Freshpet Inc
For the period ended Dec 31, 2024. Filed Feb 20, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 20, 2025
FRPT$64.39-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-26.
0001437749-24-005542
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-20.
0001611647-25-000007
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 98 previous paragraphs and 140 current paragraphs.
54 unchanged; 28 reworded; 55 added; 16 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 52 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (55)
Current report
•Increasing sales velocity from the average Freshpet Fridge due to increasing awareness, trial and adoption of Freshpet products and innovation. Our investments in marketing and advertising help to drive awareness and trial at each point of sale.
Current report
•Increasing penetration of Freshpet Fridge locations in major classes of retail, including Grocery, Mass, International, Digital, Pet Specialty, and Club. The impact of new Freshpet Fridge installations on our net sales varies by retail class and depends on numerous factors including store traffic, refrigerator size, placement within the store, and proximity to other stores that carry our products.
Current report
•Consumer trends including growing pet ownership, pet humanization and a focus on health and wellness.
Current report
•At times we increase our sales price to offset any adverse movement in input costs.
Current report
Share-based compensation. The Company recognizes share-based compensation based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. The Company estimates grant date fair value of its options using the Black-Scholes Merton option-pricing model. Restricted stock units are measured based on the fair market value of the underlying stock on the dates of the grants. Share awards are amortized under the straight-line method over the requisite service period of the entire award. The Company accounts for forfeitures as they occur.
Current report
Year Ended December 31, 2024 Compared To Year Ended December 31, 2023
Current report
Effective March 31, 2024, the Company is providing a more meaningful breakout of its sales, which now combines pet specialty and club, as both classes of retailers service a specific consumer through specialized offerings, which include value focused and or premium products. In contrast, grocery, mass, international and digital offer a wide variety of products.
Current report
Income (Loss) from Operations
Current report
Gain on Equity Investment
Current report
Net Income (Loss)
Current report
•Adjusted Gross Profit
Current report
•Adjusted Gross Profit as a percentage of net sales (Adjusted Gross Margin)
Current report
•Adjusted SG&A Expenses
Current report
•Adjusted SG&A Expenses as a percentage of net sales
Current report
•EBITDA
Current report
•Adjusted EBITDA
Current report
•Adjusted EBITDA as a percentage of net sales
Current report
•our capital expenditures or future requirements for capital expenditures;
Current report
•the interest expense, or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness;
Current report
•depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, nor any cash requirements for such replacements; and
Current report
•changes in our cash requirements for our working capital needs.
Current report
(a)Includes true-ups to share-based compensation expense compared to prior periods. We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA and/or Net Sales targets as a condition of vesting. At each reporting period, we reassess the probability of achieving the performance criteria and the performance period required to meet those targets. When the probability of achieving such performance conditions changes, the compensation cost previously recorded is adjusted as needed. When such performance conditions are deemed to be improbable of achievement, the compensation cost previously recorded is reversed.
Current report
(b)Represents costs associated with the implementation of an ERP system.
Current report
(c)Represents fees associated with the Capped Call Transactions associated with our sale of Convertible Notes in 2023.
Current report
(d)Represents advisory fees related to shareholder activism defense engagement.
Current report
(e)Represents a true-up to transition costs related to the organization changes designed to support growth, including several changes in organizational structure designed to enhance capabilities and support long-term growth objectives.
Current report
(a)Includes true-ups to share-based compensation expense compared to prior periods. We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA and/or Net Sales targets as a condition of vesting. At each reporting period, we reassess the probability of achieving the performance criteria and the performance period required to meet those targets. When the probability of achieving such performance conditions changes, the compensation cost previously recorded is adjusted as needed. When such performance conditions are deemed to be improbable of achievement, the compensation cost previously recorded is reversed.
Current report
(b)Represents costs associated with the implementation of an ERP system.
Current report
(c)Represents fees associated with the Capped Call Transactions associated with our sale of Convertible Notes in 2023.
Current report
(d)Represents advisory fees related to shareholder activism defense engagement.
Current report
(e)Represents a true-up to transition costs related to the organization changes designed to support growth, including several changes in organizational structure designed to enhance capabilities and support long-term growth objectives.
