Honest Company, Inc.

Previous wording

•Costs associated with Powering Honest Growth, including restructuring costs, are expected to be approximately $30.0 million to $35.0 million to be recognized through the first quarter of 2027. Of this range, we expect approximately $5.0 million to $8.0 million to be related to restructuring costs, primarily comprising contractual and external obligation costs, employee and personnel-related costs and asset and other restructuring-related costs, and approximately $25.0 million to $27.0 million to be related to other costs included in cost of revenue, primarily related to a discrete inventory write-down related to exiting apparel category as a seller of merchandise, fixed asset impairments, and costs associated with a warehouse closure, some of which have already been incurred.

Current wording

•Costs associated with Powering Honest Growth, including restructuring costs, are expected to be approximately $28.0 million to $31.0 million to be recognized through the first quarter of 2027. Of this range, we expect approximately $5.0 million to $6.0 million to be related to restructuring costs, primarily comprising contractual and external obligation costs, employee and personnel-related costs and asset and other restructuring-related costs, and approximately $23.0 million to $25.0 million to be related to other costs included in cost of revenue, primarily related to a discrete inventory write-down related to exiting apparel category as a seller of merchandise, fixed asset impairments, and costs associated with a warehouse closure, some of which have already been incurred.

Previous wording

◦During the three months ended March 31, 2026, we have recognized $1.3 million of costs related to Powering Honest Growth, for a total of approximately $25.3 million recognized to date. See table below for additional details of the costs recognized in the three months ended March 31, 2026.

Current wording

◦During the three and six months ended June 30, 2026, we have recognized $1.0 million and $2.3 million, respectively, of costs related to Powering Honest Growth, for a total of approximately $26.3 million recognized to date. See table below for additional details of the costs recognized in the three and six months ended June 30, 2026.

Previous wording

•Powering Honest Growth is expected to result in annualized benefits in the range of approximately $10.0 million to $15.0 million, and the Company has begun seeing benefits in 2026. These benefits include reduction in costs of revenue and reduction in operating expenses, offset by a decrease in revenue related to the exit of lower margin non-strategic portfolios.

Current wording

•Powering Honest Growth is expected to result in annualized benefits in the range of approximately $14.0 million to $17.0 million, and the Company has begun seeing benefits in 2026. These benefits include reduction in costs of revenue and reduction in operating expenses, offset by a decrease in revenue related to the exit of lower margin non-strategic portfolios.

Previous wording

•The cash impact of costs related to Powering Honest Growth is expected to be in the range of approximately $13.0 million to $18.0 million for the full years 2026 and 2027, with $3.7 million cash paid to date and the remainder to be paid throughout 2026 and 2027.

Current wording

•The cash impact of costs related to Powering Honest Growth is expected to be in the range of approximately $10.0 million to $13.0 million for the full years 2026 and 2027, with $6.5 million cash paid through the first half of 2026 and the remainder to be paid in the second half of 2026 and in 2027.

Previous wording

Costs associated with Powering Honest Growth for the three months ended March 31, 2026 were as follows (in thousands):

Current wording

Costs associated with Powering Honest Growth were as follows (in thousands):

Previous wording

(1) We incurred costs in connection with a warehouse closure which is included in cost of revenue on the consolidated statements of comprehensive loss.

Current wording

(1) Represents costs in connection with a warehouse closure which is included in cost of revenue on the condensed consolidated statements of comprehensive income.

Previous wording

(2) For further details on the restructuring element of Powering Honest Growth, refer to Note 12, “Restructuring” included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

(2) Includes an adjustment related to contract and external obligation costs for the three months ended June 30, 2026. For further details on the restructuring element of Powering Honest Growth, refer to Note 12, “Restructuring” included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

The core of our growth strategy centers around increasing physical availability through expanded stores, doors, aisles, shelves and facing and increasing digital availability of our products in retail customers websites, and third-party ecommerce sites. 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.

