The Honest Company, Inc. (HNST) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to the UBS Global Consumer and Retail Conference here in New York City. My name is Peter Grom. I'm the U.S. beverages and household products analyst here at UBS. And we are very excited to have joining us this afternoon from The Honest Company, Carla Vernon, the Chief Executive Officer and Chief Financial Officer, Dave Loretta. In terms of format for this afternoon, Carla and Dave are going to run through a presentation. And again, following the presentation, I have a few questions for the team and we will also open up the line for audience Q&A. Before we start, I am required to read a legal disclaimer. As a research analyst, I'm required to provide certain disclosures relating to the nature of my own relationship and that of UBS with any company on which I express a view on this call today. These disclosures are available at www.ubs.com/disclosures. Alternatively, please reach out to me, and I can provide them to you after this call. So with that, Carla, Dave, over to you.

Wonderful. Thank you so much, Peter, and happy Pi Day, everybody. I don't know if I've got any nerds in the house, but I don't want to miss this important holiday. Hi. I'm Carla Vernon. Thank you so much for joining us today. I'm the CEO of The Honest Company, and I'm joined today by Dave Loretta, our CFO. I recently celebrated my 1-year anniversary with Honest, and Dave joined shortly after I did. So we're thrilled to share the results of our transformation journey that began a year ago and drove a stronger business model and a stronger balance sheet. And we'll also share our thoughts on the assets and opportunities that will propel us forward. We believe that Honest is a personal care company built for modern times. In a moment, Dave will share how we've improved our financial foundation, putting us in a great position to further unleash the distinctive elements and drive increased scale for The Honest brand. Launched in 2012, Honest was born out of a desire to bring a higher standard for clean ingredients and sustainable design to baby and personal care products. In fact, our mission is to be the personal care company that courageously challenges ingredients, industries and ideals so that people can protect who they love. And to this day, we hold every product we sell to The Honest standard. This standard is a set of guiding principles that put our mission into action. At Honest, our standard always begins with clean ingredients. This is why our entire portfolio distinguishes itself by eliminating more than 3,500 chemicals and materials of concern from our products. Our own Honest standard is a stricter benchmark then restrictions dictated by either the EU or U.S. regulations and our in-house toxicology team and chemistry team ensure that all of our products meet this rigorous standard. But our success goes beyond our approach to ingredients. We've innovated our categories and reinvented how a modern CPG is built. With the power of a single brand, Honest, that is as relevant across baby products as it is for household products, beauty and apparel. This provides us both brand power and efficiency. Today, our portfolio is $344 million in revenue, and that's built from a mix that includes diapers and baby care, a variety of wipes that work on babies, surfaces and even the fur babies. We also have wonderful beauty and wellness items, all of them living up to the strict Honest standard for clean. Despite our young age as a 12-year-old company, we have achieved some remarkable milestones, including being the #1 natural baby personal care brand, the fastest-growing wipes brand and the #1 climate pledge friendly mascara on Amazon. And for families that like to jam together, our Honest Fam Jam sets have been named Oprah's Favorite Things organic pajamas for 4 years in a row. With a strong and well-loved brand and a refreshed management team in place, we've begun taking Honest into our next chapter. Now I'll ask Dave to come up and share more details about our business model.

