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What changed in Freshpet, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Freshpet, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+207 added−196 removedSource: 10-K (2026-02-23) vs 10-K (2025-02-20)

Top changes in Freshpet, Inc.'s 2025 10-K

207 paragraphs added · 196 removed · 159 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur Industry We primarily compete in the United States dog and cat food market. We believe pet food spending in North America will continue to increase at a similar rate as it has in the past. The pet food market has historically been resilient as consumers continue to spend on their pets even during economic downturns.
Biggest changeThe pet food market has historically been resilient as consumers continue to spend on their pets even during economic downturns, and we believe pet food spending in North America will increase long-term. We believe the following trends will drive growth in our industry: Pet ownership.
We own a number of trademarks and service marks that have been registered, or for which applications are pending, with the United States Patent and Trademark Office including, among others, Freshpet, Vital, Nature’s Fresh, Roasted Meals, Fresh From The Kitchen, Freshpet Dog Joy, Dognation, Homestyle Creations, and Pets People Planet.
We own a number of trademarks and service marks that have been registered, or for which applications are pending, with the United States Patent and Trademark Office including, among others, Freshpet, Vital, Nature’s Fresh, Roasted Meals, Fresh From The Kitchen, DeliFresh, Freshpet Dog Joy, Dognation, Homestyle Creations, and Pets People Planet.
We are proud of our focus on promoting employee engagement across our operations - from our supply chain to our products - and are committed to building our business on a foundation of strong ethics. Attracting and retaining talent at all levels is vital to continuing our success.
We are proud of our focus on promoting employee engagement across our operations - from our supply chain to our finished products - and are committed to building our business on a foundation of strong ethics. Attracting and retaining talent at all levels is vital to continuing our success.
Team Members & Human Capital Resources At Freshpet we always want to build a fair, healthy and safe workplace, while creating work environment policies that help us attract, develop and retain our valued employees.
Team Members & Human Capital Resources At Freshpet we always want to build a fair, healthy and safe workplace, while creating work environment policies and practices that help us attract, develop and retain our valued employees.
Due to the continued growth of our fresh pet food sales, we plan to continue expanding our manufacturing capacity via operational efficiency improvements at our current facilities and via future expansion of our physical features. In 2024, approximately 99.1% of our product volume was manufactured with Freshpet owned equipment.
Due to the continued growth of our fresh pet food sales, we plan to continue expanding our manufacturing capacity via operational efficiency improvements at our current facilities and via future expansion of our physical features. In 2025, approximately 99.1% of our product volume was manufactured with Freshpet owned equipment.
ITEM 1. BUSINESS Overview Freshpet, Inc. (“Freshpet,” the “Company,” "we" or "our") is disrupting the over $54.0 billion United States pet food industry by driving consumers to reassess conventional dog and cat food offerings that have remained essentially unchanged for decades.
ITEM 1. BUSINESS Overview Freshpet, Inc. (“Freshpet,” the “Company,” "we" or "our") is disrupting the over $56.0 billion United States pet food industry by driving consumers to reassess conventional dog and cat food offerings that have remained essentially unchanged for decades.
In order to incentivize and engage our workforce, Freshpet provides: ● Industry-leading compensation, including stock compensation for every employee ● Industry-leading healthcare offered equitably for every employee ● Annual equity grants and Key Talent awards to employees identified by the Executive Leadership team and the Board ● Competitive perquisites, including pet insurance, tuition reimbursement, paid parental leave, free healthy snack room and catered lunches ● 401(k) matching for every employee ● Rigorous focus on creating an inclusive culture to attract, engage and retain our diverse talent As of December 31, 2024, we had 1,296 employees located primarily in Bethlehem, PA, Ennis, TX, Bedminster, NJ and Europe.
In order to incentivize and engage our workforce, Freshpet provides: ● Industry-leading compensation, including stock compensation for every employee ● Industry-leading healthcare offered equitably for every employee ● Annual equity grants and Key Talent awards to employees identified by the Executive Leadership team and the Board ● Competitive perquisites, including pet insurance, tuition reimbursement, paid parental leave, free healthy snack room and catered lunches ● 401(k) matching for every employee ● Rigorous focus on creating an inclusive culture to attract, engage and retain our diverse talent As of December 31, 2025, we had 1,288 employees located primarily in Bethlehem, PA, Ennis, TX, Bedminster, NJ and Europe.
Our Freshpet-owned manufacturing lines allows us to exercise significant control over production. We have a highly skilled Food Safety and Quality Assurance team consisting of quality assurance supervisors, specialists, analysts, and quality technicians with significant experience in pet and human food production.
Our Freshpet-owned manufacturing lines allow us to exercise significant control over production. We have a highly skilled Food Safety and Quality Assurance team consisting of quality assurance supervisors, specialists, analysts, and quality technicians with significant experience in pet and human food production.
We began Freshpet by producing fresh, refrigerated slice and serve rolls, and over time have steadily expanded into successful new product forms including bags and treats. We also introduced new fresh recipes and ingredients, such as proteins and grain-free options never before seen in pet food that cater to the specific dietary requirements of pets.
We began Freshpet by producing fresh, refrigerated slice and serve rolls, and over time have steadily expanded into successful new product forms including bags and treats. We also introduced new fresh recipes and ingredients, such as proteins and grain-free options never before seen in pet food that cater to both the life stage and specific dietary requirements of pets.
