Once Upon a Farm Q2 2026 Earnings: 42% Sales Growth Comes With Margin Pressure

Once Upon a Farm (NYSE: OFRM) reported Q2 2026 net sales of $85.4 million, up 42.3% from $60.0 million a year earlier, while diluted net loss per share narrowed to $0.12 from $1.36. Growth was primarily volume-led, but gross margin declined 485 basis points and adjusted EBITDA turned negative as trade spending, mix, and higher SG&A expenses weighed on profitability. The company nevertheless raised its full-year sales and adjusted EBITDA outlook.

Core financial results

Sales increased by $25.4 million, supported by 40.3% volume growth from wider distribution of existing products and new product introductions. Gross profit increased in dollars, but it grew more slowly than revenue, resulting in substantial margin compression.

GAAP net loss narrowed by about 45%, although the improvement largely reflected the absence of a prior-year derivative liability charge rather than stronger operating profitability. Adjusted EBITDA, which excludes that charge and other specified items, swung to a loss.

Adjusted EBITDA is a non-GAAP measure. The company excludes items including stock-based compensation, certain IPO-related costs, interest, taxes, depreciation and amortization, and changes in the fair value of specified liabilities.

Baby products drove most of the growth

Baby-category sales increased much faster than Kid-category sales and generated approximately 69% of the company’s total year-over-year sales increase. Baby Snacks remained the largest contributor within the Baby category, while Kid Pouches continued to be the company’s largest individual product category.

The Baby category’s faster expansion brought its quarterly sales close to the Kid category, creating a more balanced revenue mix between the two businesses.

Gross profit growth did not keep pace with SG&A expenses

Gross margin fell to 35.9% because of trade spending, including a national club-channel program, and sales mix. Pricing and lower cooler-related slotting fees partially offset those pressures, but were not sufficient to prevent the 485-basis-point contraction.

At the same time, SG&A expenses rose by $11.9 million, compared with a $6.2 million increase in gross profit. SG&A reached 42.5% of sales, up 179 basis points, reflecting approximately $3.5 million of combined stock-based compensation and IPO-related performance payments, as well as higher marketing, labor, and employee costs. Lower logistics costs provided a partial offset.

This explains why operating results weakened even though GAAP net loss improved. The prior-year quarter included an $8.2 million non-cash derivative liability fair-value charge, compared with no such charge in Q2 2026. Interest income also rose to $835,000 from $73,000. Because adjusted EBITDA removes these non-operating effects, it fell from a $2.0 million profit to a $1.7 million loss, providing a clearer view of the underlying expense pressure.

Cash flow and balance sheet

The balance sheet strengthened substantially following the February 2026 IPO. Cash and equivalents increased to $93.5 million at June 30 from $10.9 million at the end of 2025, while total debt declined from $60.2 million to zero. The change primarily reflected IPO proceeds and debt repayment rather than cash generated by operations.

For the first six months of 2026, operating activities used $17.9 million of cash, compared with $17.2 million in the prior-year period. Working-capital uses included an $8.2 million increase in accounts receivable and a $6.8 million inventory build. Capital expenditures were $2.4 million, up from $2.0 million.

Financing activities provided $103.0 million during the first half, including $155.4 million of proceeds from common stock issuance, partly offset by repayment of a $43.0 million credit line and offering costs. The resulting debt-free balance sheet gives the company additional capacity to fund expansion, but operations remained cash-consuming through the first half.

2026 guidance

Once Upon a Farm raised both its sales and adjusted EBITDA outlook based on Q2 performance and underlying consumer trends. The release did not disclose the previous guidance ranges, so the size of the increase cannot be determined.

After first-half sales of $158.1 million, the updated range requires approximately $168.9 million to $176.9 million of second-half sales. With first-half adjusted EBITDA at a $4.8 million loss, the company would need approximately $7.8 million to $9.3 million of positive adjusted EBITDA in the second half to reach its full-year target.

The company did not provide a GAAP reconciliation for the adjusted EBITDA outlook because it said certain reconciling items could not be estimated without unreasonable effort.

Management’s view

CEO and co-founder John Foraker attributed the sales performance to expanding distribution, strong product velocities, and improving cooler productivity as consumer awareness grows, assortments broaden, and newer cooler installations mature. Management also said new products are attracting additional consumers and increasing engagement among existing households, with gains in household penetration, repeat purchases, and purchase rates.

These trends underpin the higher annual outlook, but management’s long-term profitability objective still depends on converting rapid volume growth into stronger margins and operating leverage.

Risks investors should monitor

• Gross-margin pressure: Trade spending and mix reduced gross margin by 485 basis points. Continued promotional or channel-mix pressure could limit the profit contribution from sales growth.
• SG&A growth: SG&A increased faster than both revenue and gross profit, causing an operating loss and negative adjusted EBITDA despite 42.3% sales growth.
• Second-half profitability requirements: Reaching the full-year adjusted EBITDA target requires a meaningful shift to positive adjusted EBITDA during the second half.
• Distribution and cooler execution: The current growth rate depends heavily on incremental distribution, new products, and improving cooler productivity. Slower expansion or weaker productivity would affect volume growth.
• Operating cash use: The IPO improved liquidity and eliminated debt, but the business used $17.9 million of operating cash during the first half as receivables and inventory absorbed cash.

Summary

Once Upon a Farm’s Q2 2026 results showed rapid, volume-led expansion, with Baby products accounting for most of the incremental sales. That growth did not yet translate into operating leverage: trade spending and mix compressed gross margin, while SG&A growth pushed adjusted EBITDA into a loss. The IPO created a substantially stronger, debt-free balance sheet, and the raised outlook shifts attention to whether the company can stabilize margins and produce the second-half profitability required to meet its full-year targets.