Current report
Working capital consists of current assets net of current liabilities. Working capital remained consistent at $338.1 million at both December 31, 2024 and 2023. Working capital remained consistent as the increases consisting of an increase of $17.6 million in inventories, net, an increase of $11.7 million in accounts receivable, and an increase of $8.4 million in prepaid expenses were fully offset by a decrease of $28.2 million in cash and cash equivalents, an increase of $6.4 million in accrued expenses due to timing, and an increase of $3.1 million in accounts payable as a result of timing.
Current report
Net cash provided by operating activities of $154.3 million in 2024 was primarily attributed to:
Current report
•$168.0 million of net income, adjusted for reconciling non-cash items, which excludes $121.0 million of non-cash items related to $73.6 million of depreciation and amortization, $51.8 million of share-based compensation including amortization of warrants, $2.1 million of write-off and amortization of deferred financing costs and loan discount, $1.4 million of change in operating lease right of use asset, $1.3 million of loss on disposal of property, plant and equipment, $0.3 million of a reserve for inventory obsolescence, $0.5 million of provision for loss on accounts receivable, partially offset by $9.9 million of gain on equity investment.
Current report
•$13.7 million decrease due to changes in operating assets and liabilities. The decrease was primarily due to the change in accounts receivable, inventories, other assets, and operating lease liability, partially offset by the change in accounts payable, accrued expenses, and prepaid expenses and other current assets.
Current report
•$61.7 million of net income adjusted for reconciling non-cash items, which excludes $95.3 million of non-cash items primarily related to $58.5 million of depreciation and amortization, $24.9 million of share-based compensation including amortization of warrants, $4.3 million of loss on disposal of property, plant and equipment, $4.1 million of write-off and amortization of deferred financing costs and loan discount, $1.9 million of loss on equity method investment, and $1.5 million of change in operating lease right of use asset.
Current report
•$14.3 million increase due to changes in operating assets and liabilities. The increase was primarily due to the change in accounts receivable, accounts payable and accrued expenses, primarily offset by the change in inventories, prepaid expenses and other current assets, other assets and operating lease liability.
Current report
Net cash used in investing activities of $187.1 million in 2024 was primarily attributed to:
Current report
•$187.1 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend.
Current report
•$239.1 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend.
Showing the first 40 of 55 passages. Open the source sections for the rest.
Removed paragraphs (16)
Previous report
We believe that as a result of the above key factors, we will continue to penetrate the pet food marketplace and increase our share of the pet food category.
Previous report
Share-based compensation. We account for all share-based compensation payments issued to employees, directors and non-employees using a fair value method. Accordingly, share-based compensation expense is measured based on the estimated fair value of the awards on the grant date using the Black-Scholes Merton option-pricing model. We recognize compensation expense for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to us using the straight-line single option method.
Previous report
Twelve Months Ended December 31, 2023 Compared To Twelve Months Ended December 31, 2022
Previous report
See "—Non-GAAP Financial Measures" for how we define Adjusted Gross Profit, a reconciliation of Adjusted Gross Profit to gross profit, the closest comparable U.S. GAAP measure, certain limitations of Non-GAAP measures and why management has included such Non-GAAP measures.
Previous report
See “—Non-GAAP Financial Measures” for how we define Adjusted SG&A, a reconciliation of Adjusted SG&A to SG&A, the closest comparable U.S. GAAP measure, certain limitations of Non-GAAP measures and why management has included such Non-GAAP measures.
Previous report
Loss from Operations
Previous report
Loss on Equity Method Investment
Previous report
Net Loss
Previous report
See "—Non-GAAP Financial Measures" for how we define Adjusted EBITDA, a reconciliation of Adjusted EBITDA to EBITDA, the closest comparable U.S. GAAP measure, certain limitations of Non-GAAP measures and why management has included such Non-GAAP measures; see the section entitled "Forward-Looking Statements" in this report and the section entitled "Risk Factors" in this report for factors that could cause our results to differ, in some cases materially.