We own and operate what we believe to be the first fresh, refrigerated pet food manufacturing network in North America. Our original Freshpet Kitchens Bethlehem, located in Bethlehem, Pennsylvania, is a 240,000 square foot facility, built to United States Department of Agriculture standards and currently houses six production lines customized to produce fresh, refrigerated food.
We own and operate what we believe to be the first fresh, refrigerated pet food manufacturing network in North America. Our original Freshpet Kitchens Bethlehem, located in Bethlehem, Pennsylvania, is a 240,000 square foot facility, built to United States Department of Agriculture standards and as of 2025, houses six production lines customized to produce fresh, refrigerated food.
Our Opportunity Freshpet has a unique opportunity to capture market share in this large and growing category by mainstreaming fresh food for pets and making fresh food a greater part of dogs' and cats' main meals.
Our Opportunity Freshpet has an opportunity to capture market share in this large and growing category by mainstreaming fresh food for pets and making fresh food a greater part of dogs' and cats' main meals.
And, we are committed to doing so in ways that are good for Pets, People, and Planet. 5 Table of Contents Pets Our pets are members of our family and deserve to eat the kind of fresh, healthy food that we do. Freshpet's carefully selected ingredients and gentle cooking process ensures best-in-class bioavailable nutrition.
And, we are committed to doing so in ways that are good for Pets, People, and Planet. Pets Our pets are members of our family and deserve to eat the kind of fresh, healthy food that we do. Freshpet's carefully selected ingredients and gentle cooking process ensures best-in-class bioavailable nutrition.
Hundreds of customer testimonials each year underscore Freshpet's support of a long and healthy life. Further, since founding Freshpet, we have donated over twenty-one million fresh meals to pets via shelters, charitable organizations, and humane societies, including St Hubert's Animal Welfare Center, Pennsylvania SPCA, StrayDog Inc. and 4 Paws for Ability.
Hundreds of customer testimonials each year underscore Freshpet's support of a long and healthy life. Further, since founding Freshpet, we have donated nearly twenty-six million fresh meals to pets via shelters, charitable organizations, and humane societies, including St Hubert's Animal Welfare Center, Pennsylvania SPCA, StrayDog Inc. and 4 Paws for Ability.
Competitive factors in the pet food industry include product quality, ingredients, brand awareness and loyalty, product variety, product packaging and design, reputation, price, advertising, promotion and nutritional claims. We believe that we compete effectively with respect to each of these factors.
Competitive factors in the pet food industry include product quality, ingredients, brand awareness and loyalty, product variety, product packaging and design, ease of purchase, merchandising, reputation, price, advertising, promotion and nutritional claims. We believe that we compete effectively with respect to each of these factors.
As volume grows, we will continue to leverage our distribution network to continuously improve customer service levels and decrease certain distribution costs. For certain retailers, we use national and regional distributors. 8 Table of Contents Our Product Quality and Safety We go to great lengths to ensure product quality, consistency and safety from ingredient sourcing to finished product.
As volume grows, we will continue to leverage our distribution network to continuously improve customer service levels and decrease certain distribution costs. For certain retailers, we use national and regional distributors. Our Product Quality and Safety We go to great lengths to ensure product quality, consistency and safety from ingredient sourcing to finished product.
Our Innovation Center, which is part of our Freshpet Kitchens (collectively, our Freshpet Kitchens Bethlehem, Freshpet Kitchens South and Freshpet Kitchens Ennis), helps us ensure that we remain capable of strong innovation, including creating new product platforms to expand the breadth of our fresh pet food offerings.
Our Innovation Center, which is part of our Freshpet Kitchens (with facilities in our Freshpet Kitchens Bethlehem, Freshpet Kitchens South and Freshpet Kitchens Ennis), helps us ensure that we remain capable of strong innovation, including creating new product platforms to expand the breadth of our fresh pet food offerings.
We take a fresh approach to pet food and are not constrained by conventional pet food products, attributes, and production capabilities. We employ a tightly-knit, creative team of marketing and research and development professionals, and we consult with outside experts through our Nutrition Council, which consist of PhDs in nutrition and veterinary nutritionists.
We take a fresh approach to pet food and are not constrained by conventional pet food products, attributes, and production capabilities. We employ a tightly-knit, creative team of marketing and research and development professionals, including an in-house veterinary nutritionist. We also consult with outside experts through our Nutrition Council, which consist of PhDs in nutrition and veterinary nutritionists.
People Our people include our team members, pet parents, and our partners. We treat our team members with respect and are committed to helping them develop professionally and personally. These efforts have contributed to an employee net promoter score of 8.2.
People Our people include our team members, pet parents, and our partners. We treat our team members with respect and are committed to helping them develop professionally and personally. These efforts have contributed to an employee net promoter score of 7.9.
Increasing consumer focus on health & wellness. Consumers are increasingly purchasing fresh, natural and organic food products. We believe consumers are seeking simple, fresh and easy to understand food products from brands they trust and made with ingredients that are transparently sourced. The pet food purchasing decision is underpinned by higher brand loyalty than many other consumer packaged goods categories.
We believe consumers are seeking simple, fresh and easy to understand food products from brands they trust and made with ingredients that are transparently sourced. The pet food purchasing decision is underpinned by higher brand loyalty than many other consumer packaged goods categories.
Additionally, we strive to be good partners with customers, distributors, and suppliers by conducting business with honesty and transparency knowing that we cannot grow without their support. Planet We are committed to minimizing our environmental impact while providing the healthiest, tastiest pet food possible. Freshpet Kitchens Bethlehem is a landfill-free facility thanks to state-of-the-art recycling, digesting, and waste-to-energy processes.
