HNST

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “Annual Report”), filed with the Securities and Exchange Commission (“SEC”) on February 25, 2026. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q as well as in the Annual Report for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “our company,” “the Company” and “Honest” refer to The Honest Company, Inc. and its consolidated subsidiaries. Overview Founded in 2012, The Honest Company (the “Company,” or “Honest,” which may also be referred to as “we,” “us” or “our”) is a personal care company dedicated to creating cleanly-formulated and sustainably-designed products for everyone from babies to adults. By combining thoughtful design with science-based innovation, we deliver personal care products for everyone from babies to adults, spanning categories across wipes, personal care, diapers, and beauty. Our commitment to our core values, continual innovation and engaging our community has differentiated and elevated our brand and our products. Since our launch, we have cultivated deep trust around what matters most to our consumers: their health, their families and their homes. We seek to meet consumers wherever they want to shop, balancing deep consumer connection with broad convenience and availability. We believe our distribution strategy positions us for continued growth through our trusted brand and award-winning multi-category product offerings. The Honest Standard, the Company’s rigorous set of guiding principles that shape every step of product innovation and development, reflects Honest’s ongoing dedication to safety, transparency and integrity. As a leader in clean and sustainable products, Honest continues to set a new standard for clean formulations, bringing joy to a community that seeks authenticity, transparency and efficacy in everyday essentials. Honest products are available nationwide at major retailers, including Amazon, Target and Walmart. Effective December 31, 2025, we have transitioned away from Honest.com as a shipping and fulfillment channel, while maintaining Honest.com as a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase through our leading retailers and their websites, and third-party ecommerce sites. Transformation 2.0: Powering Honest Growth In October 2025, our Board of Directors approved Transformation 2.0: Powering Honest Growth (“Powering Honest Growth”), which builds upon our original Transformation Pillars of Brand Maximization, Margin Enhancement and Operating Discipline. Powering Honest Growth is aimed at driving growth, improving simplicity, focus and profitability, which includes exiting certain lower margin, non-strategic categories and channels, including Honest.com fulfillment and the apparel category as a seller of merchandise, as well as retail and online stores in Canada, optimizing our cost structure by rightsizing selling, general and administrative expenses and implementing supply chain efficiencies. Powering Honest Growth is projected to result in the following: 18 •Costs associated with Powering Honest Growth, including restructuring costs, are expected to be approximately $28.0 million to $31.0 million to be recognized through the first quarter of 2027. Of this range, we expect approximately $5.0 million to $6.0 million to be related to restructuring costs, primarily comprising contractual and external obligation costs, employee and personnel-related costs and asset and other restructuring-related costs, and approximately $23.0 million to $25.0 million to be related to other costs included in cost of revenue, primarily related to a discrete inventory write-down related to exiting apparel category as a seller of merchandise, fixed asset impairments, and costs associated with a warehouse closure, some of which have already been incurred. ◦During the three and six months ended June 30, 2026, we have recognized $1.0 million and $2.3 million, respectively, of costs related to Powering Honest Growth, for a total of approximately $26.3 million recognized to date. See table below for additional details of the costs recognized in the three and six months ended June 30, 2026. •Powering Honest Growth is expected to result in annualized benefits in the range of approximately $14.0 million to $17.0 million, and the Company has begun seeing benefits in 2026. These benefits include reduction in costs of revenue and reduction in operating expenses, offset by a decrease in revenue related to the exit of lower margin non-strategic portfolios. •The cash impact of costs related to Powering Honest Growth is expected to be in the range of approximately $10.0 million to $13.0 million for the full years 2026 and 2027, with $6.5 million cash paid through the first half of 2026 and the remainder to be paid in the second half of 2026 and in 2027. •We expect the restructuring element of Powering Honest Growth to be substantially completed by December 31, 2026. We may incur other costs or cash expenditures not currently contemplated as a result of or in connection with Powering Honest Growth. We expect to continue driving benefits from the three Transformation Pillars of Brand Maximization, Margin Enhancement, and Operating Discipline: 1) Brand Maximization •Leveraging the strength of the Honest brand to drive growth through greater availability, expanded household penetration, product innovation, margin-accretive products, and marketing effectiveness. •Pricing strategy as a driver of revenue is also a component of Brand Maximization. 2) Margin Enhancement •Focusing our resources on the United States, which included the exit of our low-margin products in Europe and Asia in 2023 and, most recently, Canada in 2025. •Exiting low-margin elements of cleaning and sanitization products in 2023 and apparel in 2025. •Executing an inventory, or stock-keeping unit (“SKU”), rationalization program in 2023. •Re-directing resources to accelerate cost savings, including optimization of our contract manufacturing strategies, optimization of our supply chain footprint and inventory management, along with leveraging technology to improve systems, reduced shipping and logistic costs, and product costs. •Realigning resources to reflect the prioritization of higher-margin opportunities, including strategic shift away from our lower margin channels, including exiting our direct-to-consumer (“DTC”) channel in 2025. 3) Operating Discipline •Focusing on improving our executional excellence in how we operate as an enterprise. •Building a culture that emphasizes returns across growth drivers, including marketing, trade promotion, and innovation. •Managing working capital including the reduction of inventory. •Rightsizing selling and general and administrative costs. Costs associated with Powering Honest Growth were as follows (in thousands): Three Months Ended June 30, 2026 Six Months Ended June 30, 2026 Cost of Revenue(1) $ 1,390 $ 2,076 Restructuring Costs(2) (383) 223 Total $ 1,007 $ 2,299 ______________ (1) Represents costs in connection with a warehouse closure which is included in cost of revenue on the condensed consolidated statements of comprehensive income. 