Financial Data and Key Metrics Changes - Second quarter net sales were $264.7 million, up 12.5% year over year, primarily driven by volume growth [18][26] - Adjusted gross margin in the second quarter was 46.9%, compared to 45.9% in the prior year period [18][27] - Adjusted EBITDA in the second quarter was $44.4 million, up approximately $9 million or 26% year over year [19][29] - Capital expenditures for the second quarter were $33.4 million, with cash on hand of $243.7 million at the end of the quarter [29] Business Line Data and Key Metrics Changes - The company remains the number one dog food brand in the U.S. with a 95% market share in the gently cooked fresh frozen branded food dog segment [19] - Digital orders, previously referred to as e-commerce, grew by 40% in the second quarter and now account for 13% of total sales [16] Market Data and Key Metrics Changes - Household penetration as of June 29 was 14.4 million households, up 11% year over year, with a total buy rate of $110, up 6% year over year [22] - The company competes in the $54 billion U.S. pet food category and has a 3.6% market share within the $37 billion U.S. dog food and treats segment [19][20] Company Strategy and Development Direction - The company is focusing on operational improvements and capital efficiencies to achieve long-term margin and free cash flow targets [6][7] - Plans to launch a new complete nutrition bag product and roll out new multi-packs and bundles later this year [17] - The company is increasing its marketing efforts, particularly in digital and social channels, to drive household penetration [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic uncertainty affecting consumer behavior, leading to hesitance in trading up dog food and deferring pet-related expenses [8][9] - The company expects net sales growth of 13% to 16% for fiscal year 2025, adjusting previous guidance due to the current macroeconomic environment [23][30] - Long-term targets for net sales and household penetration have been removed due to challenges in maintaining projected growth rates [24] Other Important Information - The company is lowering its capital expenditure estimates for 2025 and 2026 by at least $100 million due to improved operational efficiencies [12] - The company has made significant progress in its Ennis plant, which is expected to provide over 50% of production volume in the coming years [10] Q&A Session Summary Question: Path to 22% EBITDA margin in 2027 - Management indicated that achieving a 22% EBITDA margin is feasible with mid-teens growth, emphasizing operational performance and potential upside from new technologies [36][41] Question: Clarification on net sales target removal - Management confirmed that while the net sales target has been removed, the gross margin and EBITDA margin targets remain, contingent on achieving low to mid-teen growth [44] Question: Dynamics between household penetration and buy rates - Management noted that while household penetration is growing, the buy rate is affected by consumers' reluctance to trade up, although some premium products are still seeing growth [45][48] Question: Impact of Blue Buffalo's competition - Management views increased competition as a validation of the category's growth potential, believing that overall category awareness will benefit all players, including Freshpet [82][84] Question: Nature of new advertising strategy - The new advertising will emphasize health benefits of fresh food while maintaining the brand's established emotional connection with consumers [76][90]