Previous report
Working capital consists of current assets net of current liabilities. Working capital increased $165.7 million to $338.1 million at December 31, 2023 compared with working capital of $172.4 million at December 31, 2022. The increase was primarily a result of an increase of $164.1 million in cash and cash equivalents primarily resulting from the sale of the Convertible Notes as we fund our capital expansion plan, an increase in inventory of $4.9 million, a decrease in accounts payable of $19.0 million as a result of timing and capital expenditures of approximately $15.5 million related to our capital expansion plan and a decrease in current operating lease liabilities of $0.2 million. The increase was partially offset by a decrease in accounts receivable of $0.8 million, a decrease in prepaid expenses of $2.2 million, a decrease in other current assets of $0.7 million, an increase in accrued expenses of $16.8 million due to timing and capital expenditures of approximately $3.8 million related to our capital expansion plan, and an increase in current finance lease liabilities of $2.0 million.
Previous report
For the year ended December 31, 2022, our capital resources consisted primarily of $132.7 million of cash and cash equivalents on hand, $270.0 million available under our $350.0 million credit facilities, subject to debt covenants. Our credit facilities reflected $2.0 million reserved for two letters of credit and the remaining availability after the 2022 borrowing activity of $78.0 million under the Delayed Draw Facility.
Previous report
Net cash used in operating activities of $43.2 million in 2022 was primarily attributed to:
Previous report
This was offset by:
Previous report
Net cash used in investing activities of $233.4 million in 2022 was primarily attributed to:
Previous report
Net cash provided by financing activities of $336.5 million in 2022 was primarily attributed to:
Previous report
***Share-based Compensation—***We account for all share-based compensation payments issued to employees, directors and nonemployees using a fair value method. Accordingly, share-based compensation expense is measured based on the estimated fair value of the awards on the date of grant. We recognize compensation expense for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to us using the straight-line single option method.
Reworded paragraphs (28)
Previous wording
We started Freshpet with a single-minded mission to bring the power of real, fresh food to our dogs and cats. We were inspired by the rapidly growing view among pet owners that their dogs and cats are a part of their family, leading them to demand healthier pet food choices. Since Freshpet's inception in 2006, we have created a comprehensive business model to deliver wholesome pet food that pet parents can trust, and in the process, we believe we have become one of the fastest growing pet food companies in North America. Our business model is difficult for others to replicate, and we see significant opportunity for future growth by leveraging the unique elements of our business, including our brand, product know-how, Freshpet Kitchens, refrigerated distribution, Freshpet Fridge, and culture.
Current wording
Freshpet's mission is to elevate the way we feed our pets with fresh food that nourishes all. We were inspired by the rapidly growing view among pet owners that their dogs and cats are a part of their family, leading them to demand healthier pet food choices. Since Freshpet's inception in 2006, we have created a comprehensive business model to deliver wholesome pet food that pet parents can trust, and in the process, we believe we have become one of the fastest growing pet food companies in North America. Our business model is difficult for others to replicate and we see significant opportunity for future growth by leveraging the unique elements of our business, including our brand, our product know-how, our Freshpet Kitchens, our refrigerated distribution, our Freshpet Fridges and our culture.
Previous wording
Our net sales are derived from the sale of pet food products that are sold to retailers through broker and distributor arrangements. Our products are sold to consumers through a fast-growing network of company-owned branded refrigerators, known as Freshpet Fridges, located in our customers’ stores. We continue to roll out Freshpet Fridges at leading retailers across North America and parts of Europe and have installed Freshpet Fridges in approximately 26,777 retail stores as of December 31, 2023. Our products are sold under the Freshpet brand name with ingredients, packaging and labeling customized by class of retail. Sales are recorded net of discounts, returns and promotional allowances.
Current wording
Our net sales are derived from the sale of fresh pet food products to retailers, through direct sales and distributor arrangements. Our products are sold to consumers through a fast-growing network of company-owned branded refrigerators, known as Freshpet Fridges, located in our customers’ stores. We continue to roll out Freshpet Fridges at leading retailers across North America and parts of Europe and have installed Freshpet Fridges in approximately 28,141 retail stores as of December 31, 2024. Our products are sold under the Freshpet brand name with ingredients, packaging and labeling customized by class of retail. Sales are recorded net of discounts, returns and promotional allowances.