Additionally, we strive to be good partners with customers, distributors, and suppliers by conducting business with honesty and transparency knowing that we cannot grow without their support. Planet We are committed to minimizing our environmental impact while providing the healthiest, tastiest pet food possible. All Freshpet Kitchens are landfill-free facilities thanks to our commitment to recycling, digesting, and waste-to-energy processes.
As of December 31, 2024, we are in approximately 28,141 stores, with approximately 22% of stores having second and third Freshpet Fridge placements. We sell our products through the following classes of retail: grocery, mass, international, digital, pet specialty, and club. Our customers determine whether they wish to purchase our products directly from us or through a third-party distributor.
As of December 31, 2025, we are in approximately 30,235 stores, with approximately 24% of stores having multiple Freshpet Fridges. We sell our products through the following classes of retail: grocery, mass, international, digital, pet specialty, and club. Our customers determine whether they wish to purchase our products directly from us or through a third-party distributor.
Once ordered by us, Freshpet Fridges are shipped to distribution centers for delivery and installation in retail stores. Installation into retail locations and ongoing maintenance of the Freshpet Fridge is coordinated by Freshpet and executed through leading third-party service providers. All of our Freshpet Fridges are protected by a manufacturer warranty of three years.
Once ordered by us, Freshpet Fridges are shipped to distribution centers for delivery and installation in retail stores. 9 Table of Contents Installation into retail locations and ongoing maintenance of the Freshpet Fridge is coordinated by Freshpet and executed through leading third-party service providers.
Our total chiller fleet at retailers covers over 1.7 million cubic feet of space. Marketing and Advertising Our marketing strategy is designed to educate consumers about the benefits of fresh refrigerated pet food and build awareness of the Freshpet brand.
Our total chiller fleet at retailers covers over 2.1 million cubic feet of space. 10 Table of Contents Marketing and Advertising Our marketing strategy is designed to educate consumers about the benefits of fresh refrigerated pet food while building both awareness of, and belief in, the Freshpet brand.
As a result, consumers are searching for higher quality, less processed food for their dogs’ and cats’ meals that measure up to today’s sensibilities of what actually constitutes “good food.” Freshpet addresses this growing need with affordable offerings accessible to the average consumer.
As a result, consumers are searching for higher quality, less processed food for their dogs’ and cats’ meals that measure up to today’s sensibilities of what actually constitutes “good food.” Freshpet addresses this growing need with affordable offerings accessible to the average consumer. 5 Table of Contents Our Mission and Values Our mission is to elevate the way we feed our pets with fresh food that nourishes all.
None of our employees are represented by a labor union or by any collective bargaining arrangements with respect to his or her employment with us. Our Corporate Information We were incorporated in Delaware in November 2004 and currently exist as a Delaware corporation.
None of our employees are represented by a labor union or by any collective bargaining arrangements with respect to his or her employment with us. 11 Table of Contents Our Corporate Information We were incorporated in Delaware in November 2004 and currently exist as a Delaware corporation. Our principal executive offices are located at 1450 US-206, Bedminster, New Jersey 07921.
Our principal executive offices are located at 1545 US-206, 1st Floor, Bedminster, New Jersey 07921. 11 Table of Contents Website Information The address of our corporate website is www.freshpet.com. Our annual reports, annual proxy statements and related proxy cards are made available on our website at the same time they are mailed to stockholders, as required by applicable law.
Website Information The address of our corporate website is www.freshpet.com. Our annual reports, annual proxy statements and related proxy cards are made available on our website at the same time they are mailed to stockholders, as required by applicable law.
We believe our attractive value proposition to retailers and pet parents will allow us to continue penetrating store locations of existing and new customers. The Freshpet Fridge provides a highly-visible merchandising platform, allowing us to control how our brand is presented to consumers at point-of-sale and represents a significant point of differentiation from other pet food competitors.
The Freshpet Fridge provides a highly-visible merchandising platform, allowing us to control how our brand is presented to consumers at point-of-sale and represents a significant point of differentiation from other pet food competitors.
We support renewable energy by matching the electricity used in Freshpet Kitchens and offices as well as our refrigerators in over 28,000 retail locations with Green-E Certified renewable energy certificates from North American based projects. Freshpet's chiller fleet efficiency continues to improve with our latest units using up to 90% less electricity than older units.
We support renewable energy by matching the electricity used in Freshpet Kitchens and offices as well as our refrigerators in over 30,000 retail locations with Green-E Certified renewable energy certificates from North American based projects.
As of December 31, 2024, our household penetration within the United States was approximately 13.5 million, with a target of 20 million households by 2027. Additionally, we believe that there are opportunities to expand our network into international markets as demonstrated by our recent initiatives in the U.K. market.
As of December 31, 2025, our household penetration within the United States was approximately 15.2 million households. Additionally, we believe that there are opportunities to expand our network into international markets as demonstrated by our initiatives in the U.K. market. Our Industry We primarily compete in the United States dog and cat food market.
Ingredients and Packaging: Our products are made with natural and fresh ingredients including meat and poultry products, vegetables, fruits, whole grains, vitamins and minerals. We believe in building long-term supplier and farmer partnerships to source healthy and sustainable ingredients. We strive to source raw ingredients within a 300-mile radius of the Freshpet Kitchens.
Ingredients and Packaging: Our products are made with natural and fresh ingredients including meat and poultry products, vegetables, fruits, whole grains, vitamins and minerals. We believe in building long-term supplier and farmer partnerships to source healthy and sustainable ingredients. All of our suppliers are well-established companies that we believe have the scale to support our growth.