19 (2) Includes an adjustment related to contract and external obligation costs for the three months ended June 30, 2026. For further details on the restructuring element of Powering Honest Growth, refer to Note 12, “Restructuring” included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Key Factors Affecting Our Performance We believe that the growth of our business and our future success are dependent on many factors. While each of these factors presents significant opportunities for us, they also pose important challenges that we must successfully address to enable us to sustain the growth of our business and improve our operations while staying true to our mission, including those discussed below and in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report. Operational and Marketing Efficiency To grow our business, we intend to continue to improve our operational and marketing efficiency, which includes attracting new consumers, increasing community engagement and connection with our brand, and improving fulfillment and distribution operations. Our marketing model is inclusive of a best-in-class modern approach across paid, owned, and earned marketing channels. We invest significant resources in marketing and content generation, use a variety of brand and performance marketing channels and work continuously to improve brand exposure at our retail customers to acquire new consumers. It is important to maintain reasonable costs for these marketing efforts relative to the revenue we expect to derive from our consumers. We leverage proprietary consumer insights and best-in-class analytics to guide our distribution strategy and inform our marketing spend optimization. Our future success depends in part on our ability to effectively attract consumers on a cost-efficient basis and achieve efficiencies in our operations. In addition, we believe we have been able to achieve some operational and marketing efficiency as part of cost savings in connection with our Brand Maximization Transformation Pillar. Ability to Execute Increasing Physical and Digital Availability The core of our growth strategy centers around increasing physical availability through expanded stores, doors, aisles, shelves and facings and increasing digital availability of our products in retail customers websites, and third-party ecommerce sites. While we have made significant progress in our distribution gains, we are still under indexed compared to competition. Our partnerships with leading third-party retail platforms and national retailers have broadened our consumer reach, raised our brand awareness and enhanced our margins through operating leverage. We will continue to pursue partnerships with a wide variety of retailers, including mass retailers, online retailers, club retailers, grocery stores, drugstores and specialty retailers. Our ability to execute this strategy will depend on a number of factors, such as competitive dynamics and retailers’ satisfaction with the sales and profitability of our products, channel shifts of their customers, and their own supply chain, order timing, and inventory needs, which may fluctuate from period to period. For example, we experienced distribution losses with two of our largest customers on certain diaper SKUs mainly related to these retailers' footprint changes for certain product categories overall and a shift to more exclusive non-gendered prints with one of these retailers, which has impacted our revenue since 2025, and we expect will continue to negatively impact our diaper revenue in the future. Product offerings in the diaper category remain competitive and retailer decisions related to the sale or promotion of competitive diaper products has negatively impacted our diaper revenue in 2026, which we expect to continue in the future. Due to higher costs of shipping and fulfillment activities related to our DTC channel and other related costs, we no longer utilize Honest.com as a shipping and fulfillment channel or sell products through this channel as of December 31, 2025 and instead have shifted our focus and investments towards more efficient and scalable distribution models with our retail and digital customers. The Honest.com website remains a resource for educating consumers, showcasing our complete product portfolio, and driving consumers to purchase offsite. Our discontinuation of Honest.com as a direct shipping and fulfillment channel negatively impacted our revenue for the year ended December 31, 2025 and the first half of 2026; however, we also expect that it will enable improved gross margin in future years. Our product mix is a driver of our financial performance and growth given our focus on attractive margin products. Even though our growth strategy aims to boost sales across products by increasing total distribution, we intend to prioritize growth in products with attractive margin characteristics, including wipes and personal care, and leverage our brand equity and consumer insights to extend into new products. Ability to Grow Our Brand Awareness Our brand is integral to the growth of our business and is essential to our ability to engage and stay connected with the growing clean products consumer market. In order to increase the share of wallet of our existing consumers and to attract new consumers, our brand has to maintain its trustworthiness and authenticity. Our ability to attract new consumers will depend on, among other things, the efficacy of our marketing efforts, our ability to successfully produce products that are free of defects, our ability to communicate the value of those products as cleanly-formulated, sustainably-designed and effective, and the offerings of our competitors. Beyond preserving the integrity of our brand, our performance will depend on our ability to augment our reach and increase the number of consumers aware of Honest and our product portfolio. We believe our brand strength will enable us to continue to launch new products, allowing us to deepen relationships with consumers. Our performance depends significantly on factors that may affect the level and pattern of consumer spending in the product categories in which we operate. 20 Continued Innovation Research, development and innovation are core elements underpinning our growth strategy. Through our in-house research and development laboratories, we are able to access the latest advancements in clean ingredients. Based in Los Angeles, California, our research and development team, including experts in chemistry and toxicology, develop innovative cleanly-formulated products. At Honest, product innovation is top of mind, including wipes pack size expansion and kids personal care. The improvement of existing products and the introduction of new products have been, and continue to be, integral to our growth. We have made significant investments in our product development capabilities and plan to continue to do so in the future. We believe our rigorous approach to product innovation has helped redefine and grow the clean and naturally-derived product categories in which we operate. Our continued focus on research and development will be central to attracting and retaining consumers in the future. Our ability to successfully develop, market and sell new products will depend on a variety of factors, including our continued investment in innovation. We are also committed to bringing our Honest Standard to new products where we believe there is a need for a higher standard for clean personal care. Overall Macro Trends We believe consumers’ increasing interest in cleanly-designed products and purpose-driven companies