Previous wording
We had federal net operating loss (“NOL”) carry forwards of approximately $420.3 million as of December 31, 2023, of which, approximately $175.4 million, generated in 2017 and prior, will expire between 2025 and 2037. The NOL generated from 2018 through 2023, of approximately $244.9 million, will have an indefinite carryforward period, but can generally only be used to offset 80% of taxable income in any particular year. We may be subject to certain limitations in our annual utilization of NOL carry forwards to off-set future taxable income pursuant to Section 382 of the Internal Revenue Code, which could result in NOLs expiring unused. At December 31, 2023, we had approximately $312.8 million of state NOLs, which expire between 2024 and 2043, and had $20.7 million of foreign NOLs in the United Kingdom which do not expire. At December 31, 2023, we had a full valuation allowance against our net deferred tax assets as the realization of such assets was not considered more likely than not.
Current wording
We had federal net operating loss (“NOL”) carry forwards of approximately $391.5 million as of December 31, 2024, of which, approximately $146.7 million, generated in 2017 and prior, will expire between 2028 and 2037. The NOLs generated from 2018 through 2023, of approximately $244.8 million, will have an indefinite carryforward period, but can generally only be used to offset 80% of taxable income in any particular year. We may be subject to certain limitations in our annual utilization of NOL carry forwards to off-set future taxable income pursuant to Section 382 of the Internal Revenue Code, which could result in NOLs expiring unused. At December 31, 2024, we had approximately $278.4 million of state NOLs, which expire between 2025 and 2046, and had $27.6 million of foreign NOLs in the United Kingdom which do not expire. At December 31, 2024, we had a full valuation allowance against our net deferred tax assets as the realization of such assets was not considered more likely than not.
Previous wording
Consolidated Statements of Operations and Comprehensive Loss
Current wording
Consolidated Statements of Operations and Comprehensive Income (Loss)
Previous wording
The following table sets forth net sales by class of retail:
Current wording
The following table sets forth net sales by class of retailer:
Previous wording
Net sales increased $171.6 million, or 28.8%, to $766.9 million for the twelve months ended December 31, 2023 as compared to the prior year. The $171.6 million increase in net sales was driven by growth in the Grocery, Mass, and Club channel of $160.3 million, with the remaining growth in Pet Specialty and Natural. The net sales increase was primarily driven by volume gains of 20%.
Current wording
Net sales were $975.2 million and $766.9 million for the years ended December 31, 2024 and 2023, respectively, representing increases of $208.3 million and $171.6 million, or 27.2% and 28.8%, as compared to the respective prior years. The net sales increases were driven by year-over-year growth in the Grocery, Mass, International and Digital channel of $158.5 million and $138.6 million in 2024 and 2023, respectively, with the remaining growth in the Pet Specialty and Club channel. This growth was primarily driven by year-over-year volume gains of 26.1% and 20.0% in 2024 and 2023, respectively.
Previous wording
Gross profit was $250.9 million, or 32.7% as a percentage of net sales, for the twelve months ended December 31, 2023, compared to $186.0 million, or 31.2% as a percentage of net sales, in the prior year. The increase in gross profit as a percentage of net sales was primarily due to improved leverage on plant expenses, reduced quality costs, and decreased input cost as a percentage of sales mainly due to an increase in net sales pricing, partially offset by increased depreciation expense associated with the Company's capacity expansion and cost related to the disposal of equipment. For the twelve months ended December 31, 2023, Adjusted Gross Profit was $306.6 million, or 40.0% as a percentage of net sales, compared to $214.1 million, or 36.0% as a percentage of net sales, in the prior year.
Current wording
Gross profit was $396.0 million, or 40.6% as a percentage of net sales, for the year ended December 31, 2024, compared to $250.9 million, or 32.7% as a percentage of net sales, for the prior year. The increase in gross profit as a percentage of net sales was primarily due to lower input costs, reduced quality costs and improved leverage on plant expenses. For the year ended December 31, 2024, Adjusted Gross Profit was $453.5 million, or 46.5% as a percentage of net sales, compared to $306.6 million, or 40.0% as a percentage of net sales, in the prior year. See "—Non-GAAP Financial Measures" below.
