Honest (NASDAQ:HNST) reported second-quarter results marked by organic revenue growth, record underlying profitability and stronger consumption trends in its Wipes and Personal Care businesses, while reported revenue declined due to strategic exits and continued pressure in diapers.
Chief Executive Officer Carla Vernón said the company generated nearly 7% organic revenue growth and reached its highest underlying profit margins to date. Honest raised its full-year outlook following first-half execution that management said reflected progress in brand maximization, margin enhancement and operating discipline.
Second-Quarter Financial Results
Reported gross margin was 48.4%, while adjusted gross margin was 50.1%, up 970 basis points year over year. The adjusted figure included a $6.6 million tariff refund as well as dilution from apparel liquidation. Excluding those items, underlying adjusted gross margin was 43.8%, an increase of about 340 basis points, driven by favorable product mix, operational improvements and earlier-than-expected supply-chain savings.
Operating expenses declined $4.1 million to $30.8 million, although the company increased marketing spending by nearly 20% to support Wipes and Personal Care. Net income rose to $10.7 million from $3.9 million a year earlier. Adjusted EBITDA was $14.5 million, representing a 17.3% margin. Excluding the tariff refund and apparel liquidation, underlying adjusted EBITDA margin was 9.8%, up about 160 basis points and an all-time high for the company, according to Bruce.
Honest ended the quarter with $105.9 million in cash and cash equivalents and no debt. Free cash flow for the first six months of 2026 was $35.3 million, compared with negative free cash flow of $3.8 million in the prior-year period. The company repurchased 5.6 million shares year to date for $18.7 million at an average price of $3.35 per share, leaving $6.3 million under its existing authorization.
Wipes and Personal Care Drive Consumption Growth
Vernón said total consumption grew nearly 8% during the period, outpacing 2% growth in the company’s comparative categories. Household penetration reached 8.1%, improving 100 basis points year over year, with nearly two-thirds of that increase coming from households without children.
Wipes consumption rose 26%, compared with 2% growth in the relevant categories. Honest’s Clean Conscious Wipes, which management described as the leading natural baby wipe brand, grew 16%. Flushable wipes grew more than 200%, while sanitizing wipes rose 55%.
The company’s “It’s Time to Get Honest” flushable-wipes campaign generated more than 3 billion media impressions, Vernón said. Honest recently added its flushable wipes to the feminine-care aisle at CVS and sees opportunities for additional distribution, product expansion and awareness-building.
Honest also used Amazon Prime Day to acquire new customers, with 58% of visitors to its Amazon storefront being new to the brand, according to Vernón. The company said it aims to use major retailer events not only to generate sales but also to introduce shoppers to its wider assortment and build recurring subscriptions.
Personal Care consumption increased 19%, exceeding the category’s 5% growth rate. Honest maintained its position as the No. 2 brand in total baby personal care, Vernón said. The company’s kid-focused Personal Care lineup, launched with a Pixar “Toy Story 5” campaign, is expanding beyond Walmart and Amazon into food retailers including H-E-B and select Ahold Delhaize banners.
Diaper Pressure and Apparel Licensing Shift
Management said diapers remain a drag on results as the category faces structural headwinds and broad declines among national brands. Vernón said Honest has continued investing in diaper product performance and value, but described the category as “very challenged.”
Diapers now represent less than 25% of Honest’s overall consumption, while Wipes and Personal Care account for 70%, according to management. The company said its growth in baby wipes and baby personal care has helped offset the impact of diaper-category weakness.
Honest also announced a new licensing agreement with an industry-leading apparel manufacturer. Under the arrangement, the company will return to an outbound licensing model for baby and family apparel, including bedding and baby clothing. Bruce said the agreement fits Honest’s asset-light operating model and should be margin-accretive, though it is expected to be immaterial to 2026 results.
Raised 2026 Outlook and Investment Plans
Honest raised its full-year 2026 outlook, now expecting:
- Reported revenue of $319 million to $325 million, including about $10 million from apparel inventory liquidation revenue.
- Organic revenue growth of 5% to 7%, compared with its prior outlook of 4% to 6%.
- Adjusted gross margin in the mid-40% range, up from prior guidance for the low 40% range.
- Adjusted EBITDA of $23 million to $25 million, compared with prior guidance of $20 million to $23 million.
Bruce said full-year adjusted gross-margin guidance includes both the favorable tariff refund effect and the negative impact from apparel liquidation. Management expects underlying gross-margin performance in the second half to exceed first-half levels.
The company plans to reinvest tariff-refund proceeds in marketing, technology, supply-chain capabilities and other scaling initiatives. Bruce said marketing investment will increase in both dollars and as a percentage of sales during the second half, while spending on capabilities will flow through selling, general and administrative expenses.
Management also said it expects SG&A to increase from the “low watermark” reached in the second quarter as it funds investments intended to support long-term scaling. Honest said its warehouse consolidation is now live and has begun contributing savings, though some costs tied to its Powering Honest Growth initiative remain.
About Honest (NASDAQ:HNST)
The Honest Company, Inc (NASDAQ: HNST) is an American consumer goods firm specializing in eco-friendly and responsibly formulated products for babies, personal care, beauty and home cleaning. The company emphasizes transparency in ingredient sourcing and product safety, positioning itself in the premium segment of mass-market retail and direct-to-consumer channels.
Honest was founded in 2011 by actress Jessica Alba and environmental health advocate Christopher Gavigan with a mission to offer parents household and baby care items free from harsh chemicals and synthetic fragrances.
