What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-28 · 88 added, 77 removed, 188 unchanged (47% of the section changed)

Overview Of Business

The Honest Company (the "Company," which may also be referred to as “we,” “us” or “our”) is a mission-driven lifestyle brand that formulates, designs and sells clean products with a focus on sustainability and thoughtful design .

The Honest Company (the "Company," which may also be referred to as “we,” “us” or “our”) is a digitally-native consumer products company born in the Gen Z era to make purpose-driven consumer products designed for all people .

Our commitment to our core values, continual innovation and engaging our community has differentiated and elevated our brand and our products.

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Our Products and Product Categories

The Company’s Chief Executive Officer, as the chief operating decision maker, organizes the Company, manages resource allocations, and measures performance on the basis of one operating segment.

Our Chief Executive Officer, as the chief operating decision maker, organizes the Company, manages resource allocations, and measures performance on the basis of one operating segment.

Our three product categories are Diapers and Wipes, Skin and Personal Care and Household and Wellness, which represented 64%, 28%, and 8% of our 2022 revenue, respectively.

• Diapers and Wipes.

Primary components of our diapers are made with sustainably harvested, totally chlorine-free fluff pulp and other plant-derived materials.

Primary components of our Clean Conscious™ diapers are made with sustainably harvested, chlorine-free fluff pulp and other plant-derived materials.

Our diapers are also packaged with a more efficient design than our previous diaper product that uses less material.

Our diapers serve as a strategic customer acquisition tool, as new parents often proceed to also purchase wipes and products from our Skin and Personal Care and Household and Wellness categories.

• Skin and Personal Care Products.

We use clean and safe ingredients, including many plant-based ingredients that are ethically sourced and, most-importantly, effective.

We have an extensive line of bath, body, skincare and beauty products designed for a range of skin types and concerns that are certified by trusted experts and institutions, including the National Eczema Association.

Our products are formulated to perform and be safe and many are toxicologist-audited.

For example, our award-winning (1) Extreme Length Mascara + Lash Primer lifts, lengthens and volumizes eyelashes without harmful parabens or paraffins, synthetic fragrances, silicones or mineral oil.

Our diapers serve as a strategic customer acquisition tool, as new parents often proceed to also purchase baby wipes and products from our Skin and Personal Care and Household and Wellness categories.

• Skin and Personal Care.

We use clean and safe ingredients, including many naturally-derived ingredients that, most-importantly, are effective.

We have an extensive line of bath, body, skincare and beauty products designed for a range of skin types and concerns, many of which are certified by trusted experts and institutions, including the National Eczema Association.

Our products are formulated to perform and our ingredients and formulas are toxicologist-audited for potential health concerns.

For example, our award-winning (1) Fresh Flex Concealer is made without harmful parabens or paraffin, synthetic fragrances, cyclomethicone or mineral oil and our Clean Power Technology™ to create lasting wear.

• Household and Wellness.

We offer clean products that are designed to be safe for the whole family without compromising efficacy.

Some of the category products include sanitizing wipes, hand sanitizer made with key plant-based ingredients, disinfecting spray and prenatal vitamins.

We plan to introduce new product innovation that will diversify our offering in this category outside of sanitizing and disinfecting which have made up a majority of sales in the category since their launch in 2020.

For example, we plan to introduce four new vitamin and supplement products in the second quarter of 2022.

Some of the category products include baby clothing, pre and post natal vitamins, wellness supplements, sanitizing wipes, and hand sanitizer made with key plant-based ingredients.

In 2022, we introduced new product innovation that has diversified our offering in this category, including our wellness supplement line and Honest Baby Clothing ® .

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(1) Allure's 2021 "Readers' Choice" award winner for "Clean Beauty".

10 Years of Growth (2012-2022)

(1) Allure's 2022 "Best of Beauty" award winner in the "Clean Beauty" category.

