UCZCIWA FIRMA, INC. Dyskusja i analiza sytuacji finansowej i wyników działalności prowadzonej przez kierownictwo. (formularz 10-Q)
You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and related notes included elsewhere in this Quarterly Report on Form
10-Q, as well as our audited consolidated financial statements and related notes
as disclosed in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2022 (the "Annual Report"), filed with the Securities and Exchange
Commission ("SEC") on March 16, 2023. This discussion, particularly information
with respect to our future results of operations or financial condition,
business strategy and plans, and objectives of management for future operations,
includes forward-looking statements that involve risks and uncertainties as
described under the heading "Special Note Regarding Forward-Looking Statements"
in this Quarterly Report on Form 10-Q. You should review the disclosure under
the heading "Risk Factors" in this Quarterly Report on Form 10-Q as well as in
the Annual Report for a discussion of important factors that could cause our
actual results to differ materially from those anticipated in these
forward-looking statements. Unless the context otherwise requires, all
references in this Quarterly Report on Form 10-Q to "we," "us," "our," "our
company," "the Company" and "Honest" refer to The Honest Company, Inc. and its
consolidated subsidiaries.
Overview
The Honest Company, Inc. ("Honest" and, together with its consolidated
subsidiaries, the "Company," "we," "us" and "our") is a digitally-native
consumer products company dedicated to creating clean- and sustainably-designed
products spanning baby care, beauty, personal care, wellness and household care.
Our commitment to our core values, continual innovation and engaging our
community has differentiated and elevated our brand and our products. Since our
launch in 2012, we have been dedicated to developing clean, sustainable,
effective and thoughtfully-designed products. By doing so with transparency, we
have cultivated deep trust around what matters most to our consumers: their
health, their families and their homes. We are an omnichannel brand, ensuring
our products are available wherever our consumers shop. Our differentiated
platform positions us for continued growth through our trusted brand,
award-winning multi-category product offerings, deep digital-first connection
with consumers and omnichannel accessibility.
Our integrated multi-category product architecture is intentionally designed to
serve our consumers every day, at every age and through every life stage, no
matter where they are on their journey. Our three product categories are Diapers
and Wipes, Skin and Personal Care, and Household and Wellness, which represented
64%, 27%, and 9%, respectively, of our revenue for the three months ended March
31, 2023, compared to 63%, 31%, and 6%, respectively, of our revenue for the
three months ended March 31, 2022. At the center of our product ecosystem are
our diapers, which are a strategic consumer acquisition tool that acts as an
entry point for our portfolio, as new parents often go on to purchase products
from our other categories for their everyday family needs. Our integrated
multi-category product architecture is designed to drive loyalty, increase our
consumer wallet share and generate attractive consumer lifetime value.
We believe that our consumers are modern, aspirational, conscious and
style-forward and that they seek out high quality, effective and
thoughtfully-designed products. We believe that they are passionate about living
a conscious life and are enthusiastic ambassadors for brands they trust. As
purpose-driven consumers, they transcend any one demographic, spanning gender,
age, geography, ethnicity and household income. Honest consumers are often
young, mobile-centric and digitally-inclined. We build relationships with these
consumers through a disruptive digital marketing strategy that engages them with
"snackable" digital content (short-form, easily digestible content), immerses
them in our brand values, and inspires them to join the Honest community. Our
direct connection with our community enables us to understand what consumers'
needs are and inspires our product innovation pipeline, generating a significant
competitive advantage over more traditional consumer packaged goods, or CPG,
peers.
Our omnichannel approach seeks to meet consumers wherever they want to shop,
balancing deep consumer connection with broad convenience and accessibility.
Since our launch, we have built a well-integrated omnichannel presence by
expanding our product accessibility across both Digital and Retail channels,
including the launch of strategic partnerships with Target, Amazon and Walmart
in 2014, 2017 and 2022, respectively. For the three months ended March 31, 2023,
we generated 50% and 50% of our revenue from our Digital and Retail channels,
respectively, compared to 50% and 50%, respectively, for the three months ended
March 31, 2022. We maintain direct relationships with our consumers via our
flagship digital platform, Honest.com, which allows us to influence brand
experience and better understand consumer preferences and behavior. We increase
accessibility of our products to more consumers through both the third-party
pureplay ecommerce sites that, with Honest.com, comprise our Digital channel,
and our Retail channel, which includes leading retailers and their websites. As
of March 31, 2023, our products can be found in approximately 50,000 retail
locations across the United States, Canada and Europe. Our integrated
omnichannel presence provides meaningful benefits to our consumers which we
believe are not easily replicated by our competitors. This distinctive business
model has allowed us to efficiently scale our business while remaining agnostic
as to the channel where consumers purchase our products.
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Inicjatywa Transformacji
In the first quarter of 2023, we began executing 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.