Thanks, Carla. A year ago, we embarked on a journey to stabilize and reset the financial direction of Honest. We developed 3 prongs of a very focused and purposeful action plan. And in May, we introduced the transformation initiative. The 3 prongs include brand maximization, margin enhancement and operating discipline. Brand maximization focused on the activities to increase availability of honest products to drive greater velocity of consumer sales and to fuel innovation. Margin enhancement focused on all the levers needed to improve profitability of those sales and to address the company's expense structure. The goal was to improve gross margin and generate expense leverage and turn around the direction of earnings. Operating discipline set the expectation internally that if we were going to sustain the improvements beyond 2023, we needed to create a mindset of ongoing excellence in our execution. This includes how we manage the resources and capital needed to achieve the first 2 pillars and also how we go about achieving our Honest mission. I'm pleased to share that on all fronts, we were successful. We grew revenue 10% through a combination of increased distribution, velocity and new product launches. We significantly improved our gross margin and cost structure, realizing 600 basis points of expansion in gross margin and dramatically improving the bottom line results. Lastly, we rightsized our inventory level to build cash. All in doing this, we began the institutional practices to ensure a lasting success. So what were the actions that we took to realize these results? We exited unprofitable channels and low-performing product lines to improve the portfolio's profit potential. We address the product cost structure through better pricing with manufacturers. We amended or changed our supply chain services to realize cost reductions and better service levels. And lastly, we took price increases to maintain our brand position and address input cost inflation. In operating expenses, we absorbed transition costs and set our plans on flattening the cost structure. Marketing investments were reduced for the year and redirected into higher-performing channels, generating a much higher efficiency on the media spend. For the year, we realized leverage on each expense line item and establish the company mindset of cost management. The progress on our earnings turnaround is notable, and led to positive adjusted EBITDA and operating income for the fourth quarter. Achieving positive adjusted EBITDA was an imperative of the transformation initiative. And as we announced last week, we expect to do this on a full year basis in 2024. And with more flex in our cost structure, sales growth will flow through to earnings faster. In summary, we're pleased with the results in 2023 and the impact of the transformation initiative. Net revenue increased 10% through more distribution points and increasing our ACV from 72% to 83%. We achieved the revenue growth on 36% less inventory with more efficient working capital, positive earnings will contribute to cash flow. In fact, we ended '23 with $18 million more in cash and $0 debt on the balance sheet. We have ample liquidity and a backup source in our $35 million ABL facility. All of which positions us well going forward for operational flexibility, being able to invest where needed to drive growth and build strategic dry powder. Our outlook for 2024 builds on the flexible business model we are establishing. Sales growth in the low to mid-single digit reflects a softer first half and stronger second half of the year. Going forward, we expect the long-term revenue growth will be around 4% to 6%. And driven by our scalable growth plans that Carla will share with you in a minute. Embedded in this scalable model is a continual cost management agenda that aims to deliver expanded margins. We know the earnings growth won't be a straight line. But over time, we see the strengthening of our profit model. We'll best position The Honest Company to compete and to deliver on our mission. And to deliver this mission, in addition to Carla and myself, we have a team of experienced leaders that come from consumer -- some of the wide set of consumer brands and best-in-class business models. In addition, we have a full team based in Southern California that are supported through servant leadership and have a passion for building The Honest Company. I'll turn it back over to Carla.

Thank you, Dave. With that strong foundation in place, Honest is uniquely suited to meet the modern needs and modern lifestyles of families and homes today. For example, the presence of skin allergies in children has nearly doubled since 1997, and the market for sensitive skin care products is also expected to double, and by 2030, the market for sensitive skin care products is expected to be $80 billion, up from $41 billion today. But we don't just make it clean, that would be boring. We also make it fun. In fact, we truly revolutionized the baby care category with our fashion influence diaper prints, our organic baby apparel that coordinates with our diaper prints and maybe my favorite part, the way we build rituals and community. My favorite thing is when our Honest community of users shares their baby spa days or their fun ways of filling our diaper cakes with wonderful goodies and surprise for those baby gifts and baby showers. Our current success gives us confidence for the growth ahead. Increasing distribution is the greatest opportunity we see because Honest remains underpenetrated. We have proven success and experience in building the portfolio across a very strong set of national retailers, but we're only at the beginning of that journey. Regardless of which retailer or which category we have significant ground to cover to increase total points of distribution at stores, doors, aisles, shelves and more. When we look at our distribution, we are in less than half of the available retail doors. As we look at the competition, they are in over 80% of retail doors. We see an opportunity to narrow that gap by increasing our store counts with existing retailers and by expanding into new channels. The lifeblood of any CPG company or brand is its defining collection of core items. We like to call this group our hero items. As you can see from this slide, our top products often have only between 20% to 40% of the retail availability of the top mass market counterpart. This is true broadly across our portfolio. And because of the dollars and growth we contribute to our categories, we are confident we can see gains here. And even for the stores, doors and aisles we are in, we've not fully tapped the opportunity for the number and variety of items we carry. In some cases, because of the relative youth and newness of our brand, even when we're driving faster growth than the leading player, we have fewer items. You can see that here. We're thankful for our great relationships with our retail partners and our ability to drive growth together now and in the future. I'm confident that with our stronger foundation, disciplined execution, and a clear vision for the future. Honest is well set as a brand that can grow in both breadth and depth and can serve even more homes with our beautiful purpose-driven products.

[Operator Instructions] But maybe just to start -- first of all, that was great. And congratulations to you both on kind of the tremendous turnaround you've seen. So Carla, I was hoping to get some color on kind of the channel strategy and how you kind of really see that evolving over time, right? So Amazon growth really accelerated this year. And the retail digital split, I think, is around 50-50. Where do you kind of see that going over the next 12 months and longer -- kind of longer term?