Previous wording
Selling, general and administrative expenses ("SG&A") were $281.3 million, for the twelve months ended December 31, 2023, compared to $238.0 million in the prior year. As a percentage of net sales, SG&A decreased to 36.7% for the twelve months ended December 31, 2023, compared to 40.0% in the prior year. The decrease of 330 basis points in SG&A as a percentage of net sales was mainly a result of reduced logistics cost as a percentage of net sales, decreased cost related to the ERP implementation, and increased leverage on depreciation and share-based compensation as the business scales, partially offset by activism engagement charges, increased media spend and increased variable compensation accrual.
Current wording
Selling, general and administrative expenses ("SG&A") were $358.0 million for the year ended December 31, 2024, compared to $281.3 million for the prior year. As a percentage of net sales, SG&A remained consistent at 36.7% for both years ended December 31, 2024 and 2023. SG&A as a percentage of net sales remained consistent as the decreases due to reduced logistics as a percentage of net sales and the absence of non-recurring charges incurred in the prior year were fully offset by increased media as a percentage of net sales, higher share-based compensation and increased variable compensation accrual.
Previous wording
Adjusted SG&A for the twelve months ended December 31, 2023, was $240.1 million, or 31.3% as a percentage of net sales, compared to $195.7 million, or 32.9% as a percentage of net sales, in the prior year.
Current wording
Adjusted SG&A for the year ended December 31, 2024, was $291.6 million, or 29.9% as a percentage of net sales, compared to $240.1 million, or 31.3% as a percentage of net sales, for the prior year. See "—Non-GAAP Financial Measures" below.
Previous wording
As a result of the factors discussed above, loss from operations decreased by $21.5 million to a loss from operations of $30.4 million for the twelve months ended December 31, 2023 as compared to a loss from operations of $52.0 million in the prior year.
Current wording
As a result of the factors discussed above, income from operations increased by $68.4 million to income from operations of $38.0 million for the year ended December 31, 2024 as compared to a loss from operations of $30.4 million for the prior year.
Previous wording
The Company recorded interest and other income, net of $13.0 million for the twelve months ended December 31, 2023 as a result of interest income generated from cash and short-term investments.
Current wording
The Company recorded interest and other income, net of $11.9 million for the year ended December 31, 2024 as a result of interest income generated from cash and cash equivalents as compared to $13.0 million for the prior year, which also included interest income generated from short-term investments.
Previous wording
Interest expense increased $8.9 million to interest expense of $14.1 million for the twelve months ended December 31, 2023 as compared to interest expense of $5.2 million for the same period in the prior year. The increase was primarily driven by the termination of our Credit Agreement in the current period resulting in the write-off of unamortized fees of $2.5 million which were recorded to interest expense, $5.2 million increase as a result of interest incurred on our Convertible Notes (as defined below) compared to interest incurred on the Credit Agreement that existed in the prior period, as well as a $1.2 million increase related to the interest on our finance lease liability.
Current wording
Interest expense decreased $1.8 million to interest expense of $12.3 million for the year ended December 31, 2024 as compared to interest expense of $14.1 million for the prior year. The decrease was primarily driven by the termination of our Credit Agreement in the prior year resulting in the write-off of unamortized fees of $2.5 million, which were recorded to interest expense, and the non-recurring $0.3 million of interest expense incurred on this facility prior to termination, partially offset by a $0.2 million increase (net of capitalized interest) as a result of interest incurred on our Convertible Notes compared to interest incurred in the prior year and a $1.0 million increase related to the interest on our finance lease liability.
Previous wording
Our loss on equity method investment for the twelve months ended December 31, 2023 was $1.9 million as compared to a loss on equity method investment of $3.7 million in the prior year from the Company's interest in a privately held company, as discussed in Note 1.
Current wording
The $9.9 million gain on equity investment for the year ended December 31, 2024, resulted from the change in fair value of the Company's equity interest in a privately held company.