Current wording

The core of our growth strategy centers around increasing physical availability through expanded stores, doors, aisles, shelves and facings and increasing digital availability of our products in retail customers websites, and third-party ecommerce sites. 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.

Previous wording

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 since 2025, and we expect will continue to negatively impact our diaper revenue in the future.

Current wording

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 since 2025, and we expect will continue to negatively impact our diaper revenue in the future. Product offerings in the diaper category remain competitive and retailer decisions related to the sale or promotion of competitive diaper products has negatively impacted our diaper revenue in 2026, which we expect to continue in the future.

Previous wording

Due to higher costs of shipping and fulfillment activities related to our DTC channel and other related costs, we no longer utilize Honest.com as a shipping and fulfillment channel or sell products through this channel as of December 31, 2025 and instead have shifted our focus and investments towards more efficient and scalable distribution models with our current retail and digital customers. The Honest.com website will remain a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase offsite. Our discontinuation of Honest.com as a direct shipping and fulfillment channel negatively impacted our revenue for the year ended December 31, 2025; however, we also expect that it will enable improved gross margin in future years.

Current wording

Due to higher costs of shipping and fulfillment activities related to our DTC channel and other related costs, we no longer utilize Honest.com as a shipping and fulfillment channel or sell products through this channel as of December 31, 2025 and instead have shifted our focus and investments towards more efficient and scalable distribution models with our retail and digital customers. The Honest.com website remains a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase offsite. Our discontinuation of Honest.com as a direct shipping and fulfillment channel negatively impacted our revenue for the year ended December 31, 2025 and the first half of 2026; however, we also expect that it will enable improved gross margin in future years.

Previous wording

There has been and continues to be an adverse impact on global economic conditions, specifically tariffs and 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 due to inflationary pressures, which has in the past and could continue to hamper our ability to drive margin expansion. In addition, notwithstanding legal challenges, we expect tariffs to continue to negatively impact 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. In addition, in early 2025 we hired a Senior Vice President of Supply Chain, a newly created role, which has enabled us to accelerate some of the cost savings opportunities we have developed. 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 since 2025 and the ongoing uncertainty of those rates, has primarily impacted our wipes product costs, and may in the future impact our ability to forecast the tariff impacts on our cost of revenue. As part of Powering Honest Growth, we are also taking action to optimize our supply chain footprint and inventory management, along with leveraging technology to improve systems. We expect that the ongoing military conflicts may further increase our global shipping costs and could negatively impact the cost of petrochemicals which are used in the raw materials and packaging in our personal care products.

Current wording

In addition, notwithstanding legal challenges, we expect tariffs to continue to negatively impact 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. In addition, in early 2025 we hired a Senior Vice President of Supply Chain, a newly created role, which has enabled us to accelerate some of the cost savings opportunities we have developed. 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 since 2025 and the ongoing uncertainty of those rates, has primarily impacted our wipes product costs, and may in the future impact our ability to forecast the tariff impacts on our cost of revenue.

Previous wording

We have implemented price increases in the past and we may implement additional price increases in the future as needed to offset current and future input cost inflation and to pursue productivity initiatives to offset inflation. However, we may not be able to increase our prices or productivity sufficiently enough to offset these costs. Customer demand for our products may change based on price increases.

Current wording

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 agreed to increased purchase costs from our diaper manufacturer and received requests to renegotiate purchase costs from other third-party manufacturers, which negotiations are ongoing. We have implemented price increases in the past and we may implement additional price increases in the future as needed to offset current and future input cost inflation and to pursue productivity initiatives to offset inflation. However, we may not be able to increase our prices or productivity sufficiently enough to offset these costs. Customer demand for our products may change based on price increases.

Previous wording

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.

Current wording

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. In the second quarter of 2026, we implemented price reductions on our diapers, which impacted revenue and margin in this product category.

