Freshpet, Inc.

Previous 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 28,521 retail stores as of March 31, 2025. 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 29,141 retail stores as of June 30, 2025. 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

Our net sales growth is driven by the following key factors:

Current wording

Our net sales growth strategy is driven by the following key factors:

Previous 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.

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 June 30, 2025 and December 31, 2024, the Company determined that a full valuation of its net deferred tax assets and liabilities was appropriate. Although we generated net income for the three and six months ended June 30, 2025, no federal income tax expense provision was recognized in the respective periods. The reversal of temporary differences in the current periods resulted in a tax loss, which consequently resulted in no current federal income tax expense. The change in the valuation allowance against deferred tax assets resulted in no deferred tax expense nor benefit in the current periods.

Previous wording

We will continue to monitor the realizability of our net deferred tax assets in the future and determine the necessity of changes to such valuation allowance based on future positive and negative evidence. Currently, we maintain a full valuation allowance against our deferred tax assets as the evidence supporting the maintenance of a full valuation allowance outweighs the evidence supporting any release.

Current wording

In light of recent net income positions, the Company will continue to monitor the realizability of its net deferred tax assets in the future and determine the necessity of or changes to such valuation allowance based on future positive and negative evidence. Currently, we maintain a full valuation allowance against our deferred tax assets as the evidence supporting the maintenance of a full valuation allowance outweighs the evidence supporting any release.

Previous wording

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

Current wording

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Previous wording

Net sales increased $39.4 million, or 17.6%, to $263.2 million for the three months ended March 31, 2025 as compared to $223.8 million in the same period in the prior year. The $39.4 million increase in net sales was driven by growth in the Grocery, Mass, International, and Digital channel of $30.7 million, with the remaining growth in the Pet Specialty and Club channel. The net sales increase was primarily driven by volume gains of 14.9% and favorable price/mix of 2.7%.

Current wording

Net sales increased $29.4 million, or 12.5%, to $264.7 million for the three months ended June 30, 2025 as compared to $235.3 million in the same period in the prior year. The $29.4 million increase in net sales was driven by growth in the Grocery, Mass, International, and Digital channel of $24.6 million, with the remaining growth in the Pet Specialty and Club channel. The net sales increase was primarily driven by volume gains of 10.8% and favorable price/mix of 1.7%.

Previous wording

Gross profit was $103.8 million for the three months ended March 31, 2025, compared to $88.2 million in the prior year period. Gross profit as a percentage of net sales remained consistent at 39.4% for both periods, as the benefit from lower input costs and reduced quality costs was fully offset by reduced leverage on plant expenses.

Current wording

Gross profit was $108.2 million, or 40.9% as a percentage of net sales, for the three months ended June 30, 2025, compared to $94.0 million, or 39.9% as a percentage of net sales, in the prior year period. The 1.0% increase in gross profit as a percentage of net sales was primarily due to lower input costs and reduced quality costs, partially offset by reduced leverage on plant expenses.

Previous wording

Adjusted Gross Profit for the three months ended March 31, 2025, was $120.2 million, or 45.7% as a percentage of net sales, compared to $101.5 million, or 45.3% as a percentage of net sales, in the prior year period. -See “—Non-GAAP Financial Measures” below.

Current wording

Adjusted Gross Profit for the three months ended June 30, 2025 was $124.0 million, or 46.9% as a percentage of net sales, compared to $108.0 million, or 45.9% as a percentage of net sales, in the prior year period. -See “—Non-GAAP Financial Measures” below.

Previous wording

Adjusted SG&A for the three months ended March 31, 2025, was $84.7 million, or 32.2% as a percentage of net sales, compared to $70.9 million, or 31.7% as a percentage of net sales, in the prior year period. See “—Non-GAAP Financial Measures” below.

