Once Upon a Farm, PBC

Greetings. Welcome to Once Upon a Farm's fourth quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Reed Anderson, with ICR. Thank you. You may begin.

Thank you, and welcome to the Once Upon a Farm fourth quarter 2025 earnings conference call, and first as a public company. With us on the call today are John Foraker, chief executive officer and co-founder, and Larry Waldman, president and chief financial officer. By now, everyone should have access to the earnings press release that was issued earlier this afternoon and is available on the investor relations section, Once Upon a Farm's website at onceuponafarmorganics.com. This call is also being webcast and a replay will be available shortly after the call concludes. Before we begin, please note certain comments made on this call include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. We do not undertake any obligation to update any forward-looking statements, reflect events or circumstances after the date of this call, except as required by law. During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings, as well as the earnings press release, provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures. And now, I will turn the call over to John to begin.

Thanks, Reed. Good afternoon, everyone, and thanks for joining us today. We're excited to share our fourth quarter results as a public company. Before I dive into our business performance, I want to take you back to where this incredible journey began, because understanding our origins helps explain the passion and purpose that drives everything we do today. Then I will share some more fulsome than typical updates on our prior year's performance, as this is our first earnings call. Once Upon a Farm was born from Cassandra Curtis's love and determination to provide better nutrition for her children. After bringing her first child into the world, she couldn't find baby food that met her high standards for freshness, taste, and nutrition at the grocery store, so she started making her own. That entrepreneurial instinct to solve her own problem created the company's foundation, and what started in that one kitchen with a commitment to creating real, organic, farm-fresh food has grown into a movement that's transforming childhood nutrition across America. From those early days selling at farmers markets, we've always believed that children deserve better than the available options that have historically dominated the market. When Jennifer Garner and I joined Cassandra Curtis and Ari Raz as co-founders in 2017, the very first thing we did together was draft our mission statement. We exist to drive systemic improvements in childhood nutrition for a healthier, happier, and more equitable world. It's impossible to overstate how critical these words and intentions have been in guiding us in the development of this brand and business over the years. Our mission remains unwavering and more relevant than ever. We are shaping the future of food, and our mission informs every decision, from what products we'll make, to who we'll hire, to what business partnerships we'll enter into, and how and where we source. Our entire team is dedicated to delivering on this mission and building our strong company culture as we grow from here. This mission-led approach isn't just marketing speak. It's woven into our articles of incorporation as a public benefit corporation, a PBC, where we are uniquely positioned to balance the financial interests of our stockholders with the broader impact we're making on childhood nutrition and the communities we serve. All our work against our mission results in better products and deeply layered elements of impact that drive brand trust, loyalty, and word-of-mouth advocacy among consumers who care. When parents find a product and brand they love, they share with their personal networks in powerful ways. The depth of our mission matters. From baby's first bites to kids' school-ready snacks, we've established ourselves as a rapidly growing leader in modern childhood nutrition, giving parents one trusted brand spanning baby's first foods through older kids. Our journey demonstrates the power of our consumer-first approach and the massive opportunity we're addressing in the childhood nutrition market. Our results speak to our remarkable growth trajectory. Since 2018, our net sales have grown at a compound annual rate of 63%, including a 53% year-over-year increase in 2025. We are the number one growth brand for retailers in the categories in which we participate, and we have a repeat purchase rate of over 50% from households with children, and 60% from new families. Our products are now available in more than 25,000 doors nationwide. What makes us particularly attractive to retailers is that we are a high velocity, highly incremental brand that brings valuable consumers into the store. When they get there, they find our unique and growing presence across the store. We sell in both the fresh perimeter and center of store. The positioning provides convenience for consumers, whether they're shopping on premises or online, while helping retailers attract larger basket shoppers and generate better margin outcomes. The incrementality we bring to our categories is significant and rare in consumer packaged goods. On the fresh perimeter, our kids' snacking pouches are 69% incremental, and in the baby aisle