Previous wording

In August 2022, we entered into a supplier services agreement with Butterblu, LLC (“Butterblu”) pursuant to which Butterblu provided certain design, manufacturing, sales and marketing services to us (the “Supplier Services Agreement”). As part of the Supplier Services Agreement, we agreed to purchase and own inventory for the term of the agreement, which was originally until December 31, 2026, unless terminated sooner. On November 5, 2025, we sent a Notice of Termination to Butterblu and sued the company for alleged breaches of the Supplier Services Agreement. Through agreement of the parties following our Notice of Termination, Honest and Butterblu extended the Supplier Services Agreement on a temporary basis through December 26, 2025. The Supplier Services Agreement was formally terminated on December 26, 2025. Upon termination, Butterblu was required to discontinue using Honest’s trademarks and prints and to consummate all pending purchase orders received in writing as of the November 5, 2025 termination date, and Honest has the right to sell off all products sourced by Butterblu until and through December 26, 2026 and shall pay Butterblu the Base Service Fee, defined as 22% of Honest's net revenue for product sales and adjusted to ensure that the Base Service Fee does not exceed Honest's gross profit for product sales in the applicable quarter, for product sales through December 26, 2026. The parties are in litigation, which is described in Note 7, "Commitments and Contingencies," included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Litigation related to our respective obligations under the Supplier Services Agreement, the termination of this Supplier Services Agreement, any disputes over the terms of the termination, and costs related to the apparel inventory we own have negatively impacted revenue and gross profit, offset by lower operating costs for the fourth quarter ended December 31, 2025 and full year 2025, and are expected to continue to adversely impact our results of operations going forward. In addition, the loss of the relationship with Butterblu negatively impacted apparel revenue and will negatively impact apparel revenue in the future, which may adversely affect our results of operations.

Current wording

In August 2022, we entered into a supplier services agreement with Butterblu, LLC (“Butterblu”) pursuant to which Butterblu provided certain design, manufacturing, sales and marketing services to us (the “Supplier Services Agreement”). As part of the Supplier Services Agreement, we agreed to purchase and own inventory for the term of the agreement, which was originally until December 31, 2026, unless terminated sooner. On November 5, 2025, we sent a Notice of Termination to Butterblu and sued the company for alleged breaches of the Supplier Services Agreement. Through agreement of the parties following our Notice of Termination, Honest and Butterblu extended the Supplier Services Agreement on a temporary basis through December 26, 2025. The Supplier Services Agreement was formally terminated on December 26, 2025. Upon termination, Butterblu was required to discontinue using Honest’s trademarks and prints and to consummate all pending purchase orders received in writing as of the November 5, 2025 termination date, and Honest has the right to sell off all products sourced by Butterblu until and through December 26, 2026 and shall pay Butterblu the Base Service Fee, defined as 22% of Honest's net revenue for product sales and adjusted to ensure that the Base Service Fee does not exceed Honest's gross profit for product sales in the applicable quarter, for product sales through December 26, 2026. The parties are in litigation, which is described in Note 7, "Commitments and Contingencies," included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Litigation related to our respective obligations under the Supplier Services Agreement, the termination of this Supplier Services Agreement, any disputes over the terms of the termination, and costs related to the apparel inventory we own have negatively impacted revenue and gross profit, partially offset by lower operating costs since the fourth quarter ended December 31, 2025, and are expected to continue to adversely impact our results of operations in 2026. In addition, the loss of the relationship with Butterblu negatively impacted apparel revenue and will negatively impact apparel revenue in the future, which may adversely affect our results of operations.

Previous wording

We generate revenue through the sale of our products through our leading retailers and their websites, third-party ecommerce sites and, prior to December 31, 2025, Honest.com. Our revenue is recognized net of allowances for returns, discounts, credits and any taxes collected from consumers.

Current wording

We generate revenue through the sale of our products through our leading retailers and their websites, third-party ecommerce sites and, prior to December 31, 2025, Honest.com, as well as through royalty revenue under the License Agreement. Our revenue is recognized net of allowances for returns, trade and other discounts, retailer violations and credits, and any taxes collected from consumers.