Our Integrated Omnichannel Presence

Since our launch, we have built a well-integrated omnichannel presence by expanding our retail accessibility across both Digital and Retail channels, including the launch of strategic partnerships with Target and Amazon in 2014 and 2017, respectively.

Since our launch, we have built a well-integrated omnichannel presence by expanding our product availability across both Digital and Retail channels, including the launch of strategic partnerships with Target, Amazon and Walmart in 2014, 2017 and 2022, respectively.

This business model has allowed us to efficiently scale our business while remaining agnostic as to the channel where consumers purchase our products.

Also during the COVID-19 pandemic when consumers shopping preferences shifted first online during 2020 and then back to in-store shopping during 2021, our consumers were able to find our products.

• Digital Channel.

In 2022, we generated 45% of revenue through our Digital channel, which includes our flagship digital platform, Honest.com, and third-party pureplay ecommerce sites.

Through Honest.com, we are able to establish a direct relationship with our consumers, to more effectively influence brand experience and better understand consumer preferences and behavior.

Our website showcases the entirety of our product portfolio, offers exclusive products and services including our subscription service, houses branded content featured on product detail pages and our blog, and facilitates new product feedback via exclusive pre-launch access across all our channels.

Through Honest.com, we are able to establish a direct relationship with our consumers, to more effectively influence brand experience and better understand consumer

preferences and behavior.

Our website showcases the entirety of our product portfolio, offers exclusive products and services including our subscription service and loyalty program Honest Rewards™, houses branded content featured on product detail pages and our blog, and facilitates new product feedback via exclusive pre-launch access across all our channels.

In addition to shopping our products a la carte, consumers have the option to subscribe to our popular Diapers and Wipes bundle subscription, as well as customizable single item subscriptions.

In 2022, 25% of our revenue was generated from Honest.com.

In January 2023, we launched Honest Rewards™ loyalty program aimed to increase long-term customer value with the brand through consumer incentives.

Additionally, we have strong relationships with Amazon and other third-party ecommerce platforms which allow us to further our brand experience and leverage engaging assets and content featured on Honest.com.

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Additionally, these partnerships support our differentiated value proposition by making our products conveniently accessible in the many places where our consumer shops.

In addition to our presence in the United States and Canada, we continue to expand our strategic retail playbook to Europe.

In June 2019, we launched Honest Beauty with Douglas, the #1 beauty destination in Europe, and have since launched additional categories with other leading European retailers.

Since our launch with Douglas, Douglas store count has doubled and we have added in store placement in Austria, France, and Switzerland bringing our retail presence in Europe to eight countries.

In addition, we

continue to be available online in 12 countries in partnership with Douglas.com.

As of December 31, 2022, our products can be found in approximately 50,000 retail locations across the United States, Canada and Europe.

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This metric provides a measurement of retail penetration that takes into account the importance of selling through retail locations with higher overall retail sales volumes, and as a result we believe that our competitors generally use the same measurement.

For the 13 weeks ended December 26, 2021, we had approximately 49% ACV in national multi-outlet stores.

For the 13-weeks ended January 1, 2023, in total we had approximately 72 points ACV in national multi-outlet stores, as compared with 49 points in the year ago period, primarily driven by the launch of diapers, wipes, and personal care products into over 2,500 Walmart stores.

Below is our ACV weighted distribution for the 13-week period ended:

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Marketing Strategy

The core of our Content, Community, Commerce marketing strategy is centered upon creating a “lifestyle brand” that leverages rich content to drive brand awareness around clean, conscious living through marketplaces where our products are sold.

Included in our Content, Community, Commerce marketing strategy, is our digital strategy that is geared towards creating lifetime value while fueling our omnichannel growth by converting one-time purchasers to a community of like-minded consumers aligned with Honest’s mission (the "Digital Strategy").

The core of our Content, Community, Commerce marketing strategy is centered upon creating a brand for all people that leverages rich content to drive brand awareness around clean, conscious living through marketplaces where our products are sold.

