Freshpet Inc. ( FRPT ) stock rallied on Monday after it reported second-quarter 2025 earnings of 33 cents per share, beating the consensus estimate of 16 cents.

Net sales rose 12.5% year-over-year to $264.7 million but missed the analyst estimate of $268.9 million. Sales growth was driven by a 10.8% increase in volume and a 1.7% improvement in price and mix.

Net income was $16.4 million, reversing a net loss of $1.7 million in the year-ago quarter. Gross profit rose to $108.2 million, or 40.9% of net sales, up from $94.0 million, or 39.9%.

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Adjusted gross margin improved to 46.9% from 45.9%. Adjusted EBITDA increased to $44.4 million from $35.1 million, with the margin expanding to 16.8% from 14.9%.

SG&A expenses fell to $90.4 million from $95.7 million, or 34.1% of net sales versus 40.7% a year ago. Adjusted SG&A totaled $79.6 million, or 30.1% of net sales, compared to $72.9 million, or 31.0%, in the prior-year period.

The company reported operating cash flow of $38.7 million year-to-date, down $9.1 million from the prior year, primarily due to one-time items and higher incentive compensation payments. Capital expenditures totaled $59.9 million through the second quarter.

As of June 30, 2025, cash and cash equivalents stood at $243.7 million, with $396.2 million of debt outstanding.

Operationally, Freshpet ( FRPT ) noted 170 basis points of improvement across quality, input, and logistics costs in the quarter. Ennis Kitchen became the company’s most profitable facility.

A new production line for bagged product is expected to be commissioned in Bethlehem in the fourth quarter of 2025, with potential retrofits starting in the second half of 2026. These upgrades are expected to reduce capital needs by at least $100 million between 2025 and 2026.

Freshpet’s household penetration rose 11% year-over-year, while its Most Valuable Pet Parents (MVPs) cohort increased 18%. The company added 1.4 million households over the past year and reported a 6% increase in buy rate.

Store count reached 29,141 locations, with 24% of stores now hosting multiple fridges.

“Against a more challenging consumer sentiment backdrop, we continue to significantly outperform the dog food category – delivering both category leading sales growth and strong improvements in operations,” commented Billy Cyr, Freshpet’s CEO.

“As a nimble growth company that is adapting to an economically constrained consumer, we are intensely focused on what we can control. That includes accelerating our advertising and distribution programs, reducing our capital expenditures, and strengthening our operations. On the other hand, we will be pragmatic about what we can’t control, so we are revising our current year’s net sales target and removing our long-term net sales target to match the environment we are facing today. We still believe we will deliver outsized growth for a long period of time, but we need to plan for the current economic realities. In total, we believe the actions we are taking position us well to create significant shareholder value and fulfill our mission to elevate the way we feed our pets with fresh food that nourishes all.”

Outlook

Freshpet ( FRPT ) updated its 2025 outlook, now expecting net sales growth of 13% to 16%, down from 15% to 18%. Adjusted EBITDA guidance remains unchanged at $190 million to $210 million. Capital expenditures are now forecast at approximately $175 million, reduced from the prior $225 million estimate.

The company also updated its long-term guidance, removing its $1.8 billion net sales target for 2027 due to slower growth. However, it reaffirmed its other long-term goals: an adjusted gross margin of 48% and an adjusted EBITDA margin of 22%. Management anticipates the company will be free cash flow positive by 2026. The company expects to continue to deliver growth significantly in excess of the dog food category.

Price Action: FRPT shares are trading higher by 8.15% to $71.22 at Monday’s last check.

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