Freshpet, Inc.

Thank you, Rachel. You may now begin.

Good morning, and welcome to Fresh Pet's third quarter 2025 earnings call and webcast. On today's call are Billy Sear, Chief Executive Officer, and Ivan Garcia, Interim Chief Financial Officer. Nikki Beatty, Chief Operating Officer, will also be available for Q&A. Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements related to our strategies to accelerate growth, progress and opportunities, and capital efficiencies, timing and impact of new technology, capital spending, adequacy of capacity, expectations to be free cash flow positive, 2025 guidance, and 2027 targets. They involve risks and uncertainties that can cause actual results to differ materially from any forward-looking statements made today, including those associated with these statements and those discussed in our earnings press release and most recent filings of the SEC, including our 2024 annual report on Form 10-K, which are all available on our website. Please note that on today's call, management will refer to certain non-GAAP financial measures, such as EBITDA and adjusted EBITDA, among others. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for how management defines such non-GAAP measures why management believes such non-GAAP measures are useful, a reconciliation of the non-GAAP financial measures, the most comparable measures prepared in reference of GAAP, and limitations associated with such non-GAAP measures. Finally, the company has produced a presentation that contains many of the key metrics that will be discussed on this call. That presentation can be found on the company's investor website. Management's commentary will not specifically walk through the presentation on the call. Rather, it is a summary of the results and guidance they will discuss today. With that, I'd like to turn the call over to Billy Cyr, Chief Executive Officer.

Thank you, Rachel, and good morning, everyone. The message I would like you to take away from today's call is that we are quickly adjusting to the new economic reality and remain one of the best performing pet food businesses. We continue to outperform the U.S. dog food category. We are building market share across every channel, and we are winning a disproportionate share of new pet parents. We also continue to deliver strong operating performance despite the slowdown in volume growth. Further, we have maintained financial discipline and appropriately managed our capital spending to match our growth, and that, in combination with strong operating performance, has enabled us to achieve positive free cash flow in the third quarter and will enable us to become free cash flow positive for the full year, which is one year ahead of our original 2026 target. Taking a step back, The deceleration in sales growth this year was unprecedented. We clearly started this year expecting to operate in a much different environment and have had to shift our strategy to address these challenging and dynamic times. While we can't control consumer sentiment, we can adapt our consumer proposition and make sure we are best positioned to increase household penetration by winning both new and existing pet parents while also improving our profitability and free cash flow generation. We believe we are taking all of the necessary steps to stabilize and then re-accelerate our top-line growth by continuing to focus on areas that are within our control. To address the consumer environment, we've adjusted our media and go-to-market strategy to both reach and appeal to more households while super-serving our MVPs who account for 70% of our volume. This includes starting to test new digital touchpoints and expanding our focus and resources on e-commerce channels, including DTC. The transition to this updated and improved commercial framework began earlier this year, but it is an evolution, so we will gradually increase the investment behind it as we get increased evidence of its effectiveness. We are also doubling down on our three key strategies designed to expand the appeal of Fresh Pet, particularly amongst our MVPs. Those strategies are, first, best food. We believe that Fresh Pet's highly differentiated product offers an enhanced experience for our consumers that we need to highlight in order to expand our franchise. We launched a new media campaign at the end of August and early September, showing the lengths we go to produce the best food, and at the end of October, launched another new ad showcasing our ingredients. The new ads are much more focused on the benefits of fresh food than our previous creative, and early in-market data is encouraging. Second, strong value proposition. We are operating in an environment where economic uncertainty has led to less trade-up than in the past. To address this, we have now launched our new complete nutrition bag product in select retailers to help encourage trial, as well as do multi-packs and bundles both online and in-store for the more value-focused consumer. We have also sharpened our price point on our one-pound chicken roll, which we believe will help drive more trial and increase household penetration. Third, improved accessibility. We continue to make good progress on the visibility and availability of Fresh Pet, one of our greatest competitive advantages. You may recall that we showed a rendering of a fridge island back in February