Included in our Content, Community, Commerce marketing strategy is our digital strategy that is geared towards creating lifetime value while fueling our omnichannel growth by converting one-time purchasers to a community of like-minded consumers

aligned with Honest’s mission (the "Digital Strategy").

This conversion will be facilitated through the curation of value-driven digital experiences, including personalized shopping experiences, loyalty rewards, optimized mobile and desktop experiences and overall improvements within our digital assets to delight and excite our consumers.

Innovation Strategy

We use connectivity to our community of consumers to provide lifestyle insights that power innovation across categories.

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 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 in the future of driving “big bets” across potential product adjacencies where we have;

1) permission to play with consumers, 2) relevant domain expertise, and 3) the opportunity to expand across a broader consumer demographic within an existing Honest home.

We are also focused on building a portfolio of products in complementary categories through our Innovation Strategy and the momentum created by our Digital Strategy.

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, which we refer to as costovation.

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.

Omnichannel Strategy

We reach our consumers through a strategic omnichannel approach across complementary Digital and Retail channels to maximize consumers’ connection, experience and access to our brand.

We are enhancing our technology to allow digital orders to be delivered to customers faster and providing content and community digital offerings to enable the lifestyle brand and take advantage of our subscriptions program.

We are enhancing our technology to allow digital orders to be delivered to customers faster and providing content and community digital offerings to take advantage of our subscriptions program.

Our integrated omnichannel approach provides a meaningful benefit to our consumers who can shop our brand however they want, engendering further “stickiness” and loyalty.

Our omnichannel approach seeks to meet consumers however they want to shop, balancing deep consumer connection with broad convenience and accessibility.

10 Years of Growth

Supply Chain and Operations

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Our supply chain team manages these relationships and processes and, with the support of our innovation team, researches materials and equipment, approves and manages purchasing plans, and oversees product fulfillment.

The primary raw materials and components of our products include sustainably harvested fluff pulp, plant-based substrate in our baby wipes, and other biobased materials.

Just as important as what goes into our products, we actively work with suppliers to avoid certain materials, including elemental chlorine-free pulp, parabens, paraffins, synthetic fragrances, and mineral oil, that don’t meet our standards but are commonly used by mainstream players.

Our distribution network includes four warehouses in Nevada, California, Pennsylvania and the Netherlands with retail and direct-to-consumer ("DTC") fulfillment capabilities and value-added services operated by GEODIS Logistics LLC, or GEODIS.

The primary raw materials and components of our products include sustainably harvested fluff pulp in our diapers and plant-based substrate in our baby wipes, among other materials.

Just as important as what goes into our products, we actively work with suppliers to avoid certain materials, including parabens, paraffins, synthetic fragrances, and mineral oil, that don’t meet our standards but are commonly used by mainstream brands.

Our distribution network includes three warehouses in Nevada, Pennsylvania and the Netherlands and other short-term inventory storage locations with retail and direct-to-consumer ("DTC") fulfillment capabilities and value-added services operated by GEODIS Logistics LLC, or GEODIS.

The warehouse in Las Vegas is a state-of-the-art facility leased by Honest with a focus on automated large scale DTC fulfillment.

We manage inventory by forecasting demand, analyzing product sell-through, and analyzing our supply chain to ensure sufficient capacity to support demand.

As a result of the COVID-19 pandemic and other macroeconomic trends, we and our distribution partners have experienced some disruptions to the operations of our fulfillment centers, including a nationwide truck driver shortage.

For example, during the fourth quarter of 2021, some employees at two of our warehouse facilities were ill with COVID-19 and/or following quarantine protocols, which coupled with the nationwide truck driver shortage, negatively impacted our and our distribution partner's ability to fulfill orders in a timely manner and had a negative impact on our results of operations.

As a result of the COVID-19 pandemic and other macroeconomic trends, we and our distribution partners have in the past experienced and may experience in the future some disruptions to the operations of our fulfillment centers.