Absolutely. Honest is unique because we began our journey as a direct-to-consumer digitally based company. So before we ever launched into brick-and-mortar, we were one of those consumer brands that popped up our website on honest.com and started selling directly to consumers. In many ways, when we were in our early days in 2012 in those early years, this was really a speed-to-market strategy for some of these younger brands that said, "Hey, we don't need to wait until we can break into a shelf reset, we can get on shelves." And we found so much success because products that we sell really appeal to a digital-first consumer and digital native consumer. Over time, as the brand's presence has grown, we have now grown in addition to honest.com, as you said, we scaled quite a lot with other leading digital retailers, including Amazon. And we still feel like it's early days there. But knowing that the majority of personal care transactions still happen in brick-and-mortar retailers, we're very excited about the fact that we've got demonstrated success in places like Target. We've been at Target for 10 years, and been driving growth for our entire -- the entirety of our partnership. So when we look at our channel strategy going forward, we believe that in the current mass and grocery stores where we are, we're still under distributed in all of the ways in terms of doors, in terms of the aisles that we could be in and in terms of the items carried. But we also know that there are some channels that we have not yet either tapped or we haven't maximized. So we believe that there's also opportunity for us to expand into -- further into channels like club and beauty specialty and discount channels with the right assortment and variety. We really see ourselves following that best-in-class road map of leading national brands.

Maybe sticking with that, the distribution discussion. As you think about or you look out to this year and just think about those opportunities you just mentioned. Where are you most focused?

We are making sure that we take our hero items that are performing very strongly and making sure that they are set up for continued success in breadth and depth in the retail sections of the store where we are and also making sure that we understand the ways in which our hero items could drive greater growth for the categories where we maybe don't have that depth of item distribution. So for us, it all starts with maximizing our best performing items because we know that they will drive value in those retail sets. That's a huge focus for us. But I would say, as we've transitioned our management team, we also have intentionally brought in a new -- a leader who is our SVP of Sales, who has very strong experience over 12 years, has really worked as the front sales leader across most of the major retail channels that we are talking to and collaborating with. And Jonathan Mayle in his new role as our SVP of Sales, is really developing great growth strategies that are quite custom to every retailer we're with. So the other idea is making sure that we figure out what is the growth strategy at a given retailer. They're all quite unique, whether that's Walmart or Target or Amazon and that we really line up with the growth strategy with the right products and the right subcategories, where they know it works for their consumer base.

Okay. And then maybe last one for me, another distribution question, but kind of focusing on Walmart. Can you just talk about the opportunity there? Where you see the greatest potential for growth? And how is selling going as kind of a new customer for the last year?

Wonderful. Thank you for asking that. We've been so pleased. We launched into Walmart at the end of 2022. So some of that distribution was still quite new for us last fiscal year. We modeled a lot of our strategy on what has worked so well for us at Target. Having been at Target for 10 years, we really understand the road map for how you launch into a retailer, allow the roots to sort of get watered and planted deeply with that shopper and expand at the right pace where you know you'll have the velocities to deliver. We've been able to do that in an even faster clip with Walmart because we've learned so much. So we're really pleased. Walmart has communicated that they are interested in growing their retail consumer base of upper income household, $100,000 and above households and they have picked a selection of brands that they believe will bring that household into the stores. We are finding great success. Our items are performing more strongly week after week. And so that seems to be like a great fit. I would say though, we started with a very small set of items that we believe would be strong. We wanted to test the waters and figure out what we got right and what we needed to improve. The good news is we got a lot of things right, and we see that there's an opportunity to continue to expand, as I mentioned, even into other aisles and broaden our distribution base of the number of items that are carried at retailers like Walmart and Target.

So Dave, maybe pivoting to you for a second. Just given the balance sheet stabilization in '23, do you foresee any need to kind of raise capital in the future?

Yes. Thanks, Peter. Well, we're really proud of the progress that we made in '23 on doing just that, stabilizing the balance sheet. A lot of that came from being disciplined around our inventory levels, rightsizing it so that it's matched with the demand of the sales that we're going to need and also some of the kind of exiting categories that we knew we weren't going to be as profitable for us. So over $40 million of reduction in inventory and a conversion of a lot of that into cash set us up at the end of the year with a $33 million cash balance. We also have, as I mentioned, a line of credit and ABL facility that's untapped. That adds to the liquidity position. So we're quite comfortable that the current statute -- the current position we're in will allow us to fund the operations and the profit model that we're putting together will be kind of the cash generator for us over the long term. So no expectation that we're going to need to raise capital.