Przewiduje się, że Inicjatywa Transformacji doprowadzi do:
•Costs associated with the Transformation Initiative, including restructuring costs, are expected to be approximately $10.0 million to $15.0 million for the full year 2023, with $7.0 million recognized during the three months ended March 31, 2023. Refer to discussion under "Results of Operations" below. •Restructuring costs, which include employee-related costs, asset-related costs and contract terminations related to exiting retail and online stores in unprofitable geographical locations, in Asia and Europe, were $1.4 million in the three months ended Mach 31, 2023 and were reflected in restructuring on the condensed consolidated statements of comprehensive loss. •The Transformation Initiative is expected to result in annualized benefits in the range of $15.0 million to $20.0 million, and we expect to begin seeing benefits in late 2023. These benefits include reduction in costs of revenue, reduction in operating expenses and increase in revenue. •The cash impact of costs related to the Transformation Initiative is expected to be in the range of $4.0 million to $7.0 million for the full year 2023, with an immaterial amount recognized during the three months ended March 31, 2023 and the remainder throughout 2023. •We expect the restructuring element of the Transformation Initiative to be substantially completed by December 31, 2023.
Możemy ponieść inne opłaty lub wydatki pieniężne, które nie są obecnie brane pod uwagę, a które mogą wystąpić w wyniku lub w związku z Inicjatywą Przekształcenia.
Wierzymy, że konkretne czynniki wartościowe Inicjatywy Transformacji obejmują:
1) Maksymalizacja marki
•Leveraging the strength of the Honest brand to drive growth through innovation, margin-accretive products, and marketing effectiveness. •Executing additional pricing increases across the majority of our product portfolio throughout 2023, following pricing increases in 2022 and in the first quarter of 2023 that resulted in revenue growth driven by both volume and pricing.
2) Wzmocnienie marginesu
•Focusing our resources on North America, which includes exiting our low-margin
business in Europe and Asia.
•Exiting low-margin elements of the cleaning and sanitization business (included
in Household and Wellness product category).
•Executing an inventory, or stock-keeping unit ("SKU"), rationalization program.
•Re-directing resources to accelerate cost savings, including optimization of
our contract manufacturing strategies, reduced shipping and logistic costs, and
product costs.
•Realigning resources to reflect the prioritization of higher-margin
opportunities.
3) Dyscyplina operacyjna
•Building a culture that emphasizes returns across growth drivers, including marketing, trade promotion, and innovation. •Managing working capital including the reduction of inventory.
Więcej informacji na temat Inicjatywy Przekształcenia znajduje się w nocie 14 „Restrukturyzacja” niniejszego skróconego skonsolidowanego sprawozdania finansowego.
Kluczowe czynniki wpływające na nasze wyniki
We believe that the growth of our business and our future success are dependent
on many factors. While each of these factors presents significant opportunities
for us, they also pose important challenges that we must successfully address to
enable us to sustain the growth of our business and improve our operations while
staying true to our mission, including those discussed below and in the section
of this Quarterly Report on Form 10-Q titled "Risk Factors."
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Możliwość zwiększania świadomości naszej marki
Our brand is integral to the growth of our business and is essential to our ability to engage and stay connected with the growing clean products consumer. In order to increase the share of wallet of existing conscious consumers and to attract new consumers, our brand has to maintain its trustworthiness and authenticity. Our ability to attract new consumers will depend, among other things, on our ability to successfully produce products that are free of defects and communicate the value of those products as clean, sustainable and effective, the efficacy of our marketing efforts and the offerings of our competitors. Beyond preserving the integrity of our brand, our performance will depend on our ability to augment our reach and increase the number of consumers aware of Honest and our product portfolio. Given higher costs of digital marketing and increased retail distribution, we have and expect to continue to shift the focus of our marketing spend towards supporting retail marketing programs and to make changes in our marketing initiatives to increase brand awareness. We believe our brand strength will enable us to expand across categories and channels, allowing us to deepen relationships with consumers. Our performance depends significantly on factors that may affect the level and pattern of consumer spending in the product categories in which we operate.
Kontynuacja innowacji
Research, development and innovation are core elements underpinning our growth strategy. Through our in-house research and development laboratories, we are able to access the latest advancements in clean ingredients and continue to innovate in the clean conscious space. Based in Los Angeles, California, our research and development team, including chemists, an in-house toxicologist and an eco-toxicologist, develops innovative clean products based on the latest green technology. At Honest, product innovation never stops. The improvement of existing products and the introduction of new products have been, and continue to be, integral to our growth. We have made significant investments in our product development capabilities and plan to continue to do so in the future. We believe our rigorous approach to product innovation has helped redefine and grow the clean and natural product categories in which we operate. Our continued focus on research and development will be central to attracting and retaining consumers in the future. Our ability to successfully develop, market and sell new products will depend on a variety of factors, including our continued investment in innovation, integrated business planning processes and capabilities. We use connectivity to our community of consumers to provide valuable insights that power innovation across categories. We use innovation to support our growth objectives across our product portfolio, as highlighted in the three core pillars of our Innovation Framework: that we bring product innovation that 1) feeds and nurtures our core values, 2) expands within our existing product categories, and 3) grows into new potential product categories adjacent to existing categories that fit with our value proposition to the consumer. We continue to innovate in each of our product categories in areas such as breakthrough new product formulations, innovative packaging, costovation (defined below) and marketing strategy, with a focus on driving "big bets" across potential product adjacencies where we have: 1) ability to build on our premium positioning, 2) ability to lead and win in a category, and 3) the opportunity to expand into more places within an existing Honest home while positioning ourselves as a premium brand. We are also focused on building a portfolio of products in complementary categories through our Innovation Strategy and the investment in our Digital Strategy. We are building an Honest community with the goal of creating a more holistic clean, conscious home for consumers and customers alike. We strive for continuous improvement in our existing products' safety, sustainability, efficacy and design profile while achieving better performance often at lower cost, which we refer to as costovation.
