Freshpet (FRPT) Q4 2025 Earnings Call Transcript

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DATE

Feb. 23, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — William B. Cyr
• Chief Financial Officer — John O’Connor
• SVP, Marketing — Nicola J Baty
• Interim Chief Financial Officer — Ivan Garcia
• SVP, Supply Chain — Anna Lopez

TAKEAWAYS

• Net Sales -- $285,200,000 for the quarter, reflecting 8.6% year-over-year growth, mainly driven by volume increases.
• Full-Year Net Sales -- $1,102,000,000, up 13% year over year, consistent with previously disclosed guidance.
• Adjusted Gross Margin -- 48.4% for the quarter (up from 48.1% prior year), led by lower quality costs and offset by higher input costs.
• Adjusted EBITDA -- $61,200,000 in the quarter, increasing 16% year over year, and $195,700,000 for the year, up 21% year over year.
• Net Income -- $33,800,000 for the quarter, versus $18,100,000 in the prior-year period; full-year net income of $139,100,000, aided by a $68,400,000 deferred tax benefit.
• Cash Position -- $278,000,000 at year-end, rising to approximately $400,000,000 after receipt of $95,500,000 from Ollie sale in January.
• Free Cash Flow -- Became free cash flow positive during the year, supported by $160,600,000 operating cash flow and $148,200,000 capital expenditures.
• Digital Business -- Ecommerce accounted for 14.6% of quarterly sales (14% full-year), with digital business growing nearly 40% year over year.
• Household Penetration -- 15,200,000 households at year-end, up 10% year over year.
• MVP Households -- 2,400,000 MVP (super heavy and ultra heavy) households, up 11% year over year, with ultra buyers spending over $1,100 annually each.
• Retail Footprint -- Present in 30,235 stores, with 24% having multiple fridges, and 39,347 fridges across nearly 2.1 million cubic feet of retail space.
• Market Share -- U.S. dog food market share climbed to 4%; market share gains outpaced category trends by over 10 percentage points.
• Category Size -- U.S. pet food total addressable market estimated at 36,000,000 households (up from 33,000,000 reported last year).
• Guidance for 2026 -- Net sales growth expected at 7%-10%, adjusted EBITDA targeted between $205,000,000 and $215,000,000; capital expenditures estimated at $150,000,000, excluding potential expansions.
• Margin Outlook -- Adjusted gross margin expected to improve by 50–100 basis points at midpoint of guidance.
• Long-Term Targets -- 2027 EBITDA margin expected at 20%-22%, with adjusted gross margin expected to exceed 48% under varied growth scenarios.
• Ollie Investment Exit -- Ollie sale yielded $95,500,000 in proceeds (from $33,400,000 invested) and potential additional considerations post-closing.
• Operational Capacity -- Installed 16 lines capable of supporting $1,500,000,000 in sales (excluding possible uplift from new manufacturing technology).
• Strategic Initiatives -- Launched new manufacturing technology, expanded rural lifestyle retailer test to 250 stores, and increased fridge island tests from 16 to 28 locations.

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RISKS

• CEO Cyr said, "Category growth last year slowed dramatically, and our net sales growth rate dropped from 27%," reflecting substantial market headwinds impacting top-line momentum.
• CFO O’Connor indicated that "If you look at where we guided the year initially for 2025 versus where we ended, we fell well short of our goals, and as a result, had very, very limited incentive compensation paid out in 2025. That is a meaningful portion of SG&A growth, 2025 to 2026." and investments in omnichannel capabilities and media, signaling cost pressures in the current year.
• Management stated higher beef prices remain "the one commodity cost that is really a challenge for us in this year," despite actions taken on pricing and formulation to mitigate impacts.
• CEO Cyr cautioned, there has been a lot of noise over the last several weeks, with all the storm impacts that we have seen. But even in Q4, we saw some hints that it was moving in the right direction. And we heard from some of our competitors and some of the retailers that they have observed some of the same phenomenon. How long it is going to sustain, we are not quite sure. That is why we want to provide a very conservative guide for the year based on what we did deliver in Q4 and what we feel very confident about. There is clearly some opportunity for some upside if those trends continue.

SUMMARY

Freshpet (NASDAQ:FRPT) reported 8.6% quarterly revenue growth and achieved positive free cash flow, aided by improved margins and strong digital expansion. Management introduced a lower growth outlook of 7%-10% for 2026, emphasizing focus on omnichannel investments and disciplined capital allocations. Operating efficiency gains, particularly from new manufacturing technology, and the expansion in retail visibility, such as fridge islands and club channels, support management’s margin expansion targets. The company closed its Ollie investment at a significant gain, strengthening the balance sheet and providing optionality for future strategic moves. Guidance assumptions exclude major fridge island rollouts or significant macroeconomic changes, highlighting a cautious approach to sustained category volatility and inflationary pressures.

• Incoming CFO John O’Connor detailed SG&A growth drivers as approximately one-third each from incentive compensation normalization, omnichannel capability investments, and higher media spend, suggesting short-term margin headwinds are not expected to recur at the same magnitude in 2027.
• CEO Cyr confirmed new manufacturing technology is not assumed to be the primary lever for 2027 margin targets, with expected improvements instead dependent on ongoing operational excellence, yield, and SG&A leverage.
• SVP Baty revealed that 74% of new direct-to-consumer households were incremental, indicating omnichannel efforts are expanding the addressable customer base rather than cannibalizing current customers.
• Club and multipack innovations are drawing in distinct consumer segments, designed with minimal discounting to protect margins and improve shopping convenience.
• Management noted that only 24% of stores currently have multiple fridges, suggesting further incremental retail expansion opportunities.

INDUSTRY GLOSSARY

• MVP: Freshpet’s designation for "super heavy and ultra heavy" users representing the top echelons of purchase frequency and volume among households.
• OEE: Overall Equipment Effectiveness; measures manufacturing productivity, key for driving margin improvement and capacity utilization.
• xAOC: Extended All Outlet Combined; retail measurement term used in syndicated data to capture total distribution across trade classes including grocery, mass, club, and pet specialty.
• TAM: Total Addressable Market; refers specifically to the estimated number of potential Freshpet households in the context of U.S. pet food market sizing.

Full Conference Call Transcript

Rachel Perkins-Ulsh: 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 and opportunities and capital efficiencies, timing and impacts of new technology, capital spending, adequacy of capacity, expectations to be free 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 with the SEC, including our 2024 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, investors.freshpet.com. Management 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 William B. Cyr, Chief Executive Officer.

Thank you, Rachel.

