Freshpet has increased its outlook for sales and profits again as growth continued to exceed the Nasdaq-listed company’s long-term targets.
“We are raising our net sales and adjusted EBITDA guidance for 2024 to reflect this continued strong performance and our confidence in our ability to finish the year strongly,” CEO Billy Cyr said yesterday (4 November) as Freshpet reported third-quarter revenue growth of 26.3%.
It was a 25th consecutive quarter where Freshpet has posted a sales performance above the 25% mark, a level the business is targeting annually through 2027, along with $1.8bn in sales. And profits turned back into the black after retreating into negative territory in the second quarter.
With a little under two months until the end of Freshpet’s 2024 financial year, the premium refrigerated pet-food producer for cats and dogs lifted its sales guidance for the second time and the adjusted EBITDA outlook for a third occasion since revealing initial estimates in February.
Full-year sales are now expected to grow at a 27% pace to reach “about” $975m, an uplift from the 26% to “at least” $965m forecast provided at the last upgrade in August. Sales growth was originally anticipated at 24% in February to $950m.
Meanwhile, adjusted EBITDA is envisaged to get to “at least” $155m versus “at least” $140m outlined in August. At that point, the figure was raised from the “at least” $120m provided in May, which in itself had been lifted from the February forecast of $100-110m.
"Our third-quarter results demonstrate the strength and consistency of both net sales and profitability growth we have been striving to deliver,” Cyr said. “This further strengthens our confidence in our ability to meet or exceed our 2027 goals.”
Freshpet’s sales for the quarter reached $253.4m as volumes rose 26% with a zero price/mix component.
Adjusted EBITDA climbed 17.2% to $43.5m, while the bottom line turned to a $11.9m profit from a $7.2m loss in the third quarter of the 2023 fiscal year.
Further progress was also made in the gross margin, which climbed 740 basis points to 40.4%. The adjusted margin came in at 46.5% versus 40.2% in the corresponding period, settling above the 2027 target of 45%.
For the year, the progression in the adjusted gross margin is now expected at 600 basis points rather than the 500 points previously. The margin ended 2023 at 40%.
Analysts at US investment bank William Blair, which holds an outperform rating on Freshpet’s shares, wrote in a research note: “Our thesis is that Freshpet's fresh refrigerated pet food is differentiated and should benefit from further consumer migration toward premium offerings over time.”
However, they provided four areas of risk: “A softer economy and demand for premium pet food; competition including direct-to-consumer brands; consumer responsiveness to marketing; and the implementation of capacity additions.”
Freshpet’s shares closed the day up 12.6% at $150.57 and have gained around 72% so far this year.
