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| Statement |
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| Our cash position improved from continued discipline in managing working capital, including significant reductions in inventory |
| This quarter, we delivered a record high revenue of $90 million, up 10%, driven by strong results in the digital channel, including robust consumption at Amazon; price increases implemented across the portfolio over the course of 2023; and increased volume growth due to both greater velocity and distribution gains |
| We remain committed to expanding gross margins through cost savings and improved mix of our portfolio |
| Similarly, we will continue to improve the efficiency of our operating structure with benefits from reducing nonstrategic spend and gaining leverage across fixed cost as we scale |
| These actions which began with the new leadership team, will put us on a path to sustainable positive operating margins and a bottom line that grows faster than the top line |
| These 2023 improvements include expanding our gross margins by 930 basis points since Q1, doubling our cash position year-over-year and achieving a major milestone in the fourth quarter by delivering positive adjusted EBITDA and positive net income |
| We expanded margins and achieved our profitability goal while also driving double-digit top line growth in the quarter |
| We have already started to see benefits of these enhancements by quadrupling the number of new households that are new to our brand at Amazon in Q4 |
| This brings us to introducing our new long-term financial algorithm which includes expected revenue growth of 4% to 6% annually and continued adjusted EBITDA margin expansion |
| In closing, we remain confident that we can continue to build on the stabilizing results from last year and realize our profitable growth goals as a leading modern CPG company |
| We exited 2023 with growth in both units and dollar sales, strong marketing efficiency, a healthier balance sheet and a clear path to ongoing profitability |
| Digital was a strong driver for us and that was a lot of growth that we got from Amazon which continues to have some big opportunity for us |
| I'm confident that with our stronger foundation, growing consumer resonance and a clear vision for the future, we will continue to advance Honest mission as a personal care company that courageously challenges ingredients, ideals and industries through the power of our brand, our team and our Honest standard |
| We -- I think we've been really candid about that and hard at work and proud of those results |
| Our team's work over the last 12 months has helped us to build a strong financial foundation |
| We achieved 10% revenue growth, both for the fourth quarter and full year 2023, while also expanding gross margins and reducing operating expenses |
| We marked 2023 as a significant turnaround period for the company and we expect the improving financial trends to continue in 2024 and beyond as we will share today in our strategic update |
| Our balance sheet remains strong with zero debt outstanding |
| By product category, our Diapers and Wipes revenue increased 15% in the fourth quarter, driven by new distribution, price increases and strong sales momentum in wipes |
| Wipes growth was especially strong in the quarter through increased velocity, larger pack sizes and innovation, including our new flushable wipes |
| But we do see the top line progressing in a positive way going through the balance of the year, as Carla articulated, those back half of the year opportunities |
| And we think that gives us a lot of advantages to set us up for a strong foundation in the future |
| And finally, our Household and Wellness revenue increased 28% in the fourth quarter, reflecting strong performance of the baby clothing business |
| Digital revenue increased 28%, driven by meaningful growth with Amazon |
| Our Amazon business has benefited from high return marketing and improved supply chain planning |
| Our gross margin in the fourth quarter was 34%, up 930 basis points from the first quarter of 2023 and 600 basis points from the fourth quarter of last year due to improvements from cost savings and pricing |
| This represents our highest quarterly gross margin in over 2 years |
| We -- I've talked to you before about our real strong belief in the Pareto principle in any CPG company and that every CPG brand, you look at has this sort of stable of core items that really make or break the portfolio |
| Adjusted EBITDA for the fourth quarter was positive $4 million which surpassed our original guidance |
| This also resulted in positive operating income for the quarter, marking the first time achieving this as a public company |
| Statement |
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| Next, our Skin and Personal Care revenue declined 6% in the quarter due to exiting distribution in low-margin channels |
| There will be some periods and we're particularly called out a soft first half of the year from the top line |
| As I mentioned when I was with you a year ago, we were not satisfied with our past results |
| We are expecting a softer first half of the year compared to an improved second half due to retailer ordering patterns and exiting distribution and low-margin channels |
| And so we want to call out that first quarter, in particular, will be a little more muted on the top line and that would impact the bottom line opportunity for us |
| Retail revenue decreased 3% due to exiting distribution in low-margin channels partially offset by continued benefit from distribution into new retail outlets |
| But in the very near term, some of the revenue pressures that relate to inventory that was orders that were pulled into our fourth quarter will impact our first quarter |
| And -- but it's also balanced with what we think is things that are out of our control, the uncertainty of the macro environment, pressures from the consumer that we might face |
| And those are hard costs and cash flow items that we will have in 2024 that would impact our ability to see positive cash flow |
| And so we'll keep managing that to eke out what we can but we don't expect free cash flow to be positive |
| Is that a repeatable event? Or should we expect free cash flow flattish or even a little bit worse in 2024? Dave Loretta Laura, certainly, the cash flow gains in '23 were pretty pronounced and it was that opportunity to rightsize the inventory that generated |
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