Ciągły wzrost kategorii produktów
Our product mix is a driver of our financial performance given our focus on accretive product launches and innovation to increase product margins. Even though our growth strategy aims to boost sales across all product categories, we intend to prioritize growth in Skin and Personal Care given its attractive margin characteristics and leverage our brand equity and consumer insights to extend into new adjacent product categories. Since we launched our Innovation Strategy, we have enhanced our product portfolio by strategically discontinuing certain products and making calculated extensions within our three product categories. These product changes have contributed to new revenue and brought higher margin products into our portfolio.
Kontynuacja realizacji Strategii Omnichannel
The continued execution of our omnichannel strategy impacts our financial
performance. We intend to continue leveraging our marketing strategy to drive
increased consumer traffic to our flagship digital platform, Honest.com, as it
is a valuable tool for creating direct connections with our consumers,
influencing brand experience and understanding consumer preference and behavior.
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. 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.
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Efektywność operacyjna i marketingowa
To grow our business, we intend to continue to improve our operational and marketing efficiency, which includes attracting new consumers, increasing community engagement and improving fulfillment and distribution operations. We invest significant resources in marketing and content generation, use a variety of brand and performance marketing channels and work continuously to improve brand exposure at our retail customers to acquire new consumers. It is important to maintain reasonable costs for these marketing efforts relative to the revenue we expect to derive from our consumers. We leverage our proprietary data and systems to generate valuable consumer insights that guide our omnichannel strategy and inform our marketing spend optimization. Our future success depends in part on our ability to effectively attract consumers on a cost-efficient basis and achieve efficiencies in our operations. In addition, we expect that we will be able to achieve some operational efficiency as part of cost savings in connection with our Transformation Initiative. Our paid advertising includes search engine marketing, display, paid social media and product placement and traditional advertising, such as direct mail, television, radio and magazine advertising. We drive a significant amount of traffic to our website via search engines and, therefore, rely heavily on search engines. Paid advertising costs significantly increased industry-wide during the past few years, which negatively impacted our ability to cost-effectively drive traffic to Honest.com. If paid advertising costs increase further industry-wide, as they have in the past, this may impact marketing efficiencies, costs and revenue in our Digital channel, particularly with respect to cost-effectively driving traffic to Honest.com.
Ogólne trendy makro
Zajęliśmy strategiczną pozycję, aby skorzystać z kilku makro trendów związanych ze zmianami w zachowaniach konsumentów. Wierzymy, że rosnące zainteresowanie konsumentów specjalnie zaprojektowanymi produktami przyczyniło się do wzrostu popytu na niektóre z naszych produktów. Jednocześnie zmiany w trendach wydatków konsumpcyjnych na poziomie makro, w tym w wyniku pandemii COVID-19 lub szerszych warunków makroekonomicznych, takich jak inflacja, powodowały i mogą w przyszłości powodować wahania naszych wyników operacyjnych.
Operacje biznesowe
Global economic and political uncertainty have increased due to the impact of continued inflationary pressures, adverse impact on confidence in financial markets and geopolitical events, including the conflict in Ukraine. Additionally, the extent of COVID-19 or other macroeconomic trends impact on the Company's operational and financial performance in the future will depend on future developments, including the duration and extent of the pandemic in different countries, the emergence of COVID-19 variants and the effectiveness of vaccines against these variants. Prolonged unfavorable economic conditions, including as a result of COVID-19 or similar outbreaks, and any resulting recession or slowed economic growth, have had and may continue to have an adverse effect on our sales and profitability. All of these factors are difficult to predict considering the rapidly evolving landscape as the Company continues to expect a variable operating environment going forward.
Zakłócenia łańcucha dostaw
We have experienced impacts on our inventory availability and delivery capacity
since the COVID-19 outbreak due to global supply chain delays, including a delay
in receiving shipments from overseas. In addition, there has been and continues
to be an adverse impact on global economic conditions and consumer confidence
and spending, which has adversely affected our supply chain as well as the
demand for our products and has impacted our revenue and ability to service our
customer orders. We have taken measures to bolster key aspects of our supply
chain, such as ensuring sufficient inventory to support our continued growth,
new distribution and longer lead times. In addition, as a result of the supply
chain impacts, other macroeconomic trends and high inventory levels, we have
experienced increased fulfillment costs. One of our fulfillment partners passed
on increased service and inflation related costs to us, including warehouse
labor cost, which negatively impacted our cost of revenue. If we are not
successful in negotiating future renewals, our business, financial condition,
results of operations and prospects could be adversely affected.