Sustainability is a key component of our supply chain and distribution.

We have transitioned to 100% pre-consumer or post-consumer recycled ("PCR") cardboard shipping cartons for our Honest.com shipments.

In addition, we are working with our diapers and wipes manufacturers to receive shipments made from PCR cardboard.

The markets in which we operate are highly competitive and rapidly evolving, with many new brands and product offerings emerging in the marketplace.

We face significant competition from both established, well-known legacy CPG players and emerging DTC brands.

We face significant competition from both established, well-known legacy c onsumer packaged goods, or CPG players and emerging DTC brands.

• Diapers and Wipes.

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• Household and Wellness.

Select competitors include The Clorox Company, Reckitt Benckiser Group plc (maker of Lysol) and Unilever PLC (maker of Seventh Generation products).

Select competitors include Carter's Inc., The Clorox Company, Reckitt Benckiser Group plc (maker of Lysol) and Unilever PLC (maker of Seventh Generation products).

We compete based on various product attributes including clean formulation, sustainability, effectiveness and design, as well as our ability to establish direct relationships with our consumers through digital channels.

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We believe that the “clean and natural” product categories of the Diapers and Wipes, Skin and Personal Care and Household and Wellness markets are growing at outsized rates, as a result of the increasing shift in consumer demand for “better-for-you” products.

Based on independent third-party consumption data for the 52 weeks ended December 26, 2021, the clean and natural products of Honest diaper, wipes and baby personal cares grew 11.7%, 7.3% and 10.1%, respectively, significantly outpacing the products in the industry as a whole which grew in diapers and baby personal care 8.8% and 5.2%, respectively, and wipes as a whole declined 0.1%.

Based on independent third-party consumption data for the 52 weeks ended January 1, 2023, the dollar amount of sales of the clean and natural products of Honest wipes, diaper and baby personal care grew 22.9%, 15.2% and 12.8%, respectively, significantly outpacing the products in the industry as a whole which grew in diapers and wipes 7.7% and 7.1%, respectively, and declined in baby personal care by 1.6%.

We believe that certain historical leading brands that have produced products in these categories for decades generally focus on single categories and offer products made with conventional ingredients that are less aligned with increasing consumer preference for clean and natural solutions.

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Our Purpose-Driven Organization

At Honest, we prioritize transparency, trust and sustainability in all that we do.

At Honest, we prioritize transparency, trust, safety and human health in all that we do.

Our purpose-driven mission has always been guided by our commitment to philanthropic partnerships and community engagement with a focus on diversity and inclusion.

Our Environmental, Social and Governance ("ESG") initiatives are focused around three key pillars, Planet;

• We are committed to sustainable packaging.

We recently published an Investor tear sheet on our investor relations website that aligns with both the Sustainability Accounting Standards Board ("SASB") and the Task Force on Climate-related Financial Disclosures ("TCFD") frameworks.

The Nominating and Corporate Governance Committee is responsible for overseeing management of risk related to our ESG practices, including risks related to our operations and our supply chain.

In 2022, we also formed an ESG Council which comprises certain executive management and various cross-functional leaders across the organization that share oversight of ESG matters.

• We strive for sustainable packaging.

Our commitment to environmental sustainability shows up through our product development, packaging processes and in all parts of our business on a daily basis.

For example, during the third quarter of 2021, we launched our "Beauty Restage" which is our new sustainable packaging initiative, including recyclable cartons using 100% tree-free paper made from upcycled sugarcane by-product.

For example, we use sustainable cartons in some of our Skin & Personal Care products that are environmentally-friendly, Forest Stewardship Council ("FSC")-certified, and made from 100% recycled, PCW (pre/post consumer waste) materials.

• We strive to lessen our environmental footprint—minimizing our impact by offsetting carbon emissions and working to responsibly source materials and packaging.

We have transitioned our Honest.com shipping cartons to 100% PCR cardboard.