at the Cagney Conference, which is a new concept with a mix of both open-air and closed-door fridges. It is designed to change the way the consumer shops the fresh pet food category, changing it from a search for a packaged good in an aisle to grocery shopping for your pet. We believe this is the next big unlock in our retail visibility and availability strategy and will create increased awareness of the brand and greater trial of our wide range of items. Last month, we started testing new fridge islands in the first 16 stores of a large mass retailer, and we've included a picture in our earnings presentation. It is still very early days, but we believe this expansion demonstrates how leading retailers view Fresh Pet as the future of the dog food category because of its enormous growth potential. We've also further increased distribution in a large club customer. We were in our first store in this retailer in April, 125 stores at the end of July, and are now in 590 stores as of the end of September. The sales are still ramping up. However, we are very encouraged by the launch so far and the future potential. At another club retailer, we've also expanded our range to have a third SKU in select stores and have also just started a small test in a rural lifestyle retailer. As we look to the next leg of distribution, we expect the majority of growth to come from stores where we have or can have second and third fridges or outside of aisle placements like Fridge Islands, as well as the online channel. We plan to leverage our retail strength where we are the clear category growth driver, and at the same time, we are really excited about our continued growth of e-commerce. We had another strong quarter of growth in digital orders of 45%, and we recognize we are significantly under-penetrated in the e-commerce channel, including DTC. We are keenly focused on increasing our presence to capture the omnichannel and online customers and plan for this to be a more meaningful part of the business as we head into 2026. In total, we believe these strategies will enable us to re-accelerate our growth. Each of these strategies drive actions that we can control and leverage our unique capabilities and proposition. That will ensure that we will continue to outperform the category and drive the transition of the dog food business to fresh food regardless of the macro environment. Our efforts to adapt to the current environment are not limited to driving the top line. We are also focused on driving operational efficiency through a variety of approaches. First, via our new technology. The current demand environment means that our team has more available line time to lean in and test new technologies and formulations. We have been working on new bag technology since 2019 that is designed to produce significantly better products at a lower cost. It does this by increasing throughput, improving yields, and reducing the amount of product that requires secondary processing. We expect this to result in increased bag product margins and decrease the margin gap between bags and roll products. Our goals deliver both meaningful product improvements and significantly improved economics. It can also unlock new innovation capabilities. The first new production scale line that uses this new technology is now fully installed and in the final stages of commissioning. We expect to produce saleable products on that line in Q4, and we are very excited by what we've seen so far. Second, we are also taking a pragmatic approach to managing our capacity. It is not clear how long this period of consumer uncertainty will last, so we are using a variety of approaches to ensure that we have adequate capacity to meet our growing demand but also don't get too far ahead of ourselves on capital spending and staffing. Fortunately, our facilities are running very well now, and that has provided us with free capacity. In conjunction with further operating improvements that we expect to deliver, we expect to have adequate capacity to support our growth for a while. We are a much more stable business than we were three or four years ago, and when you couple that with a new technology, it enables us to reduce our capital spending this year and next year. We do not believe that this reduction in CapEx will limit our ability to grow over the next two to three years, as we already have $1.5 billion of installed capacity available to us if the growth re-accelerates and can add staffing as needed. Now I'll provide some highlights from the third quarter. Our third quarter net sales were $288.8 million, a 14% year-over-year, primarily driven by volume. Adjusted gross margin in the third quarter was 46.0%, compared to 46.5% in the prior year period, and adjusted EBITDA in the third quarter was 54.6 million, up approximately 11 million, or 25% year over year. From a category perspective, we continue to be the number one dog food brand in U.S. food, with a 95% market share within the gently cooked, fresh, frozen branded dog food segment in Nielsen Brick and Mortar customers, defined as XAOC plus PET. We compete in the nearly $56 billion US pet food category per Nielsen omnichannel data for the 52 weeks ended September 27th, 2025. And within the nearly $38 billion US dog food and treats segment, we have increased our market share to 3.9%. From a retail perspective, competitive entrants