We continue to work with our existing manufacturing, logistics and other supply
chain partners to ensure our ability to service our consumers and retail and
third-party ecommerce customers. We have experienced and anticipate continued
increases in commodity prices, labor costs, input costs and transportation
costs, which has and could continue to hamper our ability to drive margin
expansion. In 2022, we negotiated and agreed to higher purchase prices with two
of our third-party manufacturers which has negatively impacted our cost of
revenue in the past and will continue to have a negative impact on our results
of operations. Due to continued elevated input costs, we anticipate further
escalation of purchase costs and cost of revenue in the future. We implemented
price increases that took effect in 2022 and in the first quarter of 2023 and
plan to implement additional pricing increases in 2023 and 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.
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Preferencje konsumentów
We believe that the onset of COVID-19 drove a demand shift towards our Digital channel as consumers shifted to online shopping amid the pandemic. Given our digitally-native brand and strong digital penetration, we believe we benefited from this trend. Additionally, during the onset of COVID-19 we benefited from increasing consumer and customer demand for sanitization and disinfecting products, which drove revenue growth in our Household and Wellness product category. During the past few years, we saw a significant decline in consumer demand for sanitization and disinfecting products as consumers returned to pre-COVID routines. In 2021, we began to see increased consumer willingness to return to in-store shopping as the economy reopened and more of the population became vaccinated, driving revenue growth within our Retail channel, specifically within our Diapers and Wipes and Skin and Personal Care product categories. During the three months ended March 31, 2023, the Retail and Digital channel revenue was more balanced with 50% and 50% of our revenue from our Digital and Retail channels, respectively. Inventory 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 changes in the COVID-19 pandemic, the macroeconomic environment or otherwise and related aging of inventory, among other factors, we may incur inventory write-downs, customer returns or incur donation expense or disposal costs as we reduce excess inventory. The decline in demand for our sanitization and disinfecting products included in the Household and Wellness product category has led to our plan to exit low-margin household products as part of the Transformation Initiative. Additionally, we implemented an inventory, or SKU rationalization program, as part of the Transformation Initiative. As of March 31, 2023, we recorded an inventory write-down, inclusive of overhead costs and tariffs, of $2.7 million mainly related to international product exits and SKU rationalization. Additionally, we earmarked donations of $2.4 million mainly related to the liquidation of low-margin household products during the three months ended March 31, 2023, which is included in selling, general and administrative expense on the condensed consolidated statements of comprehensive loss. Due to increasing supply chain lead times, new retail distribution, and expectation of supplier price increases that took effect in early 2023, we increased our inventory levels in 2022 to ensure in-stock position to service customers and consumers. In addition, inflation in input costs, including higher product costs, inbound shipping and warehouse labor, has resulted in a higher dollar value of inventory. We have reduced our inventory levels during the three months ended March 31, 2023 and expect future reduction of inventory in 2023.
Ustawa o ograniczaniu inflacji z 2022 r
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the "Act"), which contains provisions that became effective on January 1, 2023, including a 15% corporate minimum tax and a 1% excise tax on stock buybacks. While we are still evaluating the impact of the Act, we do not currently expect any material changes on our consolidated financial position, results of operations and cash flows.
Składowe wyników operacji
Przychód
We generate revenue through the sale of our products through Digital and Retail channels in the following product categories: Diapers and Wipes, Skin and Personal Care, and Household and Wellness. The Digital channel includes direct sales to the consumer through our website and sales to third-party ecommerce customers, who resell our products through their own online platforms. The Retail channel includes sales to traditional brick and mortar retailers and their respective websites, who may also resell our products through their own online platforms. Our revenue is recognized net of allowances for returns, discounts, credits and any taxes collected from consumers.
Koszt uzyskania przychodów
Cost of revenue includes the purchase price of merchandise sold to customers,
inbound and outbound shipping and handling costs, freight 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.
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Gross Profit and Gross Margin Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may in the future fluctuate from period to period based on a number of factors, including commodity costs, manufacturing costs, warehousing and transportation rates, the promotional environment in the marketplace, the mix of products we sell, the channel through which we sell our products, and innovation initiatives we undertake in each product category, among other factors.
Koszty operacyjne
Na nasze koszty operacyjne składają się koszty sprzedaży, ogólne i administracyjne, marketingowe oraz koszty badań i rozwoju.
Sprzedaż, Ogólne i Administracyjne
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 tariffs; facility costs, including insurance, utilities and rent relating to our headquarters; third-party service fees related to Honest Baby Clothing®; and depreciation and amortization expense. We expect our general and administrative expenses to increase in absolute dollars as we continue to grow our business and organizational capabilities. Since our IPO, we have also incurred additional costs for employees and third-party professional fees related to operating as a public company and costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations and professional services.
Marketing
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 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 product categories and hero products with key retailers, as well as expand brand awareness, introduce new product innovation across multiple product categories and implement new marketing strategies in the United States. 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.