has contributed to higher demand for certain products, which we believe we are strategically positioned to benefit from. At the same time, changes in macro-level trends, including as a result of changing consumer attitudes or behaviors or other macroeconomic conditions (such as inflation, tariffs, supply chain disruptions, trade disputes, foreign exchange volatility, ongoing military conflicts and geopolitical uncertainty, financial market instability and any resulting recession or slowed economic growth), have resulted and could in the future result in fluctuations in our operating results. Business Operations Global economic and political uncertainty has increased due to the impact of continued inflationary pressures, adverse impact on confidence in financial markets and geopolitical events, including tariffs imposed on certain foreign goods, the possibility of expanding the tariffs to capture other types of goods, and related legal challenges. Additionally, the extent of the impact of macroeconomic trends on our operational and financial performance in the future will depend on future developments. Prolonged unfavorable economic conditions, including as a result of changing consumer attitudes or behaviors or other macroeconomic conditions (such as inflation, tariffs, supply chain disruptions, trade disputes, foreign exchange volatility, ongoing military conflicts and geopolitical uncertainty, financial market instability and any resulting recession or slowed economic growth) have had and may continue to have an adverse effect on our sales, margins and profitability. All of these factors are difficult to predict considering the rapidly evolving landscape as we continue to expect a variable operating environment going forward. Supply Chain Disruptions There has been and continues to be an adverse impact on global economic conditions, specifically tariffs and inflationary pressures, which has adversely affected our supply chain in regards to cost of revenue. We have experienced and anticipate continued increases in product costs due to inflationary pressures, which has in the past and could continue to hamper our ability to drive margin expansion. In addition, notwithstanding legal challenges, we expect tariffs to continue to negatively impact the cost of raw materials, components and finished goods, which has adversely impacted our operational expenses, and may negatively impact our ability to source our finished goods and components. We have taken measures to bolster key aspects of our supply chain and mitigate the impact of tariffs, such as creating an agile supply chain, ensuring sufficient inventory to support our continued growth, minimizing lead times for raw materials, and implementing a robust cost-savings program, as part of our tariff mitigation strategy. In addition, in early 2025 we hired a Senior Vice President of Supply Chain, a newly created role, which has enabled us to accelerate some of the cost savings opportunities we have developed. If we are not successful in our attempts to bolster our supply chain and mitigate the impact of tariffs, our product and fulfillment costs may increase and our business, financial condition, results of operations and prospects could be adversely affected. For example, the fluctuation in tariff rates since 2025 and the ongoing uncertainty of those rates, has primarily impacted our wipes product costs, and may in the future impact our ability to forecast the tariff impacts on our cost of revenue. Following the February 2026 U.S. Supreme Court ruling that invalidated specific tariffs under the International Emergency Economic Powers Act (“IEEPA”), we are evaluating our eligibility for refunds of previously paid import duties. Beginning in April 2026, we began filing refund claims with U.S. Customs and Border Protection related to eligible IEEPA tariff payments made. During the three and six months ended June 30, 2026, we received IEEPA tariff refunds totaling $11.9 million, which were recognized as a $6.6 million reduction in cost of revenue and a $0.5 million increase in interest income on the condensed consolidated statements of comprehensive income, and as a $0.6 million reduction in inventory on the condensed consolidated balance sheets. Due to the inherent uncertainty surrounding the timing and recoverability of additional refunds, no receivable or corresponding offset to expense or asset was recognized as of June 30, 2026. We continue to monitor these developments, including potential refund obligations to third-party manufacturers. For details on tariff refunds received, refer to 21 Note 7, “Commitments and Contingencies” included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We are also taking action to optimize our supply chain footprint and inventory management, along with leveraging technology to improve systems. Effective June 30, 2026, we terminated our agreement with GEODIS Logistics LLC for the use and services of a Pennsylvania warehouse that was previously part of our distribution network. As a result, we now operate exclusively in the Nevada warehouse, a state-of-the-art facility leased by us with a focus on automated large scale retail fulfillment. We expect that the ongoing military conflicts may further increase our global shipping costs and could negatively impact the cost of petrochemicals which are used in the raw materials and packaging in our personal care products. We have experienced purchase price increases from our third-party manufacturers in the past and could face escalation of purchase costs and cost of revenue in the future. In 2025, we agreed to increased purchase costs from our diaper manufacturer and received requests to renegotiate purchase costs from other third-party manufacturers, which negotiations are ongoing. We have implemented price increases in the past and we may implement additional price increases in the future as needed to offset current and future input cost inflation and to pursue productivity initiatives to offset inflation. However, we may not be able to increase our prices or productivity sufficiently enough to offset these costs. Customer demand for our products may change based on price increases. Consumer Preferences We believe consumers value the flexibility in terms of where and when they choose to purchase Honest products. We also believe that consumers research their personal care ingredients and recognize the quality of Honest products, knowing that there are over 3,500 chemicals and materials that we choose not to formulate with. Given changing macroeconomic conditions, we also believe that consumers have changed their shopping behaviors and have become more price sensitive when purchasing products in some of our product categories, including diapers. In the second quarter of 2026, we implemented price reductions on our diapers, which impacted revenue and margin in this product category. Inventory Inventory is reflected at the lower of cost or net realizable value which includes a reserve for excess inventory. We estimate reserve requirements based on current and forecasted demand, including the ability to liquidate excess inventory and estimated liquidation value. Depending on future consumer behavior in relation to the macroeconomic environment or otherwise and related aging of inventory, among other factors, we have in the past and expect to incur in the future