Freshpet(FRPT) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights This section provides an overview of Freshpet's Q2 and H1 2025 financial performance, highlighting key sales growth, profitability metrics, and balance sheet figures Second Quarter 2025 Performance Overview Freshpet reported strong Q2 2025 results, outperforming the dog food category with 12.5% net sales growth, achieving $16.4 million net income and 26.5% Adjusted EBITDA increase CEO Commentary & Strategic Focus The CEO's commentary highlights Freshpet's market outperformance, strategic priorities, and updated financial targets - Freshpet significantly outperformed the dog food category in Q2 2025, delivering category-leading sales growth and strong operational improvements despite challenging consumer sentiment[2] - Strategic focus includes accelerating advertising and distribution programs, reducing capital expenditures, and strengthening operations[2] - Revised current year's net sales target and removed long-term net sales target for 2027 to align with current economic realities, while still expecting outsized long-term growth[2] Q2 2025 Financial Results This section presents a detailed table of Freshpet's key financial metrics for the second quarter of 2025 compared to the prior year Second Quarter 2025 Financial Performance (YoY) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :---------------------- | :----------------- | :----------------- | :--------- | | Net Sales | $264.7 | $235.3 | 12.5% | | Gross Profit | $108.2 | $94.0 | 15.1% | | Gross Margin | 40.9% | 39.9% | +100 bps | | Adjusted Gross Profit | $124.0 | $108.0 | 14.8% | | Adjusted Gross Margin | 46.9% | 45.9% | +100 bps | | SG&A Expenses | $90.4 | $95.7 | -5.5% | | SG&A as % of Net Sales | 34.1% | 40.7% | -660 bps | | Adjusted SG&A | $79.6 | $72.9 | 9.2% | | Adjusted SG&A as % of Net Sales | 30.1% | 31.0% | -90 bps | | Net Income (Loss) | $16.4 | $(1.7) | N/A | | Adjusted EBITDA | $44.4 | $35.1 | 26.5% | First Six Months 2025 Performance Overview Freshpet's H1 2025 net sales grew 15.0% to $527.9 million, with Adjusted EBITDA increasing 21.6% to $79.9 million, despite a significant net income decrease due to higher SG&A H1 2025 Financial Results This section provides a detailed table of Freshpet's key financial metrics for the first six months of 2025 compared to the prior year First Six Months 2025 Financial Performance (YoY) | Metric | H1 2025 (Millions) | H1 2024 (Millions) | Change (%) | | :---------------------- | :----------------- | :----------------- | :--------- | | Net Sales | $527.9 | $459.1 | 15.0% | | Gross Profit | $212.0 | $182.1 | 16.4% | | Gross Margin | 40.2% | 39.7% | +50 bps | | Adjusted Gross Profit | $244.3 | $209.5 | 16.6% | | Adjusted Gross Margin | 46.3% | 45.6% | +70 bps | | SG&A Expenses | $205.7 | $175.4 | 17.3% | | SG&A as % of Net Sales | 39.0% | 38.2% | +80 bps | | Adjusted SG&A | $164.3 | $143.8 | 14.3% | | Adjusted SG&A as % of Net Sales | 31.1% | 31.3% | -20 bps | | Net Income | $3.7 | $16.9 | -78.1% | | Adjusted EBITDA | $79.9 | $65.7 | 21.6% | - Decrease in net income for H1 2025 was primarily due to increased SG&A expenses, including $18.8 million in media spend and $16.9 million in non-recurring charges, partially offset by contributions from higher sales and improved gross profit[7] Balance Sheet & Cash Flow Snapshot This section presents a snapshot of Freshpet's balance sheet as of June 30, 2025, and key cash flow figures for the first half of the year Balance Sheet Snapshot (June 30, 2025) | Metric | Amount (Millions) | | :---------------------- | :---------------- | | Cash and Cash Equivalents | $243.7 | | Debt Outstanding (net) | $396.2 | - Cash from operations for the first six months of 2025 was $38.7 million, a decrease of $9.1 million compared to the prior year, primarily due to higher variable incentive compensation payments[8] Outlook & Guidance This section outlines Freshpet's updated financial guidance for the full year 2025 and long-term targets for 2027, along with non-GAAP measure disclaimers Full Year 2025 Guidance Update Freshpet updated its full-year 2025 guidance, lowering net sales growth expectations to 13%-16% while maintaining Adjusted EBITDA guidance and reducing capital expenditures to approximately $175 million Full Year 2025 Guidance Update | Metric | New Guidance (2025) | Previous Guidance (2025) | Change | | :---------------------- | :------------------ | :----------------------- | :-------- | | Net Sales Increase | 13% to 16% | 15% to 18% | Lowered | | Adjusted EBITDA | $190M to $210M | $190M to $210M | Unchanged | | Capital Expenditures | ~$175M | ~$225M | Reduced | Long-Term 2027 Guidance Update The company removed its $1.8 billion net sales target for 2027 due to slower growth but reiterated Adjusted Gross Margin and Adjusted EBITDA Margin targets, expecting continued outsized growth - Removed the $1.8 billion net sales target for full year 2027 to adjust for recent slower growth[10] - Reiterated Adjusted Gross Margin target of 48% and Adjusted EBITDA Margin target of 22% for full year 2027[10] - Company