Badania i rozwój
Research and development expenses consist primarily of personnel-related expenses for our research and development team. Research and development expenses also include costs incurred for the development of new products, improvement in the quality of existing products and the development and implementation of new technologies to enhance the quality and value of products. This includes the expense related to claims and clinical trials as well as formulation and packaging testing. Research and development expenses also include allocated depreciation and amortization and overhead costs. We expect research and development expenses to increase in absolute dollars as we invest in the enhancement of our product offerings through innovation and the introduction of new adjacent product categories.
Odsetki i inne dochody (wydatki), netto
Interest income consists primarily of interest income earned on our short-term
investments and our cash and cash equivalents balances. Prior to the adoption of
Financial Accounting Standards Board Accounting Standard Update No 2016-02,
Leases (ASC 842) on January 1, 2022, interest expense consisted primarily of the
portion of rent payments recognized as imputed interest expense under
build-to-suit accounting associated with our leasing arrangements. Interest
expense includes fees incurred under our 2023 Credit Facility, including
commitment fees and debt issuance costs.
Other income (expense), net consists of our foreign currency exchange gains,
losses relating to transactions denominated in currencies other than the U.S.
dollar and contingent gains. We expect our foreign currency gains and losses to
continue to fluctuate in the future due to changes in both the volume of foreign
currency transactions and foreign currency exchange rates.
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Rezerwa na podatek dochodowy
We are subject to federal and state income taxes in the United States. Our annual estimated tax rate differed from the U.S. federal statutory rate of 21% primarily as a result of a valuation allowance against deferred tax assets, stock-based compensation, state taxes, nondeductible executive compensation and other permanent differences. We maintain a full valuation allowance for our federal and state deferred tax assets, including net operating loss carryforwards, as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
Wyniki operacji
Poniższa tabela przedstawia nasze skrócone skonsolidowane sprawozdanie z działalności za każdy ze wskazanych okresów:
For the three months ended March 31,
2023 2022
(In thousands)
Revenue $ 83,388 $ 68,719
Cost of revenue 63,186 48,092
Gross profit 20,202 20,627
Operating expenses
Selling, general and administrative(1) 25,817 19,611
Marketing 10,234 13,465
Restructuring 1,350 -
Research and development(1) 1,459 2,096
Total operating expenses 38,860 35,172
Operating loss (18,658) (14,545)
Interest and other income (expense), net (189) (61)
Loss before provision for income taxes (18,847) (14,606)
Income tax provision 20 20
Net loss $ (18,867) $ (14,626)
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(1) Obejmuje koszty wynagrodzeń w formie akcji w następujący sposób:
For the three months ended March 31,
2023 2022
(In thousands)
Selling, general and administrative $ 3,713 $ 3,370
Research and development 59 178
Total $ 3,772 $ 3,548
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Poniższa tabela przedstawia dane naszego skróconego skonsolidowanego sprawozdania z działalności wyrażone jako procent przychodów*:
For the three months ended March 31,
2023 2022
(as a percentage of revenue)
Revenue 100.0 % 100.0 %
Cost of revenue 75.8 70.0
Gross profit 24.2 30.0
Operating expenses
Selling, general and administrative 31.0 28.5
Marketing 12.3 19.6
Restructuring 1.6 -
Research and development 1.7 3.1
Total operating expenses 46.6 51.2
Operating loss (22.4) (21.2)
Interest and other income (expense), net (0.2)
(0,1)
Loss before provision for income taxes (22.6) (21.3) Income tax provision - - Net loss (22.6) % (21.3) % ______________
* Kwoty mogą się nie sumować ze względu na zaokrąglenia.
Porównanie trzech miesięcy zakończonych 31 marca 2023 i 2022 roku
Revenue
For the three months ended March 31,
2023 2022 $ change % change
(In thousands, except percentages)
By Product Category
Diapers and Wipes $ 53,077 $ 43,289 $ 9,788 22.6 %
Skin and Personal Care 22,792 21,266 1,526 7.2
Household and Wellness 7,519 4,164 3,355 80.6
Total Revenue $ 83,388 $ 68,719 $ 14,669 21.3 %
For the three months ended March 31,
2023 2022 $ change % change
(In thousands, except percentages)
By Channel
Digital $ 41,814 $ 34,260 $ 7,554 22.0 %
Retail 41,574 34,459 7,115 20.6
Total Revenue $ 83,388 $ 68,719 $ 14,669 21.3 %
Revenue was $83.4 million for the three months ended March 31, 2023, as compared
to $68.7 million for the three months ended March 31, 2022. The increase of
$14.7 million, or 21.3%, reflects an increase of $9.8 million, $3.4 million and
$1.5 million in Diapers and Wipes, Household and Wellness, and Skin and Personal
Care product categories, respectively. The revenue increase in Diapers and Wipes
was primarily driven by an increase in consumption, and new and expanded
distribution. The Skin and Personal Care revenue increase was primarily driven
by a $0.9 million increase in revenue in baby personal care and a $0.9 million
increase in beauty product revenue due to new and expanded distribution, offset
by $0.5 million decline in product liquidation revenue versus prior year. The
revenue increase in Household and Wellness was primarily driven by $4.8 million
in
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przychody z Honest Baby Clothing w wyniku przejścia od umowy licencyjnej do umowy o świadczenie usług dostawcy z Butterblu, skompensowane spadkiem przychodów z chusteczek dezynfekujących o 0,7 mln USD.
