Freshpet(FRPT) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial Highlights Freshpet reported strong second-quarter 2024 results, featuring a 28.3% increase in net sales to $235.3 million, driven entirely by volume growth, with profitability significantly improving as net loss narrowed to $1.7 million and Adjusted EBITDA quadrupled to $35.1 million | Financial Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $235.3M | $183.3M | +28.3% | | Net Loss | ($1.7M) | ($17.0M) | +89.9% Improvement | | Gross Margin | 39.9% | 32.3% | +760 bps | | Adjusted Gross Margin | 45.9% | 39.8% | +610 bps | | Adjusted EBITDA | $35.1M | $9.0M | +290.0% | - The 28.3% increase in net sales was driven entirely by volume gains, indicating strong consumer demand without reliance on price increases[3] - The improvement in gross margin was primarily attributed to lower input costs, reduced quality-related costs, and improved leverage on plant expenses[3] - SG&A as a percentage of net sales decreased from 41.5% to 40.7%, mainly due to reduced logistics and media costs, which offset higher share-based compensation[3] First Six Months of 2024 Financial Results For the first half of 2024, Freshpet's net sales grew 30.9% to $459.1 million, with volume gains accounting for 29.4% of this growth, achieving a significant turnaround to net income of $16.9 million from a prior-year net loss, and Adjusted EBITDA surged to $65.7 million | Financial Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $459.1M | $350.9M | +30.9% | | Net Income/(Loss) | $16.9M | ($41.7M) | N/A (Turnaround) | | Gross Margin | 39.7% | 31.4% | +830 bps | | Adjusted EBITDA | $65.7M | $12.0M | +447.5% | - The improvement to net income was driven by higher sales, improved gross margin, reduced logistics costs as a percentage of net sales, and a $9.9 million gain on an equity investment[5] - SG&A as a percentage of net sales decreased significantly by 410 basis points to 38.2%, primarily due to reduced logistics and media costs[5] Balance Sheet and Cash Flow As of June 30, 2024, Freshpet held $251.7 million in cash and cash equivalents and had $394.1 million in debt outstanding, demonstrating a substantial improvement in cash generation with cash from operations reaching $47.8 million for the first six months of 2024 | Balance Sheet Item | As of June 30, 2024 | | :--- | :--- | | Cash and cash equivalents | $251.7M | | Debt outstanding (net) | $394.1M | - Cash from operations for the first six months of 2024 was $47.8 million, a significant turnaround from a cash use of $0.2 million in the prior year period[7][25] - The company plans to utilize its balance sheet to fund its ongoing capital needs related to its long-term capacity plan[7] Full Year 2024 Outlook Reflecting strong first-half performance and confidence in its execution capabilities, Freshpet has raised its full-year 2024 guidance, now expecting net sales of at least $965 million and Adjusted EBITDA of at least $140 million, while concurrently reducing its forecast for capital expenditures | 2024 Guidance | Updated Guidance | Previous Guidance | | :--- | :--- | :--- | | Net Sales | At least $965M | At least $950M | | Adjusted EBITDA | At least $140M | At least $120M | | Capital Expenditures | ~$200M | ~$210M | - The company is not providing guidance for net income (loss), the most comparable GAAP measure to Adjusted EBITDA, due to the difficulty in reliably estimating certain variable components[9] Financial Statements The condensed consolidated financial statements detail the company's financial position and performance, showing total assets of $1.51 billion as of June 30, 2024, a shift from net loss to near breakeven in Q2 2024, and a significant positive swing in operating cash flow | Balance Sheet (in thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $405,220 | $427,319 | | Total Assets | $1,506,331 | $1,464,421 | | Total Current Liabilities | $90,000 | $89,222 | | Total Liabilities | $510,527 | $510,967 | | Total Stockholders' Equity | $995,804 | $953,454 | | Statement of Operations (in thousands) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $235,253 | $183,331 | $459,102 | $350,853 | | Gross Profit | $93,952 | $59,244 | $182,110 | $110,004 | | (Loss) Income from Operations | ($1,750) | ($16,752) | $6,714 | ($38,263) | | Net (Loss) Income | ($1,694) | ($16,952) | $16,908 | ($41,738) | | Cash Flow (in thousands) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $47,819 | ($231) | | Net cash used in investing activities | ($94,795) | ($215,948) | | Net cash from financing activities | $1,804 | $327,492 | Reconciliation of Non-GAAP Financial Measures The report provides detailed reconciliations of non-GAAP measures to their closest GAAP counterparts, with Adjusted Gross Profit at $108.0 million, Adjusted SG&A at $72.9 million, and Adjusted EBITDA reaching $35.1 million for Q2 2024 | Adjusted Gross Profit Reconciliation (in thousands) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Gross Profit (GAAP) | $93,952 | $59,244 | $182,110 | $110,004 | | Adjusted Gross Profit (Non-GAAP) | $108,031 | $73,023 | $209,506 | $137,460 | | Adjusted SG&A Reconciliation (in thousands) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | SG&A Expenses (GAAP) | $95,702 | $75,996 | $175,396 | $148,267 | | Adjusted SG&A Expenses (Non-GAAP) | $72,900 | $63,983 | $143,795 | $125,453 | | Adjusted EBITDA Reconciliation (in thousands) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income (GAAP) | ($1,694) | ($16,952) | $16,908 | ($41,738) | | Adjusted EBITDA (Non-GAAP) | $35,131 | $9,040 | $65,712 | $12,007 |