Current wording

Adjusted SG&A for the three months ended June 30, 2025 was $79.6 million, or 30.1% as a percentage of net sales, compared to $72.9 million, or 31.0% as a percentage of net sales, in the prior year period. See “—Non-GAAP Financial Measures” below.

Previous wording

As a result of the factors discussed above, income from operations decreased by $20.0 million to a loss from operations of $11.5 million for the three months ended March 31, 2025 as compared to an income from operations of $8.5 million for the prior year period.

Current wording

As a result of the factors discussed above, income from operations increased by $19.6 million to income from operations of $17.8 million for the three months ended June 30, 2025 as compared to a loss from operations of $1.8 million in the prior year period.

Previous wording

The Company recorded interest and other income, net of $2.4 million for the three months ended March 31, 2025 as a result of interest income generated from cash and cash equivalents as compared to $3.3 million for the three months ended March 31, 2024.

Current wording

The Company recorded interest and other income, net of $2.2 million for the three months ended June 30, 2025 as a result of interest income generated from cash and cash equivalents as compared to $2.9 million in the prior year period.

Previous wording

Interest expense increased $0.4 million to $3.5 million for the three months ended March 31, 2025 as compared to $3.1 million for the same period in the prior year. The increase was primarily driven by a $0.4 million increase in interest expense on our Convertible Notes due to a decrease in capitalized interest compared to prior year period as a result of assets placed into service.

Current wording

Interest expense increased $0.9 million to $3.7 million for the three months ended June 30, 2025 as compared to $2.8 million in the prior year period. The increase was primarily driven by a $0.9 million increase in interest expense on our Convertible Notes due to a decrease in capitalized interest compared to the prior year period as a result of assets placed into service.

Previous wording

Adjusted EBITDA was $35.5 million for the three months ended March 31, 2025, compared to $30.6 million in the prior year period. 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.

Current wording

Adjusted EBITDA was $44.4 million for the three months ended June 30, 2025 as compared to $35.1 million in the prior year period. 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

Selling, general and administrative expenses ("SG&A") were $115.3 million for the three months ended March 31, 2025, compared to $79.7 million in the prior year period. As a percentage of net sales, SG&A increased to 43.8% for the three months ended March 31, 2025, compared to 35.6% in the prior year period. The increase in SG&A as a percentage of net sales was primarily due to increased media as a percentage of net sales, higher share-based compensation and non-recurring charges in the current period, including an accounts receivable write-off in connection with the liquidation of one of our pet specialty distributors, an accrual for legal obligations related to the ongoing litigation with Phillips, and termination costs due to a business change in our international go-to-market strategy, partially offset by reduced logistics as a percentage of net sales.

Current wording

Selling, general and administrative expenses ("SG&A") were $205.7 million for the six months ended June 30, 2025, compared to $175.4 million in the prior year period. As a percentage of net sales, SG&A increased to 39.0% for the six months ended June 30, 2025, compared to 38.2% in the prior year period. The increase in SG&A as a percentage of net sales was primarily due to increased media spend as a percentage of net sales and higher non-recurring charges in the first quarter of 2025, partially offset by decreased share-based compensation and variable compensation accrual.

Previous wording

Net income decreased $31.3 million to a net loss of $12.7 million for the three months ended March 31, 2025, as compared to a net income of $18.6 million for the same period in the prior year due to increased SG&A expenses, including increased media spend of $7.7 million and non-recurring charges of $16.9 million, which was partially offset by contributions from higher sales and reduced logistics costs as a percentage of net sales.

Current wording

Net income decreased $13.2 million to net income of $3.7 million for the six months ended June 30, 2025, as compared to net income of $16.9 million in the prior year period, due to increased SG&A expenses, including increased media spend of $18.8 million and $16.9 million of non-recurring charges in the first quarter of 2025 compared to a $9.9 million gain on equity investment in the prior year period, which were partially offset by contributions from higher sales and improved gross profit as a percentage of sales.