Previous wording
Net loss decreased $25.9 million to a net loss of $33.6 million for the twelve months ended December 31, 2023 as compared to a net loss of $59.5 million for the prior year due to contribution from higher sales, increased gross margin and reduced logistics costs as a percentage of net sales, partially offset by increased SG&A including increased media spend of $23.1 million.
Current wording
Net income increased $80.5 million to net income of $46.9 million for the year ended December 31, 2024 as compared to a net loss of $33.6 million in the prior year, primarily due to contribution from higher sales, improved gross margin, reduced logistics costs as a percentage of net sales, and gain on equity investment, partially offset by increased SG&A expenses.
Previous wording
Adjusted EBITDA was $66.6 million, or 8.7% as a percentage of net sales (also called Adjusted EBITDA Margin), for the twelve months ended December 31, 2023, compared to $20.1 million, or 3.4% as a percentage of net sales, in the prior year. The increase in Adjusted EBITDA was a result of increased Adjusted Gross Profit partially offset by higher Adjusted SG&A expense.
Current wording
Adjusted EBITDA was $161.8 million, or 16.6% as a percentage of net sales, for the year ended December 31, 2024, compared to $66.6 million, or 8.7% as a percentage of net sales, in the prior year. The increase in Adjusted EBITDA was a result of increased Adjusted Gross Profit partially offset by higher Adjusted SG&A expenses. See "—Non-GAAP Financial Measures" below.
Previous wording
Such financial measures are not financial measures prepared in accordance with U.S. GAAP. We define Adjusted Gross Profit as Gross Profit before depreciation expense, non-cash share-based compensation, and loss on disposal of manufacturing equipment. We define Adjusted SG&A as SG&A expenses before depreciation and amortization expense, non-cash share-based compensation, implementation and other costs associated with the implementation of an ERP system, fees related to the Capped Call Transactions, loss on disposal of equipment, and advisory fees related to activism engagement. EBITDA represents net income (loss) plus interest expense net of interest income, income tax expense and depreciation and amortization. Adjusted EBITDA represents EBITDA plus loss on equity method investment, non-cash share-based compensation, implementation and other costs associated with the implementation of an ERP system, loss on disposal of property, plant and equipment, fees related to the Capped Call Transactions, and advisory fees related to activism engagement.
Current wording
Such financial measures are not financial measures prepared in accordance with U.S. GAAP. We define Adjusted Gross Profit as Gross Profit before depreciation expense, non-cash share-based compensation, and loss on disposal of manufacturing equipment. We define Adjusted SG&A as SG&A expenses before depreciation and amortization expense, non-cash share-based compensation, implementation and other costs associated with the implementation of an ERP system, fees related to the Capped Call Transactions associated with the sale of our Convertible Notes in 2023, loss on disposal of equipment, advisory fees related to shareholder activism defense engagement, and organizational changes. EBITDA represents net income (loss) plus interest expense net of interest income, income tax expense and depreciation and amortization expense. Adjusted EBITDA represents EBITDA less gain on equity investment, plus loss on equity method investment, non-cash share-based compensation expense, implementation and other costs associated with the implementation of an ERP system, loss on disposal of property, plant and equipment, fees related to the Capped Call Transactions, advisory fees related to activism engagement, and organizational changes.
Previous wording
The non-GAAP financial measures are presented here because we believe they are useful to investors in assessing the operating performance of our business without the effect of non-cash items, and other items as detailed below. The non-GAAP financial measures should not be considered in isolation or as alternatives to net income (loss), income (loss) from operations or any other measure of financial performance calculated and prescribed in accordance with U.S. GAAP. Neither EBITDA nor Adjusted EBITDA should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our non-GAAP financial measures may not be comparable to similarly titled measures in other organizations because other organizations may not calculate non-GAAP financial measures in the same manner as we do.
Current wording
The non-GAAP financial measures are presented here because we believe they are useful to investors in assessing the operating performance of our business without the effect of non-cash items, and other items as detailed herein. The non-GAAP financial measures should not be considered in isolation or as alternatives to net income (loss), income (loss) from operations or any other measure of financial performance calculated and prescribed in accordance with U.S. GAAP. Neither EBITDA nor Adjusted EBITDA should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our non-GAAP financial measures may not be comparable to similarly titled measures in other organizations because other organizations may not calculate non-GAAP financial measures in the same manner as we do.