Previous wording

Cost of revenue includes the purchase price of merchandise sold to customers, inbound and outbound shipping and handling costs, freight, tariffs and duties, shipping and packaging supplies, credit card processing fees and warehouse fulfillment costs incurred in operating and staffing warehouses, including rent. Cost of revenue also includes depreciation and amortization for warehouse fulfillment facilities and equipment, allocated overhead and direct and indirect labor for warehouse personnel, inventory reserves and destruction costs.

Current wording

Cost of revenue includes the purchase price of merchandise sold to customers, inbound and outbound shipping and handling costs, freight, tariffs and duties, shipping and packaging supplies, credit card processing fees related to Honest.com, and warehouse fulfillment costs incurred in operating and staffing warehouses, including rent. Cost of revenue also includes depreciation and amortization for warehouse fulfillment facilities and equipment, allocated overhead and direct and indirect labor for warehouse personnel, inventory reserves and destruction costs.

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 our apparel products 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 our exited apparel products 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

Restructuring costs are one of the elements of Powering Honest Growth and are included in Restructuring on the statements of comprehensive income (loss). Restructuring costs include contract and external obligation costs, employee and personnel-related costs, and asset and other restructuring-related costs. For further details on the restructuring element of Powering Honest Growth, refer to Note 12, “Restructuring” included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

Restructuring costs are one of the elements of Powering Honest Growth and are included in Restructuring on the condensed consolidated statements of comprehensive income. Restructuring costs include contract and external obligation costs, employee and personnel-related costs, and asset and other restructuring-related costs. For further details on the restructuring element of Powering Honest Growth, refer to Note 12, “Restructuring” included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

The following table sets forth our condensed consolidated statements of comprehensive income (loss) data for each of the periods indicated:

Current wording

The following table sets forth our condensed consolidated statements of comprehensive income data for each of the periods indicated:

Previous wording

The following table sets forth our condensed consolidated statements of comprehensive income (loss) data expressed as a percentage of revenue*:

Current wording

The following table sets forth our condensed consolidated statements of comprehensive income data expressed as a percentage of revenue*:

Previous wording

Comparison of the Three Months Ended March 31, 2026 and 2025

Current wording

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

Previous wording

Revenue was $78.1 million for the three months ended March 31, 2026, as compared to $97.3 million for the three months ended March 31, 2025. The decrease of $19.2 million, or 19.7%, was primarily due to the strategic exits related to Powering Honest Growth and a decline in diaper revenue, partially offset by an increase in revenue mainly within wipes and personal care products. Refer to the Organic Revenue table under “Non-GAAP Financial Measures” below for further details of revenue excluding the revenue associated with the discrete exits related to Powering Honest Growth.

Current wording

Revenue was $83.3 million for the three months ended June 30, 2026, as compared to $93.5 million for the three months ended June 30, 2025. The decrease of $10.2 million, or 10.9%, was primarily due to the strategic exits related to Powering Honest Growth and a decline in diaper revenue, partially offset by an increase in revenue mainly within wipes and personal care and other products.

Previous wording

Cost of revenue was $44.8 million for the three months ended March 31, 2026, as compared to $59.6 million for the three months ended March 31, 2025. The decrease of $14.8 million, or 24.8%, was primarily driven by a decline in product, shipping and fulfillment costs due to sales volume decline related to Powering Honest Growth strategic exits and lower freight costs, partially offset by an increase in tariff costs. Cost of revenue as a percentage of revenue decreased by 390 basis points compared to the three months ended March 31, 2025.

Current wording

Cost of revenue was $42.9 million for the three months ended June 30, 2026, as compared to $55.7 million for the three months ended June 30, 2025. The decrease of $12.8 million, or 22.9%, was primarily driven by lower costs associated with strategic exits under Powering Honest Growth and tariff refunds. Cost of revenue as a percentage of revenue decreased by 800 basis points compared to the three months ended June 30, 2025.