Previous wording

The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net (loss) income, 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

(a)Includes true-ups to share-based compensation expense in prior period. We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA margins, 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 wording

(a)Includes true-ups to share-based compensation expense. We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA margins, 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.

Previous wording

(a)Includes true-ups to share-based compensation expense in prior period. We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA margins, 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 wording

(a)Includes true-ups to share-based compensation expense. We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA margins, 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.

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 the three months ended March 31, 2025, we spent approximately $26.5 million of capital to meet our capacity needs as well as recurring capital expenditures. We expect to spend an additional $223.5 million in the remainder of fiscal year 2025.

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 the six months ended June 30, 2025, we spent approximately $59.9 million of capital to meet our capacity needs as well as recurring capital expenditures. We expect to spend an additional $115.1 million in the remainder of fiscal year 2025.

Previous wording

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. Further, such macroeconomic factors could negatively impact consumer sentiment, resulting in reduced demand and changes in purchasing behaviors for some or all of our products. 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.

Current wording

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. Further, such macroeconomic factors could negatively impact consumer sentiment, resulting in reduced demand and changes in purchasing behaviors for some or all of our products and other relevant factors, such as consumer hesitancy to trade up in pet food, deferral of veterinary visits, and reduced pet adoption rates. While these factors are expected to persist in the near term, the Company has implemented strategic initiatives, including targeted marketing, value-focused product innovation, and expanded distribution in club and mass channels, to mitigate their impact. Management believes these actions will support continued growth and margin expansion, even if the current economic environment remains unchanged. 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.

Previous wording

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 business, financial condition and results of operations.

Current wording

Expanding certain of our Freshpet Kitchens primarily comprises our material future cash requirement. The Company has reduced its capital expenditure forecast for 2025, reflecting both a moderation in demand and significant operational efficiencies. These changes are expected to materially improve near-term cash flow and reduce the capital intensity of the business, while maintaining flexibility to scale as market conditions evolve. 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 business, financial condition and results of operations.

Previous wording

Working capital consists of current assets net of current liabilities. Working capital decreased $15.3 million to $322.8 million as of March 31, 2025 compared with working capital of $338.1 million as of December 31, 2024. The decrease was primarily a result of a decrease of $24.9 million in cash and cash equivalents, a decrease of $5.8 million in accounts receivable, a decrease of $2.1 million in prepaid expenses and an increase of $3.6 million in accounts payable as a result of timing. The decrease was partially offset by an increase of $1.2 million in inventories, net. and a decrease of $20.0 million in accrued expenses due to timing.

Current wording

Working capital consists of current assets net of current liabilities. Working capital decreased $13.9 million to $324.2 million as of June 30, 2025 compared to working capital of $338.1 million as of December 31, 2024. The decrease was primarily a result of a decrease of $24.9 million in cash and cash equivalents, a decrease of $8.0 million in accounts receivable, a decrease of $5.3 million in prepaid expenses and an increase of $3.7 million in accounts payable as a result of timing. The decrease was partially offset by an increase of $9.8 million in inventories, net and a decrease of $18.4 million in accrued expenses due to timing.

Previous wording

Net cash provided by operating activities consists primarily of net (loss) income adjusted for certain non-cash items (i.e., provision for loss on accounts receivable, loss on disposal of property, plant and equipment, share-based compensation, change in reserve for inventory obsolescence, depreciation and amortization, amortization of deferred financing costs, change in operating lease right of use asset, and gain on equity investment).

Current wording

Net cash provided by operating activities consists primarily of net income adjusted for certain non-cash items (i.e., provision for loss on accounts receivable, loss on disposal of property, plant and equipment, share-based compensation, change in reserve for inventory obsolescence, depreciation and amortization, amortization of deferred financing costs, change in operating lease right of use asset, and gain on equity investment).

