Financial Data and Key Metrics Changes - The third quarter net sales were $288.8 million, up 14% year over year, primarily driven by volume growth of 12.9% and a positive price mix of 1.1% [15][25] - Adjusted gross margin in the third quarter was 46.0%, a decrease from 46.5% in the prior year period [16][26] - Adjusted EBITDA for the third quarter was $54.6 million, an increase of approximately $11 million or 25% year over year [16][27] - Net income for the third quarter was $101.7 million, significantly up from $11.9 million in the prior year, primarily due to a deferred income tax benefit [27] Business Line Data and Key Metrics Changes - Freshpet remains the number one dog food brand in the U.S. food category, holding a 95% market share in the gently cooked, fresh, frozen branded dog food segment [16][17] - The company has increased its market share in the U.S. dog food and treats segment to 3.9% [16] - The household penetration as of September 28 was 14.8 million households, up 10% year over year, with a total buy rate of $111, up 4% year over year [18] Market Data and Key Metrics Changes - Freshpet products are now available in 29,745 stores, with 24% of those having multiple fridges [17] - The company ended the third quarter with 38,778 fridges, representing nearly 2.1 million cubic feet of retail space [17] - The company experienced a 45% growth in digital orders, indicating a strong performance in the e-commerce channel [11] Company Strategy and Development Direction - The company is focusing on three key strategies: best food, strong value proposition, and improved accessibility to expand its appeal [7][8] - Freshpet is testing new digital touchpoints and expanding its focus on e-commerce channels, including direct-to-consumer (DTC) [6][11] - The company is also investing in new technology to improve operational efficiency and reduce costs [12][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented deceleration in sales growth and emphasized the need to adapt strategies to the current economic environment [5][6] - The company expects to achieve positive free cash flow for the full year, one year ahead of its original target [5][21] - Management remains confident in achieving 48% adjusted gross margin and 22% adjusted EBITDA margin by 2027, contingent on sales volume growth [22][23] Other Important Information - The company is currently conducting a search for a new CFO and is confident in the interim CFO's capabilities [23][24] - Capital expenditures for the year are projected to be approximately $140 million, down from previous guidance [31] Q&A Session Summary Question: Inquiry about new production technologies and pricing strategy - Management expressed excitement about new technology and indicated that decisions on expansion would depend on the performance of the initial line [34][35] - The potential for improved margins was acknowledged, but no commitment was made regarding pricing strategies at this time [38] Question: Competitive dynamics in the pet food space - Management noted that new competition has not significantly impacted their retail placement plans and that they view it as validation of the fresh category's potential [40][41] - Retailers have shown strong support for Freshpet, with significant growth in fridge placements despite increased competition [42] Question: Details on the fridge island test and future expansion - The company has installed 16 fridge islands and is working with a major retailer to determine sales velocity criteria for future rollouts [46][47] Question: CapEx and capacity management - Management clarified that the $140 million CapEx will support ongoing projects and new technology implementation, with flexibility for additional investments if needed [53][55] Question: Gross margin improvement strategies - Management indicated that improvements in conversion costs and inventory management are key drivers for achieving gross margin targets [60][61]