expects to continue to deliver growth significantly in excess of the dog food category[10] Non-GAAP Guidance Disclaimer Freshpet does not provide GAAP net income guidance or reconciliation for forecasted Adjusted EBITDA due to the unreliability of estimates for certain uncontrollable components - Company does not provide GAAP net income (loss) guidance or reconciliation for forecasted Adjusted EBITDA due to unreliable estimates for certain components outside its control[13] Company Information This section provides details on Freshpet's conference call, company mission, product distribution, and forward-looking statement disclaimers Conference Call & Earnings Presentation Webcast Information Freshpet hosted a conference call on August 4, 2025, at 8:00 a.m. ET, with webcast and dial-in details provided for investor access - Conference call held on August 4, 2025, at 8:00 a.m. ET, with webcast available on www.freshpet.com[14](index=14&type=chunk) - Dial-in numbers: (877) 407-0792 (North America) and (201) 689-8263 (International), passcode: 13754861[14] About Freshpet Freshpet's mission is to provide fresh, refrigerated pet food made from locally sourced ingredients, distributed across various retailers and online in North America and Europe - Freshpet's mission is to elevate pet nutrition with fresh food made from locally farmed meats, vegetables, and fruits[15] - Foods are prepared in small batches at lower temperatures and maintained refrigerated throughout the supply chain[15] - Products are distributed through grocery, mass, digital, pet specialty, and club retailers in the US, Canada, and Europe, as well as online in the U.S[16] Forward-Looking Statements This press release contains forward-looking statements regarding strategic focus and guidance, which are subject to risks and uncertainties, and Freshpet disclaims any obligation to update them unless legally required - The press release includes forward-looking statements concerning strategic focus, growth expectations, and updated guidance, subject to various risks and uncertainties[17] - Risks include difficulties in new technology launches, economic uncertainty, changes in pet acquisition rates, new competitive products, tariffs, and manufacturing facility construction issues, as detailed in SEC filings[17] - Freshpet disclaims any obligation to publicly update or revise forward-looking statements unless legally required[17] Non-GAAP Financial Measures This section defines Freshpet's non-GAAP financial measures and explains management's rationale for their use in financial reporting Definitions of Non-GAAP Measures Freshpet defines its non-GAAP measures, including Adjusted Gross Profit, Adjusted SG&A, EBITDA, and Adjusted EBITDA, by excluding specific non-cash or non-recurring items to clarify operational performance - Adjusted Gross Profit is gross profit before depreciation, non-cash share-based compensation, and loss on disposal of manufacturing equipment[19] - Adjusted SG&A excludes depreciation and amortization, non-cash share-based compensation, loss on disposal of equipment, distributor transition costs, legal obligation, and international business changes[19] - Adjusted EBITDA is EBITDA (net income plus interest, tax, depreciation, amortization) adjusted for gain on equity investment, non-cash share-based compensation, loss on disposal of property, plant and equipment, distributor transition costs, legal obligation, and international business changes[20] Management's Rationale for Non-GAAP Measures Management utilizes non-GAAP measures to provide a meaningful view of ongoing operating results and for investment community analysis, emphasizing they are supplementary to GAAP measures - Management believes non-GAAP measures provide a meaningful view of ongoing operating results and are widely used by the investment community for analysis and comparative evaluation[21] - These measures offer additional metrics to evaluate operations and, with GAAP results and reconciliations, provide a more complete business understanding[21] - Non-GAAP measures should not be considered an alternative to, or superior to, U.S. GAAP measures of performance[21] Condensed Consolidated Financial Statements This section presents Freshpet's condensed consolidated balance sheets, statements of operations, and cash flows for the reported periods Condensed Consolidated Balance Sheets As of June 30, 2025, Freshpet's total assets increased to $1,647.5 million, with total liabilities rising to $575.8 million and stockholders' equity growing to $1,071.7 million Condensed Consolidated Balance Sheets (in thousands) | ASSETS / LIABILITIES & EQUITY | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $243,684 | $268,633 | | Total Current Assets | $409,177 | $436,998 | | Property, plant and equipment, net | $1,101,367 | $1,065,869 | | Total Assets | $1,647,494 | $1,574,878 | | Total Current Liabilities | $84,981 | $98,869 | | Convertible senior notes | $396,237 | $395,163 | | Total Liabilities | $575,840 | $519,518 | | Total Stockholders' Equity | $1,071,654 | $1,055,360 