And then maybe just another important topic has just kind of been the path to profitability. What gives you confidence in achieving positive adjusted EBITDA in '24? I know you exited the year with some nice momentum, but just maybe speak to the confidence you have for '24?

Yes, definitely. I'd say there's 3 elements to that confidence in positive adjusted EBITDA on a full year basis. Certainly, it starts at the top of the P&L with sales and having visibility into the order flow. As Carla mentioned, discussions that we have with our customers are ongoing. There's activities around promotions and marketing combinations. And so we know that we've got a pretty good line of sight on that sales line for the year. Second, all the activities that we put into place to address our cost structure, and those are structural in nature. There -- a lot of them came through the back half of '23. And so we will realize the benefit of a full year basis of some of those activities in '34, which gives us a lot of confidence. And then lastly, as you touched on fourth quarter positive adjusted EBITDA and positive operating income, is a proof point that certainly we -- the model can work. The model can grow revenue and grow earnings faster. And that's really what we're focused on.

[Operator Instructions] But maybe just last one I have for you both and it's kind of a broad-based question. But if you were to look out over the next 3 to 5 years, like how would you define success? Like what would you -- what would be your definition of success, whether it's just any sort of financial metrics? Or just what are you focused on as you think about that?

Well, I tell people that I joined The Honest Company to build the kind of company I'd always hoped to work for. So by that, I mean I want to build a company that has products that we're very proud of and that our consumers love that are meeting needs that maybe were not as well understood by some of the older line brands that are in existence, and we can uniquely show up in a new way without any of the baggage of what our legacy brand has to be about, and bring people something that's really fit for the people who are shopping today. But in addition to the importance of bringing the right kind of products forward, a purpose-driven portfolio of products. I also want to make sure that we're building a culture that is an organization that is both disciplined, where people can have great careers and really learn how to operate a company from great leaders that are value centered but then prove that, that can all be true within a company that drives great shareholder return. This would be a dream thesis. Purpose-driven products and employer of choice and shareholder value off the charts, that's what I'm looking for.

Dave, how about you?

Yes. Well, Carla stole my thunder a little bit there with value creation but it does come down to that in combination with fulfilling the mission of The Honest Company. Shareholder value creation isn't just for the shareholders, but it's for all the stakeholders. Our employees are shareholders of the company, and we think the consumers really deserve this product out there. So the more that we can self-fund and generate the kind of returns that allow us to maintain that progress long term. It positions Honest Company to be a larger, more impactful company down the road. So hopefully, that's what we're aiming for.

Great. All right. So I have 3 that just came in. So one on Walmart, I think it's a product placement here. So are your products located at similar locations of other, call it, cheaper diaper products or in a different more premium location?

Well, of course, every retailer has their own different way that they manage their categories and their shopper flow. For the most part, in most of our categories, whatever is the category of the item, if that is skin care, if that is baby products, if that is diapers, that set is usually all in one place. Often the retailers will have what I like to call the good, better, best strategy where the value price option might be occupying that good slot, and that is usually located on one side in a shelf set of the mainstream major brand and then the premium tiered players are often located on the other side. So you're kind of really creating that visual concept of good, better, best. And so often what we are there to do is play both the role of the premium player, but also really the natural and clean player.

Okay. And then 2 pricing questions, both actually completely different questions. But I guess, do you need to cut price in Walmart to entice people to try your brands? How is the competition? How many other premium brands in the similar category does Walmart bring in?

Price cutting.

Yes, I can touch on the price positioning. And it is a positioning that's a little premium level. We're always going to be diligent about measuring that. And we're not going to -- take price action before others. But we will be active in making sure that our position is maintained within the categories. We think that Walmart has got just as much opportunity as target in terms of maintaining that premium level, and we'll be diligent about making sure that prices are set, to qualify the value of the product that we know that consumers are looking for.

We actually just took our first price advance in the history of the company in 2022. We have not taken pricing before that. I would say we might have even fallen behind letting the premium kind of gap close, and we play such an important role for our retailers and our categories by making sure that, that upper tier pricing is very clear in the categories. But also, if we're going to have a portfolio of products with this level of high quality ingredients, and care, it's important that the pricing and the business model go together. One of the things I have been so pleased to see as we took our pricing starting in 2022 and then rolled a further cascade of pricing is we've been able to maintain our growth on both units and dollars and are still among the top growers in all of our competitive category sets. For us, that tells us -- for me as a long-time runner of CPG brand, that tells me that consumers actually value our product at the prices we have set it at.