Previous wording

•$31.0 million of net income, adjusted for reconciling non-cash items, which excludes $43.7 million of non-cash items related to $21.8 million of depreciation and amortization, $11.5 of provision for loss on accounts receivable, $8.8 million of share-based compensation, $0.5 million of amortization of deferred financing costs, $0.7 million of loss on disposal of property, plant and equipment, and $0.3 million of change in operating lease right of use asset.

Current wording

•$75.6 million of net income, adjusted for reconciling non-cash items, which excludes $72.0 million of non-cash items related to $42.4 million of depreciation and amortization, $11.5 million of provision for loss on accounts receivable, $15.0 million of share-based compensation, $1.1 million of amortization of deferred financing costs, $1.2 million of loss on disposal of property, plant and equipment, and $0.7 million of change in operating lease right of use asset.

Previous wording

•$26.2 million decrease due to changes in operating assets and liabilities. The decrease was primarily due to the change in accrued expenses, accounts receivable, inventories, and other assets, partially offset by the change in accounts payable and prepaid expenses and other current assets.

Current wording

•a $36.9 million decrease due to changes in operating assets and liabilities. The decrease was primarily due to the change in accrued expenses, inventories, accounts receivable, prepaid expenses and other current assets, and other assets, partially offset by the change in accounts payable.

Previous wording

•$32.6 million of net income, adjusted for reconciling non-cash items, which excludes $14.0 million of non-cash items related to $15.9 million of depreciation and amortization, $6.2 million of share-based compensation including amortization of warrants, $0.7 million of reserve for inventory obsolescence, $0.5 million of amortization of deferred financing costs, $0.4 million of change in operating lease right of use asset and $0.2 million of loss on disposal of property, plant and equipment, partially offset by $9.9 million of gain on equity investment

Current wording

•$68.9 million of net income, adjusted for reconciling non-cash items, which excludes $52.0 million of non-cash items related to $33.3 million of depreciation and amortization, $25.8 million of share-based compensation including amortization of warrants, $1.0 million of write-off and amortization of deferred financing costs and loan discount, $0.8 million of change in operating lease right of use asset, $0.7 million of reserve for inventory obsolescence and $0.3 million of loss on disposal of property, plant and equipment, partially offset by $9.9 million of gain on equity investment.

Previous wording

•$27.2 million decrease due to changes in operating assets and liabilities. The decrease was primarily due to the change in accrued expenses, accounts receivable, inventories, other assets, and operating lease liability, primarily offset by the change in accounts payable and prepaid expenses and other current assets.

Current wording

•a $21.1 million decrease due to changes in operating assets and liabilities. The decrease was primarily due to the changes in accounts receivable, inventories, prepaid expenses and other current assets, other assets, accounts payable, and operating lease liability, primarily offset by the change in accrued expenses.

Previous wording

•$26.5 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend.

Current wording

•$59.9 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend.

Previous wording

•$46.5 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend.

Current wording

•$94.8 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend.

Previous wording

Net cash used in financing activities of$3.2 millionfor the three months ended March 31, 2025, was primarily attributed to:

Current wording

Net cash used in financing activities of$3.7 millionfor the six months ended June 30, 2025, was primarily attributed to:

Previous wording

•$0.5 million for principal payments under finance lease obligations.

Current wording

•$1.0 million for principal payments under finance lease obligations.

Previous wording

Net cash provided by financing activities of $2.1 million for the three months ended March 31, 2024, was primarily attributed to:

Current wording

Net cash provided by financing activities of $1.8 million for the six months ended June 30, 2024 was primarily attributed to:

Previous wording

•$2.8 million cash proceeds from the exercise of stock options.

Current wording

•$4.2 million cash proceeds from the exercise of stock options.

Previous wording

•$0.2 million for tax withholdings related to net share settlements of restricted stock units; and

Current wording

•$1.4 million for tax withholdings related to net share settlements of restricted stock units; and

Previous wording

•$0.5 million for principal payments under finance lease obligations.

Current wording

•$1.0 million for principal payments under finance lease obligations.