William B. Cyr: Good morning, everyone. The message I would like you to take away from today's call is that the challenges we faced in 2025 taught us quite a bit about our strengths and weaknesses, and have made us a much stronger company for 2026 and beyond. We learned that after more than a decade of strong, reliable, and predictable growth, the pet food category and the Freshpet growth algorithm are not immune to swings in consumer sentiment. Category growth last year slowed dramatically, and our net sales growth rate dropped from 27% in fiscal year 2024 to 13% in fiscal year 2025.

While the 13% growth we delivered in fiscal year 2025 would excite most companies, it was not the kind of growth we had become accustomed to nor what we expected when we started the year. This dramatic change in sentiment forced us to reevaluate every aspect of our model and adapt to the new environment. We changed our messaging and media buying strategy. We increased our focus on creating value at the entry point. And we demonstrated flexibility in, and control over, our capacity expansion plans.

In the end, I am very proud of the agility that our team showed in the face of a dramatic change in the macroeconomic market. The benefits of that agility were demonstrated in our results. Our growth was more than 10 points better than the category. We built significant market share. And we exceeded the $1,000,000,000 net sales target we set in 2020. We also expanded distribution in a very large club customer, and began testing another new class of trade, rural lifestyle retail. At the same time, we protected and even expanded our margins and achieved positive free cash flow. And we withstood the onslaught of new competitive entries with little discernible impact on our business.

More importantly, we built a really strong foundation for fiscal year 2026 and beyond. Our new messaging and related media plans are showing early signs of generating the household penetration growth we expect. Our efforts to expand our ecommerce business continue to gain traction, with digital business growing nearly 40% last year, and it is now up to 14% of our total business. We have installed and started up the biggest breakthrough in manufacturing technology in our history. And we began testing fridge islands in a major retailer, one of our biggest breakthroughs in retail visibility and availability ever. In each case, we believe we are in the very early stages of a major new driver of growth and profitability.

In total, we believe we are very well positioned to continue to capture a very large share of the growing market for fresh pet food. Our data suggests that despite the macroeconomic headwinds we experienced last year and continue to see today, the total addressable market for Freshpet, Inc. continues to grow and is now up to 36,000,000 households, compared to the 33,000,000 households we announced at CAGNY last year. These figures reflect consumers' ongoing interest in treating their pets as valuable family members and the growth is driven, in part, by the ongoing generational transition to younger consumers for whom pets and high-quality food are of greater interest than previous generations.

We believe this suggests that fresh pet food is the future of the pet food category, and that Freshpet, Inc. has a very long runway for growth. And the results of the past year strongly suggest that we have the ability to maintain a very high share of this market, despite the determined efforts of many new competitors.

The competitive moat we have built enables us to deliver a wide range of noticeably better products at lower costs, in more locations, in a variety of channels versus competition. And we continue to invest in new manufacturing technologies that we believe will extend our competitive advantages even further. Plus, we are leveraging our extensive fridge network, digital marketing efforts, and strong brand equity to create an omnichannel business that will be difficult for other fresh food marketers to match. We firmly believe we have a unique and compelling advantage in not only manufacturing, but also quality and product appeal. And it can be enhanced through marketing.

Last quarter, we talked about our improved commercial framework that focuses on consumers who have the potential and ability to become very heavy users. We expected the increase in digital and streaming as part of our media mix to drive increased trial and usage by millennials and Gen Z, with the highest propensity to become MVPs. And it has. We continue to outperform the category and peers on household acquisition across income brackets and generations and see millennials and Gen Z as our fastest growing generations. Further, we are disproportionately gaining share despite heightened competition, particularly in retail. In 2026, we are rebalancing our media mix to be more diversified and digital-forward, helping to build out our omnichannel presence.

We are evolving our marketing plans to super-serve MVPs, who now make up 71% of our net sales, designing our marketing plans to deliver against this critical MVP consumer while ensuring our media reaches our entire TAM. The current campaign showcases the products and the ingredients more than in the past, and has been effective so far in driving new households. In addition to our current campaign, we are leaning more heavily on trusted voices to build relevance and credibility with our MVPs. And this spring, we are introducing a new campaign that deepens our connection with our core audience.

We believe we have a strong value proposition with our product portfolio today, and we are continuously working on ways to drive more perceived value for our consumers. We have affordable innovation with multipacks and bundles of both rolls and bags, now available in select retailers, and expect those to gain traction and more distribution in 2026, particularly in the club channel. We also have our complete nutrition line that is a bag item and a roll item at an attractive entry price point, which will continue to gain distribution as well. Further, we have an exciting pipeline of innovation and renovation slated for this year that we will share more on as it hits the market.

From a distribution standpoint, 2025 was our best year in over a decade for new store growth, largely driven by our club expansion. In 2026, we are focused on having a stronger omnichannel presence, and we are building capabilities around that. In Q4, ecommerce as a percent of sales was 14.6%, and for the full year, it was up to 14%, as I mentioned earlier. The digital channel will be an important growth driver for us moving forward, but we are also still focused on expanding multiple fridges in the highest-velocity stores. The rural lifestyle retailer test we referenced last quarter has now confirmed the expansion to 250 stores in the first half of the year.

We have expanded the fridge island test in a mass retailer from 16 to 28 stores today. Additionally, we are testing open-air bunker fridges and full-size open-air end caps as we reimagine how consumers shop for their pets. We expect continued experimentation with these new fridge configurations, seeking the optimal combination of visibility, shoppability, holding power, and space efficiency.

We are also building a stronger product proposition by leveraging our breakthrough technology to deliver both meaningful product improvements and significantly improved economics. I am pleased to report that our first line using the new production technology is up and running and producing product that we began shipping to customers last month. The products produced in that new line are exceptional, and the early indications are that the new line should deliver significant quality, throughput, and yield benefits. We want to run the line for several months before we quantify the magnitude of the benefits, but we are encouraged so far.

The first retrofit of an existing bag line in Bethlehem with the light version of this new technology is slated for the second quarter, and we plan to use it to both renovate and innovate our product portfolio. We believe that the conversion of our existing lines to the light version of the new technology will require minimal downtime and modest CapEx. Investing in manufacturing capability and technologies can not only extend our competitive moat, but also offers us the opportunity to produce the highest-quality products at the best possible cost, and demonstrate the technical mastery of our team.

Now I will provide some highlights from the fourth quarter and year. Fourth quarter net sales were $285,200,000, up 8.6% year over year, primarily driven by volume. Adjusted gross margin in the fourth quarter was 48.4%, compared to 48.1% in the prior-year period. Adjusted EBITDA in the fourth quarter was $61,200,000, up approximately $8,500,000, or 16% year over year. For the year, net sales were up 13% year over year, in line with our guidance of approximately 13% growth. Full-year 2025 adjusted gross margin was 46.7%, up 20 basis points year over year despite the slowdown in volume growth. And full-year adjusted EBITDA was $195,700,000, up 21%, or approximately $34,000,000, year over year.