additional inventory write-downs, customer returns or incur donation expense or disposal costs as we reduce excess inventory. As part of our Transformation Pillar of Operating Discipline, we have reduced inventory since December 31, 2025 as part of managing working capital efficiently, including inventory management. Supplier Services Agreement In August 2022, we entered into a supplier services agreement with Butterblu, LLC (“Butterblu”) pursuant to which Butterblu provided certain design, manufacturing, sales and marketing services to us (the “Supplier Services Agreement”). As part of the Supplier Services Agreement, we agreed to purchase and own inventory for the term of the agreement, which was originally until December 31, 2026, unless terminated sooner. On November 5, 2025, we sent a Notice of Termination to Butterblu and sued the company for alleged breaches of the Supplier Services Agreement. Through agreement of the parties following our Notice of Termination, Honest and Butterblu extended the Supplier Services Agreement on a temporary basis through December 26, 2025. The Supplier Services Agreement was formally terminated on December 26, 2025. Upon termination, Butterblu was required to discontinue using Honest’s trademarks and prints and to consummate all pending purchase orders received in writing as of the November 5, 2025 termination date, and Honest has the right to sell off all products sourced by Butterblu until and through December 26, 2026 and shall pay Butterblu the Base Service Fee, defined as 22% of Honest's net revenue for product sales and adjusted to ensure that the Base Service Fee does not exceed Honest's gross profit for product sales in the applicable quarter, for product sales through December 26, 2026. The parties are in litigation, which is described in Note 7, "Commitments and Contingencies," included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Litigation related to our respective obligations under the Supplier Services Agreement, the termination of this Supplier Services Agreement, any disputes over the terms of the termination, and costs related to the apparel inventory we own have negatively impacted revenue and gross profit, partially offset by lower operating costs since the fourth quarter ended December 31, 2025, and are expected to continue to adversely impact our results of operations in 2026. In addition, the loss of the relationship with Butterblu negatively impacted apparel revenue and will negatively impact apparel revenue in the future, which may adversely affect our results of operations. Licensing and Inventory Purchase Agreement On June 1, 2026, we entered into a License Agreement (the “License Agreement”) and an accompanying Inventory Purchase Agreement with O5-MD, LLC and O5 North ULC (collectively, the “Licensee”). The License Agreement grants the Licensee an exclusive license to manufacture, distribute, promote, and sell certain apparel, accessories, bath and bedding products, 22 and footwear under "The Honest Company" and "Honest Baby" trademarks. The primary territory for the License Agreement covers the United States, Canada, and Mexico, as well as specified international club and off-price accounts. Under the License Agreement, we will earn royalty revenue on the Licensee's net sales. The initial term of the License Agreement expires on December 31, 2030. The Licensee holds the option to renew the agreement for two additional successive five-year terms, provided it complies with all material terms, meets required notice periods, among other requirements. For the three and six months ended June 30, 2026, we did not recognize any royalty revenue with respect to the License Agreement. In connection with the License Agreement, the Licensee agreed to purchase our remaining on-hand inventory of licensed apparel products for a total purchase price of $10.0 million, subject to certain adjustments for inventory deficiencies or missing certifications. The purchase price is payable in installments, with four 25% payments tied to the delivery timeline. For the three and six months ended June 30, 2026, we recognized $3.1 million in revenue and $3.1 million in cost of revenue related to the partial liquidation of the remaining apparel inventory, that was delivered to the Licensee at its carrying value, resulting in no gross profit. These transactions resulted in a corresponding increase in accounts receivable and a decrease in inventory of $3.1 million each. Components of Results of Operations Revenue We generate revenue through the sale of our products through our leading retailers and their websites, third-party ecommerce sites and, prior to December 31, 2025, Honest.com, as well as through royalty revenue under the License Agreement. Our revenue is recognized net of allowances for returns, trade and other discounts, retailer violations and credits, and any taxes collected from consumers. Cost of Revenue Cost of revenue includes the purchase price of merchandise sold to customers, inbound and outbound shipping and handling costs, freight, tariffs and duties, shipping and packaging supplies, credit card processing fees related to Honest.com, and warehouse fulfillment costs incurred in operating and staffing warehouses, including rent. Cost of revenue also includes depreciation and amortization for warehouse fulfillment facilities and equipment, allocated overhead and direct and indirect labor for warehouse personnel, inventory reserves and destruction costs. Gross Profit and Gross Margin Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may in the future fluctuate from period to period based on a number of factors, including commodity costs, manufacturing costs, warehousing and transportation rates, the promotional environment in the marketplace, the mix of products we sell, the channel through which we sell our products, and innovation initiatives we undertake in each product category, among other factors. Operating Expenses Our operating expenses consist of selling, general and administrative, marketing, restructuring and research and development expenses. Selling, General and Administrative Selling, general and administrative expenses consist primarily of personnel costs, principally for our selling and administrative functions. These include personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses. Selling, general and administrative expenses also include technology expenses; professional fees, including audit and legal expenses; donation expenses including overhead and tariffs; facility costs, including insurance, utilities and rent relating to our headquarters; third-party service fees related to our Supplier Services Agreement for our exited apparel products and, depreciation and amortization expenses. We expect our general and administrative expenses to decrease as a percentage of revenue as we continue to grow our business and organizational capabilities and efficiencies. We have incurred and expect in the future to continue to incur additional third-party professional fees related to compliance obligations as a public company. Marketing Marketing expenses include costs related to our branding initiatives, retail customer marketing activities, point of purchase displays, targeted online advertising through sponsored search, display advertising, email and influencer marketing campaigns, market research, content