Freshpet Boosts Full-Year Outlook But Investors Frown Over EBITDA Margin Decline

Freshpet, Inc. (NASDAQ:FRPT) reported first-quarter results on Wednesday that beat Wall Street expectations and raised its full-year sales outlook, driven by double-digit volume growth and margin expansion. Despite the strong results and higher guidance, Freshpet shares traded lower following the earnings release. Freshpet reported first-quarter EPS of 91 cents, beating analyst estimates of 15 cents. Net sales increased 13.1% year over year to $297.6 million, above estimates of $291.8 million. Net income totaled $48.5 million, compared with a net loss of $12.7 million a year earlier. Growth, Margins Improve Sales growth was driven by volume gains of 14.6%, partly offset by unfavorable price and mix of 1.5%. Gross profit increased to $120.7 million from $103.8 million, while gross margin expanded to 40.5% from 39.4%. Adjusted gross margin rose to 46.9% from 45.7%, helped by lower input costs and improved plant leverage. Operating income totaled $4.3 million, compared with an operating loss of $11.5 million in the prior-year quarter. Adjusted EBITDA increased to $37.9 million from $35.5 million, while adjusted EBITDA margin declined to 12.7% from 13.5%. Cash Flow, Balance Sheet SG&A expenses rose slightly to $116.3 million, though SG&A as a percentage of sales improved to 39.1% from 43.8%. Adjusted SG&A increased to $101.7 million, partly due to higher media spending. Net income also benefited from a $62 million gain tied to the sale of the company's non-controlling equity investment. Operating cash flow increased to $40.3 million from $4.8 million, while free cash flow improved to positive $12.7 million from negative $21.7 million. Capital expenditures totaled $27.6 million. Freshpet ended the quarter with $381.4 million in cash and $397.9 million in debt. Outlook CEO Billy Cyr said, "We are encouraged by our strong start to 2026, delivering first quarter sales growth in excess of our 2026 guidance and reinforcing our confidence in Freshpet's long-term growth opportunity." Freshpet raised full-year 2026 sales growth guidance to 8% to 11% from 7% to 10%, implying revenue of about $1.19 billion to $1.223 billion versus estimates of $1.203 billion. The company maintained its adjusted EBITDA outlook of $205 million to $215 million and continued to expect positive free cash flow with about $150 million in capital expenditures. Conference Call Highlights Freshpet said demand remains resilient, though management is monitoring macroeconomic volatility, inflation, tariffs, fuel, and ingredient costs. Digital orders grew 43% and represented 16.1% of sales, with most fulfilled through Freshpet's fridge network. Products are now in 30,435 stores, while Tractor Supply is expected to expand Freshpet to about 700 stores by year-end. Management also said new advertising is lowering customer acquisition costs, while new manufacturing technology could improve quality, throughput, and yield. FRPT Price Action: Freshpet shares were down 9.94% at $54.19 at the time of publication on Wednesday, according to Benzinga Pro data. Photo by T. Schneider via Shutterstock