From a category perspective, we are the leading dog food brand in U.S. food, and maintain a sizable market share within the gently cooked, fresh, frozen branded dog food segment in Nielsen brick-and-mortar customers defined as xAOC plus pet. We compete in the $56,000,000,000 U.S. pet food category per Nielsen omnichannel data for the 52 weeks ended 12/27/2025. And within the nearly $38,000,000,000 U.S. dog food and treats segment, we have increased our market share to 4%. As I mentioned a few moments ago, 2025 was our best year in over a decade for new store expansion, demonstrating that our fridge expansion has not been hindered by heightened competition entering brick-and-mortar stores.

From a retail standpoint, products are now in 30,235 stores, 24% of which have multiple fridges in the U.S. and Canada. As we add additional fridges to the highest-velocity stores to service more omnichannel customers, this percentage should increase over time. We ended the fourth quarter with 39,347 fridges, or nearly 2,100,000 cubic feet of retail space, with an average of 19.1 SKUs in distribution. Our percent ACV in grocery was at 80% at quarter end. In xAOC, we are up to 72%.

From a household penetration and buy rate standpoint, we have seen some green shoots recently. On a twelve-month basis, as of 12/31/2025, household penetration was 15,200,000 households, up 10% year over year. And total buy rate was approximately $115, up 4% year over year. MVPs, our super heavy and ultra heavy users, are continuing to grow faster than overall households and now total 2,400,000 households, up 11% year over year, and have an average buy rate of $56. Our fastest growing buyer group is our ultra buyers, who make up nearly 500,000 households and spend over $1,100 a year on Freshpet, Inc. Overall, we are not seeing trade down. And we are not seeing loyal customers buying us less often.

We are continuing to win with new dog households, the next-generation dog owners, millennials and Gen Z, and believe our omnichannel strategy will drive further growth with these cohorts.

Turning to capacity. We have 16 lines across our network today that can support over $1,500,000,000 in sales when fully staffed. This figure excludes additional throughput or yields that could come from the new technology we have developed for our bag lines. After we run both the full version and the light version for an extended period of time, we will update the market on what our full capacity potential is within the current footprint. Our capital efficiency framework underpins the work we have been doing to advance the manufacturing process for Freshpet, Inc. food and what we believe is a significant competitive advantage. To continue to drive capital efficiency, we aim 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 on our campuses; and three, develop and implement new technologies.

Now turning to 2026 guidance. We expect net sales growth to be between 7% to 10% for the year, and adjusted EBITDA to be between $205,000,000 and $215,000,000. We expect capital expenditures to be approximately $150,000,000 this year, absent any incremental investment to accelerate our manufacturing technology or capitalize on a distribution breakthrough in fridge islands. At our current plan level of capital expenditures, we expect to be free cash flow positive in 2026. If we do decide to retrofit more than just one bag line with the new technology, and we have a large rollout of fridge island units, we may choose to increase CapEx by anywhere between $20,000,000 to $50,000,000 so that we can capture those benefits sooner.

John will walk through more details of our 2026 guidance in a few minutes.

In regard to our fiscal year 2027 targets, we remain confident in our ability to deliver net sales growth well in excess of the U.S. dog food category growth, and thus grow market share. Depending on the macroeconomic conditions and the health of the dog food category, that growth could be in the high single digits or low double digits. We believe we can achieve at least 48% adjusted gross margin under a variety of growth scenarios and have updated our adjusted EBITDA margin target to a range of 20% to 22%.

We believe we have a variety of paths to achieve those margins, including higher net sales growth rates, further improvement in gross margins, media efficiency and effectiveness, and further SG&A efficiencies. For example, if our net sales growth is in high single digits, we believe we can still achieve an adjusted EBITDA margin of approximately 20% in 2027. If we exceed the high end of our guidance and deliver growth in the mid-teens, we believe we can achieve a 22% adjusted EBITDA margin in 2027.

As we announced earlier this month via press release, we are thrilled to welcome John O’Connor as our new Chief Financial Officer and Anna Lopez as SVP, Supply Chain. We continue to build out the leadership team that can support our mission and fuel our next phase of growth. John brings deep financial leadership and animal health expertise, having spent much of his career at Zoetis and previously served as Chief Financial Officer of Thrive Pet Healthcare, a leading veterinary services platform. Anna Lopez, our new SVP, Supply Chain, brings extensive experience across both supply chain and manufacturing. She joins us from Unilever.

I would like to thank Ivan Garcia for the incredible job he did as interim CFO over the past several months. We did not miss a beat during his tenure, and he has made the CFO transition seamless. We are grateful for his continued assistance as John gets up to speed on the business.

Lastly, as some of you may recall, we made an equity investment six years ago, and a follow-on investment a few years later, in a strategically related business for a total of $33,400,000. For competitive reasons, we never disclosed the company we had invested in. We can now tell you that the investment was in Ollie, the DTC dog food brand. We invested so that we could learn more about the DTC business and maintain some level of optionality if we wanted to enter that space. We learned quite a bit from that ownership position that is helping us develop our omnichannel approach to the Freshpet, Inc. business. And it was also a successful investment from a financial perspective.

Ollie was recently sold, and we received proceeds of approximately $95,500,000 in January, plus the potential for a small amount of additional consideration subject to ordinary post-closing conditions. So we got a good financial return in addition to the strategic benefits of observing the development of the DTC dog food space from the inside.

With John now on board and getting up to speed, we are evaluating our capital allocation strategy. I am pleased that we are operating from a position of strength, especially now that we are free cash flow positive and with a strong balance sheet, and plan to share an update on the strategy in the coming months. That update will take into account the opportunities we have to accelerate our growth and improve margins through various investments, and our desire to continue to improve our cash efficiency and deliver strong returns to investors. With that, I will turn it over to John to walk through more details of our financial results. Thank you, Billy, and good morning, everyone.

The fourth quarter results demonstrated our ability to deliver category-leading growth while also achieving positive free cash flow. Net sales in the quarter were $285,200,000, up 8.6% year over year. Volume contributed 9.7% growth, partially offset by unfavorable price/mix of 1.1%, which was primarily driven by modest pricing actions in the current year designed to deliver value at the entry point and bring in new users and favorable pricing items in the prior-year period. We had broad-based consumption growth across channels. For Nielsen-measured dollars, we saw 9.4% growth in total U.S. pet retail plus with Costco, 8.5% in total U.S. pet retail plus, 9% growth in xAOC, 5.8% in U.S. food, and 1% growth in pet specialty.