Szacujemy, że podwyżki cen wprowadzone w 2022 r. przyczyniły się do przychodu w wysokości 2,0 mln USD za trzy miesiące zakończone 31 marca 2023 r.
The increase in revenue in our Retail channel for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was primarily driven by new and expanded distribution and strong consumption. The increase in revenue in our Digital channel for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was primarily driven by an $11.0 million increase in revenue by our key digital customer due to inventory restocking compared to the same key digital customer inventory destocking in the three months ended March 31, 2022 and $4.8 million in Honest Baby Clothing revenue, offset by a $3.8 million decrease in revenue at Honest.com due to lower digital marketing spend which resulted in lower traffic to Honest.com.
Koszty uzyskania przychodów i zysku brutto
For the three months ended March 31,
2023 2022 $ change % change
(In thousands, except percentages)
Cost of revenue $ 63,186 $ 48,092 $ 15,094 31.4 %
Gross profit $ 20,202 $ 20,627 $ (425) (2.1) %
Cost of revenue was $63.2 million for the three months ended March 31, 2023, as
compared to $48.1 million for the three months ended March 31, 2022. The
increase of $15.1 million, or 31.4%, was primarily driven by a 21.3% increase in
revenue, $2.7 million in inventory reserves related to the Transformation
Initiative and higher fulfillment costs, especially in transportation, in-bound
freight, storage and warehouse labor costs. Cost of revenue as a percentage of
revenue increased by 579 basis points primarily due to actions taken in
connection with the Transformation Initiatives and higher input costs.
Gross profit was $20.2 million for the three months ended March 31, 2023, as
compared to $20.6 million for the three months ended March 31, 2022. The
decrease was mainly related to costs related to the Transformation Initiative,
including inventory reserves related to product exits and SKU rationalization,
partially offset by price increases and more efficient trade spending.
Koszty operacyjne
Koszty sprzedaży, ogólne i administracyjne
For
trzy miesiące zakończone 31 marca,
2023 2022 $ change % change
(In thousands, except percentages)
Selling, general and administrative $ 25,817 $ 19,611 $ 6,206 31.6 %
Selling, general and administrative expenses were $25.8 million for the three
months ended March 31, 2023, as compared to $19.6 million for the three months
ended March 31, 2022. The increase of $6.2 million, or 31.6%, was primarily due
to $2.4 million increase in donation expenses related to the Transformation
Initiative, $1.3 million in CEO transition expenses, $1.0 million increase in
service fees related to Honest Baby Clothing, $0.7 million increase in legal
expenses, $0.6 million in retailer violation charges, $0.5 million increase in
employee-related expenses and $0.3 million increase in stock-based compensation
expense.
Marketing Expenses
For the three months ended March 31,
2023 2022 $ change % change
(In thousands, except percentages)
Marketing $ 10,234 $ 13,465 $ (3,231) (24.0) %
Marketing expenses were $10.2 million for the three months ended March 31, 2023,
as compared to $13.5 million for the three months ended March 31, 2022. The
decrease of $3.2 million, or 24.0%, was primarily due to a $3.7 million
reduction in digital advertising, offset by a $0.4 million increase in retail
marketing to support new distribution.
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Koszty restrukturyzacji
Za okres trzech miesięcy zakończony 31 marca br.
2023 2022 $ change % change
(In thousands, except percentages)
Restructuring $ 1,350 $ - $ 1,350 100.0 %
Restructuring expenses were $1.4 million for the three months ended March 31,
2023. Restructuring costs are one of the elements of the Transformation
Initiative and include employee-related costs of $0.5 million, contract
termination costs of $0.8 million, and asset-related costs of $0.1 million. For
further details on the Transformation Initiative, refer to Note 14,
"Restructuring" included in these condensed consolidated financial statements.
Wydatki na badania i rozwój
For the three months ended
31 marca,
2023 2022 $ change % change
(In thousands, except percentages)
Research and development $ 1,459 $ 2,096 $ (637) (30.4) %
Research and development expenses were $1.5 million for the three months ended
March 31, 2023, as compared to $2.1 million for the three months ended March 31,
2022. The decrease of $0.6 million, or 30.4%, was primarily related to a
decrease in research and development spend and a $0.1 million decrease in
stock-based compensation expense.
Odsetki i inne dochody (wydatki), netto
For
trzy miesiące zakończone 31 marca,
2023 2022 $ change
(In thousands, except percentages)
Interest income (expense), net $ (187) $ 22 $ (209)
Other income (expense), net (2) (83) 81
Interest and other income (expense), net $ (189) $ (61) (128)
Interest and other income (expense), net was net expense of $189 thousand for
the three months ended March 31, 2023, as compared to net expense of $61
thousand for the three months ended March 31, 2022. The increase of $128
thousand was primarily due to the write-off of unamortized debt issuance costs
as we entered into the new 2023 Credit Facility.