Moreover, to ensure quality, cleanliness and appropriate in-stock levels, we employ brokerage partners to conduct a physical audit of the Freshpet Fridge network on an ongoing basis, with photographic results of our Freshpet Fridges transmitted back to Freshpet for review by members of our sales team. 9 Table of Contents We currently estimate less than 12-month cash-on-cash payback for the average Freshpet Fridge installation, calculated by comparing our total current costs for a refrigerator (including installation) to our current margin on net revenues.
Moreover, to ensure quality, cleanliness and appropriate in-stock levels, we employ brokerage partners to conduct a physical audit of the Freshpet Fridge network on an ongoing basis, with photographic results of our Freshpet Fridges transmitted back to Freshpet for review by members of our sales team.
In 2020, we began making investments at a manufacturing facility called Freshpet Kitchens South. Freshpet Kitchens South currently has three production lines in operation with a fourth planned for early 2025 and space for additional production lines in the future. The construction of Freshpet Kitchens Ennis, located in Ennis, Texas, began in 2020.
In 2020, we began making investments at a manufacturing facility called Freshpet Kitchens South. Freshpet Kitchens South currently has four production lines in operation with a potential fifth line to be installed in the future. The construction of Freshpet Kitchens Ennis, located in Ennis, Texas, began in 2020.
According to Numerator, 89% of United States dog parents view their pets as members of the family. As pets are increasingly viewed as companions, friends and family members, pet owners are being transformed into “pet parents” who spare no expense for their loved ones, driving premiumization across pet categories. This trend is reflected in food purchasing decisions.
As pets are increasingly viewed as companions, friends and family members, pet owners are being transformed into “pet parents” who spare no expense for their loved ones, driving premiumization across pet categories. This trend is reflected in food purchasing decisions. Increasing consumer focus on health & wellness. Consumers are increasingly purchasing fresh, natural and organic food products.
Distribution: Outbound transportation from our distribution center ("DC") facilities is managed through an integrated transportation management system, with carriage provided by a network mostly comprised of refrigerated asset-based carriers, with limited use of refrigerated freight brokers.
For raw materials, we strategically source from multiple suppliers and identify alternative sources of supply that meet our quality and safety standards. 8 Table of Contents Distribution: Outbound transportation from our distribution center ("DC") facilities is managed through an integrated transportation management system, with carriage provided by a network mostly comprised of refrigerated asset-based carriers, with limited use of refrigerated freight brokers.
Our refrigerators are designed to be highly reliable, and at any given time, less than 0.5% of the network is out of service for maintenance.
Freshpet Fridges purchased in 2025 are protected by a manufacturer warranty of five years, while those purchased prior to 2025 carry a three-year manufacturer warranty. Our refrigerators are designed to be highly reliable, and at any given time, less than 0.5% of the network is out of service for maintenance.
These efforts are intended to help achieve our environmental goals while reducing the costs of doing business. 2023 saw the introduction of our new Texas distribution center and freight bracket pricing program. These efforts helped minimize the fuel used to ship Freshpet products to our customers resulting in significantly reduced logistics costs and environmental footprints.
Freshpet's chiller fleet efficiency continues to improve with our latest units using up to 91% less electricity than older units. 2023 saw the introduction of our Texas distribution center and freight bracket pricing program. These efforts helped minimize the fuel used to ship Freshpet products to our customers resulting in significantly reduced logistics costs and environmental footprints.
We believe the following trends are driving growth in our industry: Pet ownership. There are currently approximately 95.0 million pet food buying households in the United States, which represent approximately 75% of total households having a dog and/or cat, according to Numerator. Pet humanization .
There are currently approximately 98 million dog or cat food buying households in the United States, meaning that approximately 73% of total households are buying dog and/or cat food, according to Numerator. Pet humanization . According to Numerator, 90% of United States dog households view their pets as members of the family.
Our marketing strategy has allowed us to drive new consumers to our brand and develop a highly engaged community of users who actively advocate for Freshpet. 10 Table of Contents Competition Pet food is a highly competitive industry. We compete with some of the largest pet food manufacturers such as Nestlé Purina Pet Care, the J.M. Smucker Company U.S.
Through this integrated marketing approach, we have driven new consumers to the brand while fostering a highly engaged community of Freshpet users who actively advocate for our products. Competition The pet food industry is highly competitive, with numerous manufacturers of varying sizes.
We deploy a broad set of marketing tools across television, digital and public relations to reach consumers through multiple touch points and increase product trials. Our network of fridges at approximately 28,141 retail locations within blue-chip retailers helps to introduce consumers to our brand and instantly distinguish Freshpet from traditionally merchandised pet food.
Our network of fridges at approximately 30,235 retail locations within blue-chip retailers serves as a powerful in-store marketing asset, introducing consumers to our brand and clearly differentiating Freshpet from traditionally merchandised pet food.
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Our Mission and Values Our mission is to elevate the way we feed our pets with fresh food that nourishes all.
Added
In 2025, our largest distributor by net sales accounted for less than 10% of our net sales and our largest customers, Walmart and Costco, accounted for 25% and 10% of our net sales, respectively. The Freshpet Fridge We primarily sell our products through a growing network of company-owned branded refrigerators, the Freshpet Fridges.
Removed
In 2022, we opened our state-of-the-art Kitchens in Ennis, TX. This facility has been designed to incorporate sustainable technologies such as wastewater recycling, and advanced heating / cooling technology. On-site solar power and a battery micro-grid is planned for future development.
