BEDMINSTER, NJ. — Capacity expansions, improved costs and high buy rate are all proving fruitful for Freshpet, as evidenced by the company’s strong financial for the second quarter ended June 30. 

“Freshpet is delivering disciplined growth,” said Billy Cyr, chief executive officer, Freshpet. “That has enabled us to significantly improve profitability while continuing to deliver category-leading net sales growth. The momentum we have today gives us even greater confidence in our ability to achieve our 2027 targets, a number of which we have already exceeded.”

For the second quarter, net sales for the fresh pet food company were $235.3 million, an increase of 28.3% from $183.3 million in the prior year, which Freshpet entirely attributed to volume gains. Gross profit was $94 million (accounting for 39.9% of net sales), an increase from $59.2 million in the prior year. The company attributed this growth to lower input costs, reduced quality costs and improved plant expenses. Adjusted gross profit was $108 million (accounting for 45.9% of net sales), a significant increase compared to $73 million in the second quarter of 2023. 

Adjusted EBITDA was $35.1 million for the second quarter of 2024, compared to $9 million in the prior year. This increase was attributed to increased adjusted gross profit and partially offset by higher adjusted selling, general and administrative (SG&A) expenses. SG&A expenses were $95.7 million, an increase from $76 million in the prior year. 

Net loss was $1.7 million, a significant improvement compared to net loss of $17 million in 2023. According to Freshpet, this decrease was fueled by higher sales, improved gross margin and reduced logistics costs. 

For the first six months of 2024, net sales rose 30.9% to $459.1 million, compared to $350.9 million in the prior year. Freshpet attributed this increase to volume gains of 29.4%. Gross profit was $182.1 million (accounting for 39.7% of net sales), compared to $110 million in the first six months of 2023. For the first half of 2024, adjusted gross profit was $209.5 million (accounting for 45.6% of net sales), compared to $137.5 million in the prior year. 

Adjusted EBITDA was $65.7 million for the first six months of 2024, an increase from $12 million in the prior year. The company attributed this drastic increase to increased adjusted gross profit partially offset by higher SG&A expenses. SG&A expenses were $175.4 million, compared to $148.3 million in the previous year. 

For the first six months of 2024, net income for the fresh pet food company was $16.9 million, a reversal from net loss of $41.7 million in the first six months of 2023. This improvement was attributed to higher sales, improved gross margin, reduced logistics costs and gains in equity investment. 

To support its growth, Freshpet continues to home in on improving its operations. For the quarter, logistics costs decreased 220 basis points year-over-year, input costs decreased 460 basis points year-over-year, and quality costs dropped 90 basis points year-over-year. 

In addition to reducing costs, the company is also focused on beefing up capacity. Currently the company’s Bethlehem Kitchen has six operating lines, the Kitchen South has three lines, and the Ennis Kitchen has three lines with a fourth expected to begin production by the end of the third quarter this year. Looking to the future, Freshpet estimates that the Bethlehem Kitchen will have seven lines, the Kitchen South will have at least five, and the Ennis Kitchen will have 10, representing a total of at least 22 production lines. 

“We have a disciplined approach to managing capacity and continue to execute on our expansion plans while also improving throughput and yields on existing lines,” Cyr said. “In Ennis, the fourth line is still on track to start-up by the end of Q3 2024. We began commissioning the line in July and feel good about the test runs so far. In Bethlehem, the team is focused on increasing capacity utilization, or OEE, and our seventh line on that campus will test new technology and is expected to start up in the second half of 2025. In Kitchen South, we continue to evaluate ways to add more lines and/or shifts. We continue to evolve our capacity expansion plans to drive greater capital efficiency.”

According to Cyr, the company is intensely focused on maximizing throughput of its existing production lines, maximizing capacity of its existing facilities, and developing and implementing new technology to generate more throughput per line. 

“While we have come a long way since our first facility in Quakertown, Pa., the manufacturing systems to make fresh pet food are still not where we’d like them to be,” he detailed. “We have invested and will continue to invest heavily in both technology and talent to make our production more stable, reliable, and efficient. We have made tremendous progress, but still believe the opportunities for improvement are sizable… I’m incredibly proud of the progress we have made and the results we have delivered — especially since Ennis is still sub-scale and we have some exciting new technologies under development that could meaningfully enhance the economics of our bags business. Now we need to continue to execute at a high level and keep raising the bar.”

The company continues to ramp up its household penetration and retail footprint. It added more than 2.5 million households, increasing its household penetration to 12.8 million in 2024, a 25% increase year-over-year. Buy rate rose 3% to $99.94, compared to $96.77 in 2023. To increase buy rate, Freshpet is continuing its strategy of converting toppers (consumers that serve Freshpet as a topper to their pets) to main meal users (consumers that serve Freshpet as their pet’s entire meal). 

“From a household penetration perspective, our growth rate is where we need it to be to hit our 2027 target of 20 million households,” Cyr said. “We are growing households in the low-mid 20s and increasing the buying rate in the low-single digits. That combination results in mid-20’s growth rates, which is our targeted level. More encouragingly, our heaviest users are growing even faster than the total user base.”

Regarding its retail presence, Freshpet also continues to ramp up its presence. In the second quarter, the company had a presence in 27,497 stores, placing an additional 790 fridges. Seventy-eight percent of the retailers that carry Freshpet have one Freshpet-branded refrigerator, while 22% have second and even third refrigerators. 

“From a retail perspective, we are having a solid year of retail availability growth,” Cyr said. “Store count growth is inline with our long-term rates. More importantly, some of our larger customers are engaging with us on potential plans to add second and third fridges in high velocity stores. That is where we expect to see the bulk of our growth.”

Freshpet also updated its outlook for the full year, raising its guidance across the board. The company now expects net sales of at least $965 million, an increase of 26% from 2023. Previously the company expected net sales of at least $950 million. Adjusted EBITDA is now expected at $140 million, compared to previous guidance of $120 million. Capital expenditures is expected around $200 million, a decrease from previous expectations of $210 million. 

“We are raising our net sales and Adjusted EBITDA guidance for the year to reflect our outperformance in the first half, as well as our conviction in our ability to execute in the second half of the year,” Cyr said. “If we continue to deliver the kind of disciplined growth we have achieved so far this year, we believe we will create meaningful shareholder value in a way that serves pets, people and the planet.”

In addition to its successful second quarter, the company also shared that it has outgrown its corporate offices in Secaucus, NJ, and is in the process of constructing a new office in Bedminster, which the company expects to move into the first half of 2025. 

“Our new location in Bedminster will allow us to attract and retain the top marketing and finance talent we need while making it much easier for our team members to go back and forth to our technical base in Bethlehem, enabling much closer collaboration and planning,” Cyr shared. “Our new office will embody our ‘Pets. People. Planet.’ mantra and we look forward to sharing it with you when it opens next year.”

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