In 2020, we entered into an agreement to participate in a six-month carbon offset program to reduce greenhouse gas emissions resulting from our domestic Honest.com shipments.

We participated in this program for six months of each of 2020 and 2021, respectively.

We continue to participate in this six month program through the end of 2022.

In 2020, Honest entered into an agreement to participate in a six-month carbon offset program to reduce greenhouse gas emissions resulting from our domestic Honest.com shipments.

We began our participation in this program in 2020 and have participated in consecutive six-month periods through 2021 and 2022.

We plan to continue to participate in this six-month program through the end of 2023.

Our Clean Conscious™ diaper features an innovative design including our plant-based backsheet, sustainably harvested fluff pulp and a more efficient design than our previous diaper product that uses less material helping to avoid using over 7,000 trees every single year.

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100% of our baby personal care and household cleaning bottles are recyclable or include recycled materials and we are regularly looking to increase the amount of post-consumer resin in our components.

We are eliminating plastic in many of our Skin and Personal Care products by moving to aluminum tubes, refillable tin compacts and glass jars.

We eliminated plastic in many of our Skin and Personal Care products by moving to aluminum tubes, refillable tin compacts and glass jars.

• We are committed to the health, safety and well-being of our consumers by providing clean, effective, well-designed products consumers can feel great about using.

We place an emphasis on ingredient and formula assessments, including external third-party certifications and in-house Toxicologist Audit protocols where we review the final formula for potential chemical hazards, dose-response, and anticipated exposure, thinking not only about the effects of using the product once but over the consumer’s lifetime.

We place an emphasis on ingredient and formula assessments, including external third-party certifications and in-house Toxicologist and Eco-toxicologist Audit protocols where we review the final formula for potential chemical hazards, dose-response, and anticipated exposure to determine if our products meet a health-protective margin of safety, not only for single product use, but over the consumer’s lifetime.

Our NO List™ contains over 3,500 chemicals and materials we choose not to use, including parabens, sulfate surfactants, phthalates, formaldehyde donors and synthetic fragrances.

• We prioritize naturally-derived resources over synthetic, petro-chemicals in our product formulas and designs.

The majority of our Baby Personal Care and Mama Care formulas are in compliance with the United States Department of Agriculture ("USDA"), BioPreferred Program for certified biobased products ("Biobased Certified").

The alcohol used in our alcohol wipes, hand sanitizer gel and hand sanitizer spray is 100% plant-derived and our fragrances are all 100% natural, never synthetic.

Primary components of our diapers are made with sustainably harvested, totally chlorine-free fluff pulp and other plant-derived materials, including our plant-based backsheet.

• We comply with the requirements of many independent organizations or certification authorities.

This includes the USDA's, National Organic Program, the USDA’s BioPreferred Program for Biobased Certified products, the National Eczema Association’s Seal of Acceptance, and the NSF/ANSI 305 standards set by Quality Assurance International.

• We prioritize naturally-derived resources over synthetic, petroleum-derived ingredients in our product formulas and designs.

The majority of our Baby Personal Care and Mama Care formulas meet the United States Department of Agriculture's ("USDA") BioPreferred® Program requirements for biobased content.

The alcohol used in our alcohol wipes, hand sanitizer gel and hand sanitizer spray is plant-derived and our fragrances are naturally derived, never synthetic.

Primary components of our diapers are made with sustainably harvested, chlorine-free fluff pulp and other plant-derived materials, including our plant-based backsheet.

Our baby clothing is made with organic cotton.

• We comply with the requirements of many independent organizations or certification authorities for several of our products.

This includes the USDA's, National Organic Program, the USDA’s BioPreferred® Program for biobased content, the National Eczema Association’s Seal of Acceptance, EWG Verified™, the U.S.

EPA’s Safer Choice Program, Green Seal®, the NSF/ANSI 305 standards set by Quality Assurance International and the Global Organic Textile Standard for organic cotton in our baby clothing and bedding.