Added
We currently estimate less than 12-month cash-on-cash payback for the average Freshpet Fridge installation, calculated by comparing our total current costs for a refrigerator (including installation) to our current margin on net revenues. We believe our attractive value proposition to retailers and pet parents will allow us to continue penetrating store locations of existing and new customers.
Removed
All of our suppliers are well-established companies that we believe have the scale to support our growth. For raw materials, we strategically source from multiple suppliers and identify alternative sources of supply that meet our quality and safety standards.
Added
We focus on establishing trust in the quality, safety, and nutritional benefits of our products, while deploying a broad set of marketing tools to reach consumers through multiple touchpoints and drive increased consumer trials of our products.
Removed
In 2024, our largest distributor by net sales, Animal Supply Co., accounted for 7.9% of our net sales and our largest customer, Walmart, accounted for 24.5% of our net sales. We are currently considering the manner in which we provide products to the pet specialty channel, which is primarily serviced by Animal Supply Co. through a distributor arrangement.
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We utilize a holistic media approach to support brand building and consumer engagement, including national television advertising, which has been effective in driving incremental consumer product trials, as well as investments across streaming television, digital, and social media channels. We maintain a robust online presence designed to engage consumers across their purchase journey, including those seeking delivery or omnichannel options.
Removed
We are considering alternative approaches to distribution of products within the pet specialty channel to help increase our market share, including but not limited to establishing a replacement distribution partner in that channel. The Freshpet Fridge We sell our products through a growing network of company-owned branded refrigerators, the Freshpet Fridges.
Added
Our digital efforts span a range of platforms and environments, including company and retail websites, retail media networks, search engines, blogs, and online reviews, and are further supported by tailored messaging across leading social and digital platforms.
Removed
We have effectively used national TV advertising to drive incremental consumers to try Freshpet products. We expect to realize greater benefits from national TV advertising as we continue to grow the network of Freshpet store locations nationwide. We have also expanded our online presence to better target consumers seeking information on healthy pet food.
Added
Our competitors include pet food divisions of large consumer product companies, regional niche brands, direct-to-consumer frozen brands, as well as retailers with their own private label products. Competitors market and sell their products through brick-and-mortar stores and e-commerce. Many of our principal competitors have substantially larger financial, marketing, and other resources than we do.
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We reach consumers across multiple digital and social media platforms including websites, blogs and online reviews, as well as with tailored messaging on popular digital hubs including Instagram, Facebook, X, TikTok and YouTube.
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Retail Pet Foods, Colegate-Palmolive Pet Nutrition, Mars Petcare, General Mills North America Pet, and Post Consumer Brands. In addition, we compete with many regional niche brands in individual geographic markets, as well as the launch of new direct-to-consumer frozen brands.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeInternal Revenue Code of 1986, as amended (the “Code”), an ownership change occurs if the aggregate stock ownership of certain stockholders (generally 5% stockholders, applying certain look-through and aggregation rules) increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years).
Biggest changeOur ability to utilize these NOLs may be limited under Section 382 ("Section 382") of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), which restricts the use of pre-change NOLs following an "ownership change." An ownership change generally occurs when the ownership of 5% shareholders increases by more than 50 percentage points over a three‑year testing period.
In addition, our expansion into new countries may require significant resources and the efforts and attention of our management and other personnel, which will divert resources from our existing business operations.
In addition, expansion into new countries may require significant resources and the efforts and attention of our management and other personnel, which will divert resources from our existing business operations.
In addition, if the cost savings initiatives we have implemented to date, or any future cost-savings initiatives, do not generate expected cost savings, our business, financial condition and results of operations could be adversely affected. 17 Table of Contents Our manufacturing capacity and expansion plans could have a material adverse effect on our business, financial condition and results of operations.
In addition, if the cost savings initiatives we have implemented to date, or any future cost-savings initiatives, do not generate expected efficiencies and cost savings, our business, financial condition and results of operations could be adversely affected. 17 Table of Contents Our manufacturing capacity and expansion plans could have a material adverse effect on our business, financial condition and results of operations.
Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in the loss of brand recognition and could require us to devote resources to advertising and marketing new brands.
Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks or branding are successfully challenged, we could be forced to rebrand our products, which could result in the loss of brand recognition and could require us to devote resources to advertising and marketing new brands.
We cannot predict the extent to which any environmental law or regulation that may be enacted or enforced in the future may affect our operations. The effect of these actions and future actions on the availability and use of pesticides could adversely impact our financial position or results of operations.
We cannot predict the extent to which any environmental law or regulation that may be reinterpreted, enacted or enforced in the future may affect our operations. The effect of these actions and future actions on the availability and use of pesticides could adversely impact our financial position or results of operations.
The cost of the protein-based ingredients we use in our products has been adversely impacted in the past by the publicity surrounding animal diseases, such as bovine spongiform encephalopathy, or “mad cow disease.” As a result of extensive global publicity and trade restrictions imposed to provide safeguards against mad cow disease, the cost of alternative sources of the protein-based ingredients we use in our products has from time to time increased significantly and may increase again in the future if additional cases of mad cow disease are found.
The cost of the protein-based ingredients we use in our products has been adversely impacted in the past by the publicity surrounding animal diseases, such as bovine spongiform encephalopathy, or “mad cow disease.” As a result of extensive global publicity and trade restrictions imposed to provide safeguards against mad cow disease, the cost of alternative sources of the protein-based ingredients we use in our products has from time to time increased significantly and may increase again in the future if additional cases of mad cow disease or similar pathogens are found.
