Freshpet, Inc.

Good morning and welcome to Fresh Pet's third quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Rachel Ulsh, Vice President, Investor Relations. Please go ahead.

Good morning and welcome to FreshPep's third quarter 2026 earnings call and webcast. On today's call are Billy Cyr, Chief Executive Officer, and John O'Connor, Chief Financial Officer. Nikki Beaty, President and Chief Operating Officer, will also be available for Q&A. Before we begin, please remember that during my 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 the size of the category in our TAM, our strategy and expectations for growth, the competitive advantage of our manufacturing on quality and cost, bridge expansion expectations, opportunities and capital efficiencies, expectations on margin improvement, capital spending, media spend, logistics costs, 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 with 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 would like to turn the call over to Billy Cyr, Chief Executive Officer.

Thank you, Rachel, and good morning, everyone. The message I would like for you to take away from today's call is that our market performance and financial results continue to demonstrate the strength and durability of the Fresh Pet business model. We have built a structurally different business than many of our CPG peers with multiple strategic competitive advantages that have grown and evolved over the last 20 years and are now the foundation of an advantage business that has sizable upside potential. We continue to raise our product quality, advance the manufacturing of fresh pet food, and improve the access and distribution of our products. Our breadth of product forms, sizes, price points, and channels is unmatched. We believe our most significant competitive advantage is the product itself, i.e., our recipes are strongly preferred by dogs and pet parents due to taste, aroma, color, texture, inclusions, and overall quality. And our manufacturing scale and technical expertise are the foundation of why we believe our product quality is superior. Owning our kitchens enables us to continue to develop the highest quality products at the lowest cost to help pets live longer, happier, healthier lives. We also continue to broaden our availability and access, particularly online, as we continue to grow our franchise of highly loyal consumers. The total addressable market of these loyal consumers, who we refer to as most valuable pet parents or MVPs, is 10 million households and growing due to the generational shift of pet-owning households. We're only at 2.6 million MVP households today. We're approximately 26% into our current and still growing MVP TAM. Our third quarter results demonstrate the strength and durability of our business. In a consumer environment that remains challenging, we are performing and operating well. We achieved double-digit sales growth and reported an adjusted gross margin of 50% in the third quarter. This was our best adjusted gross margin in over seven years, since the first quarter of 2019, before we had opened our second kitchen in Bethlehem, our Ennis kitchen, or Kitchen South, and when higher margin rolls made up a greater percentage of our sales. Importantly, our gross margin this quarter included only a limited benefit from the new bag technology, with the adjusted gross margin increase primarily driven by our improved operating performance. I'm incredibly proud of our team for their hard work and dedication in achieving this milestone, and we are very encouraged by our future margin potential. Our sources of growth in the quarter were broad-based and the result of a wide range of strategic initiatives we have implemented. They include, one, advertising. We continue to invest heavily in advertising as the primary driver of our growth, and have particularly targeted that to potential MVPs, our most valuable pet parents. As a result, we saw our MVP household penetration increase 8%, and the combination of total household penetration gains and buying rate overall grow 10%. A portion of our media spend is still aimed at growing total brand awareness, particularly on linear TV, but we have evolved our strategy to superserve MVPs to drive greater returns. As the category becomes more competitive, we're also increasingly focused on building awareness of fresh pet and our real food leadership, not just building awareness of the fresh category. Our marketing campaign launched in May, Better Food for Your Better Half, and new creative we launched in September are designed to reinforce the qualities that make fresh pet unique. Real ingredients you can see, freshly cooked, vet-developed, healthy recipes, a proposition that resonates with pet parents who treat their pets like family members. Second, distribution. Our retail presence continues to strengthen, including a 5% increase in store count to more than 31,000 stores and a 14% increase in TDPs due to the increased presence of larger and double fridges. We continued to grow distribution significantly in a major rural lifestyle retailer, began testing new three-door fridges in a major club customer, added SKUs in two major club customers, and 25% of our stores have more than one fridge. We expect this figure to increase to enable both greater holding capacity and the broadest assortment to be available. Each of these increases is another indication of retailer confidence in the growth potential of Fresh Pet, even in the face of significant new competition. Retailers know that we are growing market share, and we remain the fastest growing brand in dog food in dollars, and the second most popular brand among new Gen Z and millennial dog households. Third, omnichannel access. In the third quarter, we had outsized growth in e-commerce, with sales up 35% year-over-year. Digital orders now account for 16.9% of our total business, and our fridges and retails serve as micro-fulfillment points and support both online and in-store sales. Approximately 82% of our digital order volume went through our fridge network via Omni Retail or last-mile delivery services, with the remainder of the volume from pure-play online retailers or direct-to-consumer. Fourth, technology. Our Fresh From the Kitchen product line has been the major beneficiary of the product quality and margin improvement potential of our new bag production technology. Since