Płynność i zasoby kapitałowe
We have incurred net losses and net cash outflows from operating activities
since our inception. As of March 31, 2023, we had $9.2 million of cash and cash
equivalents and $2.7 million of short-term investments. 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,
cash equivalents, and short-term investments will be sufficient to meet our
short-term projected operations for the next 12 months from the date of issuance
of our unaudited consolidated financial statements and long-term working capital
and capital expenditure needs, given our plan to generate positive cash flow
from reducing our inventory, managing our working capital and achieving our
Transformation Initiative. We also have availability under our 2023 Credit
Facility which was not drawn as of March 31, 2023. Future capital requirements
will depend on many factors, including our rate of revenue growth, gross margin
and the level of expenditures in all areas of the Company. To the extent that
existing capital resources and sales growth are not sufficient to fund future
activities, we will need to raise capital through additional equity or debt
financing. Additional funds may not be available on terms favorable to us or at
all. Failure to raise additional capital, if and when needed, could have a
material adverse effect on our financial position, results of operations, and
cash flows.
2023 Credit Facility
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 subfacility 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 an availability block and 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
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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 loss. For the three months ended
March 31, 2023, the commitment fee incurred was immaterial. As of March 31,
2023, there were $4.8 million of outstanding letters of credit and $18.3 million
available to be drawn upon.
The interest rate applicable to the 2023 Credit Facility is, at our option,
either (a) the Adjusted Term SOFR rate (subject to a 0.00% floor), plus a margin
ranging from 1.50% to 2.25% or (b) the CB floating rate, (i) plus a margin of
0.25% or (ii) minus a margin ranging from 0.25% to 0.50%. The margin is based
upon our fixed charge coverage ratio. The CB floating rate is the higher of (a)
the Wall Street Journal prime rate and (b) 2.50%.
The 2023 Credit Facility will terminate and borrowings thereunder, if any, would
be due in full on April 30, 2026. Debt under the 2023 Credit Facility is
guaranteed by substantially all of our material domestic subsidiaries and is
secured by substantially all of our and such subsidiaries' assets.
The 2023 Credit Facility contains covenants that restrict, among other things,
our ability to sell assets, make investments and acquisitions, grant liens,
change our lines of business, pay dividends and make certain other restricted
payments. We are subject to certain affirmative and negative covenants including
the requirement that we maintain a minimum total fixed charge coverage ratio
during the periods set forth in the 2023 Credit Facility. Failure to do so,
unless waived by the lenders under the 2023 Credit Facility pursuant to its
terms, as amended, would result in an event of default under the 2023 Credit
Facility. As of March 31, 2023, we are in compliance with all covenants under
the 2023 Credit Facility.
Więcej informacji na temat Kredytu 2023 znajduje się w nocie 6 „Linie kredytowe” zawartej w niniejszym skróconym skonsolidowanym sprawozdaniu finansowym.
Przepływy środków pieniężnych
Poniższa tabela podsumowuje nasze przepływy pieniężne za prezentowane okresy:
For the three months ended March 31,
(In thousands) 2023 2022
Net cash used in operating activities $ (2,761) $ (14,702)
Net cash provided by investing activities $ 2,480 $ 8,609
Net cash (used in) provided by financing activities $ (15) $ 45
Operating Activities
Our largest source of operating cash is from the sales of our products through
Digital and Retail channels to our consumers and customers. Our primary uses of
cash from operating activities are for cost of revenue expenses, selling,
general and administrative expenses, marketing expenses and research and
development expenses. We have generated negative cash flows from operating
activities and have supplemented working capital requirements through net
proceeds from the sale and maturity of short-term investments.
Net cash used in operating activities of $2.8 million for the three months ended
March 31, 2023 was primarily due to net loss of $18.9 million, non-cash
adjustments of $6.0 million and a net increase in cash related to changes in
operating assets and liabilities of $10.1 million. Non-cash adjustments
primarily consisted of stock-based compensation of $3.8 million, amortization of
operating Right-of-Use ("ROU") assets of $1.5 million and depreciation and
amortization of $0.7 million. Changes in cash flows related to operating assets
and liabilities primarily consisted of cash provided by a $17.2 million decrease
in inventory and a $7.9 million decrease in prepaid expenses and other assets,
offset by uses of cash including a $2.9 million increase in accounts receivable
due to increased revenue and $10.8 million lower accounts payable and accrued
expenses driven by lower inventory purchases in the three months ended March 31,
2023.
Net cash used in operating activities of $14.7 million for the three months
ended March 31, 2022 was primarily due to net loss of $14.6 million, non-cash
adjustments of $5.9 million and a net decrease in cash related to changes in
operating assets and liabilities of $6.0 million. Non-cash adjustments primarily
consisted of stock-based compensation of $3.5 million, amortization of operating
ROU assets of $1.6 million and depreciation and amortization of $0.7 million.