and center store, our coolers are 61% incremental to the baby food category, while our dry baby snacks are 80% incremental to each baby and toddler snacking segment. As a result, our brand helps drive two to four times larger baskets for our retailers, and we contribute significantly to growing the entire category. Retailers see the power of our brand and the results we deliver, and as a result, we have significant future growth opportunities ahead of us. Our brand's farm-fresh-first approach has created deep, authentic connections with parents who share our values around childhood nutrition. This has resulted in exceptional consumer loyalty and advocacy that goes far beyond traditional brand metrics. The power of our brand is perhaps best demonstrated through word of mouth marketing, which has become increasingly significant for us. In 2025, over one-third of new consumers discovered the Once Upon a Farm brand through word of mouth. This authentic advocacy from parents who genuinely love our products provides us with cost-effective marketing that money simply can't buy. When parents become advocates for our brand, They're not just recommending a product, they're sharing their belief in our mission and values. Our brand strength is built on several key elements. First is trust. Parents know that when they choose Once Upon a Farm, they're getting always USDA-certified organic products with no added sugar, no preservatives, and nothing artificial. Second is quality. Our cold-pressed approach and farm-fresh ingredients deliver taste and nutrition that kids actually crave. Third is convenience. We make it easy for parents to provide nutritious options for their children without compromising on quality. We believe we are building the first parent-ally brand with a deep commitment to superior fresh products with high nutrition standards. 92% of our customers believe that O-Farm delivers the best overall nutrition. Together, with incredible taste from baby's first foods all the way through kid, O-Farm's positioning differentiates us in a crowded marketplace and creates emotional connections that drive long-term loyalty. Our growth strategy is built on four foundational pillars. Number one, growing brand awareness to drive increased household penetration. Number two, deepening and expanding reach with retailers. Number three, continuing innovation-led category disruption. And four, driving sustained profitable growth. Together, these pillars leverage our unique positioning in the childhood nutrition market to capitalize on the significant opportunities ahead of us. We're making tremendous progress growing brand awareness to drive increased household penetration, our first strategic pillar. At the end of December, our household penetration stood at 5.1%, a 42% increase over the past year. While this growth trajectory is encouraging, we recognize substantial runway remains when we consider that leading competitors average 12.5% household penetration or higher. Over time, we see mid-teens or higher household penetration as we continue to build brand awareness, and broaden our product portfolio to increase the number of consumer relevant categories where we show up. Our marketing approach encompasses a comprehensive omni-channel strategy from top of the funnel awareness efforts down through purchase and repeat. Key elements include national television advertising, influencer partnerships, social media engagement, retail media, strategic sponsorships, and of course, compelling in-store and digital shelf positioning with the best retailers in every corner of the country. What's particularly noteworthy is that even while growing our penetration by more than 42% in 2025, where we added approximately 2.2 million new households, our buy rate among households with children increased by nearly 7%, to a robust $47.20. Generally, when brands add new households at this fast a pace, you expect to see dilution in buy rate as they attract lots of lighter and more infrequent users. But we are seeing the opposite. We are obviously attracting the right brand fit households. And additionally, more of them are buying us across multiple categories, which is our goal as we grow. Our direct-to-consumer channel also continues to serve as a valuable data collection and relationship-building platform, providing critical insights that inform our product development and marketing strategies. Regarding deepening and expanding our reach with retailers, our second strategic pillar, we are seeing strong results across both existing and new partnerships. We have achieved 69% ACV distribution, spanning more than 25,000 locations across six product categories, with an average SKU count exceeding 20 per door in U.S. NULO channels. Our top-tier retail partners carry between 30 and 60 SKUs with continued growth trajectory. Baby coolers are an important cornerstone of our retail strategy, but they are only part of it. Coolers in a baby aisle serve as a key point of entry into the brand for new households. We are rapidly expanding this program, including 62% growth in 2025 to over 3,400 units installed. The economics are compelling, with each cooler generating approximately $12,000 in run rate average annual retail sales and our investment contribution ranging from $3,000 to $8,000 per unit, depending on the size of the cooler, retail terms, and anticipated productivity. This expense varies on our