Additionally, we depend on our ability to attract and retain qualified personnel to efficiently operate and expand our business, and in recent years have rapidly expanded our workforce to support our increased manufacturing capacity.
Additionally, we depend on our ability to attract and retain qualified personnel to efficiently operate and expand our business, and in recent years have expanded our workforce to support our increased manufacturing capacity.
Prices for these and other items we use may be volatile, and we may experience shortages in these items due to factors beyond our control, such as commodity market, availability of supply, increased demand (whether for the item we require or for other items, which in turn impacts the item we require), shortages of agricultural workers (including due to U.S. immigration policies); weather conditions, natural disasters, animal disease outbreaks (such as HPAI), pestilence, operational disruption, financial distress or insolvency of key suppliers or other third parties on whom we or they rely, the effects of climate change, currency fluctuations, tariffs or trade wars, inflationary and/or interest rate pressures, governmental regulations (including import restrictions), sustained government or regulatory shutdowns, regulatory uncertainty or delays, agricultural programs or issues, energy programs, geopolitical concerns, including the ongoing conflict between Ukraine and Russia, labor strikes and the financial health of our suppliers.
Prices for these and other items we use may be volatile, and we may experience shortages in these items due to factors beyond our control, such as commodity market pricing, availability of supply, increased demand (whether for the item we require or for other items, which in turn impacts the item we require), shortages of agricultural workers (including due to U.S. immigration policies); weather conditions, natural disasters, animal disease outbreaks (such as HPAI), pestilence, operational disruption, financial distress or insolvency of key suppliers or other third parties on whom we or they rely, the effects of climate change, currency fluctuations, tariffs or trade wars, inflationary and/or interest rate pressures, governmental regulations (including import restrictions), sustained government or regulatory shutdowns, regulatory uncertainty or delays, agricultural programs or issues, energy programs, geopolitical concerns, including ongoing global geopolitical conflict, labor strikes and the financial health of our suppliers.
The steps we take to prevent misappropriation, infringement or other violation of our intellectual property or the intellectual property of others may not be successful. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited for some of our trademarks and patents in some foreign countries.
The steps we take to prevent misappropriation, infringement or other violation of our intellectual property or the intellectual property of others may not be successful. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited for some of our intellectual property in some foreign countries.
In recent years, we have expanded our global footprint by entering into new markets and may expand into additional markets in the future. For example, we currently do business with four retailers in the United Kingdom, where our products are selling in approximately 608 stores.
In recent years, we have expanded our global footprint by entering into new markets and may expand into additional markets in the future. For example, we currently do business with four retailers in the United Kingdom, where our products are selling in approximately 637 stores.
As we continue to expand our business into new countries, we may encounter tariffs, regulatory, personnel, technological and other difficulties that increase our expenses or delay our ability to become profitable in such countries. This may have an adverse effect on our business.
Should we continue to expand our business into new countries, we may encounter tariffs, regulatory, personnel, technological and other difficulties that increase our expenses or delay our ability to become profitable in such countries. This may have an adverse effect on our business.
For example, the long-term effects of global climate change present both physical risks (such as extreme weather conditions or rising sea levels) and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable.
The long-term effects of global climate change present both physical risks (such as extreme weather conditions or rising sea levels) and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable.
Risks Related to our Manufacturing and Supply Chain We may not be able to successfully implement initiatives to improve productivity and streamline operations to control or reduce costs. Failure to implement such initiatives could adversely affect our results of operations.
Risks Related to our Manufacturing and Supply Chain We may not be able to successfully implement initiatives to improve productivity and product quality, to streamline operations, or to control or reduce costs. Failure to successfully implement such initiatives could adversely affect our results of operations.
If effected, these or any new or increased tariffs or resultant trade wars could have an adverse effect on us or on our suppliers, distributors or customers, which could lead to significant increases in the costs of materials and services, resulting in product cost increases and reduced consumer demand.
Any new or increased tariffs or resultant trade wars could have an adverse effect on us or on our suppliers, distributors or customers, which could lead to significant increases in the costs of materials and services, resulting in product cost increases and reduced consumer demand.
Our business is dependent on our ability to timely source ingredients that comply with our product quality standards. The primary inputs, commodities and ingredients that we use include meat, poultry products, vegetables, fruits, carrageenans, whole grains, vitamins, minerals, packaging and energy (including wind power).
Our business is dependent on our ability to timely source ingredients that comply with our product quality standards. The primary inputs, commodities and ingredients that we use include meat, poultry products, vegetables, fruits, carrageenans, whole grains, vitamins, minerals, packaging and energy.
As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and purchasers of our common stock in this offering bear the risk of our future offerings reducing the market price of our common stock and diluting their ownership interest in our company.
As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and purchasers of our common stock in this offering bear the risk of our future offerings reducing the market price of our common stock and diluting their ownership interest in our company. 26 Table of Contents
Because many of our costs, such as energy and logistics costs, packaging costs and ingredient, commodity and raw product costs, are affected by factors outside or substantially outside our control, we generally must seek to control or reduce costs through operating efficiency or other initiatives.
As many of our costs, such as energy and logistics costs, packaging costs and ingredients, commodity and raw product costs, are affected by factors outside or substantially outside our control, we generally must seek to control or reduce costs through operating efficiency or other initiatives.
Our customers purchase products either directly from us, or through a network of distributors who have purchased product inventory from us. A relatively limited number of customers and distributors account for a large percentage of our net sales. During 2024, ten customers, who purchase either directly from us or through distributors, collectively accounted for approximately 68.1% of our net sales.