We have over 100 EWG Verified™ SKUs across

the organization, which are products that do not include EWG's chemicals of concern while also meeting their strict health-based guidelines.

• We conduct quality audits of our third-party manufacturing partners.

We require our third-party manufacturers to follow our high standards of controlled documentation, cleaning and safety protocols, and laboratory controls.

• We partner with trusted science-based industry groups driving change in green chemistry.

In 2022, we announced our Co-Design Partnership with ChemFORWARD, a nonprofit value chain collaboration increasing access to data on chemical hazards and safer alternatives.

We are also members of the Green Chemistry & Commerce Council (GC3), a multi-stakeholder collaboration driving for commercial adoption of green chemistry by forging meaningful connections across the supply and value chain.

Community Impact

We work closely with our charity partners, including Baby2Baby, to help provide children and families around the world with the basic essentials and resources they need to live healthy lives.

Since the start of our relationship with Baby2Baby, we have donated more than 26 million family personal care, feminine care, clean beauty products and other essentials to those in need and our compassionate team has volunteered countless hours giving back to our communities and providing disaster relief.

Since the start of our relationship with Baby2Baby and other partners, we have donated more than 28 million family personal care, feminine care, clean beauty products and other essentials to those in need and our compassionate team has volunteered countless hours giving back to our communities and providing disaster relief.

Our partnership with March of Dimes helps fund research, advocacy and service programs addressing maternal and infant mortality with critical healthcare and support.

The partnership will also fund the creation of new advocacy content about environmental justice for moms and babies, helping further spread the important work this organization has set out to do.

Through this partnership, we have committed to donate $250,000 to support the organization, including its new Mom and Baby Action Network.

In 2022, we announced that our Head of Toxicology co-authored the Personal Care Product & Beauty Justice brief through March of Dimes' Mom and Baby Action Network (M-BAN), highlighting cosmetic ingredients of potential concern for a pregnant person and their unborn child as well as inequities experienced by marginalized populations;

the brief is expected to be published in 2023.

Through this partnership, we have donated more than $0.4 million, reaching more than an estimated 455,000 mothers with health education and programs to support the organization, including its new Mom and Baby Action Network.

Human Capital Management

Our Board of Directors and Compensation Committee provide important oversight on certain human capital matters, including the strategic direction for various people-related business goals and strategies, such as compensation and benefit programs, leadership succession planning, culture and talent development.

Our human capital planning process strategically aligns our business needs with the goal of ensuring we have the capability and capacity we need to meet consumer demand.

As of December 31, 2021, we had a total of 187 full-time employees, as well as a limited number of temporary employees and consultants.

As of December 31, 2022, we had a total of 198 full-time employee equivalents, as well as a limited number of temporary employees and consultants.

In building our high-performing teams, we have invested in leadership, marketing, digital and technology capabilities.

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As a Company founded by a woman of color, we have always been passionate about ensuring a diverse and inclusive workforce that reflects our consumers and the communities we serve.

We are proud to say that as of December 31, 2021, people of color represented nearly half of our workforce, and women represented 72% and 60% of our workforce and leadership, which includes director level and above, respectively.

Our Chief Executive Officer is one of the only Afro-Latina Chief Executive Officers at a U.S.

publicly traded company, bringing a new era of leadership that reflects the diversity of Honest’s consumers.

We are proud to say that as of December 31, 2022, people of color represented nearly half of our workforce, and women represented more than 65% and 60% of our workforce and leadership, which includes director level and above, respectively.

We currently have four Employee Resource Groups:

Women Excelling in Leadership and Living , or W.E.L.L, Parents & Friends , Black Leadership, Allies & Community , or B.L.A.C and Honest Asian-American Pacific Islanders , or H.A.A.P.I.

Women Excelling in Leadership and Living , or W.E.L.L,

Parents & Friends , Black Leadership, Allies & Community , or B.L.A.C and Honest Asian-American Pacific Islanders , or H.A.A.P.I.