production, consumer insights research, and other public relations and promotional 23 initiatives. Given the dynamic macro-environment, higher costs in digital marketing and increased retail distribution, we will continue to optimize our marketing activities for impact and efficiency. We will continue to prioritize investment in marketing initiatives around our most strategic and profitable categories, through strategic key retailers activities, as well as brand building campaigns and initiatives. As we launch new products, we expect to make marketing investments to support growth at key retailers, build brand awareness, encourage first-time use and set the foundation for future revenue growth. Restructuring Restructuring costs are one of the elements of Powering Honest Growth and are included in Restructuring on the condensed consolidated statements of comprehensive income. Restructuring costs include contract and external obligation costs, employee and personnel-related costs, and asset and other restructuring-related costs. For further details on the restructuring element of Powering Honest Growth, refer to Note 12, “Restructuring” included in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Research and Development Research and development expenses consist primarily of personnel-related expenses for our research and development team. Research and development expenses also include costs incurred for the development of new products, improvement in the quality of existing products and the development and implementation of new technologies to enhance the quality and value of products. This includes the expense related to claims and clinical trials as well as formulation and packaging testing. Research and development expenses also include allocated depreciation and amortization and overhead costs. We expect research and development expenses to increase in absolute dollars as we invest in the enhancement of our product offerings through innovation and the introduction of new adjacent product categories. Interest and Other Income (Expense), Net Interest income consists primarily of interest income earned on our short-term investments and our cash and cash equivalents balances. Interest expense includes fees incurred under our 2026 Credit Facility, including commitment fees and debt issuance costs. Other income (expense), net consists of our foreign currency exchange gains, losses relating to transactions denominated in currencies other than the U.S. dollar and contingent gains. We expect our foreign currency gains and losses to be immaterial in future periods but continue to fluctuate due to changes in both the volume of foreign currency transactions and foreign currency exchange rates. Income Tax Provision We are subject to federal and state income taxes in the United States. Our annual estimated tax rate differed from the U.S. federal statutory rate of 21% primarily as a result of a valuation allowance against deferred tax assets, stock-based compensation, state taxes, nondeductible executive compensation and other permanent differences. We maintain a full valuation allowance for our federal and state deferred tax assets, including net operating loss carryforwards, as we have concluded that it is not more likely than not that the deferred tax assets will be realized. 24 Results of Operations The following table sets forth our condensed consolidated statements of comprehensive income data for each of the periods indicated: For the three months ended June 30, For the six months ended June 30, 2026 2025 2026 2025 (In thousands) Revenue $ 83,303 $ 93,459 $ 161,402 $ 190,709 Cost of revenue 42,943 55,707 87,771 115,287 Gross profit 40,360 37,752 73,631 75,422 Operating expenses Selling, general and administrative(1) 14,967 20,352 32,436 41,393 Marketing 14,476 12,552 28,469 24,822 Restructuring (383) — 223 — Research and development(1) 1,722 1,960 3,584 3,812 Total operating expenses 30,782 34,864 64,712 70,027 Operating income 9,578 2,888 8,919 5,395 Interest and other income (expense), net 1,174 1,026 1,838 1,812 Income before provision for income taxes 10,752 3,914 10,757 7,207 Income tax provision 65 44 111 84 Net income $ 10,687 $ 3,870 $ 10,646 $ 7,123 __________________________ (1) Includes stock-based compensation expense as follows: For the three months ended June 30, For the six months ended June 30, 2026 2025 2026 2025 (In thousands) Selling, general and administrative $ 2,815 $ 2,495 $ 5,066 $ 4,736 Research and development 200 221 414 392 Total $ 3,015 $ 2,716 $ 5,480 $ 5,128 25 The following table sets forth our condensed consolidated statements of comprehensive income data expressed as a percentage of revenue*: For the three months ended June 30, For the six months ended June 30, 2026 2025 2026 2025 (as a percentage of revenue) Revenue 100.0 % 100.0 % 100.0 % 100.0 % Cost of revenue 51.6 59.6 54.4 60.5 Gross profit 48.4 40.4 45.6 39.5 Operating expenses Selling, general and administrative 18.0 21.8 20.1 21.7 Marketing 17.4 13.4 17.6 13.0 Restructuring (0.5) — 0.1 — Research and development 2.1 2.1 2.2 2.0 Total operating expenses 37.0 37.3 40.1 36.7 Operating income 11.5 3.1 5.5 2.8 Interest and other income (expense), net 1.4 1.1 1.1 1.0 Income before provision for income taxes 12.9 4.2 6.7 3.8 Income tax provision 0.1 — 0.1 — Net income 12.8 % 4.1 % 6.6 % 3.7 % ______________ * Amounts may not sum due to rounding. Comparison of the Three and Six Months Ended June 30, 2026 and 2025 Revenue For the three months ended June 30, For the six months ended June 30, 2026 2025 $ change % change 2026 2025 $ change % change (In thousands, except percentages) Revenue $ 83,303 $ 93,459 $ (10,156) (10.9) % $ 161,402 $ 190,709 $ (29,307) (15.4) % Revenue was $83.3 million for the three months ended June 30, 2026, as compared to $93.5 million for the three months ended June 30, 2025. The decrease of $10.2 million, or 10.9%, was primarily due to the strategic exits related to Powering Honest Growth and a decline in diaper revenue, partially offset by an increase in revenue mainly within wipes and personal care and other products. Revenue was $161.4 million for the six months ended June 30, 2026, as compared to $190.7 million for the six months ended June 30, 2025. The decrease of $29.3 million, or 15.4%, was due to the strategic exits related to Powering Honest Growth and a decline in diaper revenue, partially offset by an increase in revenue mainly within wipes and personal care and other products. Refer to the Organic Revenue table under “Non-GAAP Financial Measures” below for further details of revenue excluding the revenue associated with the discrete exits related to Powering Honest Growth. Cost of Revenue and Gross Profit For the three months ended June 30, For the six months ended June 30, 2026 2025 $ change % change 2026 2025 $ change % change (In thousands, except percentages) Cost of revenue $ 42,943 $ 55,707 $ (12,764) (22.9) % $ 87,771 $ 115,287 $ (27,516) (23.9) % Gross profit $ 40,360 $ 37,752 $ 2,608 6.9 % $ 73,631 $ 75,422 $ (1,791) (2.4) % 26 Cost of revenue was $42.9 million for the three months ended June 30, 2026, as compared to $55.7 million for the three months ended June 30, 2025. The decrease of $12.8 million, or 22.9%, was primarily driven by lower costs associated with strategic exits under Powering Honest Growth and tariff refunds. Cost of revenue as a percentage