Previous wording

Selling, general and administrative expenses were $17.5 million for the three months ended March 31, 2026, as compared to $21.0 million for the three months ended March 31, 2025. The decrease of $3.6 million, or 17.0%, was primarily due to a $2.1 million decline in third-party apparel service fees, a $1.1 million decrease in legal expenses and a $1.0 million decrease in employee-related expenses. Selling, general and administrative expenses as a percentage of revenue increased 0.7% as compared to the three months ended March 31, 2025.

Current wording

Selling, general and administrative expenses were $32.4 million for the six months ended June 30, 2026, as compared to $41.4 million for the six months ended June 30, 2025. The decrease of $9.0 million, or 21.6%, was primarily due to a $5.2 million decline in third-party service fees, a $1.4 million decrease in legal expenses, a $0.8 million decrease in donation expense and a $0.7 million decrease in executive officer transition expenses. Selling, general and administrative expenses as a percentage of revenue decreased 1.6% as compared to the six months ended June 30, 2025.

Previous wording

Marketing expenses were $14.0 million for the three months ended March 31, 2026, as compared to $12.3 million for the three months ended March 31, 2025. The increase of $1.7 million, or 14.0%, was primarily due to increased marketing investment to support our higher growth, higher margin wipes and personal care platforms. Marketing expenses as a percentage of revenue increased 5.3% as compared to the three months ended March 31, 2025.

Current wording

Marketing expenses were $14.5 million for the three months ended June 30, 2026, as compared to $12.6 million for the three months ended June 30, 2025. The increase of $1.9 million, or 15.3%, was primarily due to increased marketing investment to support our higher growth, higher margin wipes and personal care platforms. Marketing expenses as a percentage of revenue increased 3.9% as compared to the three months ended June 30, 2025.

Previous wording

Restructuring expenses included employee and personnel-related costs of $0.3 million, and asset and other restructuring-related costs of $0.3 million for the three months ended March 31, 2026. For the three months ended March 31, 2025, we did not incur any restructuring expenses. For further details on Powering Honest Growth, refer to “Transformation 2.0: Powering Honest Growth” above and Note 12, “Restructuring” in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

For further details on Powering Honest Growth, refer to “Transformation 2.0: Powering Honest Growth” above and Note 12, “Restructuring” in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. For the three and six months ended June 30, 2025, we did not incur any restructuring expenses.

Previous wording

Interest and other income (expense), net was net income of $0.7 million for the three months ended March 31, 2026, as compared to net income of $0.8 million for the three months ended March 31, 2025.

Current wording

Interest and other income (expense), net was net income of $1.2 million for the three months ended June 30, 2026, as compared to net income of $1.0 million for the three months ended June 30, 2025.

Previous wording

As of March 31, 2026, we had $90.4 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 2026 Credit Facility, which was not drawn as of March 31, 2026.

Current wording

As of June 30, 2026, we had $105.9 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 2026 Credit Facility, which was not drawn as of June 30, 2026.

Previous wording

The 2026 Credit Facility provides a revolving credit facility in an aggregate principal amount of up to $35.0 million (the “Commitment Amount”) and 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. If more than 50% of the Commitment Amount is outstanding, availability of the 2026 Credit Facility will be based upon a borrowing base formula and periodic borrowing base certifications valuing certain of our accounts receivable and inventory as reduced by certain reserves, if any. The 2026 Credit Facility includes an uncommitted accordion feature that allows for increases in the Commitment Amount to as much as an additional $35.0 million, for up to $70.0 million in potential revolving commitments. The 2026 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 2026 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 months ended March 31, 2026, the commitment fee incurred was immaterial. As of March 31, 2026, there were $1.5 million of outstanding letters of credit. As of March 31, 2026, there wasno outstanding borrowing under the 2026 Credit Facility, but the letters of credit reduce the amount available under the 2026 Credit Facility on a dollar-for-dollar basis.