As we said on the last earnings call, the initial pipeline fill of a club customer helped boost our third quarter shipments and impacted the fourth quarter by about a point. Fiscal 2025 net sales were $1,102,000,000, up 13% year over year. Volume contributed 12% growth and we had favorable price/mix of 1%.

Fourth quarter adjusted gross margin was 48.4% compared to 48.1% in the prior-year period. The 30 basis point increase was driven by reduced quality costs, partially offset by higher input costs. Fiscal year 2025 adjusted gross margin was 46.7%, an increase of 20 basis points compared to the prior year. Fourth quarter adjusted SG&A was 27% of net sales, compared to 28% in the prior-year period. This decrease was primarily due to lower variable compensation, partially offset by increased media as a percentage of net sales. Media spending was 10% of net sales in the quarter, up from 8.9% of net sales in the prior-year period. Logistics costs were flat in the quarter at 6.2% of net sales.

Fiscal year 2025 adjusted SG&A was 29% of net sales compared to 29.9% in the prior-year period. Media as a percent of net sales was 12.7% compared to 11.4% in the prior year, while logistics improved 20 basis points year over year to 5.8% of net sales.

Fourth quarter net income was $33,800,000 compared to $18,100,000 in the prior-year period. The increase in net income was primarily due to the contribution from higher sales, an increase in gross profit, and lower SG&A expenses, partially offset by the deferred income tax expense in the current-year period. Fiscal year 2025 net income was $139,100,000 compared to $46,900,000 in the prior-year period. The significant increase in net income was primarily due to the deferred income tax benefit resulting from the release of a $68,400,000 valuation allowance in the current year, higher sales, and was partially offset by higher SG&A. Fourth quarter adjusted EBITDA was $61,200,000 compared to $52,600,000 in the prior-year period, an increase of 16%.

This improvement was primarily driven by higher sales and gross profit partially offset by higher adjusted SG&A expenses. Fiscal year 2025 adjusted EBITDA was $195,700,000, or 17.8% of net sales, compared to $161,800,000, or 16.6% of net sales, in the prior-year period.

Capital spending for 2025 was $148,200,000, while operating cash flow was $160,600,000. We ended the year with cash on hand of $278,000,000 and we were free cash flow positive. As Billy mentioned, subsequent to the quarter end, we received $95,500,000 in proceeds from the sale of Ollie, bringing our cash balance to approximately $400,000,000 today.

Now turning to guidance for 2026. As Billy mentioned earlier, we expect net sales growth of 7% to 10% compared to 2025, with the midpoint of this range in line with the growth we delivered in Q4. We believe this is a prudent place to start our guidance after a challenging year. As for the cadence of the growth in 2026, it is important to remember that the base year included some disruption in Q1 from the change in our pet distributor, and primarily from the significant expansion in a large club customer that we had unusually strong growth in Q3, including pipeline fill. That will make the Q1 comp a bit easier, and the Q3 comp more challenging.

This guidance for the year assumes that there is no material change in the macroeconomic environment compared to where we exited 2025. It does not include any significant fridge island expansion. We continue to expect our growth to be in excess of the U.S. dog food category and in turn grow market share. Given year-to-date trends, we are optimistic about our ability to deliver these plans. Our current Nielsen growth rate and the recent household penetration and buying rate data we have seen support growth at this level or higher. Further, our advertising and media plans have begun to demonstrate traction in the market and we are increasingly confident that the plan is working.

But we acknowledge the fact that it is still early; there have been storm-related impacts to the recent Nielsen numbers which create noise. To meet or exceed the high end of our guidance, from a category perspective, we would likely need to see stronger dog food category growth and/or a resurgence in trade-up behaviors. In terms of the factors that are within our control, we would need to see an outperformance of our omnichannel efforts, more rapid expansion of island fridges, and greater impact from our advertising.

We expect adjusted EBITDA in the range of $205,000,000 to $215,000,000, an increase of 5% to 10% year over year. Media as a percent of net sales for the year is expected to be roughly in line with 2025 and will be front-half weighted in dollars and as a percent of sales, with the first quarter expected to be our largest quarter of media spend. With the turn of the calendar, we have reset expectations for incentive compensation to target levels, which will compare unfavorably to 2025, when lower variable compensation expense helped cushion margins from the lower sales growth than we expected at the start of the year.

With this factor at play, to have adjusted EBITDA growth outpace sales growth in 2026, we need to overdeliver on sales volume. Beyond 2026, however, we expect adjusted EBITDA growth to exceed net sales growth on an expectation of a more consistent variable compensation expense. We anticipate adjusted gross margin to improve by approximately 50 to 100 basis points at the midpoint of our net sales range, primarily driven by plant leverage, partially offset by mix. We do not intend to add staffing in 2026 based on our guidance, but rather utilize our existing staffing and use further OEE improvements to deliver more volume.

From an inflation standpoint, we are optimizing our formulations and have taken pricing on specific SKUs to address some higher input costs. Capital expenditures are currently projected to be approximately $150,000,000 in 2026, and as mentioned earlier, this figure excludes any significant incremental investments in fridge islands or expediting the rollout of our new technology. If we were to take those actions, we would likely make that decision sometime in the middle of the year, and they would be supported by strong results from our tests in the case of fridge islands and demonstration of consistent and meaningful efficiency gains in the case of the manufacturing technology expansion.

As I said earlier, we believe our outlook is prudent coming off a challenging year and in the midst of a still-uncertain consumer backdrop. While I just completed my second week here, I am incredibly excited to join Freshpet, Inc. at such an important moment in its growth story, and look forward to meeting many of you over the weeks and months ahead. I believe the company has a long runway for growth from an already solid leadership position, supported by a strong foundation and a compelling long-term opportunity to capture sales and profit growth in the fresh frozen dog food category. That concludes our overview. We will now be glad to answer your questions.

As a reminder, we ask that you please focus your questions on the quarter, guidance, and the company's operations. Operator?

Operator: Thank you. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question. Please pick up your handset before pressing the star keys. We ask that you please ask one question and one follow-up question. First question is from Peter Benedict with Baird. Please proceed.

Peter Sloan Benedict: Hi, good morning, guys. Thanks for taking the questions and welcome. Questions, I guess maybe just help us to understand a little bit more the implied uptick in EBITDA margins as you look out to 2027. Maybe can you help us size maybe the incentive comp impact on 2026? Obviously, that is something that is weighing on this year. But just the other factors that give you the confidence that these margins can be 20% plus in 2027. That is my first question.

