Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Freshpet Inc (NASDAQ:FRPT) achieved strong top-line growth in fiscal 2024, driven primarily by volume gains and increased household penetration.
• The company added approximately 2 million households, with significant growth in super heavy and heavy users, contributing to a loyal consumer base.
• Freshpet Inc (NASDAQ:FRPT) improved its adjusted gross margin by 650 basis points in 2024 and over 1,000 basis points in the last two years, indicating strong operational efficiency.
• The company achieved positive net income for the first time, with an EPS of $0.94 and generated $154 million in operating cash flow.
• Freshpet Inc (NASDAQ:FRPT) successfully expanded its retail presence, adding over 1,300 new stores and increasing its fridge count significantly, supporting future growth.

Negative Points

• The pet specialty channel has struggled, and Freshpet Inc (NASDAQ:FRPT) plans to change its distribution partner, which may involve non-recurring effects.
• The company's growth rate for fiscal year 2025 is projected to be below the previously outlined 25% rate, potentially impacting investor expectations.
• Freshpet Inc (NASDAQ:FRPT) faces challenges in maintaining its growth momentum due to capacity constraints and the need for new technology investments.
• The adjusted gross margin in the first quarter of 2025 is expected to be negatively impacted by approximately 150 basis points due to inventory normalization.
• The company anticipates capital expenditures of approximately $250 million in 2025, which could affect its ability to be free cash flow positive by 2026.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with FRPT.

Q: Can you elaborate on the factors driving the strong net sales growth in 2024? A: Billy Cyr, CEO, explained that the strong net sales growth was primarily driven by volume gains, resulting from increased household penetration and buy rate. This was fueled by media investment and retail expansion, leading to a loyal consumer base without relying on trade promotions or discounting.

Q: How did Freshpet manage capacity expansion and maintain high fill rates? A: Billy Cyr, CEO, stated that Freshpet successfully managed capacity expansion by threading the needle on capacity and media spend, maintaining over 99% fill rates while selling 27% more volume than the previous year.

Q: What were the key financial achievements for Freshpet in 2024? A: Todd Cunfer, CFO, highlighted that Freshpet achieved a 46.5% adjusted gross margin, up 650 basis points year over year, and a full-year adjusted EBITDA of $161.8 million, up 143% year over year. The company also generated $154 million in operating cash flow and achieved positive net income for the first time.

Q: What is Freshpet's outlook for fiscal year 2025? A: Todd Cunfer, CFO, provided guidance for 2025, expecting net sales of approximately $1.18 billion to $1.21 billion, representing 21% to 24% growth year over year. Adjusted EBITDA is expected to be at least $210 million, with capital expenditures projected at approximately $250 million.

Q: How does Freshpet plan to address the challenges in the pet specialty channel? A: Todd Cunfer, CFO, mentioned that Freshpet intends to change its distribution partner in the pet specialty channel and invest in new approaches to enable customer success, as the channel has struggled in recent years.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.