Freshpet, Inc. Reports Q1 2024 Financial Results Stock Up 10%

Freshpet, Inc. ( FRPT ) reported its Q1 2024 financial results, which were a significant increase from the prior year period. The company's net sales increased 33.6% to $223.8 million, a 33.6% increase from the previous year. Gross margin was 39.4%, compared to 30.3%, and adjusted gross margin was 45.3%. Net income was $18.6 million, compared to the prior year period net loss of $24.8 million. Adjusted EBITDA was $30.6 million, compared to the prior year period of $3.0 million.

Freshpet's Chief Executive Officer, Billy Cyr, stated that the strong first quarter results provide solid evidence that the company can deliver its long-term financial goals. The company's strong business model and consumer proposition continue to drive robust net sales growth, and its intense focus on operational improvements is delivering the margin expansion it knew it could achieve with additional scale. Freshpet's ( FRPT ) focus now is on delivering consistently strong performance, creating significant shareholder value while fulfilling its mission to nourish pets, people, and the planet.

Net sales increased 33.6% to $223.8 million for the first quarter of 2024 compared to $167.5 million for the prior year period. The increase in net sales was primarily driven by volume gains of 30.6%. Gross profit was $88.2 million, or 39.4% as a percentage of net sales, for the first quarter of 2024, compared to $50.8 million, or 30.3% as a percentage of net sales, for the prior year period. The increase in reported gross profit as a percentage of net sales was primarily due to improved leverage on plant expenses, reduced quality costs, and lower input cost as a percentage of sales.

Selling, general and administrative expenses (“SG&A”) were $79.7 million for the first quarter of 2024 compared to $72.3 million for the prior year period. As a percentage of net sales, SG&A decreased to 35.6% for the first quarter of 2024 compared to 43.1% for the prior year period. The decrease of 750 basis points in SG&A as a percentage of net sales was mainly a result of reduced logistics costs and media as a percentage of net sales, in addition to lower share-based compensation. Adjusted SG&A for the first quarter of 2024 was $70.9 million, or 31.7% as a percentage of net sales, compared to $61.5 million, or 36.7% as a percentage of net sales, for the prior year period.

As of March 31, 2024, Freshpet ( FRPT ) had cash and cash equivalents of $257.9 million with $393.6 million of debt outstanding net of $8.9 million of unamortized debt issuance costs. For the first quarter of 2024, cash from operations was $5.4 million, an increase of $19.1 million compared to the prior year period. The Company will utilize its balance sheet to support its ongoing capital needs in connection with its long-term capacity plan.

For full year 2024, the Company is updating its guidance and now expects net sales of at least $950 million, adjusted EBITDA of at least $120 million, and capital expenditures of ~$210 million. The company does not guide net income, the U.S. GAAP measure most directly comparable to Adjusted EBITDA, and cannot provide a reconciliation between its forecasted Adjusted EBITDA and net income metrics without unreasonable effort due to the unavailability of reliable estimates for certain components of net income and the respective reconciliations.

Technical Outlook
Freshpet ( FRPT ) stock is up 10% as a result of the earnings beat forming an upside gap or gapper effect. The stock is trading in the overbought region with a Relative Strength Index (RSI) of 73.55.