W.E.L.L supports the personal and professional development of women at Honest.

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B.L.A.C was created to lift, engage and empower Black voices within The Honest Company and across the community.

H.A.A.P.I was recently launched in 2021 to create a supportive and inclusive community for Asian Americans and Pacific Islanders and allies.

H.A.A.P.I was launched in 2021 to create a supportive and inclusive community for Asian Americans and Pacific Islanders and allies.

We have made a commitment to provide training and a platform for important dialogue about diversity, inclusion and equity.

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Employee Safety and Well-Being

As a values-driven organization, the Company takes a holistic approach to caring for our employees, with benefits and programs designed to support physical, mental, emotional and financial well-being.

We prioritize safety for all employees through a combination of education, training and safety-related policies, while also operating in compliance with applicable regulations, including Occupational Safety and Health Administration guidelines in the U.S.

As a values-driven organization, the Company takes a holistic approach to caring for its employees, with benefits and programs designed to support physical, mental, emotional and financial well-being.

We prioritize safety for all employees and third-party warehouse partners through a combination of education, training and safety-related policies, while also operating in compliance with applicable regulations, including Occupational Safety and Health Administration guidelines in the U.S.

This approach was particularly important as the Company continued to navigate the COVID-19 pandemic and implemented enhanced safety protocols across our facilities, including preventive detection measures, contact tracing, frequent cleaning and sanitizing, required use of personal protective equipment and the adjustment of work schedules to reduce exposure.

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Government Regulation

Our cosmetic, over-the-counter drugs, food (vitamins/dietary supplements) and cleaning products are subject to regulation by the Food and Drug Administration, or the FDA.

Substantially all of our products are subject to regulation by the Consumer Product Safety Commission, or the CPSC, the EPA, and the Federal Trade Commission, or the FTC, as well as various other federal, state, local and foreign regulatory authorities.

These laws and regulations principally relate to the ingredients or components, proper labeling, advertising, packaging, marketing, manufacture, registration, safety, shipment and disposal of our products.

Our cosmetic, over-the-counter drugs, food (vitamins/dietary supplements) and cleaning products are subject to regulation by the Food and Drug Administration, or the FDA.

Under the Federal Food, Drug and Cosmetic Act, or the FDCA, cosmetics are defined as articles or components of articles that are applied to the human body and intended to cleanse, beautify or alter its appearance, with the exception of soap.

The labeling of cosmetic products is also subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations.

The labeling of cosmetic prod ucts is also subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations.

Cosmetics are not subject to pre-market approval by the FDA, however certain ingredients, such as color additives, must be pre-authorized.

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In the event the FDA identifies false or misleading labeling or unsanitary conditions or otherwise a failure to comply with FDA requirements, we may be required by a regulatory authority or we may independently decide to conduct a recall or market withdrawal of our product or to make changes to our manufacturing processes or product formulations or labels.

In addition, the Modernization of Cosmetics Regulation Act, enacted in December 2022, is expected to expand the FDA’s regulatory authority over cosmetic products, including by providing the FDA with new mandatory recall authority over cosmetics and by

requiring the registration of cosmetic manufacturing facilities, the reporting of certain adverse events, the issuance of cGMP requirements and the establishment of safety substantiation requirements.

If a product is intended for use in the diagnosis, cure, mitigation, treatment or prevention of a disease condition or to affect the structure or function of the human body, the FDA will regulate the product as a drug.

Our current products that are intended to treat acne and used as sunscreen, including skin care products with sun protection factor, or SPF, are considered over-the-counter, or OTC, drug products by the FDA.

Our current products that are intended to treat acne and skin care products with sun protection factor, or SPF, are considered over-the-counter, or OTC, drug products by the FDA.

Our OTC products are subject to regulation through the FDA’s “monograph” system which specifies, among other things, permitted active drug ingredients and their concentrations.