P&L, but is typically recognized in our trade spend or sales expense with minimal spend hitting our CapEx. Coolers are treated as a period expense, and when reflected in trade spend, our net sales and profitability are depressed by such in the period the cooler is installed. For retailers, coolers are a clear winner. They drive a 1.8x lift in overall baby department basket size, creating incremental value for our retail partners as they see higher share and more frequent trips down the aisle that lift the entire aisle. Because of these attractive consumer dynamics, we are either expanding, are in test and about to expand, or about to go into test with almost every significant grocery retailer in the U.S. with lots of opportunity to expand. We see potential to scale this program to over 15,000 coolers in North America over time. This represents the number of stores where our cooler strategy is viable today and where a cooler would work well right now if we got it in, not just a future projection. Of course, it will take time to build toward this potential. Given our confidence and years of experience in coolers, we are prioritizing speed to market while ensuring we partner with the right retailers and right stores within their footprints to expand this part of our business as fast as we can while executing with precision. Our third strategic pillar, continuing innovation-led category disruption, underscores how our innovation pipeline consistently delivers impressive market performance and drives valuable cross-category shopping behavior. Since 2023, we've introduced more than 40 new products from new product lines. all of which captured significant share within a short period of time. For example, we introduced dry baby snacks in 2024, and within six months, we had achieved top three performance within the category according to SPIN's US MULO data. Last week, we announced the latest wave of all USDA certified organic innovation that will be hitting store shelves beginning in April. Our meat, meat and bone broth, and legume blends mark the next evolution of Once Upon a Farm's signature pouches. These are the brand's first-ever refrigerated, organic, cold-pressure protected, protein-forward pouches for babies. We are targeting these products for placement in all our existing and future baby coolers over the coming quarters. We expect these pouches to be highly incremental to our existing assortment and they should be a driver of continued cooler productivity growth in the years ahead. Further advancing our innovation in the pouch category, we're also introducing smoothies with protein and probiotics, offering four grams of protein and added probiotics to help support immune health of older kids. These products will be focused on kid dairy sets where we sit nationally in retail. Finally, we launched Power Wheels, a soft and chewy fun-sized fuel made with four grams of protein, 100% whole grain oats, and real fruits and veggie ingredients created with older active kids in mind. Power Wheels builds on the success of tractor wheels with an aged-up version that extends our wheel franchise and expands our retail brand block and presence in kid bar sets nationally, an area of significant growth opportunity for our brand. Our final strategic pillar, driving sustained profitable growth, encompasses a broad range of operational excellence initiatives that have already delivered meaningful margin expansion and cost optimization. For example, gross margin was 42.3% in 2025 and has improved 305 basis points over the past three years. Our optimization efforts have delivered over 25 million in annual savings and include reducing final mile delivery costs by more than 35% over the last three years while maintaining our customer-first experience. Going forward, we will continue to focus on high ROI investments in our supply chain, systems, and business capabilities to drive further margin expansion potential from our portfolio. We've also made strategic investments in best-in-class talent, implemented strategic revenue and sales management principles, and built scalable information technology systems to support profitable growth. Our Follow the Harvest global procurement network enhances both quality and cost efficiency while ensuring supply chain resiliency. We've developed a scalable production platform with partners who share our commitment to quality and have invested alongside us to support our growth. positioning us well to consistently deliver premium products while ensuring profitability and sustainability. These four strategic pillars work synergistically to position us for sustained profitable growth while staying true to our mission of transforming childhood nutrition. As we look ahead to the opportunities before us, we're excited about our ability to continue creating positive change in childhood nutrition while delivering value to our shareholders and stakeholders alike. Our strong foundation in mission, business operations, brand building, innovation, and supply chain excellence positions us well for continued growth and success as a public company. We believe our products and mission are more important and relevant than ever, given the widely recognized societal challenges around the health of our children, and we're committed to being part of the solution. Now I'll turn the call over to Larry to cover the financial details and our updated outlook.