Our customers purchase products either directly from us, or through a network of distributors who have purchased product inventory from us. A relatively limited number of customers and distributors account for a large percentage of our net sales. During 2025, ten customers, who purchase either directly from us or through distributors, collectively accounted for approximately 68.0% of our net sales.
If activist stockholder activities continue, our business could be adversely affected because responding to proxy contests and reacting to other actions by activist stockholders can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees.
If activist stockholder activities arise in the future, our business could be adversely affected because responding to proxy contests and reacting to other actions by activist stockholders can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees.
If allowed to become or remain effective, these or any new or increased tariffs or resultant trade wars could have an adverse effect on us or on our suppliers, which could lead to significant increases in the costs of materials, and as a result could negatively impact our results of operations, cash flow and financial condition.
These or any new or increased tariffs or resultant trade wars could have an adverse effect on us or on our suppliers, which could lead to significant increases in the costs of materials, and as a result could negatively impact our results of operations, cash flow and financial condition.
In addition, many states have adopted the Association of American Feed Control Officials’ model pet food regulations or variations thereof, which generally regulate the information manufacturers provide about pet food. Complying with government regulation can be costly or may otherwise adversely affect our business.
In addition, many states have adopted the Association of American Feed Control Officials’ (AAFCO) model pet food regulations or variations thereof, which generally regulate the information manufacturers provide about pet food. Complying with government regulation, including state by state adoption of AAFCO guidelines, can be costly or may otherwise adversely affect our business.
Failure to protect our intellectual property could harm our business, financial condition and results of operations. 22 Table of Contents Our brand names and trademarks are important to our business, and we have registered or applied to register many of these trademarks. We cannot assure you that our trademark applications will be approved.
Failure to protect our intellectual property could harm our business, financial condition and results of operations. 22 Table of Contents Our brand names and trademarks are important to our business, and we have registered or applied to register many of these trademarks, but have no assurance that our trademark applications will be approved.
There are numerous brands and products that compete for shelf space and sales, with competition based primarily upon brand recognition and loyalty, product packaging, quality and innovation, taste, nutrition, breadth of product line, price and convenience. We compete with a significant number of companies of varying sizes, including divisions or subsidiaries of larger companies.
There are numerous brands and products that compete for retail space, e-commerce and direct-to-consumer sales, with competition based primarily upon brand recognition and loyalty, product packaging, quality and innovation, taste, nutrition, breadth of product line, price and convenience. We compete with a significant number of companies of varying sizes, including divisions or subsidiaries of larger companies and private label brands.
Product recalls or withdrawals can result in substantial and unexpected expenditures, destruction of product inventory, and lost sales due to the unavailability of the product for a period of time, which could reduce profitability and cash flow. In addition, a product recall or withdrawal may require significant management attention.
Product recalls or withdrawals can result in substantial and unexpected expenditures, destruction of product inventory, and lost sales due to the unavailability of the product for a period of time, which could reduce profitability and cash flow.
Climate change or concerns regarding climate change may increase environmental regulation and environmental risks. As a result of our agricultural and food processing operations, we are subject to numerous environmental laws and regulations at the federal, state and local levels. As these laws and regulations become increasingly complex, our compliance costs become increasingly expensive.
Climate change or evolving views or concerns regarding climate change may increase environmental risks and environmental regulation of such risks. As a result of our agricultural and food processing operations, we are subject to numerous environmental laws and regulations at the federal, state and local levels.
Additionally, the growth of crops, as well as the manufacture and processing of our products, requires significant amounts of water. Drought or other causes of a reduction of water in aquifers may affect availability of water, which in turn may adversely affect our results of operations.
Additionally, the growth of crops, the raising of cattle, and the manufacturing and processing of our products, all require significant amounts of water. Drought or other causes of a reduction of water in aquifers may affect availability of water, which in turn may adversely affect the cost of beef, vegetables and fruits, as well as our results of operations.
The ingredients that we use in the production of our products (including, among others, meat and poultry products, vegetables, fruits, carrageenans, whole grains, vitamins and minerals) are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, frosts, fires, earthquakes, tornadoes, livestock disease such as avian influenza and pestilences.
The ingredients that we use in the production of our products (such as meat and poultry products, vegetables, fruits, and whole grains) are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, frosts, fires, earthquakes, tornadoes, livestock disease such as avian influenza and pestilences. Adverse weather conditions may be impacted by climate change and other factors.
Any compromise or breach of our security could result in a violation of applicable privacy and other laws, including federal and state law, as well as the General Data Protection Regulation ("GDPR"), which could result in significant legal and financial exposure, and a loss of confidence in our security measures, which could have an adverse effect on our business, financial condition and results of operations. 24 Table of Contents Risks Related to our NOLs We may be unable to use some or all of our net operating loss carryforwards, which could adversely affect our financial results.
Any compromise or breach of our security could result in a violation of applicable privacy and other laws, including federal and state law, as well as the General Data Protection Regulation ("GDPR"), which could result in significant legal and financial exposure, and a loss of confidence in our security measures, which could have an adverse effect on our business, financial condition and results of operations.
Regulations limiting greenhouse gas emissions and energy inputs may also increase in coming years, which may increase our costs associated with compliance. 23 Table of Contents Additionally, compliance with evolving environmental legislation and regulations at the international, national, state and local levels, particularly if they are more aggressive than our current sustainability measures used to monitor our emissions and improve our energy efficiency, may increase our costs and adversely affect our results of operations.