Changes in cash flows related to operating assets and liabilities primarily
consisted of a $7.7 million increase in inventory due to timing of inventory
purchases, a $1.6 million use of cash due to the timing of payments associated
with our accounts payable and a $1.5 million use of cash due to operating
leasing obligations, offset by a $3.0 million decrease in prepaid expenses and
other assets due to timing of payments and a $1.8 million decrease in accounts
receivable due to lower revenue in the three months ended March 31, 2022.
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Działalność inwestycyjna
Naszym głównym źródłem inwestowania środków pieniężnych jest sprzedaż i termin zapadalności inwestycji krótkoterminowych, a naszym głównym sposobem inwestowania środków pieniężnych jest zakup inwestycji krótkoterminowych oraz nieruchomości i wyposażenia.
Net cash provided by investing activities of $2.5 million for the three months ended March 31, 2023 was primarily due to proceeds from maturities of short-term investments of $3.0 million, offset by purchases of property and equipment of $0.5 million. Net cash used in investing activities of $8.6 million for the three months ended March 31, 2022 was primarily due to maturities of short-term investments of $8.8 million. Financing Activities
Na naszą działalność finansową składały się głównie wpływy ze sprzedaży papierów wartościowych, wpływy z przyznania opcji na akcje oraz spłaty kapitału zobowiązań z tytułu leasingu finansowego.
Środki pieniężne netto wykorzystane w działalności finansowej w wysokości 15 tys. USD za okres trzech miesięcy zakończony 31 marca 2023 r. obejmowały spłaty kapitału zobowiązań z tytułu leasingu finansowego.
Net cash provided by financing activities of $45 thousand for the three months ended March 31, 2022 primarily consisted of proceeds from stock option exercises, partially offset by principal payments of financing lease obligations and taxes paid related to net share settlement of equity awards.
Dywidendy
We do not anticipate declaring or paying any cash dividends in the foreseeable future. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions (including any restrictions in our then-existing debt arrangements), capital requirements, business prospects and other factors our board of directors may deem relevant. The 2023 Credit Facility contains restrictions on our ability to pay dividends.
Miara finansowa niezgodna z GAAP
Skrócone skonsolidowane sprawozdanie finansowe sporządzamy i prezentujemy zgodnie z GAAP. Kierownictwo uważa jednak, że skorygowana EBITDA, miara finansowa niezgodna ze standardami GAAP, dostarcza inwestorom dodatkowych informacji przydatnych przy ocenie naszych wyników.
Skorygowaną EBITDA obliczamy jako dochód (stratę) netto skorygowaną o wyłączenie: (1) odsetek i innych kosztów (przychodowych) netto; (2) rezerwa na podatek dochodowy; (3) amortyzacja i amortyzacja; (4) koszty wynagrodzeń w formie akcji, w tym podatek od wynagrodzeń; (5) opłaty sądowe i ugodowe związane z niektórymi roszczeniami sądowymi dotyczącymi papierów wartościowych o nietypowym kursie; (6) Koszty zmiany prezesa oraz (7) Koszty restrukturyzacji związane z Inicjatywą Transformacyjną.
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.
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) 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 CEO
transition expenses and restructuring expenses in connection with Transformation
Initiative. 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 net income (loss), revenue and other results stated in accordance with GAAP.
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Poniższa tabela przedstawia uzgodnienie zysku (straty) netto, najbardziej bezpośrednio porównywalnej miary finansowej określonej zgodnie z GAAP, do skorygowanej EBITDA, dla każdego z prezentowanych okresów:
For the three months ended March 31,
(In thousands) 2023 2022
Reconciliation of Net Loss to Adjusted EBITDA
Net loss $ (18,867) $ (14,626)
Interest and other (income) expense, net 189 61
Income tax provision 20 20
Depreciation and amortization 668 720
Stock-based compensation 3,772 3,548
Securities litigation expense 1,178 -
CEO transition expense(1) 1,277 -
Restructuring costs(2) 1,350 -
Payroll tax expense related to stock-based compensation 79 13
Adjusted EBITDA $ (10,334) $ (10,264)
__________________
(1) Obejmuje premię za wpisowe, koszty relokacji i koszty odpraw. (2) Patrz Nota 14 „Restrukturyzacja” w naszym niezbadanym skróconym skonsolidowanym sprawozdaniu finansowym dla pozycji uwzględnionych w kosztach restrukturyzacji.
Materialne wymagania pieniężne
As of March 31, 2023, 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, apart from the material cash outlay of $4.0 million to $7.0 million expected in 2023 as part of our Transformation Initiative.
Krytyczne zasady rachunkowości i szacunki
Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. 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 months ended March 31, 2023, there were no material changes to our critical accounting estimates from those discussed in our Annual Report. Refer to Note 2, "Summary of Significant Accounting Policies" to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the adoption of Accounting Standard Codification 326 and related policy changes.
Najnowsze komunikaty księgowe
Refer to Note 2, "Summary of Significant Accounting Policies" to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted, as applicable.
Status rozwijającej się firmy
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.
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