Previous wording
Additionally, Adjusted EBITDA (i) excludes non-cash share-based compensation expense, which is and will remain a key element of our overall long-term incentive compensation package, and (ii) certain costs essential to our sales growth and strategy. Adjusted EBITDA also excludes certain cash charges resulting from matters we consider not to be indicative of our ongoing operations. Other companies in our industry may calculate the non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.
Current wording
Additionally, Adjusted EBITDA excludes (i) non-cash share-based compensation expense, which is and will remain a key element of our overall long-term incentive compensation package, and (ii) certain costs essential to our sales growth and strategy. Adjusted EBITDA also excludes certain cash charges resulting from matters we consider not to be indicative of our ongoing operations. Other companies in our industry may calculate the non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.
Previous wording
The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net loss, the most directly comparable financial measure presented in accordance with U.S. GAAP:
Current wording
The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure presented in accordance with U.S. GAAP:
Previous wording
We expect to make future capital expenditures in connection with the completion of our planned development of Freshpet Kitchens Ennis phase 2 and 3. During fiscal year 2023, we spent approximately $239.1 million of capital to meet our capacity needs as well as recurring capital expenditures. In fiscal year 2024, we expect to spend approximately $210.0 million.
Current wording
We expect to make future capital expenditures in connection with the completion of our planned development of Freshpet Kitchens Ennis Phase 2 and 3. During fiscal year 2024, we spent approximately $187.1 million of capital to meet our capacity needs as well as recurring capital expenditures. In fiscal year 2025, we expect to spend approximately $250.0 million.
Previous wording
Our primary cash needs, in addition to our plant expansions, are for purchasing ingredients, operating expenses, marketing expenses and capital expenditures to procure Freshpet Fridges. We believe that cash and cash equivalents, short-term investments, expected cash flow from operations, amounts previously raised through the issuance of the Convertible Notes and our ability to access the capital markets, if appropriate, are adequate to fund our debt requirements, operating and finance lease obligations, capital expenditures and working capital obligations for the foreseeable future. We believe our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow from operations and our ability to manage costs and working capital successfully. Additionally, our cash flow generation ability is subject to general economic factors, including but not limited to increasing interest rates and inflation, financial, competitive, legislative and regulatory factors and other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations in an amount sufficient to enable us to fund our liquidity needs. Expanding certain of our Freshpet Kitchens primarily comprises our material future cash requirement. However, our capital requirements, including our cash requirements, may vary materially from those currently planned if, for example, our revenues do not reach expected levels, or we have to incur unforeseen capital expenditures and make investments to maintain our competitive position. If this is the case, we may seek alternative financing, such as selling additional debt or equity securities, and we cannot assure you that we will be able to do so on favorable terms, if at all. Moreover, if we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity or if the Convertible Notes are converted to common shares, existing stockholders may experience dilution, and such new securities could have rights senior to those of our common stock. These factors may make the timing, amount, terms and conditions of additional financing unattractive. Our inability to raise capital could impede our growth or otherwise require us to forego growth opportunities and could materially adversely affect our business, financial condition and results of operations.