we converted that product to the new technology, we've seen consumer feedback on quality improve significantly, and volume trends have stepped up noticeably. The new technology is also enabling a broader range of new innovation, including new protein formulas, upgraded recipes, new pack sizes like our healthy mixers, and better-looking inclusions like carrots and green beans. All these technology-led innovations increase our product quality advantage and do it at attractive costs. Fifth, new product innovation. In addition to the new products enabled by our new technology, our business model enables us to nurture significant new innovations much longer. For example, our most premium product line, Homestyle Creations, crossed the $100 million mark in annual retail sales during the quarter and is the fastest growing part of our business. And it accomplished that with just a handful of recipes. We continue to believe that this wide array of strategies can drive strong and sustained top-line growth well in excess of the dog food category and deliver sizable market share gains. As the economic backdrop and competitive environment shift over time, each tool may play a larger or smaller role at any particular time, but the wide array of tools we have, the scale and technology we have built, our mastery of the fresh pet food category, and the strength of our team provide us with the ability to drive outsized growth over time. The past year has provided solid evidence of that, as we are now projecting to grow 12-13% this year in the face of the most significant amount of new competition we have ever had and a tough economic backdrop, all while increasing margins and cash flow. As encouraging as that is, we are more encouraged by the long-term growth potential that remains in front of us. First, large category growing market share. We only have a 4.5% market share of the approximately $38 billion dog food and treats category, a significant white space opportunity to continue to take share from traditional dog food competitors. Second, large and expanding TAM. As I said earlier, we are only 26% into our MVP TAM, and that TAM grows each year as more millennial and Gen Z consumers form households and get dogs. The MVPs in our franchise represent 72% of our sales today and spend roughly $522 a year, which is nearly 13 times more than a non-MVP, and they are likely to have a much higher lifetime value than an occasional user. Third, expanding distribution with an omnichannel focus. We still have a long runway for growth, both online and in-store. E-commerce is the fastest growing part of our business and still has a significant runway for growth, as over 35% of dog food category sales are done online. versus our 16.9% today. And 75% of stores only have one fridge, the same number of fridges that most of them had when Fresh Pet was one quarter the size it is today. More fridges provide a broader assortment, more holding power to support an online business, and greater visibility. For retailers looking to lean into the growing part of the category, we believe we have one of the most attractive propositions. With our products in over 31,000 stores Thank you for joining us. It is the foundation for our product quality, which is noticeably different than competition. We continue to improve the products and are increasingly bullish on our new bag technology potential. We have made significant progress in our operations and will continue to refine elements of those lines and ramp up volume throughout this year and next year. At fully optimized performance, we still expect over 100 basis points of adjusted gross margin improvement on the entire business from the three lines we have already installed. We are still finding more and better ways to use technology for innovation as well as optimize performance to unlock greater capacity. Within our existing asset base, we are driving better capital efficiency through our productivity and operational effectiveness initiatives. Our goal is to, one, optimize our existing lines to drive more volume, primarily through OEE improvements. Two, get more out of existing sites, whether that be optimizing our network or adding more lines or capabilities to our existing campuses. and three, develop and deploy new technologies to improve returns on capital investments. We have a long runway to further improve capital efficiency but are very pleased by the progress we've made to date. We've also made a strategic decision to transition from a third-party distribution center in Allentown, Pennsylvania to our new distribution center in Bethlehem, Pennsylvania that will open in early 2027. While this is a custom-built, dedicated facility, it is leased so it requires very little capital spending on our part. Beyond adding capacity, it brings a critical piece of our cold chain network closer to our Bethlehem kitchen, giving us greater control over distribution, enhancing service levels, and creating a platform for longer-term efficiency, automation, and scale as we continue to grow. I hope you can see why we are very bullish on the long-term potential of Fresh Pet. Our core strategy remains intact, but we continue to adapt and evolve our strategies and are focused on the things we can control in a challenging operating environment. We are operating from a position of strength with a strong portfolio of products, a loyal and growing consumer franchise, expanding on the channel access, and a proprietary manufacturing platform that we believe is difficult to replicate. The key areas we have chosen to focus on to maintain and expand our competitive advantage are resulting in more durable growth and improving financial performance. Our results continue to prove that fresh is the future of pet food, and we remain well positioned to capture a meaningful share of what we believe can become a $10 billion category over time. Lastly, I want to highlight that in October, we celebrated Fresh Pets' 20th anniversary. As we announced in June, upon this milestone, one of our co-founders, Scott Morris, transitioned to an advisory role, and Nikki Baty has assumed the role of president and COO. Prescott is now entering its third decade with a strong leadership team, scaled operations, and significant opportunities for future growth. With that, I'll turn it over to John to walk through more details on our financial results.