Freshpet, Inc.

Greetings and welcome to the Fresh Pet first quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Rachel Ulsch, Vice President, Investor Relations and Corporate Communications. Thank you. You may begin.

Good morning, and welcome to Fresh Pet's first quarter 2026 earnings call and webcast. On today's call are Billy Sear, Chief Executive Officer, and John O'Connor, Chief Financial Officer. Nikki Beaty, 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 reaccelerate growth, progress in opportunities and capital efficiencies, timing and impact of new technology, capital spending, adequacy of capacity, expectations to be pre-cash flow positive, 2026 guidance, and 2027 targets. They involve risks and uncertainties that could 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 our most recent filings from the SEC, including our 2025 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 to the most comparable measures prepared in accordance with 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 Sear, 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 off to a strong start to the year and are well-positioned to continue to capture a very large share of the growing market for fresh pet food. This strong start and our success are built on manufacturing scale and expertise that deliver a broad lineup of exceptional products. Our extensive fridge network across a wide array of channels that increasingly serves a rapidly growing e-commerce business and our first mover advantage that has enabled us to build a large and diverse consumer franchise. We've built a business around a wide range of products, forms, sizes, prices, and channels, and with a level of quality that no single competitor can match. It is those strengths that position us to lead the transformation of the pet food category from kibble and can to fresh. Our first quarter net sales growth was ahead of our guidance range for the year. and we believe demonstrates our ability to successfully adapt our growth plans to the dynamic environment in which we are operating. Since last reporting earnings in February, however, the macro environment has been increasingly volatile, so while we are encouraged by the trends we see, we also want to remain prudent. Year-to-date, the consumers remain remarkably resilient, but we are keeping a watchful eye on potential shifts in consumer buying habits, particularly as it relates to their willingness to trade up, and are balancing these risks against the strength we have seen to start the year. As such, we are modestly increasing our sales guidance for 2026. As we look at the business holistically, the fundamentals remain firmly intact. We compete in a large category, we're making consistent share gains, and our improving margins and new technologies are increasing our returns on capital. Together, this creates a compelling backdrop and a long runway for value creation. Against that backdrop, there are three core reasons we remain confident in our long-term growth opportunity. First, pet food is a very attractive category with long-term tailwinds like the humanization of pets, treating our pets as valuable family members, and younger generations are increasingly interested in feeding high-quality food to every member of their family, including their pets. The phenomenon of feeding your children and pets better food is a generational shift, and that suggests we have a very long runway for growth. As a result, our total addressable market has grown to 36 million households versus the 16.1 million we have today, and we expect both the addressable market and our household penetration to keep growing. Second, consumers are increasingly choosing fresh and frozen over dry and canned food, so we have the winning proposition in a winning category. We've increased our market share to 4.2% in U.S. dog food and treats, according to Nielsen on the channel data, and expect to capture a large portion of the future growth of the fresh frozen category as it continues to become more mainstream. Third, we are focused on improving returns on capital investments as we progress from being a category disruptor to a high-growth, profitable, scaled business. Our operational effectiveness programs, plus the new technologies we are developing, are designed to improve returns. And to continue to drive capital efficiency, we intend to, one, get more out of existing lines, primarily through OEE improvements. Two, get more out of existing sites, whether that be finding ways to optimize our network or add more lines to our existing campuses. And three, develop and implement new technologies. We are quite encouraged by the progress we are making on each piece of that plan. We've discussed over the last few quarters how we are shifting our commercial model by changing the media mix and message, making tactical pricing changes, and evolving into an on-the-channel distribution model. Our goal is to address the needs of a broad consumer base, and we want to give them the fresh pet products they want, how they want them, when they want them, and where they want them. We've built significant organization capability to accomplish that, And in conjunction with our network of more than 39,000 fridges that serve as fulfillment centers, we believe that Fresh Pet is uniquely positioned to serve the widest range of consumers seeking fresh pet food in the most diverse ways in which they buy. As we make these changes, there will be learnings along the way, but the key will be how we pivot to capture that opportunity. As you know, our marketing model is based on strong advertising driving household growth, and more households helps drive further distribution growth. A recent shift in both our advertising message and our media mix to support our on-the-channel business appears to be working, and we are seeing some early signs of increasing media leverage. Our fall campaigns continue to resonate with consumers, and we just launched a new campaign this week called Kitchen Conversations. Our