have not slowed our expansion to date. In fact, we believe that new competition will ultimately grow the category as we've seen many times before in other categories. such as Greek yogurt and coffee. Fresh Pit products are now in 29,745 stores, 24% of which have multiple fridges in the US. Looking ahead, we expect this percentage to increase as we add more fridges to the highest velocity stores. We ended the third quarter with 38,778 fridges, or nearly 2.1 million cubic feet of retail space, with an average of 20.1 SKUs in distribution. Our percent ACV in grocery, where we're the dog food market leader, was 79% at quarter end, and in XAOC, only 68%. From a household penetration and buy rate standpoint, we remain one of the only dog food companies that consistently grows both. Our household penetration as of September 28th was 14.8 million households, up 10% year over year, and total buy rate was $111, a 4% year over year. MVPs, which are our super heavy and ultra heavy users, are continuing to grow faster with a total of 2.3 million of those households, a 15% year over year. MVPs represented 70% of our sales in the latest 12 months with an average buy rate of $490. We are still growing households across every age and income group and gaining market share. The dog food category is declining, but Fresh Pet continues to be a clear winner. we are seeing that we are attracting a large portion of new pet parents, which is very encouraging. Turning to capacity, we feel good about our manufacturing footprint today. NS continues to be the most profitable fresh pet kitchen and accounts for approximately 38% of sales volume. Our overall operating effectiveness, or OEE, our measure of operating efficiency, continues to improve, and the new technology line in Bethlehem is expected to produce saleable product later this quarter, as I mentioned a few minutes ago. This will be our 16th line across the network, and we are very excited by its potential. The technology to make fresh pet food is still very nascent, and we constantly try to push the limits and come up with ways to drive greater returns. Next spring, we also plan to retrofit another bag line in our Bethlehem kitchen with the light version of the new technology that could prove to deliver a meaningful portion of the same benefits of the full technology line with minimal line downtime to install the new technology and minimal capex. Our capital efficiency framework is centered around three key areas. First, getting more volume out of existing lines, primarily through OEE improvements. Second, getting more out of existing sites, whether that be finding ways to add more lines on our campuses or network optimization. And third, developing and implementing new technologies. We've made tremendous progress with this framework and believe there is still a significant opportunity to create incremental shareholder value. Now turning to outlook for the remainder of the year, we are currently tracking to the lower end of our previous net sales and adjusted EBITDA guidance ranges. So we now expect net sales growth to be approximately 13% for the year and adjusted EBITDA to be between 190 and 195 million. We are updating our CapEx guidance to approximately 140 million as we're able to shift more projects out. The silver lining of the slower than expected sales growth this year is it has now positioned us to achieve positive free cash flow a year earlier than anticipated, a significant company milestone. Ivan, our interim CFO, will walk through more details of our 2025 guidance in a few minutes. In regard to our fiscal 2027 targets, we remain confident in our ability to achieve 48% adjusted gross margin and 22% adjusted EBITDA margin in 2027 if our sales volume growth is at least low teens. If we were to grow high single digits, we believe we can still achieve an adjusted EBITDA margin of approximately 20%. In summary, we have taken actions in strategic areas to focus on what we can control and make sure we continue to deliver category-leading growth despite the current category softness and competitive entrants. Dog food has historically been one of the best, most recession-resistant categories, and we believe we are best positioned to capture the future growth of the category. We expect to continue to build market share, grow household penetration, and win a disproportionate share of new pet parents to ultimately capture the lion's share of profit in the category too. Before I hand it to Ivan, I want to address the ongoing CFO search. We've hired an independent executive search firm and we have a very long list of very exciting candidates. We hope to select the next CFO quickly, but we'll take our time to find the right person. In the interim, we are confident in Ivan and his team's capabilities and believe we can still deliver the necessary business results until we find a permanent successor. Ivan has been with Fresh Pet for 11 years, having joined the company shortly before the company went public in 2014 from KPMG. He has been involved in every aspect of our financial operations since then, including leading accounting, financial planning, systems development, and our data analytics operation. Ivan is a trusted member of our team, and his move into the interim CFO role has been seamless. With that, I'll turn it over to Ivan to walk through more details of our financial results. Ivan?