Freshpet (FRPT 5.70%), a leading provider of fresh, refrigerated pet food, released its second quarter 2025 earnings results on August 4, 2025. The most notable news in the release was the company’s return to profitability, with GAAP diluted earnings per share reaching $0.33 in Q2 2025, and GAAP EPS came in at $0.10, matching the consensus estimate. Revenue climbed 12.5% to $264.7 million, but this fell short of the $267.87 million (GAAP) that analysts expected. Despite the revenue miss, operating margins (gross margin, GAAP) improved year over year. Management described the quarter as a period of operational progress but also acknowledged slower household penetration and revised its full-year FY2025 revenue outlook downward, citing economic uncertainty and tempered demand from new consumers.

MetricQ2 2025Q2 2025 EstimateQ2 2024Y/Y Change
EPS, Diluted (GAAP)$0.33$0.10$(0.03)N/M
Revenue$264.7 millionN/A$235.3 million12.5 %
Adjusted EBITDA$44.4 million$35.1 million26.5%
Adjusted Gross Margin46.9 %45.9 %1.0 pp
Adjusted SG&A as % of Revenue30.1 %31.0 %(0.9) pp

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Focus

Freshpet operates in the pet food industry, selling fresh, refrigerated dog and cat food through branded refrigerators known as Freshpet Fridges. Its products target health-focused pet owners who are influenced by the trend of treating pets as family members and are seeking higher quality, minimally processed food for their animals.

The business centers on three critical areas: capitalizing on health and wellness demand among pet owners, differentiating itself with in-store Freshpet Fridges, and maintaining a strong focus on sustainability. Recent years have seen the company expand household penetration, launch value-oriented product lines, and emphasize operational efficiency—all keys to its growth. High brand loyalty and a steady repeat purchase rate remain major strengths as it seeks to increase market share domestically and abroad.

Quarterly Highlights: Revenue Growth, Profitability, and Strategic Shifts

During Q2 FY2025, Freshpet increased net sales (GAAP) by 12.5% compared to the prior year period. The primary growth driver was a 10.8% increase in sales volume, while pricing and product mix contributed an additional 1.7%. However, GAAP revenue came in $3.17 million below consensus estimates, marking a slight deceleration from the company’s historical growth rates. While still adding new households, Freshpet noted a slower-than-usual pace and identified new consumer trial as a key challenge amid broader economic uncertainty.

The company’s profitability saw significant year-over-year improvement. Net income turned positive, moving from a $1.7 million loss in the prior year to $16.4 million in Q2 2025. Adjusted EBITDA, which excludes certain one-time and non-cash charges, increased by 26.5% compared to the second quarter of 2024, reaching $44.4 million. Adjusted gross margin also expanded in Q2 FY2025, reflecting lower input and quality costs as Freshpet leaned into targeted advertising to attract higher-income and digital-savvy pet parents.

Freshpet’s product set continues to evolve. The introduction of "Complete Nutrition" bag products and value multipacks aims to attract price-sensitive consumers and drive new household adoption. These offerings complement long-standing premium products. Distribution strategy remains central: as of the end of Q1 2025, the company was present in 28,521 stores with 37,044 branded fridges. Plans are underway to add 100,000 cubic feet of refrigerated capacity in FY2025, including multi-fridge “island” displays in high-traffic retailers to increase household reach and shelf visibility.

Online sales rose 43% in Q1 2025. The company’s direct-to-consumer (DTC) business, though still small, is showing strong customer retention and higher average buy rates than traditional retail channels, favored by “Most Valuable Pet Parent” (MVP) and “High-Intensity Pet Parent Owner” (HIPPO) consumers—cohorts responsible for roughly 69% of sales and buy rates of approximately $498 per year over the last 12 months.

No material one-time charges were reported for the current period, and there were no new dividends or changes to capital allocation beyond a lowered full-year capital expenditure forecast. Notably, Freshpet continues to avoid traditional discounting or couponing tactics, opting instead for value entry price points and creative multipacks as tools for consumer acquisition.

Looking Forward: Guidance and Key Watchpoints

For fiscal year 2025, management revised its net sales growth target to a range of 13–16% over 2024, down from the previous guidance of 15–18%. Full-year 2025 adjusted EBITDA guidance remains at $190–210 million, and Projected capital expenditures were trimmed to ~$175 million for full year 2025 to reflect a more measured pace of capacity expansion. The company has also withdrawn its longer-term FY2027 net sales target of $1.8 billion, reflecting uncertainty about future category growth and consumer spending patterns. Margin improvement goals remain unchanged, with a reaffirmed target of 48% adjusted gross margin and 22% adjusted EBITDA margin for full year 2027.

Steady cash flow and a strong liquidity position support ongoing investments. At quarter-end, Freshpet reported $243.7 million in cash and cash equivalents and $396.2 million of debt outstanding, net of $6.3 million in unamortized debt issuance costs, as of June 30, 2025. Management highlighted the importance of flexibility, with capital and operational spending ready to adjust as needed based on consumer and category trends. Investors and analysts will likely track sell-through data, channel shifts—especially to club and value retailers—and digital adoption in the quarters ahead, along with results from ongoing store expansion and product innovation efforts.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.