new tagline of Better Food for Your Better Half deepens our connection and relationship with our core audience, and our ads showcase the difference that fresh products make. From a household penetration and buy rate standpoint, we continue to see household penetration growth in excess of all other Super Premium dog food brands, including DTC brands, and MVP growth continues to outpace total households. On a 12-month basis, as of March 29, 2026, household penetration was 16.1 million households, up 8% year over year, and total buy rate was approximately $114, up 6% year over year. MVPs, our super-heavy and ultra-heavy users, are continuing to grow faster than overall households and now total 2.5 million households, up 13% year-over-year, and have an average buy rate of $513. Note that Numerator recently completed its annual panel reset in April, so there have been some revisions to the absolute numbers in the historical data, but the overall trends remain the same. Growth continues to be strongest amongst higher-income households and millennials, amongst club and online shoppers, and amongst our heaviest users, ultra buyers. We do not see any signs of trade down amongst our users. From a retail standpoint, our objective is to improve accessibility and visibility for the on-the-channel consumer. Our products are now in 30,435 stores, and 25% of those stores in the US and Canada have multiple fridges. You can see on the updated chart on slide 13 of our investor presentation, that we are adding fridges faster than new stores, and we expect that trend to continue. We will still add new stores, such as Tractor Supply's recently announced expansion to up to 700 stores by year end, but have more opportunity to add more fridges in a variety of formats and configurations in the highest velocity stores we are already in, so we can serve more on-the-channel consumers. Our large retail footprint acts as a micro-fulfillment center for on-the-channel consumers and is a key piece of fulfilling digital orders. In the first quarter, digital orders grew 43% and accounted for 16.1% of our total business, up from 14.6% in the fourth quarter, and 81% of those sales volume went through our extensive bridge network. According to Nielsen Omnichannel data, Fresh Pet was the fastest-growing brand over the 13 weeks ending March 28, 2026, demonstrating the power of our marketing model and the broad availability of Fresh Pet design to meet a wide range of consumers' buying preferences. Our scale advantages extend to our manufacturing as well. Because we own our manufacturing, we have the incentive and the ability to advance the technology for making fresh pet food. We believe our new breakthrough technology enables an even stronger product proposition with both a better consumer experience and better unit economics. As we mentioned last quarter, the first bag line in Bethlehem utilizing the new technology started up in January. That line continues to perform well, and our first light version of the technology was successfully installed on another bag line in Bethlehem last month. We are very encouraged by the potential to significantly improve quality, throughput, and yield, but we want to run each of these lines for several months before we quantify the magnitude of the benefits. However, the results to date supported our decision to convert a bag line in Ennis to the light version of the technology as well. That conversion is expected to be completed by late June or early July and will allow us to convert a larger portion of our existing product lineup to the new technology this year. By the end of the year, we expect to have about 35% of our bag capacity using some version of the new technology. The capital for this expansion is modest and does not change our CapEx guidance for the year. In the coming months, we will decide whether to convert an additional bag line, i.e. a third line converted to the light version of the new technology, and also whether we'll pull forward the installation of a completely new line using the full version of the technology. That incremental line using the full version of the new technology would add significant capacity to our network sooner than we might need it, and that will factor in our decision-making. If we do move forward with either project, any capital spending for those projects would be above our original $150 million capital budget. We believe the development of this technology demonstrates our technical mastery as a self-manufactured leader in fresh pet food. Maintaining control of our manufacturing also opens up opportunities to further advance the technology. Now I'll provide some highlights from the first quarter. First quarter net sales were 297.6 million, up 13.1% year over year, primarily driven by volume. Recall in Q1 of fiscal year 25, we had distributor disruption in the pet specialty channel. Lapping net disruption added 50 to 100 basis points to our growth rate in Q1 of this year. Adjusted gross margin in the first quarter was 46.9% compared to 45.7% in the prior year period. Adjusted EBITDA in the first quarter was 37.9 million, up 2.4 million year-over-year. Now turning to our updated 2026 guidance. We are raising our net sales guidance range from 7% to 10% growth to 8% to 11% growth year-over-year and reiterating our adjusted EBITDA guidance of 205 to 215 million. We are encouraged by recent sales trends and believe raising net sales guidance is prudent based on year-to-date trends. However, we are balancing the dynamic environment we are operating in, so we are monitoring our costs closely, particularly on logistics, packaging, and any additional ripple effects on input costs. We continue to expect capital expenditures to be approximately $150 million this year, absent any incremental investments, and we expect to be free cash flow positive in 2026. John will walk through more details of our 2026 guidance in a few minutes. With that, I'll turn it over to John to walk through more details of our financial results.