceeds from stock option award exercises.

Previous wording

Net cash provided by financing activities of $0.6 million for the six months ended June 30, 2024 consisted primarily of $0.5 million of proceeds from stock option award exercises.

Current wording

Net cash provided by financing activities of $2.4 million for the nine months ended September 30, 2024 consisted primarily of $2.4 million of proceeds from stock option award exercises.

Previous wording

We prepare and present our condensed consolidated financial statements in accordance with GAAP. However, management believes that adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance.

Current wording

We prepare and present our condensed consolidated financial statements in accordance with GAAP. However, management believes that Organic Revenue and Adjusted EBITDA, which are are non-GAAP financial measures, which provide investors with additional useful information in evaluating our performance.

Previous wording

Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with GAAP. We believe that adjusted EBITDA, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.

Current wording

Organic Revenue and Adjusted EBITDA are financial measures that are not required by, or presented in accordance with GAAP. We believe that Organic Revenue and Adjusted EBITDA, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Organic Revenue and Adjusted EBITDA is helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes. Additionally, we believe Organic Revenue is helpful to our investors as it adjusts for revenue sources that we are exiting in connection with Powering Honest Growth.

Previous wording

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations of adjusted EBITDA include that (1) it does not reflect capital commitments to be paid in the future; (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and adjusted EBITDA does not reflect these capital expenditures; (3) it does not consider the impact of stock-based compensation expense; (4) it does not reflect other non-operating expenses, including interest expense; (5) it does not reflect tax payments that may represent a reduction in cash available to us; and (6) it does not include certain non-ordinary cash expenses that we do not believe are representative of our business on a steady-state basis, such as executive officer transition expenses. In addition, our use of adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider adjusted EBITDA alongside other financial measures, including our revenue, net income (loss) and other results stated in accordance with GAAP.

Current wording

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations of Adjusted EBITDA include that (1) it does not reflect capital commitments to be paid in the future; (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (3) it does not consider the impact of stock-based compensation expense; (4) it does not reflect other non-operating expenses, including interest expense; (5) it does not reflect tax payments that may represent a reduction in cash available to us; and (6) it does not include certain non-ordinary cash expenses that we do not believe are representative of our business on a steady-state basis, such as executive officer transition expenses. In addition, our use of Adjusted EBITDA and Organic Revenue may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA and Organic Revenue alongside other financial measures, including our revenue, net income (loss) and other results stated in accordance with GAAP.

Previous wording

(1) For the three and six months ended June 30, 2025, this includes separation, bonus and recruiting costs related to our Chief Financial Officer transition. For the three and six months ended June 30, 2024, this includes sign-on bonus and relocation costs related to the appointment of our Chief Executive Officer and separation costs related to the termination of our founder and former Chief Creative Officer.

Current wording

(1) For the nine months ended September 30, 2024, this includes sign-on bonus and relocation costs related to the appointment of our Chief Executive Officer and separation costs related to the termination of our founder and former Chief Creative Officer. For the nine months ended September 30, 2025, this includes separation, bonus and recruiting costs related to our Chief Financial Officer transition.

Previous wording

Our critical accounting estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report and the notes to the audited consolidated financial statements appearing in our Annual Report. During the three and six months ended June 30, 2025, there were no material changes to our critical accounting estimates from those discussed in our Annual Report.

Current wording

Our critical accounting estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report and the notes to the audited consolidated financial statements appearing in our Annual Report. During the three and nine months ended September 30, 2025, there were no material changes to our critical accounting estimates from those discussed in our Annual Report.

Previous wording

In April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we are not subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult.

Current wording

In April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we are not subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult. We expect to lose the benefits provided to emerging growth companies as of December 31, 2026.