The Honest Company, dedicated to creating cleanly-formulated and sustainably designed personal care products, has reported a revenue of $99 million in the third quarter (Q3) ended September 30, 2024, an increase of 15 per cent compared to $86 million in the same quarter last year.

Net income of the company increased $8 million to $165,000 compared to a net loss of $8 million in Q3 2023. The gross margin of the company expanded 710 basis points to 38.7 per cent compared to 31.6 per cent year-over-year (YoY). This growth was primarily driven by improvements across most of the cost structure, including supply chain and product cost efficiencies, as well as efficient trade spend, said The Honest Company in a press release.

Consequently, the company’s gross profit rose significantly by 41.1 per cent, reaching $38.4 million in Q3 2024, compared to $27.2 million in Q3 2023.

The operating expenses increased $3 million to $38 million, reflecting a decrease of 221 basis points, as a percentage of revenue. The company continues to maintain expense discipline across the enterprise with selling, general and administrative expenses as a percentage of revenue decreasing 441 basis points, partially offset by increased investment in retail marketing to drive brand maximisation pillar.

Adjusted EBITDA was positive $7 million compared to negative $1 million in the prior year’s quarter. This represents the company’s fourth consecutive quarter of positive adjusted EBITDA. Tracked channel consumption for the company grew 9.3 per cent outperforming the comparative categories which were down 2.4 per cent in the same period last year.

“Our strong third quarter results are a clear reflection of the power of the Honest brand and the strength of the Honest team that has executed our strategy and Transformation Initiative with discipline and excellence. Our ability to grow profitably is evidenced in our results -- with double digit revenue growth reaching an all-time high, significant expansion in gross margin, and positive net income for the period,” said Carla Vernón, chief executive officer (CEO) of the Honest Company. “We are confident that our long-term growth strategy will continue to allow us to scale across our categories, meeting the growing consumer demand for cleanly-formulated and sustainably designed products across our portfolio. With our recent performance, continued positive momentum, and overall strength of the Honest brand going into the final quarter of the year, we are again raising our full year financial outlook.”

Nine months (9M) financials

The company reported a revenue of $278.5 million in the 9M period in 2024, witnessing an increase from $254.1 million in the same period last year. The cost of revenue was $172.6 million, which represents a decline from $183.8 million in the previous year. As a result, the gross profit for the period rose to $105.9 million, a significant increase compared to $70.3 million in the previous year.

Total operating expenses for the first nine months of 2024 amounted to $111.2 million, slightly higher than the $110.3 million recorded in the same period in 2023. Notably, selling, general, and administrative expenses saw a minor decline to $72.3 million from $75 million. Marketing expenses, however, increased to $33.8 million, up from $28.6 million, suggesting a continued focus on brand visibility and market expansion. Research and development (R&D) expenses were also up slightly to $5.1 million, compared to $4.6 million last year.

The company recorded an operating loss of $5.3 million for the 9M period, an improvement over the $40 million loss in 2023, driven by better revenue performance and controlled operating expenses. Interest and other income (net) showed a positive balance of $44, compared to a loss of $269 in the previous year, positively impacting the pre-tax loss, which stood at $5.3 million, a significant improvement from the pre-tax loss of $40.3 million in 2023.