William B. Cyr: Peter, it is great to hear from you this morning. Just a notice for you and for everybody else, all of us are in remote locations this morning because of the storm. So if we sound a little disjointed, please bear with us. And if we have technical difficulties, please bear with us as well. It is a great question, Peter. I am going to just frame it up briefly, but then I am going to turn it over to John to give you some thoughts on it. But I would just say, as I said on the call, we see multiple pathways to getting towards our 2027 EBITDA margin target.

As I said, there is an opportunity here to deliver more on gross margin, to deliver more on net sales, and also within the G&A structure. I think John can give you a more fulsome answer than that.

John O’Connor: Sure. Thanks, Billy, and thanks for the question, Peter. I will focus first on SG&A from 2026 to 2025. And I will put it into really three main buckets in terms of the growth in dollars year over year. Roughly a third is coming from that compensation item. If you look at where we guided the year initially for 2025 versus where we ended, we fell well short of our goals, and as a result, had very, very limited incentive compensation paid out in 2025. That is a meaningful portion of SG&A growth, 2025 to 2026. Roughly another third is coming from the build-out of our omnichannel capabilities to evolve how we reach our customers.

So we are evolving the model in how we go to market, and there is some investment required to do that. And then roughly one third of the growth is coming in media in terms of dollars, which we have said will stay in similar terms of percentage of sales year over year. In terms of 2027, at this stage, we still have a fairly wide range to the outcome. And importantly, because of two of those items that I mentioned earlier, in 2025 to 2026, that path of margins, 2025 to 2026, is not necessarily indicative of the underlying operating leverage in our model. The incentive comp impact is more one-time in nature.

And while we are always going to be looking to make sure we have the necessary capabilities to continue growing our category leadership, we do not foresee the degree of additions that we have from 2025 to 2026 going from 2026 to 2027. As Billy said, we believe we have meaningful upside on adjusted gross margin through volume, OEE, and new technology, which is why we updated adjusted gross margin to be greater than 48% now. And the final driver will be what our net sales growth looks like for the next two years, and the degree of leverage we can gain over our cost structure.

Peter Sloan Benedict: Alright. Great. That is super helpful. And I think leads me to the next question actually is around the omnichannel stuff. I am just curious if you guys could expand on what you learned from owning Ollie or being involved with Ollie for all those years, and how that is being deployed in your own custom meals business, your own DTC business. Maybe just expand a little bit more on that. It sounds like 2026 is going to be a big year for how you are going to start to push on that. So any further color there would be helpful. Thank you.

William B. Cyr: Yeah. Peter, it was really good to have a front-row seat to watch how that segment of the market was unfolding. It is also nice that it turned out to deliver a very good financial return for us. But as we watched it, one of the things that became clear to us was that the best return for us was going to be focusing on building out what I would call an omnichannel business. And by that, I mean a place where we can leverage our brand equity, the brand investment that we are making in the existing channels to cover a wider range of channels.

Then we could also leverage the manufacturing footprint that we have, which has significant scale and volume across the existing products and the existing channels, and cover a wider range of channels. And it is our belief that the combination of the custom meals business that we have incubating at this point as well as the broad retail network, you know, lots and lots of fridges, puts us in a position where we are uniquely positioned to meet the consumer wherever they want to buy and however they want to buy. So we will be able to provide you with the Freshpet, Inc. quality products in whatever way in which you want to purchase them.

And we feel pretty good about that position, and, frankly, we want to invest in that. I am going to ask Nicola J Baty to talk just for a second about what that means from an organizational capability perspective and how we are investing the media dollars to match that. But to us, that is a huge opportunity and a fairly significant shift for us.

Peter Sloan Benedict: Nikki?

Nicola J Baty: Thanks, Billy, and good morning, Peter. Yes. As Billy said, we are very focused on omnichannel, and we see DTC as just one part of that. When we talk about omnichannel, we are still very much talking about it from a retail standpoint with click-and-collect, a segment that is last-mile delivery, a segment that is also pure play ecommerce, and then a final segment that really is our DTC business. As you know, we went to national on our DTC business really around a year ago, and we have had some great learnings from it. Over 74% of our households are actually coming in incrementally to Freshpet, Inc.

They have never bought Freshpet, Inc. before in the retail environment, and I think that is just a key indicator that Omni, for us, drives better brand awareness, and we did have a gap in our brand awareness to purely being in a retail environment. So as we think a little bit about capabilities, we are building there in both the marketing teams and the sales team. On the marketing side, it will be moving more to what we call digital-forward in our media. So that will include everything from how we approach streaming, retail media, and social.

And then on the sales side, it is really building capabilities not just to service our direct-to-consumer, but also really to service pure play and other areas too.

Peter Sloan Benedict: Great. Thanks so much, guys. Good luck.

William B. Cyr: Thanks, Peter.

Operator: Our next question is from Brian Patrick Holland with D.A. Davidson. Please proceed.

Brian Patrick Holland: Thanks. Good morning. Maybe just to start on rank ordering, if you would, the drivers for consumption growth in 2026. As you just spoke in great detail about DTC as obviously an increasing catalyst here. You have got distribution as well. You also have this increased focus on value proposition, which seems to be, at least from what we can see in tracked data, the initial impetus for the stabilizing in unit consumption growth. So just thinking about, as we bring this together in the aggregate, how you would rank order the consumption drivers in 2026?

William B. Cyr: Brian, let me frame it, and then I will ask Nikki to fill in some of the building blocks. But from a broad perspective, what we are seeing is that the volume growth is going to come, as it always has, from highly effective advertising in a good environment. We obviously want to get increased visibility. We want the right product innovation program. But advertising will always remain our number one driver of our growth. And if we are operating with highly effective advertising, in a better backdrop, then we obviously would expect to see some acceleration beyond that.

There are elements that are within that, such as the omnichannel piece we just talked about, some channel-specific stuff that I will ask Nikki to walk you through. But suffice it to say that the model is going to be evolving—still the same model, but it is evolving. You are going to see an increasing percentage of the growth coming from our omnichannel, or the ecommerce portion of the omnichannel business. Nikki?

Nicola J Baty: Thanks, Billy. Yep. So maybe I will start there and build on that. On the distribution side, we have obviously got a full year of distribution coming through within the club channel. And we also believe we have got continued growth coming from clubs, so that is built into our plan. We will continue to grow new stores. So we had a record year of new stores last year, and we are still anticipating that there is more new store development to come through this year. And then also within distribution, outside of the ecommerce component of omni where we have significant headroom to grow, we also have multiples and new retail visibility opportunities—for example, the Island Genius.