of revenue decreased by 800 basis points compared to the three months ended June 30, 2025. Gross profit was $40.4 million for the three months ended June 30, 2026, as compared to $37.8 million for the three months ended June 30, 2025. The increase of $2.6 million, or 6.9%, was primarily related to tariff refunds and favorable product mix, partially offset by sales volume declines and restructuring-related costs related to Powering Honest Growth. Cost of revenue was $87.8 million for the six months ended June 30, 2026, as compared to $115.3 million for the six months ended June 30, 2025. The decrease of $27.5 million, or 23.9%, was primarily driven by lower costs associated with strategic exits under Powering Honest Growth and tariff refunds. Cost of revenue as a percentage of revenue decreased by 607 basis points compared to the six months ended June 30, 2025. Gross profit was $73.6 million for the six months ended June 30, 2026, as compared to $75.4 million for the six months ended June 30, 2025. The decrease of $1.8 million, or 2.4%, was primarily due to sales volume declines and restructuring-related costs related to Powering Honest Growth, partially offset by a decline in associated cost of revenue and tariff refunds. Operating Expenses Selling, General and Administrative Expenses For the three months ended June 30, For the six months ended June 30, 2026 2025 $ change % change 2026 2025 $ change % change (In thousands, except percentages) Selling, general and administrative $ 14,967 $ 20,352 $ (5,385) (26.5) % $ 32,436 $ 41,393 $ (8,957) (21.6) % Selling, general and administrative expenses were $15.0 million for the three months ended June 30, 2026, as compared to $20.4 million for the three months ended June 30, 2025. The decrease of $5.4 million, or 26.5%, was primarily due to a $2.6 million decline in third-party service fees, a $1.4 million decrease related to retailer violations adjustments and a $0.9 million decrease in executive officer transition expenses. Selling, general and administrative expenses as a percentage of revenue decreased 3.8% as compared to the three months ended June 30, 2025. Selling, general and administrative expenses were $32.4 million for the six months ended June 30, 2026, as compared to $41.4 million for the six months ended June 30, 2025. The decrease of $9.0 million, or 21.6%, was primarily due to a $5.2 million decline in third-party service fees, a $1.4 million decrease in legal expenses, a $0.8 million decrease in donation expense and a $0.7 million decrease in executive officer transition expenses. Selling, general and administrative expenses as a percentage of revenue decreased 1.6% as compared to the six months ended June 30, 2025. Marketing Expenses For the three months ended June 30, For the six months ended June 30, 2026 2025 $ change % change 2026 2025 $ change % change (In thousands, except percentages) Marketing $ 14,476 $ 12,552 $ 1,924 15.3 % $ 28,469 $ 24,822 $ 3,647 14.7 % Marketing expenses were $14.5 million for the three months ended June 30, 2026, as compared to $12.6 million for the three months ended June 30, 2025. The increase of $1.9 million, or 15.3%, was primarily due to increased marketing investment to support our higher growth, higher margin wipes and personal care platforms. Marketing expenses as a percentage of revenue increased 3.9% as compared to the three months ended June 30, 2025. Marketing expenses were $28.5 million for the six months ended June 30, 2026, as compared to $24.8 million for the six months ended June 30, 2025. The increase of $3.6 million, or 14.7%, was primarily due to increased marketing investment to support our higher growth, higher margin wipes and personal care platforms. Marketing expenses as a percentage of revenue increased 4.6% as compared to the six months ended June 30, 2025. 27 Restructuring Expenses For the three months ended June 30, For the six months ended June 30, 2026 2025 $ change % change 2026 2025 $ change % change (In thousands, except percentages) Restructuring $ (383) $ — $ (383) 100.0 % $ 223 $ — increase $ 223 100.0 Restructuring expenses included asset and other restructuring-related costs of $0.2 million, employee and personnel-related costs of $0.1 million, and an adjustment to contract and external obligation costs of $0.7 million for the three months ended June 30, 2026. Restructuring expenses included asset and other restructuring-related costs of $0.5 million, employee and personnel-related costs of $0.4 million, and an adjustment to contract and external obligation costs of $0.7 million for the six months ended June 30, 2026. For further details on Powering Honest Growth, refer to “Transformation 2.0: Powering Honest Growth” above and Note 12, “Restructuring” in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. For the three and six months ended June 30, 2025, we did not incur any restructuring expenses. Research and Development Expenses For the three months ended June 30, For the six months ended June 30, 2026 2025 $ change % change 2026 2025 $ change % change (In thousands, except percentages) Research and development $ 1,722 $ 1,960 $ (238) (12.1) % $ 3,584 $ 3,812 $ (228) (6.0) % Research and development expenses were $1.7 million for the three months ended June 30, 2026, as compared to $2.0 million for three months ended June 30, 2025. Research and development expenses were $3.6 million for the six months ended June 30, 2026, as compared to $3.8 million for the six months ended June 30, 2025. Interest and Other Income (Expense), Net For the three months ended June 30, For the six months ended June 30, 2026 2025 $ change 2026 2025 $ change (In thousands, except percentages) Interest income (expense), net $ 1,178 $ 593 $ 585 $ 1,834 $ 1,208 $ 626 Other income (expense), net (4) 433 (437) 4 604 (600) Interest and other income (expense), net $ 1,174 $ 1,026 $ 148 $ 1,838 $ 1,812 $ 26 Interest and other income (expense), net was net income of $1.2 million for the three months ended June 30, 2026, as compared to net income of $1.0 million for the three months ended June 30, 2025. Interest and other income (expense), net was net income of $1.8 million for the six months ended June 30, 2026, as compared to net income of $1.8 million for the six months ended June 30, 2025. Liquidity and Capital Resources As of June 30, 2026, we had $105.9 million of cash and cash equivalents. Although we are dependent on our ability to generate sufficient cash flow from operations or raise capital to achieve our business objectives, we believe our existing cash and cash equivalents together with cash generated from operations will be sufficient to meet our short-term projected operations for the next 12 months from the date of issuance of our condensed consolidated financial statements. We will need to generate sufficient cash from operations or may need to raise additional capital to meet our long-term working capital and capital 28 expenditure needs in the future. We also have availability under our 2026 Credit Facility, which was not drawn as of June 30, 2026. 