Okay. And this is actually the complete opposite. So do you raise prices in order to achieve better profitability? How do you think about that? And also maybe building on that, I think the question is who is your key income cohort for -- who are your key customers from an income perspective?

Yes. Well, yes, price activity is certainly one of the elements that factor into gross margin expansion and falling behind means you might be falling behind on the opportunity to do that to grow your bottom line. Where we've been coming out of over the last number of years, we clearly had to catch up. And so we're not raising prices simply to drop it to the bottom line. But we think it's a reflection of what the product quality is. And as long as the consumers are continuing to realize that with unit sales growing just as fast as the total sales number, then that's proof that we found the right balance there. And I think that's what's important is finding that balance.

Yes. And as far as who is an Honest consumer. One of the things that I've learned, and I have run so many really like top-notch best brands in the United States. I've run the loved brands like Cheerios. I run Annie's organic, LÄRABAR, Nature Valley granola bars. I mean -- and then when I was at Amazon as the Vice President of consumables categories, I saw all the brands, across all of the consumables and essentials. And what I've learned in that is I do not actually stereotype a shopper or consumer because what someone thinks -- when someone decides something worth paying for, it's because however much it costs, they believe it gives them that much value. And we recently did a segmentation study in order to develop this long-range strategy that we're bringing. We did a segmentation study that included talking with nearly 3,000 consumers in quantitative -- quantitative information gathering, we layered that on with qualitative conversations with both our current Honest product users and our non-product users so that we could really understand what kind of value we deliver and what is our right to win and right to play. And I would say we've learned that our demographics have proven that our brand works for households with kids. It works for people -- adults individuals for themselves. And when we look at the pricing segmentation and strategy depending on how passionate you are about the benefit of clean products on your skin, in your life on your household services, Honest is often the thing that's worth paying for. I got to tell you, if anybody here has had a baby and a baby is fussy and crying because they have rashes somewhere on their skin. You will do anything, you will pay anything. You want to find the product, the diaper, the lotion that soothes the most precious person in your home, that baby.

Been there. All right.

[indiscernible] Anybody got any teenagers, I can use that product.

Maybe just one from me on the pricing. Just to throw it in there. I mean, what have the pricing discussions with retailers been like? And I guess you talked about taking it in '22, which at a time, inflation was very high, I'd be curious to kind of how the pricing discussion has evolved. And I think one of the key concerns in CPG as we have -- obviously, it doesn't feel like we're at deflation yet. But if that were to happen, is there risk that there could be price concessions? Like how are you thinking about that? How are those discussions coming? And I guess, how do you think about managing your price gap versus peers but also kind of protecting profitability?

I could start with -- because I was here for a little bit longer than Dave to see how those conversations went. And I'd say you can see conversations in the execution. If anybody has really studied pricing dynamics, retailers -- you have to agree together, collaboratively how the product is going to show up in market, and we were successfully able to deliver our pricing increases across our entire category, breadth of categories. So I think that's an indication that they not only believe in Honest and how it performs and I saw that price contraction in the gap versus the mainstream mass products. But they also do need someone to prove that the category dollars can be there. It's important for brands to play that kind of role, for a brand to play that roll though, the quality needs to be extraordinary. So we've been in great conversations with our retailers, and we're seeing the execution. And as Dave has already mentioned, consumers are also accepting those prices. You could probably talk about how we feel about what our model can handle and how we're looking at that.

Yes. Certainly, the flexibility of this model, a combination of cost savings and the price increases. And going forward, a smaller degree of that margin expansion is really coming from price increases. It is about being diligent on costs, both supply chain and product costs. So getting to benchmark levels of margin across the categories where we think we've got opportunity in each that we participate in is really the primary objective, and having spent most of my career on the retailer side, working with brands, they want you to succeed just as much as we do because their success depends on the brands they bring in for success. So it's very symbiotic. And that's just the nature of the discussions that our folks have with our customers. There's enough to continue to keep the momentum going in periods that might be a slower moving consumer pressure period, and then there's enough to allow more flow through. And that's just the nature of this business.

Okay. So I'm going to break this last one up into 2 questions. So Honest brand Google search trends the last 5 years are flat to down. How do you plan to reinvigorate consumer interest in the brand?

