Freshpet Q2 2026 earnings: Volume growth supports higher guidance

Freshpet (NASDAQ: FRPT) reported second-quarter 2026 net sales of $305.6 million, up 15.5% from $264.7 million, while diluted EPS increased to $0.39 from $0.33. Growth was almost entirely volume-driven, and gross margin expanded, although higher logistics costs and variable compensation increased SG&A as a percentage of sales. The quarter ended June 30, 2026.

Core earnings data

Freshpet’s 15.5% sales increase reflected a 15.7% gain in volume, partially offset by a 0.2% unfavorable price and mix effect. Operating income and adjusted EBITDA increased, but SG&A grew slightly faster than revenue.

Net income rose to $19.5 million, helped by higher sales and a $4.5 million gain on an equity investment. Higher SG&A and income tax expense partly offset those benefits.

Adjusted gross profit, adjusted gross margin and adjusted EBITDA are non-GAAP measures used by Freshpet to evaluate ongoing operating performance.

Gross margin gains were partly absorbed by SG&A pressure

GAAP gross margin expanded by 120 basis points, primarily because of lower input costs and improved leverage on plant expenses. Higher quality-related costs associated with starting new technology lines partially offset those benefits. On an adjusted basis, gross margin rose by 170 basis points to 48.6%.

The improvement did not fully flow through to operating margins. SG&A increased to 35.0% of sales from 34.1%, mainly because of higher logistics costs and variable compensation accruals. Lower media spending as a percentage of sales provided a partial offset. Consequently, adjusted EBITDA margin increased by a more limited 30 basis points.

The GAAP earnings comparison also includes the $4.5 million equity investment gain. Freshpet excludes this gain from adjusted EBITDA, making the adjusted measure more representative of the quarter’s operating improvement.

Cash flow and balance sheet

Freshpet disclosed cash flow only for the first six months of 2026 rather than for the second quarter separately. Six-month operating cash flow increased by $46.1 million to $84.8 million from $38.7 million. With capital expenditures of $57.3 million, free cash flow was $27.4 million, compared with negative $21.2 million a year earlier.

Cash and cash equivalents reached $350.8 million at June 30, up $72.8 million from December 31, 2025. The increase primarily reflected $100.0 million of proceeds from the sale of an equity investment and positive free cash flow, partially offset by $54.4 million of share repurchases. Freshpet had $398.4 million of debt outstanding, net of unamortized debt issuance costs.

The asset sale also affected reported profitability: the six-month net income of $68.0 million included a $66.6 million equity investment gain. That gain is separate from the improvement in operating cash flow and is excluded from adjusted EBITDA.

Earnings guidance

Freshpet raised both ends of its 2026 sales growth and adjusted EBITDA ranges. It maintained its expectations for positive free cash flow and approximately $150 million of capital expenditures. For 2027, the adjusted gross margin target increased to at least 49%, while the adjusted EBITDA margin target remained unchanged.

First-half sales growth was 14.3%, above the full-year range, which implies a lower growth rate in the second half than in the first. Based on first-half adjusted EBITDA of $90.1 million, Freshpet would need roughly $120 million to $130 million in the second half to reach its updated full-year range. The company’s 2027 goal of growing sales well above the category rate was unchanged.

Management perspective

CEO Billy Cyr said Freshpet gained share and improved margins despite economic headwinds and the arrival of new competitors. Management attributed its position to manufacturing scale and expertise, along with an expanding omnichannel presence intended to increase customer reach and engagement.

Recent insider transactions

The supplied six-month summary shows insiders purchased 583,632 shares across 32 transactions and sold 282,080 shares across five transactions, resulting in net purchases of 301,552 shares. The latest listed records include CEO derivative conversions and sales alongside direct purchases by several directors; these transactions do not by themselves establish insiders’ views of the company’s prospects.

Risks investors need to watch

• Dependence on volume growth: Volume increased 15.7%, while price and mix reduced growth by 0.2%. A slowdown in volume would therefore have a direct effect on the sales trajectory.
• SG&A pressure: Logistics costs and variable compensation pushed SG&A higher as a percentage of sales, absorbing part of the gross margin improvement.
• Manufacturing execution: Quality-related costs from starting new technology lines already affected gross margin. Delays, additional costs or product-quality issues during implementation could limit further margin expansion.
• Input costs and competition: Lower input costs supported this quarter’s margin improvement, while management cited economic headwinds and new competitors. Changes in ingredient, fuel, energy or tariff costs could reverse part of the benefit.
• Capital spending and cash flow targets: Freshpet expects approximately $150 million of 2026 capital expenditures while maintaining positive free cash flow. With $57.3 million spent in the first half, a substantial portion of planned investment remains for the second half.

Summary

Freshpet’s second quarter combined volume-led sales growth with better plant leverage and lower input costs, supporting higher gross profit and adjusted EBITDA. However, logistics and compensation expenses limited the margin flow-through, while a one-time investment gain helped GAAP net income. The main items to monitor are second-half growth relative to the raised annual outlook, execution on the new technology lines, SG&A discipline and the ability to remain free-cash-flow positive while completing planned capital spending.