Freshpet Stock Earnings Reports

Financial Performance Overview

Fourth-quarter sales were $263 million, up 22% year-over-year.

Adjusted gross margin for the year was 46.5%, improving by 650 basis points from the previous year.

Operating cash flow was $154 million for the year, marking significant year-over-year growth.

Achieved positive net income for the first time, with $0.94 EPS.

Growth Drivers

• Sales growth was primarily driven by volume, with significant gains in household penetration (approximately 2 million new households added).
• 1,300 new store distributions added, enhancing retail presence.

Profitability and Operational Efficiency

• Cost Management
  • Successfully maintained 99% fill rates while increasing volume sold by 27%.
  • Adjusted SG&A costs as a percentage of net sales decreased since 2020.
  • Achieved the company’s adjusted gross margin targets two years ahead of schedule.
• Future Capacity and Expansion
  • New production lines have been successfully implemented, with more capacity expansion planned for the future to support projected growth.
  • Expect to reach up to $3 billion in sales capacity with existing facilities.

2025 Outlook

• Sales Guidance
  • Projecting net sales between $1.18 billion to $1.21 billion for 2025, representing year-over-year growth of 21% to 24%.
  • Adjusted EBITDA is expected to be at least $210 million.
• Margin Improvement
  • Anticipating modest adjusted gross margin improvement driven by operational advancements.
  • Short-term gross margin in Q1 2025 may see a negative impact of 150 basis points as inventory normalizes.

Strategic Focus

• Target Market
  • Shifting focus to the Most Valuable Pet-parents (MVPs) who are key growth drivers, representing 69% of sales for 2024.
  • Continued commitment to build on existing growth trends, with aspirations to expand market share in the pet food category, which is projected at $54 billion.
• Long-Term Strategy
  • Enhancing marketing and distribution strategies, with a clear path to meet a long-term net sales target of $1.8 billion by 2027.
  • Revisions to margin targets for 2027, now expecting 48% adjusted gross margin (previously 45%) and 22% adjusted EBITDA margin (previously 18%).

Conclusion

Freshpet reports strong financial health and operational success, with a clear strategy for future growth and profitability. Investors should note the emphasis on scaling operations, improving margins, and leveraging household penetration and customer loyalty for sustained success. The outlook remains optimistic with significant market opportunities in the evolving pet food landscape.