So that falls under that distribution bracket. Media Billy has already touched on. And then the third component I would suggest is what I would call affordability. And we have sharpened our plan in affordability and we do anticipate a little bit more coming through from how we have shored up the entry-level price point within our portfolio. And that is both in terms of innovation, but also in terms of some price elasticity work that we did.

Brian Patrick Holland: Appreciate the color. And then maybe just looking backwards a bit, Q4 household penetration vis-à-vis my model came in above. CAC came in below. So that is an encouraging development relative to the prior few quarters. Just curious—you talked about in your prepared remarks the extent to which maybe hitting the high end or above would be dependent a bit on the category, maybe the effectiveness of some of the media. But we are, to be sure, in Q4 seeing some of this come together. So just curious to get your perspective on the landscape, whether it be competitive or category dynamics, consumer dynamics.

Are we seeing any drivers here that we think would be sustainable as we start to look forward in 2026 and beyond? That we have seen the bottom in this category, and we are starting to see behaviors, if not back to the level they were, at least starting to normalize.

William B. Cyr: Yeah, Brian. We are seeing some very, very early indications that the category trend, as well as our trends, have started to improve. You can—depends whether you are looking at household penetration, whether you are looking at our MVPs, whether you are looking at the category when it actually inflected. But it has begun to move up in the right direction. We are cautious, though, because there has been a lot of noise over the last several weeks, with all the storm impacts that we have seen. But even in Q4, we saw some hints that it was moving in the right direction.

And we heard from some of our competitors and some of the retailers that they have observed some of the same phenomenon. How long it is going to sustain, we are not quite sure. That is why we want to provide a very conservative guide for the year based on what we did deliver in Q4 and what we feel very confident about. There is clearly some opportunity for some upside if those trends continue.

Operator: Our next question is from Steve Powers with Deutsche Bank. Please proceed.

Steve Powers: Great. Thank you. Good morning, Billy, Nikki. Welcome aboard, John. I guess, can we talk a little bit more about what you have learned so far from the fridge island expansion efforts and what you are looking to better understand as you move from the 16 to 28 stores? And you also talked about some of the other concepts that you are testing, including the open-air end caps and the bunker-style coolers. So is that part of the fridge island initiative? Or is that incremental testing? Maybe just a little bit more clarity there would be helpful. Thank you.

Nicola J Baty: Billy, would you like me to take this one?

William B. Cyr: Yep. Great.

Nicola J Baty: So we are still very much in test phase with the islands. We are learning a lot. It is early days, and we have taken a thoughtful approach. Clearly, there is more capital that is required for these island units. But they do deliver us 2.5 times capacity versus a single fridge. So that is a really big move forward. So we are now at 28 island units. And what it is allowing us is a broader assortment which is ultimately bringing in new households into the brand. So just by getting that capacity up we get more assortment in, but we are also getting more holding capacity.

And the holding capacity is really important for us for omnichannel, especially to serve click-and-collect as well. So we are finding we are staying in stock much better and able to service that consumer coming through too. So that is outside of the significant beacon it is providing, with a better location in the store and driving that awareness overall. So we are very encouraged—I think that is probably the best way to put it—with the fridge islands at the moment. And what our plan is obviously to just continue to work with retailers that are looking to experiment in this way, and then make sure we really pick the right store locations in order to get the best return.

But even outside of fridge islands, we still have a very significant opportunity with multiple fridge expansion. We are only at 25% of all stores having more than one chiller. So we will continue to lean in and put more multiples in, experiment with end-cap open-airs, and also bunker units. So very much looking to tailor our approach for different retailers.

Steve Powers: Okay. Very helpful. Thank you. And then, Nikki, I do not know if you want to take this one as well, but you talked about the affordability initiatives, sharpening entry-level price points, etc. I guess, related to that, number one is, do we have more to go on that front, or do you feel like you have made the intervention necessary at this point? And either way, as you think about the full year 2026, is the expectation that volume growth exceeds sales growth because of those affordability investments? Or will revenue growth management and mix, etc., allow sales to keep pace or even exceed volume growth? How are you thinking about that?

Nicola J Baty: Yeah. That is a great question. I think I would start by saying we did do a big step back. It was a very challenging environment for us really around 2026. I think to start with, for us, it is really about winning more with the retailers that are winning in the marketplace. So you saw us really focus and expand out some of our club channel offerings, and clearly in mass we have made some key moves. We do not anticipate a significant shift in mix or investment coming in this area.

I think we have done what we needed to do really within the portfolio, and that is paying back as we saw through the back end of last year and into this year. And we did a lot of work modeling price elasticity, so the small movements we made were really data-driven and well executed. So in summary, I believe as we look through this year, we have made the steps we think are right in the current macro environment. But we do reserve the right, obviously, to regroup and review that if things adjust and change as we go through the year.

Steve Powers: Thanks, Nikki.

Operator: Our next question is from Thomas Palmer with JPMorgan. Please proceed.

Thomas Palmer: Good morning and thanks for the question. I wanted to ask just on the drivers of the gross margin expansion this year and how that might evolve as we think about the 48% plus target for 2027. One call-out for 2026, for instance, was increasing sales growth without really increasing headcount. So I guess to what extent is that a continued driver as we think about 2027? And what other items such as the new technology might be key drivers as we think about not just 2026, but beyond.

William B. Cyr: Let me take a shot at that, and then John might want to add something to that. I would start with this is one of the areas that we are most bullish on. The reality is that our manufacturing team has done an exceptional job over the last several years. It started when we rebuilt organizational capability through the Freshpet Academy. It has included our Freshpet performance excellence program that has been driving up OEEs. That is really the biggest driver. But in addition to that, you saw we have continued to make good improvement on our quality costs and our input costs.

From this point going forward, and particularly in 2026, the biggest driver is going to be, as you called out, getting more volume from the same number of people. We can do that because we have the installed asset base. And we can do that because the team that we have got is demonstrating every week and every month they are running the lines more efficiently than they have in the past, and we expect that to continue on for many years. We do not believe this is a one-and-done kind of program. There is a long runway for growth. There will be points along the way where, as we grow, we will have to add staffing.

But incremental staffing, a shift on a line or something like that, is increasingly a small share of our total overall staffing. So it will be less disruptive to our margin progress. But I do expect into 2027, we will have to add staffing. It will be against a larger net sales base. Within that, we also expect to continue to improve yields on our lines even if we do not have the new technology. And then, as you highlighted, new technology is the big wild card.

If we decide to accelerate the expansion of that new technology, which is one of the options we talked about—making that decision sometime in the middle of the year—that would have a meaningful impact in 2027, not in 2026. In 2027, we would start seeing much broader use of that technology and the related throughput and yield benefits, as well as quality benefits, we get from that. I do not know if I missed anything, John, or is there anything you want to add to that?

