Honest Company, Inc.HNST
Honest Company, Inc. Stock Compensation Disclosure
Stock-Based Compensation
2011 Stock Incentive Plan
The Company’s 2011 Stock Incentive Plan (the “2011 Plan”), which is stockholder-approved, permits the grant of incentive and non-qualified stock options, stock awards, stock units or stock appreciation rights of common stock. Generally, stock options vest 25% on the first anniversary of the vesting commencement date and then monthly thereafter for 36 months, or pursuant to another vesting schedule as approved by the Board and set forth in the option agreement. Certain options and share awards provide for accelerated vesting upon certain events as described in the terms of the option and award agreements. Stock options have a maximum term of ten years. Prior to the IPO, all of the stock options and restricted stock units the Company granted were made pursuant to the 2011 Plan. Following the IPO, the Company grants equity incentive awards under the terms of the 2021 Plan (defined below).
The following table summarizes the stock option activity:
| Number of Options | Weighted Average Exercise Price | Weighted Average Contractual Term (Years) | Intrinsic Value (in thousands) | ||||||||||||||||||||
Outstanding at December 31, 2023 | 13,315,796 | $ | 5.25 | 3.0 | $ | — | |||||||||||||||||
| Granted | — | $ | — | ||||||||||||||||||||
| Exercised | (8,007,999) | $ | 5.18 | ||||||||||||||||||||
| Forfeited/Cancelled | (321,911) | $ | 4.55 | ||||||||||||||||||||
Outstanding at December 31, 2024 | 4,985,886 | $ | 5.41 | 2.2 | $ | 7,600 | |||||||||||||||||
| Granted | — | $ | — | ||||||||||||||||||||
| Exercised | (75,000) | $ | 5.13 | ||||||||||||||||||||
| Forfeited/Cancelled | (658,396) | $ | 5.13 | ||||||||||||||||||||
Outstanding at December 31, 2025 | 4,252,490 | $ | 5.45 | 2.0 | $ | — | |||||||||||||||||
Exercisable at December 31, 2024 | 4,985,886 | $ | 5.41 | 2.2 | $ | 7,600 | |||||||||||||||||
Exercisable at December 31, 2025 | 4,252,490 | $ | 5.45 | 2.0 | $ | — | |||||||||||||||||
The intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 were immaterial, $12.6 million and $0.1 million, respectively. This intrinsic value represents the difference between the fair value of the Company’s common stock on the date of exercise and the exercise price of each option. The total fair value of options vested during the years ended December 31, 2025, 2024 and 2023 were $0.0 million, $0.1 million and $0.7 million, respectively. As of December 31, 2025 and 2024, there was no unrecognized stock-based compensation expense related to unvested stock options.
During the year ended December 31, 2023, the Company extended the post-termination exercise period for each outstanding stock option held by certain former executives such that the post-termination exercise period will end on the earlier of (i) the original expiration date of the stock option, or (ii) the date that is the 3-year anniversary of certain former executives no longer providing services to the Company. There were no changes to the exercise price or other terms of these stock options, and these stock options were already fully vested prior to the modification. As a result of this modification, we recognized incremental stock-based compensation expense of $0.5 million for the year ended December 31, 2023.
2021 Equity Incentive Plan
In April 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), which became effective in connection with the IPO. All equity-based awards granted on or after the effectiveness of the 2021 Plan are granted under the 2021 Plan. The 2021 Plan provides for grants of incentive stock options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to the Company’s employees and its subsidiary corporations’ employees, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”) awards, performance awards and other forms of awards to the Company’s employees, directors and consultants and any of its affiliates’ employees and consultants. Initially, the maximum number of shares of the Company’s common stock that may be issued under its 2021 Plan will not exceed 25,025,580 shares of the Company’s common stock. In addition, the number of shares of the Company’s common stock reserved for issuance under its 2021 Plan will automatically increase on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, in an amount equal to (1) 4% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors prior to the date of the increase. On January 1, 2025, 4,356,092 additional shares were reserved for issuance pursuant to this provision. The maximum number of shares of the Company’s common stock that may be issued on the exercise of ISOs under its 2021 Plan is 75,100,000 shares.
2023 Inducement Plan
In March 2023, the Company's Compensation Committee adopted the 2023 Inducement Plan (the “2023 Inducement Plan”). The 2023 Inducement Plan reserved 4,000,000 shares of the Company’s common stock for issuance under the 2023 Inducement Plan to individuals who satisfy the standards for inducement grants under the relevant Nasdaq Stock Market rules. As of December 31, 2025, there were 738,806 shares available for future grant under the Inducement Plan.
On July 1, 2025, the Company granted 202,880 RSUs to the Chief Financial Officer under the 2023 Inducement Plan. On March 16, 2025, the Company granted 115,122 RSUs to the Senior Vice President of Supply Chain under the 2023 Inducement Plan. On February 29, 2024, the Company granted 208,757 RSUs to the Chief People Officer under the 2023 Inducement Plan. On March 21, 2023, the Company granted 1,845,238 RSUs to the Chief Executive Officer under the 2023 Inducement Plan. On May 18, 2023, the Company granted 843,565 RSUs to the Chief Growth Officer under the 2023 Inducement Plan. On November 1, 2023, the Company granted 827,357 RSUs to the Chief Financial Officer under the 2023 Inducement Plan.