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For Q2 2025, Freshpet reported $264.7 million in net sales and $16.4 million net income, while H1 2025 saw $527.9 million net sales and $3.7 million net income Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 |\n| :---------------------- | :----------- | :----------- | :----------- | :----------- | | Net Sales | $264,689 | $235,253 | $527,938 | $459,102 | | Gross Profit | $108,190 | $93,952 | $211,978 | $182,110 | | SG&A Expenses | $90,386 | $95,702 | $205,671 | $175,396 | | Income (Loss) from Operations | $17,804 | $(1,750) | $6,307 | $6,714 | | Net Income (Loss) | $16,356 | $(1,694) | $3,659 | $16,908 | | Basic EPS | $0.34 | $(0.03) | $0.08 | $0.35 | | Diluted EPS | $0.33 | $(0.03) | $0.07 | $0.34 | Condensed Consolidated Statement of Cash Flows For H1 2025, net cash from operations was $38.7 million, with net cash used in investing at $59.9 million and financing at $3.7 million, leading to a $24.9 million decrease in cash and cash equivalents Condensed Consolidated Statement of Cash Flows (in thousands) | Cash Flow Activity | H1 2025 | H1 2024 | | :------------------------------ | :----------- | :----------- | | Net cash from operating activities | $38,693 | $47,819 | | Net cash used in investing activities | $(59,932) | $(94,795) | | Net cash (used in) provided by financing activities | $(3,710) | $1,804 | | Net change in cash and cash equivalents | $(24,949) | $(45,172) | | Cash and cash equivalents, end of period | $243,684 | $251,699 | Non-GAAP Reconciliations This section provides detailed reconciliations of Freshpet's GAAP financial measures to their corresponding non-GAAP adjusted measures Reconciliation Between Gross Profit and Adjusted Gross Profit Adjusted Gross Profit for Q2 2025 was $124.0 million (46.9% of net sales) and for H1 2025 was $244.3 million (46.3% of net sales), both showing year-over-year improvements Gross Profit to Adjusted Gross Profit Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :---------------------- | :----------- | :----------- | :----------- | :----------- | | Gross profit | $108,190 | $93,952 | $211,978 | $182,110 | | Depreciation expense | $13,729 | $11,827 | $28,909 | $22,502 | | Non-cash share-based compensation | $1,831 | $2,220 | $3,114 | $4,841 | | Loss on disposal of manufacturing equipment | $260 | $32 | $255 | $53 | | Adjusted Gross Profit | $124,010 | $108,031 | $244,256 | $209,506 | | Adjusted Gross Profit as a % of Net Sales | 46.9% | 45.9% | 46.3% | 45.6% | Reconciliation Between SG&A Expenses and Adjusted SG&A Expenses Adjusted SG&A Expenses for Q2 2025 were $79.6 million (30.1% of net sales) and for H1 2025 were $164.3 million (31.1% of net sales), with H1 2025 including significant non-recurring charges SG&A Expenses to Adjusted SG&A Expenses Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :---------------------- | :----------- | :----------- | :----------- | :----------- | | SG&A expenses | $90,386 | $95,702 | $205,671 | $175,396 | | Depreciation and amortization expense | $6,167 | $5,385 | $12,104 | $10,455 | | Non-cash share-based compensation | $4,390 | $17,313 | $11,923 | $20,913 | | Loss on disposal of equipment | $225 | $104 | $391 | $233 | | Distributor transition costs | — | — | $10,680 | — | | Legal obligation | — | — | $4,987 | — | | International business charges | — | — | $1,273 | — | | Adjusted SG&A Expenses | $79,604 | $72,900 | $164,313 | $143,795 | | Adjusted SG&A Expenses as a % of Net Sales | 30.1% | 31.0% | 31.1% | 31.3% | - H1 2025 Adjusted SG&A includes $10.7 million for distributor transition costs, $5.0 million for legal obligations, and $1.3 million for international business changes[31][32] Reconciliation Between Net Income (Loss) and Adjusted EBITDA Adjusted EBITDA for Q2 2025 was $44.4 million (16.8% of net sales) and for H1 2025 was $79.9 million (15.1% of net sales), reflecting adjustments for various non-cash and non-recurring items Net Income (Loss) to Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :---------------------- | :----------- | :----------- | :----------- | :----------- | | Net income (loss) | $16,356 | $(1,694) | $3,659 | $16,908 | | Depreciation and amortization | $19,896 | $17,212 | $41,013 | $32,957 | | Interest expense, net of interest income | $1,546 | $(110) | $2,610 | $(384) | | Income tax (benefit) expense | $(102) | $54 | $32 | $108 | | EBITDA | $37,696 | $15,462 | $47,314 | $49,589 | | Non-cash share-based compensation | $6,221 | $19,533 | $15,037 | $25,755 | | Loss on disposal of property, plant and equipment | $485 | $136 | $646 | $286 | | Distributor transition costs | — | — | $10,680 | — | | Legal obligation | — | — | $4,987 | — | | International business charges | — | — | $1,273 | — | | Gain on equity investment | — | — | — | $(9,918) | | Adjusted EBITDA | $44,402 | $35,131 | $79,937 | $65,712 | | Adjusted EBITDA as a % of Net Sales | 16.8% | 14.9% | 15.1% | 14.3% | - H1 2025 Adjusted EBITDA includes adjustments for $10.7 million in distributor transition costs, $5.0 million in legal obligations, and $1.3 million in international business charges[33][34]