Did you say Honest brand Google search trends are down in the last 5 years?

Yes.

Oh, what an interesting period. That period covers such a span because it includes the pandemic, and it includes now. What I would say is our revenues grew 10% last year. Our consumption is up double digits. Our market shares are up in every single category we're in and our -- and the big indicator to me is there's 2. Our household penetration crossed the 5% threshold this year. And when you're growing household penetration, that by default means you are bringing in more knowledge and more users to the brand. And then on Amazon, which you did indicate has been one of our strongest performing channels, especially in the last quarter. Last quarter, we quadrupled, 4x. We quadrupled the number of first-time on new-to-brand households on Amazon's channels across Honest. So I don't know how to correlate that with Google search trends and what people are searching for. But the indicators to me are really based on the consumer movement and engagement with the brand that we see at retail.

Okay. And then second part of this question, last 3-year revenue CAGR growth of 5%. What's the growth rate of hero products versus non-hero? And are you cutting or focusing your SKU offering or growing SKUs?

I appreciate the question. I would say we don't disclose some of the specific details and mechanics of our hero portfolio. But certainly, the items in our hero portfolio are both items that consumers -- they are beloved by consumers and that fit our go-forward business model that Dave talked about, which is the overall 4% to 6% growth in revenues on the top and continuous margin expansion on the bottom. So those items fit very nicely into those portfolios and the ways in which we will build around those hero items with the knowledge of benefits and the features that consumers like will continue to inform our strategy going forward.

Okay. Well, last one for me. When you think about sourcing consumers. Do you find that you're kind of sourcing from existing brands? From moms that are having unpleasant experiences that you were just discussing? Or do you find that you're actually kind of getting more penetration in kind of the new moms of the world, but maybe we haven't had experiences with maybe the more legacy brands within baby?

Okay. I love that. Every time a baby is born, I think of them as my boss. So I'm just like, are you wearing my products? And do you have any feedback for me? I love being on airplanes. I might see my boss everywhere. Well, every -- as I said, every time a baby is born, it's an opportunity for us to win a household, and that's the way we feel. But we don't want to win the household just because we care about revenue and market share. I mean that is an indication. If you were winning a baby household, your product has to work because if it don't work, goodbye. But I would say there's a lot of research that would tell you that there's a lot of stickiness and you do need to recruit your households early into their product life cycle while they're testing and exploring the diapers. We make sure that our diaper quality is effective for all of the ways in which you want to keep a baby comfortable and dry. We also believe we bring some other qualities that affect -- every time we purchase a product, it's not only rational based. There's a motion in things we like. Some would say iPhones are not technologically the best phones. However, people who love their iPhones love their iPhones. There can be some emotion to it, right? Similarly, with our prints that are seasonal. We got these fun prints for holiday. We got these fun prints for spring. They allow you to sort of freshen up that baby routine. And then we hear a lot of parents these days talking about what is in the products that they are putting in the bath routine for their baby, overall next to baby skin, that's always our opportunity to win. Now not all of our products are baby products. The other thing we are finding is when people come into our wipes franchise, they actually stay in that wipes franchise, transitioning out of using it on babies, they -- by that time, they've started using it all over their house, and they love it. So in fact, today, 40% of the usage of Honest wipes is in households with no baby. So we believe that we appeal not only as how are we looking at those households that are coming home from the hospital with that new life coming into the home. But we've got -- look at women of a certain age, we love our skin care products, and we've got money to spend on them. And I've had sensitive skin my whole life. I didn't even use to be a skin care consumer. And honest to goodness, when I was running beauty at Amazon, that's when I first met the Honest team, in a top-to-top when I was on the other side of the table. And they left me with a sample of products, and I have had the world's most expensive lotions and serums on this face because I ran the whole category for Amazon. And the quality of the sensitive skin and clean formulated products blew my mind, and so that's also a household we're fighting for. We're fighting for the household to say, your skin care doesn't have to cost triple digits for it to be the highest quality and great for you and if you can feel good about it. We really are a new thing. And we have a new proposition. People are showing up, also looking for products that give them value in new ways. And that's, I think, the people we're fighting for.

Well, that's great. Well, why don't we leave it there? Carla, Dave, thank you so much for joining us this afternoon, and we wish you nothing but the best of luck moving forward.

It was so wonderful to be with you. Thank you, Peter.

Thank you.

Thanks, everybody. Happy Pi Day.