The Honest Company (HNST) Q1 2026 earnings summary

Executive summary

• Q1 2026 revenue was $78.1 million, down 19.7% year-over-year due to strategic exits and diaper declines, but organic revenue grew 3.9% driven by wipes and personal care platforms.

• Adjusted gross margin reached a record 43.5%, up 480 basis points year-over-year, reflecting portfolio optimization and margin enhancement initiatives.

• Household penetration hit an all-time high of 8.1%, with 1.6 million new households added over the past year.

• Net loss was less than $0.1 million; adjusted net income was $1.3 million, excluding restructuring costs.

• The company is executing Transformation 2.0: Powering Honest Growth, focusing on brand maximization, margin enhancement, and operating discipline, including exiting direct-to-consumer and apparel channels.

Financial highlights

• Organic revenue grew 3.9% year-over-year, offsetting a 19.7% reported revenue decline due to strategic exits.

• Adjusted gross margin hit an all-time high at 43.5%, up 480bps year-over-year; reported gross margin improved to 42.6%.

• Adjusted EBITDA was $4.0 million (5.1% margin), down from $6.9 million (7.1% margin) last year.

• Free cash flow improved to $3.8 million from -$3 million in the prior year; net cash provided by operating activities was $5.5 million.

• Ended Q1 with $90.4 million in cash and no debt.

Outlook and guidance

• Reaffirmed full-year 2026 outlook: reported revenue decline of 16%-18% due to exits, organic revenue growth of 4%-6%, adjusted gross margin in the low 40% range, and adjusted EBITDA of $20-$23 million.

• Powering Honest Growth restructuring expected to be substantially completed by year-end 2026, with total costs of $30–$35 million and annualized benefits of $10–$15 million.

• Guidance reflects a prudent approach amid macroeconomic uncertainties and ongoing diaper category pressures.