Current wording

The 2026 Credit Facility provides a revolving credit facility in an aggregate principal amount of up to $35.0 million (the “Commitment Amount”) and 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. If more than 50% of the Commitment Amount is outstanding, availability of the 2026 Credit Facility will be based upon a borrowing base formula and periodic borrowing base certifications valuing certain of our accounts receivable and inventory as reduced by certain reserves, if any. The 2026 Credit Facility includes an uncommitted accordion feature that allows for increases in the Commitment Amount to as much as an additional $35.0 million, for up to $70.0 million in potential revolving commitments. The 2026 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 2026 Credit Facility. We recognize the commitment fee as incurred in interest and other income (expense), net in the condensed consolidated statements of comprehensive income. For the three and six months ended June 30, 2026, the commitment fee incurred was immaterial. As of June 30, 2026, there were $2.7 million of outstanding letters of credit. As of June 30, 2026, there was no outstanding borrowing under the 2026 Credit Facility, but the letters of credit reduce the amount available under the 2026 Credit Facility on a dollar-for-dollar basis.

Previous wording

As of March 31, 2026, there were no changes to our material cash requirements from those described under “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

Current wording

As of June 30, 2026, there were no changes to our material cash requirements from those described under “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report, except for the corporate office lease entered into in June 2026. Refer to Note 11, “Leases” included in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information on the corporate office lease.

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.

Current wording

Our largest source of operating cash is from the sales of our products to our 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.

Previous wording

Net cash used in operating activities of $2.9 million for the three months ended March 31, 2025 was primarily due to a net decrease in cash related to changes in operating assets and liabilities of $12.1 million, partially offset by non-cash adjustments of $5.9 million and net income of $3.3 million. Change in inventory reserves and accounts receivable reserves and utilization of marketing credits are included in "Other" in the accompanying condensed consolidated statements of cash flows. Changes in cash flows related to operating assets and liabilities primarily consisted of a $5.8 million increase in inventory, a $5.8 million decrease in accounts payable and accrued expenses due to timing of employee related expenses, and a $2.1 million use of cash due to operating lease obligations, partially offset by a $0.9 million decrease in prepaid expenses and other assets and a $0.7 million decrease in accounts receivable. Non-cash adjustments primarily consisted of stock-based compensation of $2.4 million, amortization of operating ROU assets of $1.6 million, change in inventory reserves of $0.8 million, depreciation and amortization of $0.7 million and utilization of marketing credits of $0.4 million.

Current wording

Net cash provided by operating activities of $37.8 million for the six months ended June 30, 2026 was primarily due to a net increase in cash related to changes in operating assets and liabilities of $15.2 million, non-cash adjustments of $11.9 million and net income of $10.6 million. The change in operating assets and liabilities primarily consisted of a $23.0 million decrease in inventory as part of our Operating Discipline pillar, partially offset by a $4.4 million increase in accounts receivable, a $2.3 million use of cash due to operating lease obligations and a $0.8 million increase in prepaid expenses and other assets. Non-cash adjustments primarily consisted of stock-based compensation of $5.5 million, amortization of operating Right-of-Use (“ROU”) assets of $3.3 million and depreciation and amortization of $1.3 million. Non-cash adjustments for accounts receivable reserves, inventory reserves, donation expense and utilization and write-off of marketing and transportation credits are included in "other" in the accompanying condensed consolidated statements of cash flows.

Previous wording

Net cash provided by operating activities of $5.5 million for the three months ended March 31, 2026 was primarily due to non-cash adjustments of $5.0 million and net loss of $42 thousand, partially offset by a net increase in cash related to changes in operating assets and liabilities of $0.6 million. Non-cash adjustments primarily consisted of stock-based compensation of $2.5 million, amortization of operating ROU assets of $1.7 million and depreciation and amortization of $0.6 million. Net cash provided by operating activities primarily consisted of a $11.4 million decrease in inventory, partially offset by a $7.7 million decrease in accounts payable and accrued expenses due to timing of payments, a $2.3 million use of cash due to operating lease obligations and a $0.5 million increase in prepaid expenses and other assets.

Current 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. 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 ROU assets of $3.3 million, and depreciation and amortization of $1.5 million.