2026 Credit Facility In March 2026, we entered into a First Amendment to Credit Agreement and First Amendment to Pledge and Security Agreement (the “Amendment”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent and lender, and the other lenders party thereto (together with JPMorgan, the “Lenders”), which amended the terms of the then existing first lien credit agreement (the “2023 Credit Facility”), extended the maturity date of the senior secured revolving credit facility (the “2026 Credit Facility”) and modified the borrowing formula and modified the interest rate. The 2026 Credit Facility provides a revolving credit facility in an aggregate principal amount of up to $35.0 million (the “Commitment Amount”) and includes a sub-facility that provides for the issuance of letters of credit in an amount of up to $15.0 million at any time outstanding. If more than 50% of the Commitment Amount is outstanding, availability of the 2026 Credit Facility will be based upon a borrowing base formula and periodic borrowing base certifications valuing certain of our accounts receivable and inventory as reduced by certain reserves, if any. The 2026 Credit Facility includes an uncommitted accordion feature that allows for increases in the Commitment Amount to as much as an additional $35.0 million, for up to $70.0 million in potential revolving commitments. The 2026 Credit Facility is subject to customary fees for loan facilities of this type, including a commitment fee based on the average daily undrawn portion of the 2026 Credit Facility. We recognize the commitment fee as incurred in interest and other income (expense), net in the condensed consolidated statements of comprehensive income. For the three and six months ended June 30, 2026, the commitment fee incurred was immaterial. As of June 30, 2026, there were $2.7 million of outstanding letters of credit. As of June 30, 2026, there was no outstanding borrowing under the 2026 Credit Facility, but the letters of credit reduce the amount available under the 2026 Credit Facility on a dollar-for-dollar basis. The interest rate applicable to the 2026 Credit Facility will be, at our option, either (a) the Adjusted Term SOFR Rate (subject to a 0.00% floor), plus a margin ranging from 1.75% to 2.25% or (b) the CB floating rate, (i) plus a margin of 0.00% or 0.25% or (ii) minus a margin of 0.25%. The margin will be based upon our leverage ratio. The CB floating rate is the higher of (a) the Wall Street Journal prime rate and (b) 2.50%. The 2026 Credit Facility will terminate and borrowings thereunder, if any, will be due in full on March 31, 2029. Debt under the 2026 Credit Facility will be guaranteed by substantially all of our material domestic subsidiaries and will be secured by substantially all of our and such subsidiaries’ assets. We are subject to certain affirmative and negative covenants including financial covenants related to a minimum total fixed charge coverage ratio and a maximum total leverage ratio, each calculated on a trailing four fiscal quarter basis at the end of each fiscal quarter. The 2026 Credit Facility also includes customary events of default. The 2026 Credit Facility contains covenants that restrict, among other things, our ability to sell assets, make investments and acquisitions, incur indebtedness, grant liens, change our lines of business, pay dividends and make certain other restricted payments, each subject to customary exceptions. Failure to do so, unless waived by the Lenders under the 2026 Credit Facility pursuant to its terms would result in an event of default under the 2026 Credit Facility. As of June 30, 2026, we are in compliance with all covenants under the 2026 Credit Facility. Refer to Note 5, “Credit Facilities” included in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information on the 2026 Credit Facility. Material Cash Requirements As of June 30, 2026, there were no changes to our material cash requirements from those described under “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report, except for the corporate office lease entered into in June 2026. Refer to Note 11, “Leases” included in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information on the corporate office lease. Cash Flows The following table summarizes our cash flows for the periods presented: For the six months ended June 30, (In thousands) 2026 2025 Net cash provided by (used in) operating activities $ 37,769 $ (3,683) Net cash used in investing activities $ (2,498) $ (143) Net cash (used in) provided by financing activities $ (18,953) $ 468 29 Operating Activities Our largest source of operating cash is from the sales of our products to our customers. Our primary uses of cash from operating activities are for cost of revenue, selling, general and administrative expenses, marketing expenses and research and development expenses. Net cash provided by operating activities of $37.8 million for the six months ended June 30, 2026 was primarily due to a net increase in cash related to changes in operating assets and liabilities of $15.2 million, non-cash adjustments of $11.9 million and net income of $10.6 million. The change in operating assets and liabilities primarily consisted of a $23.0 million decrease in inventory as part of our Operating Discipline pillar, partially offset by a $4.4 million increase in accounts receivable, a $2.3 million use of cash due to operating lease obligations and a $0.8 million increase in prepaid expenses and other assets. Non-cash adjustments primarily consisted of stock-based compensation of $5.5 million, amortization of operating Right-of-Use (“ROU”) assets of $3.3 million and depreciation and amortization of $1.3 million. Non-cash adjustments for accounts receivable reserves, inventory reserves, donation expense and utilization and write-off of marketing and transportation credits are included in "other" in the accompanying condensed consolidated statements of cash flows. Net cash used in operating activities of $3.7 million for the six months ended June 30, 2025 was primarily due to a net decrease in cash related to changes in operating assets and liabilities of $22.9 million, partially offset by non-cash adjustments of $12.1 million and net income of $7.1 million. Cash used in operating activities primarily consisted of a $11.4 million increase in inventory, a $6.5 million decrease in accounts payable and accrued expenses due to timing of payments, a $4.2 million use of cash due to operating lease obligations, and a $1.6 million increase in accounts receivable, partially offset by a $1.0 million decrease in prepaid expenses and other assets. Non-cash adjustments primarily consisted of stock-based compensation of $5.1 million, amortization of operating ROU assets of $3.3 million, and depreciation and amortization of $1.5 million. Investing Activities Our primary use of investing cash is property and equipment. Net cash used in investing activities of $2.5 million and $0.1 million for the six months ended June 30, 2026, and June 30, 2025, respectively, was due to the purchase of property and equipment. Financing Activities Our financing activities primarily consisted of share repurchases, proceeds from sales of securities, proceeds from stock option award exercises and principal payments of financing lease obligations. Net cash used in financing activities of $19.0 million for the six months ended June 30, 2026 primarily consisted of repurchases of common stock. Net cash provided by financing activities of $0.5 million for the six months ended June 30, 2025 consisted primarily of $0.4 million of proceeds from stock option award exercises. Share Repurchase Program On February 20, 2026, our