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The CPSC may seek penalties for regulatory noncompliance under certain circumstances.

CPSC regulations also require manufacturers of consumer products to report to the CPSC certain types of information regarding products that fail to comply with applicable regulations, that contain a defect which could create a substantial product hazard, or that create an unreasonable risk of

serious injury or death.

Certain state laws also address the safety of consumer products and mandate reporting requirements, and noncompliance may result in penalties or other regulatory action.

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The Endorsement Guides provide that an endorsement must reflect the honest opinion of the endorser and cannot be used to make a claim about a product that the product’s marketer couldn’t itself legally make.

They also say that if there is a connection between an endorser and the marketer that consumers would not expect and it would affect how consumers evaluate the endorsement, that connection should be disclosed.

They also say that if there is a connection between an endorser and the marketer that

consumers would not expect and it would affect how consumers evaluate the endorsement, that connection should be disclosed.

Another principle in the Endorsement Guides applies to ads that feature endorsements from people who achieved exceptional, or even above average, results from using a product.

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Many of these laws and regulations are still evolving and being tested in courts, and could be interpreted in ways that could harm our business.

These may involve user privacy, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions and online payment services.

In particular, we are

subject to federal, state, local and international laws regarding privacy and protection of people’s data.

These may involve user privacy, data protection, content, intellectual property, distribution, electronic contracts and other communications, automatically renewing product subscriptions, competition, protection of minors, consumer protection, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions and online payment services.

Among other laws and regulations, we are subject to federal, state, local and international laws regarding privacy and protection of people’s data.

Foreign data protection, privacy and other laws and regulations can be more restrictive than those in the United States.

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The GDPR also significantly increases penalties for non-compliance.

The California Consumer Privacy Act, or CCPA requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, and allows consumers to opt out of the sale of personal information with third parties and provides a private right of action and statutory damages for data breaches.

In addition, California voters recently approved the California Privacy Rights Act of 2020, or CPRA, that goes into effect on January 1, 2023.

The CPRA would, among other things, give California residents the ability to limit the use of their sensitive information, provide for penalties for CPRA violations concerning California residents under the age of 16, and establish a new California Privacy Protection Agency to implement and enforce the law.

The California Consumer Privacy Act, or CCPA imposes obligations on covered businesses that process information on California residents to provide specific disclosures to consumers about their data collection, use and sharing practices, and to respond to certain requests from California residents related to their personal data (for example, requests to know of the business’s personal data processing activities, to delete the individual’s personal data, and to opt out of certain personal data disclosures).

Also, the CCPA provides for civil penalties and provides a private right of action which may include an award of statutory damages for certain data breaches.

In addition, the California Privacy Rights Act of 2020, or CPRA, that went into effect on January 1, 2023, expands the CCPA.

The CPRA, among other things, gives California residents the ability to limit the use of certain sensitive information, establishes restrictions on personal data retention, expands the types of data breaches that are subject to the CCPA’s private right of action, provides for penalties for CPRA violations concerning California residents under the age of 16, and establishes a new California Privacy Protection Agency to implement and enforce the law.

There are also a number of legislative proposals pending before the U.S.

21 unchanged sentences

Information relating to corporate governance at Honest, including the Company’s Code of Business Conduct and Ethics, the Honest Company Corporate Governance Guidelines and Committee charters for the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee, is available at investors.honest.com under Corporate Governance or https://investors.honest.com/corporate-governance/douments-charters.

The Company will provide any of the foregoing information without charge upon written request to Corporate Communications, The Honest Company, 12130

Millennium Drive, #500, Los Angeles, CA 90094.

The Company will provide any of the foregoing information without charge upon written request to Corporate Communications, The Honest Company, 12130 Millennium Drive, #500, Los Angeles, CA 90094.

The information contained on the Company’s website is not included as a part of, or incorporated by reference into, this Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business