Previous wording

Net cash used in investing activities of $1.7 million and $0.1 million for the three months ended March 31, 2026, and March 31, 2025, respectively, was due to the purchase of property and equipment.

Current wording

Net cash used in investing activities of $2.5 million and $0.1 million for the six months ended June 30, 2026, and June 30, 2025, respectively, was due to the purchase of property and equipment.

Previous wording

Our financing activities primarily consisted of proceeds from sales of securities, proceeds from stock option award exercises and principal payments of financing lease obligations.

Current wording

Our financing activities primarily consisted of share repurchases, proceeds from sales of securities, proceeds from stock option award exercises and principal payments of financing lease obligations.

Previous wording

Net cash used in financing activities of $3.0 million for the three months ended March 31, 2026 consisted of repurchases of common stock.

Current wording

Net cash used in financing activities of $19.0 million for the six months ended June 30, 2026 primarily consisted of repurchases of common stock.

Previous wording

Net cash provided by financing activities of $0.4 million for the three months ended March 31, 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 six months ended June 30, 2025 consisted primarily of $0.4 million of proceeds from stock option award exercises.

Previous wording

On February 20, 2026, our Board of Directors approved our first share repurchase program for up to $25.0 million of our outstanding common stock. Under the program, share repurchases may be made at our discretion from time to time in open market transactions or privately negotiated transactions, or by other means, including through Rule 10b5-1 trading plans. The timing and number of shares repurchased under the new program will depend on a variety of factors, including, without limitation, stock price and trading volume. The repurchase program does not obligate us to purchase any shares, has no expiration date and may be modified, suspended or terminated at any time. We expect to fund repurchases with a combination of existing cash and cash equivalents and cash flows from operations. We repurchased 1,052,672 shares of common stock at an average share price of$2.85 per share, for an aggregate amount of approximately $3.0 million, during thethree months ended March 31, 2026. As of March 31, 2026, approximately $22 million remained available under the share repurchase program. Refer to Note 8, “Stockholders' Equity” included in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information on the share repurchase program. Between April 1, 2026 and May 1, 2026, we repurchased 3,471,969 shares of common stock at an average share price of $3.26 per share, for an aggregate amount of approximately$11.3 million. Accordingly, as of May 1, 2026, approximately$10.7 million remained available under the share repurchase program.

Current wording

On February 20, 2026, our Board of Directors approved our first share repurchase program for up to $25.0 million of our outstanding common stock. Under the program, share repurchases may be made at our discretion from time to time in open market transactions or privately negotiated transactions, or by other means, including through Rule 10b5-1 trading plans. The timing and number of shares repurchased under the new program will depend on a variety of factors, including, without limitation, stock price and trading volume. The repurchase program does not obligate us to purchase any shares, has no expiration date and may be modified, suspended or terminated at any time. We expect to fund repurchases with a combination of existing cash and cash equivalents and cash flows from operations.

Previous wording

We calculate Adjusted EBITDA as net (loss) income, adjusted to exclude: (1) interest and other (income) expense, net; (2) income tax provision; (3) depreciation and amortization; (4) stock-based compensation expense, including payroll tax; (5) litigation and settlement fees associated with certain non-ordinary course securities litigation claims; (6) executive officer transition expenses; and (7) restructuring-related expenses in connection with Powering Honest Growth.

Current wording

We calculate Adjusted EBITDA as net income, adjusted to exclude: (1) interest and other (income) expense, net; (2) income tax provision; (3) depreciation and amortization; (4) stock-based compensation expense, including payroll tax; (5) litigation and settlement fees associated with certain non-ordinary course securities litigation claims; (6) executive officer transition expenses; and (7) restructuring-related expenses 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 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 Organic Revenue and Adjusted EBITDA alongside other financial measures, including our revenue, net (loss) income 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 Organic Revenue and Adjusted EBITDA alongside other financial measures, including our revenue, net income and other results stated in accordance with GAAP.