Current wording
Our primary cash needs, in addition to our plant expansions, are for purchasing ingredients, operating expenses, marketing expenses and capital expenditures to procure Freshpet Fridges. We believe that cash and cash equivalents, expected cash flow from operations, amounts previously raised through the issuance of the Convertible Notes and our ability to access the capital markets, if appropriate, are adequate to fund our debt service requirements, operating and finance lease obligations, capital expenditures and working capital obligations for the foreseeable future. We believe our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow from operations and our ability to manage costs and working capital successfully. Additionally, our cash flow generation ability is subject to general economic factors at the international, national and regional levels, including but not limited to increased interest rates and inflation, tariffs, trade wars, recession, financial, competitive, legislative and regulatory factors and other factors that are beyond our control, including government or regulatory shutdowns or defunding, or disruptions with or increased costs imposed by our key suppliers or others within our supply chain. We cannot assure you that our business will generate cash flow from operations in an amount sufficient to enable us to fund our liquidity needs. Expanding certain of our Freshpet Kitchens primarily comprises our material future cash requirement. However, our capital requirements, including our cash requirements, may vary materially from those currently planned if, for example, our revenues do not reach expected levels, or we have to incur unforeseen capital expenditures and make investments to maintain our competitive position. If this is the case, we may seek alternative financing, such as issuing additional debt or equity securities, and we cannot assure you that we will be able to do so on favorable terms, if at all. Moreover, if we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity or if the Convertible Notes are converted to common shares, existing stockholders may experience dilution, and such new securities could have rights senior to those of our common stock. These factors may make the timing, amount, terms and conditions of additional financing unattractive. Our inability to raise capital could impede our growth or otherwise require us to forego growth opportunities and could materially adversely affect our bus…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
We normally carry three to four weeks of finished goods inventory and less than 30 days of accounts receivable.
Current wording
We normally carry three to five weeks of finished goods inventory and less than 30 days of accounts receivable.
Previous wording
For the year ended December 31, 2023 our capital resources consisted primarily of $296.9 million of cash and cash equivalents on hand.
Current wording
As of December 31, 2023, our capital resources consisted primarily of $296.9 million of cash and cash equivalents on hand.
Previous wording
The following table sets forth, for the periods indicated, our beginning balance of cash, net cash flows provided by operating, investing and financing activities and our ending balance of cash.
Current wording
The following table sets forth, for the periods indicated, our beginning balance of cash, net cash flows provided by (used in) operating, investing and financing activities and our ending balance of cash.
Previous wording
Net Cash Provided by (Used In) Operating Activities
Current wording
Net Cash Provided by Operating Activities
Previous wording
Cash provided by (used in) operating activities consists primarily of net loss adjusted for certain non-cash items (i.e., provision for (gains) loss on receivable, loss on disposal of property, plant and equipment, share-based compensation, change in reserve for inventory obsolescence, depreciation and amortization, write-off and amortization of deferred financing costs and loan discount, change in operating lease right of use asset and loss on equity method investment).
Current wording
Net cash provided by operating activities consists primarily of net income (loss) adjusted for certain non-cash items (i.e., provision for loss (gains) on accounts receivable, loss on disposal of property, plant and equipment, share-based compensation, change in reserve for inventory obsolescence, depreciation and amortization, write-off and amortization of deferred financing costs and loan discount, change in operating lease right of use asset, loss on equity method investment, and gain on equity investment).
Previous wording
Revenue Recognition and Incentives—Revenue is reported net of applicable trade incentives and allowances. Amounts billed and due from our customers are classified as receivables and require payment on a short-term basis. The Company applies judgment in the determination of the amount of consideration the Company receives from its customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Revenue the Company recognizes varies with changes in trade incentives the Company offers to its customers and their consumers. Trade incentives consist primarily of customer pricing allowances and merchandising funds, and consumer coupons are offered through various programs to customers and consumers. Estimates of trade promotion expense and coupon redemption costs are based upon programs offered, timing of those offers, estimated redemption/usage rates from historical performance, management’s experience and current economic trends.
Current wording
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, including estimates of trade incentives the Company offers to its customers and their consumers. Trade incentives consist primarily of customer pricing allowances and merchandising funds, and consumer coupons offered through various programs to customers and consumers. Estimates of trade promotion expense and coupon redemption costs are based upon programs offered, timing of those offers, estimated redemption/usage rates from historical performance, management’s experience and current economic trends.
Previous wording
We have determined we operate in one segment: the manufacturing, marketing and distribution of pet food and pet treats for dogs and cats.
Current wording
We have determined we operate in one segment: the manufacturing, marketing and distribution of fresh dog food, cat food, and dog treats.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report — wording carried from elsewhere
As of December 31, 2024, our capital resources consisted primarily of $268.6 million of cash and cash equivalents on hand.
Current report — wording carried from elsewhere
Revenue is reported net of applicable trade incentives and allowances. Amounts billed and due from our customers are classified as receivables and require payment on a short-term basis and, therefore, we do not have any significant financing components.