The following table summarizes the RSU activity under the 2021 Equity Incentive Plan and the 2023 Inducement Plan:
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||||||||||||||
| Non-Employee Directors | Directors, Officers and Employees | Non-Employee Directors | Directors, Officers and Employees | ||||||||||||||||||||
Unvested RSUs at December 31, 2023 | 957,199 | 7,299,254 | $ | 2.19 | $ | 2.38 | |||||||||||||||||
| Granted | 545,178 | 4,890,798 | $ | 2.81 | $ | 3.63 | |||||||||||||||||
Vested(1) | (775,804) | (4,411,643) | $ | 2.15 | $ | 2.96 | |||||||||||||||||
| Forfeited | — | (821,805) | $ | — | $ | 3.10 | |||||||||||||||||
Unvested RSUs at December 31, 2024 | 726,573 | 6,956,604 | $ | 2.70 | $ | 2.81 | |||||||||||||||||
| Granted | 345,077 | 2,629,375 | $ | 5.11 | $ | 5.04 | |||||||||||||||||
| Vested | (652,726) | (2,874,632) | $ | 2.96 | $ | 3.01 | |||||||||||||||||
| Forfeited | — | (1,444,879) | $ | — | $ | 2.44 | |||||||||||||||||
Unvested RSUs at December 31, 2025 | 418,924 | 5,266,468 | $ | 4.28 | $ | 3.92 | |||||||||||||||||
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(1) The Company modified certain former executives' RSUs to accelerate vesting, resulting in stock-based compensation expense of $6.7 million during the year ended December 31, 2024.
As of December 31, 2025 and 2024, there was $18.7 million and $17.6 million, respectively, of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 2.3 years and 2.6 years, respectively.
2021 Employee Stock Purchase Plan
In April 2021, the Company’s board of directors adopted the Company’s 2021 Employee Stock Purchase Plan (the “2021 ESPP”). The Company initially authorized the issuance of 1,175,000 shares of common stock under the 2021 ESPP. In addition, the number of shares available for issuance under the 2021 ESPP will be annually increased on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031 by the lesser of (i) 1% of the total number of shares of common stock outstanding on December 31 of the immediately preceding year; and (ii) 3,525,000 shares, except before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set
forth in clauses (i) and (ii). On January 1, 2025, 1,089,023 additional shares were reserved for issuance pursuant to this provision. Subject to any limitations contained therein, the 2021 ESPP allows eligible employees to contribute (in the form of payroll deductions or otherwise to the extent permitted by the administrator) an amount established by the administrator from time to time in its discretion to purchase common stock at a discounted price per share.
Under the 2021 ESPP, eligible employees are granted the right to purchase shares of common stock at the lower of 85% of the fair value at the time of grant or 85% of the fair value at the time of exercise. The right to purchase shares of common stock is granted in May and November of each year for an offering period of approximately six months. For the years ended December 31, 2025 and 2024, employees who elected to participate in the 2021 ESPP purchased 47,582 and 95,830 shares of common stock, respectively, under the 2021 ESPP, resulting in cash proceeds to the Company of $0.2 million and $0.2 million, respectively. The weighted average price at purchase was $3.19 and $1.70 per share for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, the Company had 4,658,349 and 3,616,908, respectively, remaining authorized shares available for purchase.
The following table summarizes the key input assumptions used in the Black-Scholes option-pricing model to estimate the grant-date fair value of the 2021 ESPP:
For the Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Expected life of options (in years) | 0.50 | 0.50 | |||||||||||||||||||||
| Expected stock price volatility | 63.10% | — | 75.59% | 69.20 | % | — | 79.27 | % | |||||||||||||||
| Risk free interest rate | 3.80% | — | 4.44% | 4.44 | % | — | 5.43 | % | |||||||||||||||
| Expected dividend yield | —% | —% | |||||||||||||||||||||
| Grant-date fair value per share | $ | 0.95 | $ | 2.56 | $ | 0.56 | — | $ | 2.56 | ||||||||||||||
Stock-Based Compensation Expense
Stock-based compensation expense related to RSU awards under the 2021 Equity Incentive Plan and the 2023 Inducement Plan, 2021 ESPP purchases and stock options, as applicable, are as follows:
| For the year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
Selling, general and administrative(1) | $ | 9,734 | $ | 15,105 | $ | 15,465 | |||||||||||
| Research and development | 778 | 570 | 339 | ||||||||||||||
| Total stock-based compensation expense | $ | 10,512 | $ | 15,675 | $ | 15,804 | |||||||||||
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(1) Includes $6.7 million and $3.1 million, respectively, of stock-based compensation expense during the years ended December 31, 2024 and 2023 related to the acceleration of RSUs held by certain former executives. The Company extended the post-termination stock option exercise period for certain former executives, resulting in stock-based compensation expense of $0.5 million during the year ended December 31, 2023.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Mar 8, 2024 | |
| 2022 | Mar 16, 2023 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.