John O’Connor: Yeah. Sure. I think you covered most of it, Billy. I think there is maybe just a smaller scale—as we continue to look to be efficiently managing our input costs, we are always optimizing our formulations to manage that margin. And then while we did focus on the last question on pricing items to drive value at the entry point, we are, in other places, actually taking price on some of our products and helping to expand margins there.

Thomas Palmer: Right. Thanks for all the detail, guys. I do want to follow up just on that new technology rollout. You noted the potential for $20,000,000 to $50,000,000 higher CapEx both from the potential higher, accelerated fridge rollout and then the faster deployment of that new technology. Just any framing of, one, is it just the two rollouts in the $150,000,000 CapEx number; and two, how much does a new line with the technology actually cost? So if we do start to see the acceleration, we get an idea of incremental each one might be.

William B. Cyr: Yeah. I will take a shot at that. So the base CapEx budget for this year includes the line that is already started up, but most of that CapEx was in last year. And it also includes the conversion of the first line that we are doing, which is here in Bethlehem. If we expand the CapEx, it would include additional conversions. As we said in the prepared comments, the cost of those conversions is a modest cost. Think of that in the single millions of dollars, not in double-digit millions of dollars per line, depending on the configuration, what line we are converting, how much space there is, those kinds of things.

If we are going to install another one of the new full-up lines, like the line we have installed here in Pennsylvania, it is a little bit harder to describe that because it would, in essence, be replacing another line of a traditional technology line. And so think of this as: it is a more expensive line than a traditional technology line. It has significantly higher throughput. And so the cost per dollar of production is actually very competitive or very attractive for us. If we were to do that—install one of the new technology lines—we would incur some of the CapEx this year. A much bigger portion of the CapEx would come in 2027 for that line.

You would not be starting up that line until sometime at the end of 2027 or in 2028.

Thomas Palmer: Okay. Thank you. Very helpful.

Operator: Our next question is from Robert Bain Moskow with TD Cowen. Please proceed.

Robert Bain Moskow: Hi. Thanks, and welcome, John. Really a question for Billy and Nikki. I did not hear much in the presentation today about the journey to shift consumers from using Freshpet as a topper to more as a main meal. And I am just wondering, is that still a major objective of the marketing plan, or have you kind of evolved the marketing plan to, you know, through the variety of offerings that you have, you know, make it more that something can use more frequently for meals or in other, in other ways. So just wondering where you are in that journey.

William B. Cyr: Yeah. Rob, I will have Nikki address this and our focus on the MVP consumer.

Nicola J Baty: Thanks, Billy. Thanks, Rob. So it is still very much core to our marketing and plans. MVP is 71% now of our total sales. So by far, the biggest area that I call it, we need to super-serve. So in order to really be able to get these households in, this is what has also prompted our renewed focus on omnichannel. And one of the key elements, I think, to bring in those MVPs into the brand is shifting our media mix to being more digital-forward. And this is really driving brand awareness through streaming, through social, and then through retail media.

And then making sure from an online standpoint, we can actually sell and serve those consumers where they best want to buy. So our efforts are still very much around super-serving that audience, but when we look at our total media spend, we will continue to make sure that we first address the TAM, which is those 36,000,000 households we have got. And then we will drive better reach and frequency, so we will put more dollars, I guess, per MVP household into what I would call the digital part of our spend. So it has not changed from what we talked about last year.

I think that we just got better at where to spend those dollars and how to focus on and attract those MVPs. And then the last thing I would say, perhaps to put a bow around it, is our expansion in club and what I would call value packs and bulk packs is also really helping to serve those MVPs better. We rolled out a number of value pack items last year, and we have expanded into club. We do see club and online—online because of that retention, that subscription service, and club because of the nature of the pack—as really helping us to better improve our offering to MVPs.

William B. Cyr: Hey, Rob. I would also encourage you to think about the discussion that we have had in the call so far, both the prepared remarks and in the questions, about omnichannel as being highly synergistic—highly synergistic—with the focus on MVPs. In essence, to meet the needs of the MVPs, we have got to be available and effectively marketed in a wider range of channels. And so when we talk about omnichannel, it is sort of the distribution and availability component of an MVP strategy.

Robert Bain Moskow: Okay. I will follow up offline. Thanks.

Operator: Our next question is from Michael Scott Lavery with Piper Sandler. Please proceed.

Michael Scott Lavery: Thank you. Good morning, and welcome, John, as well. Just wanted to understand the multi a little bit better and maybe get a sense of how the consumer interacts with that—if you have found it to be incremental. You seem to have an already loyal consumer. Assume it is obviously at a more favorable price point. I guess, how do you know you are not just maybe giving a subsidy through that? Or how does it interact with the rest of the portfolio?

William B. Cyr: Nikki, you want to take that one?

Nicola J Baty: Yeah. Sure. I would say we are pretty early days on multipacks at the moment. So we have relatively focused distribution, especially where we are in the double chillers—so multiple chillers—and also in island units. So far, we have seen there is a certain kind of household that wants to buy those packs. And that is different to those that want to come in very frequently into store. One of the challenges I think we have had historically has been fresh food requires very, very frequent shopping trips.

So putting a product into a multipack that is very convenient—both in an online format and also a club format—is making sure that they are getting enough of their food in a more convenient way rather than multi trips per week. So far, we are seeing a different household target coming through those multipacks, but we will continue to experiment and see how it works and make sure it maximizes incrementality. The other thing I would say is the discount level for a multipack is very, very low. So this is not something that we are driving aggressively in terms of pricing.

Michael Scott Lavery: Okay. That is helpful. And just a question back on the consumer. Your upper, kind of middle-end consumer. It would seem to be the very one that could most benefit from some of the tax law changes, and maybe not as much a function of elevated refund this year as much as withholding changes that have an ongoing benefit. Is this something you think could maybe help drive some improvement in trends over the course of the year? And even if so, is it something that you, just as yet another piece of your conservatism, would not be capturing in the guidance, but that you would keep an eye on?

William B. Cyr: Yeah, Michael. I will tell you there is a variety of things that we think can influence the macro market. The larger tax refunds are certainly going to help; the lower withholdings, in part because of the change in SALT deductions. All that is going to help, and we think there are other drivers that are helping. If you take a look at the consumer sentiment data, it was not good last year. It hit a real low in April and May, kind of bounced back, and it dropped down again very low in November.

But we have now seen a couple of months in a row where it is starting to tick up, and one of the things that I would attribute that to is the consumer is remarkably resilient. They digest the bad news. They look for the good news. And then they move on. It takes time, and there is a little bit of pain that we all endure when you are going through that process. But the consumer, I think, is remarkably resilient over time. And we are hopeful that means good things for the pet food category and certainly for Freshpet, Inc.

