Freshpet, Inc. Q4 FY2025 earnings call

William B. Cyr mentioned that the company faced challenges in 2025 but adapted, showing agility. They changed messaging and media buying strategy, increased focus on entry point value, and had flexibility in capacity expansion. Ecommerce business grew nearly 40% last year, now 14% of total business. Installed new manufacturing technology and began testing fridge islands. Fourth quarter and full year results showed growth. John O’Connor walked through financial results, including net sales, margins, and cash flow. Nicola J Baty talked about omnichannel efforts, distribution, and affordability initiatives.

Fourth quarter net sales were $285,200,000, up 8.6% year over year. Adjusted gross margin in the fourth quarter was 48.4%, compared to 48.1% in the prior-year period. Adjusted EBITDA in the fourth quarter was $61,200,000, up approximately $8,500,000, or 16% year over year. For the year, net sales were up 13% year over year. Full-year 2025 adjusted gross margin was 46.7%, up 20 basis points year over year. Full-year adjusted EBITDA was $195,700,000, up 21%, or approximately $34,000,000, year over year. We are the leading dog food brand in U.S. food, maintain a sizable market share within the gently cooked, fresh, frozen branded dog food segment. Products are now in 30,235 stores, 24% of which have multiple fridges in the U.S. and Canada. Ended the fourth quarter with 39,347 fridges. Household penetration was 15,200,000 households, up 10% year over year. Total buy rate was approximately $115, up 4% year over year. MVPs total 2,400,000 households, up 11% year over year, with an average buy rate of $56.

Expect net sales growth to be between 7% to 10% for 2026, and adjusted EBITDA to be between $205,000,000 and $215,000,000. Capital expenditures are currently projected to be approximately $150,000,000 in 2026, but could increase by $20,000,000 to $50,000,000 if more fridge island units are rolled out or more bag lines are retrofitted with new technology. For fiscal year 2027, remain confident in delivering net sales growth well in excess of the U.S. dog food category growth, aim for at least 48% adjusted gross margin and adjusted EBITDA margin range of 20% to 22%.

Q: Peter Benedict with Baird asked about implied uptick in EBITDA margins and incentive comp impact.

A: William B. Cyr and John O’Connor discussed SG&A components, including incentive comp, omnichannel build-out, and media, and how they relate to 2027 margins.

Q: Peter Sloan Benedict with Baird asked about what was learned from owning Ollie and its deployment in custom meals and DTC.

A: William B. Cyr and Nicola J Baty talked about gaining insights from Ollie and how it relates to building an omnichannel business.

Q: Brian Patrick Holland with D.A. Davidson asked about ranking consumption drivers in 2026.

A: William B. Cyr and Nicola J Baty discussed advertising, distribution, affordability as key drivers.

Q: Steve Powers with Deutsche Bank asked about fridge island expansion efforts and other testing.

A: Nicola J Baty talked about fridge islands, their capacity and benefits, and other testing like open-air end caps.

Q: Steve Powers with Deutsche Bank asked about affordability initiatives and volume vs sales growth.

A: Nicola J Baty discussed affordability efforts and how they relate to volume and sales growth.

Q: Thomas Palmer with JPMorgan asked about drivers of gross margin expansion and new technology rollout.

A: William B. Cyr and John O’Connor talked about OEE improvements, input cost optimization, and new technology's potential impact.

Q: Robert Bain Moskow with TD Cowen asked about shifting consumers from using Freshpet as a topper to main meal.

A: William B. Cyr and Nicola J Baty discussed focus on MVP consumers and omnichannel efforts to serve them.

Q: Michael Scott Lavery with Piper Sandler asked about multi packs and consumer interaction.

A: Nicola J Baty talked about multipacks and their target households.

Q: Michael Scott Lavery with Piper Sandler asked about consumer tax law changes and impact.

A: William B. Cyr discussed how tax law changes and consumer sentiment can impact the business.

Q: Rupesh Dhinoj Parikh with Oppenheimer and Company asked about competitive backdrop.

A: William B. Cyr talked about competitors entering the market and how it validates Freshpet's position.

Q: Jon Andersen with William Blair asked about 2027 EBITDA margin targets and technology inclusion.

A: William B. Cyr discussed how technology could impact 2027 margins.

Q: Jon Andersen with William Blair asked about cadence of EBITDA delivery and raw material inputs.

A: John O’Connor talked about EBITDA cadence and William B. Cyr discussed raw material costs, especially beef.