Board of Directors approved our first share repurchase program for up to $25.0 million of our outstanding common stock. Under the program, share repurchases may be made at our discretion from time to time in open market transactions or privately negotiated transactions, or by other means, including through Rule 10b5-1 trading plans. The timing and number of shares repurchased under the new program will depend on a variety of factors, including, without limitation, stock price and trading volume. The repurchase program does not obligate us to purchase any shares, has no expiration date and may be modified, suspended or terminated at any time. We expect to fund repurchases with a combination of existing cash and cash equivalents and cash flows from operations. We repurchased approximately 5.6 million shares of common stock at a weighted average share price of $3.35 per share, for an aggregate amount of approximately $18.7 million, during the six months ended June 30, 2026. As of June 30, 2026, approximately $6.3 million remained available under the share repurchase program. As of August 5, 2026, we repurchased approximately the full $25.0 million of our outstanding common stock under the share repurchase program. Refer to Note 8, “Stockholders' Equity” included in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information on the share repurchase program. 30 Dividends We do not anticipate declaring or paying any cash dividends in the foreseeable future. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions (including any restrictions in our then-existing debt arrangements), capital requirements, business prospects and other factors our board of directors may deem relevant. The 2026 Credit Facility contains restrictions on our ability to pay dividends. Non-GAAP Financial Measures We prepare and present our condensed consolidated financial statements in accordance with GAAP. However, management believes that Organic Revenue and Adjusted EBITDA, which are non-GAAP financial measures, provide investors with additional useful information in evaluating our performance. We calculate Organic Revenue as net revenue, adjusted to exclude revenue from exited operations in connection with Powering Honest Growth including: (1) product revenue from our apparel line; (2) revenue from our Honest.com website as a fulfillment center; (3) revenue from sales to Canadian retailers or channels and (4) in certain periods, revenue from other acquisitions, divestitures and product or channel exits. We calculate Adjusted EBITDA as net income, adjusted to exclude: (1) interest and other (income) expense, net; (2) income tax provision; (3) depreciation and amortization; (4) stock-based compensation expense, including payroll tax; (5) litigation and settlement fees associated with certain non-ordinary course securities litigation claims; (6) executive officer transition expenses; and (7) restructuring-related expenses in connection with Powering Honest Growth. Organic Revenue and Adjusted EBITDA are financial measures that are not required by, or presented in accordance with GAAP. We believe that Organic Revenue and Adjusted EBITDA, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Organic Revenue and Adjusted EBITDA are helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes. Additionally, we believe Organic Revenue is helpful to our investors as it adjusts for revenue sources that we exited in connection with Powering Honest Growth. Additionally, we believe Organic Revenue is helpful to our investors as it adjusts for revenue sources that we exited in connection with Powering Honest Growth. We anticipate disclosing this measure until the exited revenue streams are removed from the comparable prior period. Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations of Adjusted EBITDA include that (1) it does not reflect capital commitments to be paid in the future; (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (3) it does not consider the impact of stock-based compensation expense; (4) it does not reflect other non-operating expenses, including interest expense; (5) it does not reflect tax payments that may represent a reduction in cash available to us; and (6) it does not include certain non-ordinary cash expenses that we do not believe are representative of our business on a steady-state basis, such as executive officer transition expenses. In addition, our use of Adjusted EBITDA and Organic Revenue may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Organic Revenue and Adjusted EBITDA alongside other financial measures, including our revenue, net income and other results stated in accordance with GAAP. 31 The following table presents a reconciliation of revenue, the most directly comparable financial measure stated in accordance with GAAP, to Organic Revenue, for each of the periods presented: For the three months ended June 30, For the six months ended June 30, (In thousands) 2026 2025 2026 2025 Reconciliation of Revenue to Organic Revenue Revenue $ 83,303 $ 93,459 $ 161,402 $ 190,709 Less revenue from: Apparel 3,114 7,780 3,114 18,285 Honest.com — 9,822 — 20,134 Canada — 734 — 2,012 Organic Revenue $ 80,189 $ 75,123 $ 158,288 $ 150,279 The following table presents a reconciliation of net income, the most directly comparable financial measure stated in accordance with GAAP, to Adjusted EBITDA, for each of the periods presented: For the three months ended June 30, For the six months ended June 30, (In thousands) 2026 2025 2026 2025 Reconciliation of Net Income to Adjusted EBITDA Net income $ 10,687 $ 3,870 $ 10,646 $ 7,123 Interest and other (income) expense, net (1,174) (1,026) (1,838) (1,812) Income tax provision 65 44 111 84 Depreciation and amortization 698 741 1,344 1,458 Stock-based compensation 3,015 2,716 5,480 5,128 Securities litigation expense 44 122 120 1,157 Executive officer transition expense(1) 63 1,066 63 1,066 Restructuring-related costs(2) 1,007 — 2,299 — Payroll tax expense related to stock-based compensation 48 84 178 341 Adjusted EBITDA $ 14,453 $ 7,617 $ 18,403 $ 14,545 __________________ (1) For the three and six months ended June 30, 2026 and 2025, this includes bonus costs related to our Chief Financial Officer transition, as well as separation and recruiting costs related to our Chief Financial Officer transition for the three and six months ended June 30, 2025. (2) See Note 12 “Restructuring” in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for items included in restructuring-related costs. Critical Accounting Policies and Estimates Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Our critical accounting estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report and the notes to the audited consolidated financial statements appearing in our Annual Report. During the three and six months ended June 30, 2026, there were no material changes to our critical accounting estimates from those discussed in our Annual Report. Recent Accounting Pronouncements Refer to Note 2, “Summary of Significant Accounting Policies” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements. 32 Emerging Growth Company Status In April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we are not subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult. We will no longer qualify as an emerging growth company as of December 31, 2026, or earlier if certain conditions exist.