Michael Scott Lavery: Okay. Great. Thanks. I will pass it on.

Operator: Our next question is from Rupesh Dhinoj Parikh with Oppenheimer and Company. Please proceed.

Rupesh Dhinoj Parikh: Good morning, and thanks for taking my questions. So just going back to the competitive backdrop, just curious if there is anything surprising that you have seen from some of the competitor entries, whether positive or negative, just given the increased focus on the fresh category? Thank you.

William B. Cyr: Yeah. First of all, it is not a surprise that we have had as many competitors enter the market, in as many different channels. We think it is helping the total category—the increased attention of retailers, media investment, all that is—you know, a rising tide is going to lift all the boats, and we feel very good about that. We also believe that as you take a look at it, it is also validating that the business that we spent almost two decades now building, and the things that we have chosen to invest in—the strength of the brand—are the most important and most meaningful.

The quality of our products that we have built, the manufacturing, distribution, and scale—all those have done a very nice job of insulating our business from fairly significant investments by a wide range of competitors with a very diverse array of offerings. At the end, we feel really good about the product proposition that we have, the brand proposition we have, and the capabilities that we have built. We are not standing still either. We are looking for ways to add on to that. So we talked about building out omnichannel. We have talked about new technologies in manufacturing.

We are leaning in a very big way to make sure that as this segment becomes a larger and larger share of the category—which I think everybody now believes it will be—that we will have a very large share of that expanding category.

Rupesh Dhinoj Parikh: Great. Thank you, I will pass.

William B. Cyr: Great. Thanks, Rupesh.

Operator: Our next question is from Jon Andersen with William Blair. Please proceed.

Jon Andersen: Hey, good morning. Thanks for the question and welcome, John. I guess, I wanted to ask on the 2027 EBITDA margin targets that you talked about—kind of reiterating what you have said before, 20% with an upper single-digit growth rate, and if you kind of resume mid-teen growth closer to 22%—what is, is the benefit of the technology that you have been talking about today, the production technology, included in those targets? And if so, to what degree?

William B. Cyr: Yeah. I will take a shot at that, and then John might have something to add. I would start with the reality that unless we accelerate the manufacturing investment on the new technology, it will still have a relatively modest impact in 2027. The one line that we have installed in Pennsylvania is a relatively small-scale line, so it will produce good product, but not a significant percentage of our total volume. And the line that we are converting this year is, again, going to produce a good amount of product. But against the backdrop of the total number of lines we have, it is still a relatively small share.

If we do pull forward the investment to accelerate the technology, it could help us get there. We have not—our building blocks have not assumed that. Our building blocks have assumed that we would get there through good old-fashioned OEE improvements, through yield improvements, through G&A efficiency, net sales growth that would be at a higher level. And that could just give us another lever to pull that might get us there, but it is not necessarily necessary.

Jon Andersen: Thanks. That is helpful. And then the 7% to 10% sales growth for 2026, what are you—is that what we should expect from a consumption perspective as well? Are there any puts and takes that we need to think about there where consumption might deviate from that one way or the other? And then with respect to the cadence, I think John mentioned, to what extent should we be thinking about maybe over-delivery on that guide in Q1 due to easy comp and maybe under-delivery in Q3 due to the more difficult comp? Thank you.

William B. Cyr: Yeah. Let me take a shot at that. So starting with the difference between consumption and net sales, consumption is now measuring just about every part of our business. It does not provide a complete measure of our DTC business or of some of the ecommerce businesses that we do. But it is a relatively small share of the total pie that it does not measure. So the two should trend fairly close together. There should not be any significantly meaningful difference between what is measured in consumption and what we report in net sales, outside of our own internal DTC business. In terms of the cadence, I think you called it out right.

We said in the call, Q1 is a little bit softer comp just because of disruption we had a year ago. Q3 is a tougher comp. Beyond that, it is really going to come down to how effective is our advertising and what is the consumer environment. And that will dictate the pace of the year. But we feel very good about the trends that we are seeing so far. We feel really good about the building blocks that we put in place between the advertising program, the product initiatives, the retailer support that we are getting.

Jon Andersen: Thanks so much.

Operator: Our next question is from Peter Thomas Galbo with Bank of America. Please proceed.

Peter Thomas Galbo: Hey, Billy, John, Nikki. Thanks for taking the question. Maybe if I could just actually follow up on the last question. I know we talked a lot about cadence of sales for the year, but maybe you could help us a little bit with the cadence of EBITDA delivery for 2026. It sounds like with the higher sales in Q1, but then you have some increased media investment spend. So maybe anything you can do to help us with detail there, please.

John O’Connor: Sure, Peter. Yeah. So looking at the year, I would expect to index below our implied margins in the guidance in the first quarter, and then be building through the year, as we soften the amount of media spend—because that is going to be more front-loaded in the beginning of the year—and also as we continue to gain leverage through growing sales throughout the year.

Peter Thomas Galbo: Okay. Got it. No, that is helpful. And Billy, we spent a lot of time talking about the gross margin improvement and some of the benefits that could potentially unlock from the technology side. I guess just what I have not heard today at all is any color on raw material inputs. You know, the protein complex has kind of been all over the map over the last twelve months and kind of where chicken has gone, where beef has gone. So maybe you can just remind us where you stand on material costs and the curve there—maybe locks for the year? Thanks very much.

William B. Cyr: Yes. I will comment on this, and Nikki, you might want to add to it. But overall, we, as we mentioned in the past, we lock our chicken pricing, or at least the bulk of our chicken pricing, in the fourth quarter, and we did. And it came in at prices that were in line with where we were a year ago. The big issue for everyone is beef. Beef continues to be a higher cost. We are taking some actions to try to address the higher beef cost. But at the end of the day, that is the one commodity cost that is really a challenge for us in this year.

And as we mentioned in the comments earlier, we have taken some pricing. We have done some formulation work. All of that is intended to address those costs. Nikki, is there anything you want to add? Nope.

Peter Thomas Galbo: Awesome. Thanks.

Operator: We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing remarks.

William B. Cyr: Great. Thank you, everybody, for bearing with us through the middle of this blizzard. I want to leave you with a thought from the comedian Fran Lebowitz, and it is: if you are a dog, your owner suggests that you wear a sweater, suggest that he wear a tail, to which I would add, or you could just feed your dog Freshpet, Inc., and all will be forgiven. Thank you very much for your time.

Operator: Thank you. This will conclude today's call. You may disconnect at this time, and thank you for your participation.

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