Freshpet(FRPT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, net sales were $285.2 million, an increase of 8.6% year-over-year, primarily driven by volume growth of 9.7% [17][31] - For the full year 2025, net sales reached $1.102 billion, up 13% year-over-year, with volume contributing 12% growth [18][33] - Adjusted gross margin for Q4 was 48.4%, compared to 48.1% in the prior year, while full year adjusted gross margin was 46.7%, up 20 basis points year-over-year [18][34] - Adjusted EBITDA for Q4 was $61.2 million, a 16% increase year-over-year, and for the full year, it was $195.7 million, up 21% [18][36] - The company ended the year with cash on hand of $278 million and was free cash flow positive [37] Business Line Data and Key Metrics Changes - The e-commerce business grew nearly 40% last year, now accounting for 14% of total business [8][14] - The company expanded its distribution network significantly, with products now in 30,235 stores, 24% of which have multiple fridges [19][20] - The company achieved its best year in over a decade for new store growth, largely driven by club expansion [13][19] Market Data and Key Metrics Changes - The total addressable market for Freshpet has grown to 36 million households, up from 33 million [9] - The company has increased its market share in the US dog food category to 4.0% [19] Company Strategy and Development Direction - The company is focusing on building an omni-channel presence, leveraging its brand equity and manufacturing capabilities to meet consumer demands across various channels [10][51] - Freshpet aims to enhance its competitive advantages through investments in new manufacturing technologies and expanding its fridge network [10][16] - The company plans to rebalance its media mix to be more diversified and digital-forward, targeting Millennials and Gen Z consumers [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2025 but emphasized the lessons learned that have strengthened the company for future growth [5] - The company expects net sales growth of 7% to 10% for 2026, with adjusted EBITDA projected between $205 million and $215 million [23][40] - Management remains optimistic about the growth potential despite macroeconomic headwinds, citing early signs of improvement in household penetration and buying rates [64] Other Important Information - The company received $95.5 million from the sale of Ollie, a DTC dog food brand, which has strengthened its financial position [29] - Freshpet is evaluating its capital allocation strategy to accelerate growth and improve margins [29] Q&A Session Summary Question: Can you elaborate on the implied uptick in EBITDA margins for 2027? - Management indicated multiple pathways to achieve 2027 EBITDA margin targets, including improvements in gross margin and net sales growth [44][45] Question: What insights were gained from the investment in Ollie? - The investment provided valuable insights into the DTC market, leading to a focus on building an omni-channel business [49][50] Question: What are the key drivers for consumption growth in 2026? - Management ranked advertising effectiveness, distribution growth, and affordability initiatives as primary drivers for consumption growth [58][61]