Although the current presidential administration has taken steps to reassess and scale back existing environmental regulation, future presidential administrations could adopt a different policy, in which case federal regulations limiting greenhouse gas emissions and energy inputs could increase in coming years, which may increase our costs associated with compliance. 23 Table of Contents Compliance with evolving environmental legislation and regulations at the international, federal, state and local levels, particularly if they are more aggressive than our current sustainability measures used to monitor our emissions and improve our energy efficiency, may increase our costs and adversely affect our results of operations.
Marketing investments may be costly. Additionally, we may, from time to time, change our marketing and trade spending strategies, including the timing, amount or nature of television advertising and related promotional programs. The sufficiency and effectiveness of our marketing and trade spending practices is important to our ability to retain or improve our market share or margins.
Marketing investments may be costly. Additionally, we may, from time to time, change our marketing and trade spending strategies, including the timing, amount or nature of television advertising, use of social media and related promotional programs.
In addition, (i) the amount of NOLs generated in taxable years beginning after December 31, 2017 that we are permitted to deduct in any taxable year beginning after December 31, 2020 is limited to 80% of our taxable income in such year, and (ii) NOLs generated in taxable years beginning after December 31, 2020 cannot be carried back to prior taxable years.
In addition, (i) NOLs generated in taxable years beginning after December 31, 2017 are limited to offsetting 80% of taxable income in taxable years beginning after December 31, 2020, and (ii) NOLs generated in taxable years beginning after December 31, 2020 may not be carried back to prior taxable years.
Risks Related to Ownership of Our Common Stock Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to various factors that are beyond our control, resulting in a decline in our stock price.
During periods of rising interest rates, our cost of borrowing could increase, the fair value of our investments could be affected, and it could constrain the purchasing power of our customers. 25 Table of Contents Risks Related to Ownership of Our Common Stock Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to various factors that are beyond our control, resulting in a decline in our stock price.
Changes in environmental conditions may result in existing legislation having a greater impact on us. Additionally, we may be subject to new legislation and regulation in the future.
As these laws and regulations become increasingly complex, evolve or are reinterpreted, our compliance costs may become increasingly expensive. Changes in environmental conditions may result in existing legislation having a greater impact on us. Additionally, we may be subject to new legislation and regulation in the future.
Global or local pandemics could also have adverse impacts on our business operations. In addition, any tariffs imposed by the new U.S. presidential administration or retaliatory tariffs announced by other countries could result in a trade war.
In addition, tariffs imposed by the U.S. presidential administration or retaliatory tariffs announced by other countries could result in a trade war.
We cannot assure you that these agreements will provide meaningful protection in the event of any unauthorized use, misappropriation or disclosure of our trade secrets, know-how or other proprietary information. If we are unable to maintain the proprietary nature of our recipes, methods and other know-how, we could be materially adversely affected.
If these agreements fail to provide meaningful protection in the event of any unauthorized use, misappropriation or disclosure of our trade secrets, know-how or other proprietary information, our business could be materially adversely affected. Further, to the extent we develop, introduce and acquire products, the risk of such claims may be exacerbated.
Consumers have access to lower-priced offerings and, during economic downturns, may shift purchases to these lower-priced or other perceived value offerings. Customers may become more conservative in response to these conditions and seek to reduce their inventories. For example, during the economic downturn from 2007 through 2009, customers significantly reduced their inventories.
Consumers have access to lower-priced offerings and, during economic downturns, may shift purchases to these lower-priced or other perceived value offerings. Customers may become more conservative in response to these conditions and seek to reduce their inventories in response to consumer behavior. Global or local pandemics could also have adverse impacts on our business operations.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price and we have defended against such lawsuits in the past. 25 Table of Contents Future sales of our common stock, or the perception that such sales may occur, could depress our common stock price.
As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price and we have defended against such lawsuits in the past.
As of December 31, 2024, we had federal net operating loss (“NOLs”) carryforwards of approximately $391.5 million and state NOLs of approximately $278.4 million that we may use to offset taxable income for U.S. federal and state income tax purposes, respectively.
Risks Related to our NOLs We may be unable to use some or all of our net operating loss carryforwards, which could adversely affect our financial results. As of December 31, 2025, we had federal net operating loss (“NOLs”) carryforwards of approximately $391.1 million and state NOLs of approximately $275.4 million available to offset future taxable income.
In February 2025, the new U.S. presidential administration announced the imposition of tariffs on imports from Canada, Mexico and China, and those countries subsequently announced retaliatory tariffs in response. Although the imposition of certain of these tariffs was temporarily stayed, the situation is dynamic, rapidly evolving and uncertain.
The U.S. presidential administration has in the past year announced the imposition of tariffs on imports from many countries, including but not limited to Canada, Mexico and China, and certain of those countries subsequently announced retaliatory tariffs in response, with citizens of several countries calling for boycotts of U.S. products.
Furthermore, there may be periods during which the use of NOLs is suspended or otherwise limited for state tax purposes, which could accelerate or permanently increase state taxes owed. Risks Related to Interest Rates Changes in interest rates may adversely affect our earnings and cash flows.
Risks Related to Interest Rates Changes in interest rates may adversely affect our earnings and cash flows.
Removed
As an example, in June 2022 we initiated a voluntary recall of a single lot of a particular brand due to potential salmonella contamination.
Added
The sufficiency and effectiveness of our marketing and trade spending practices is important to our ability to retain or improve our market share or margins.
Removed
Although we received no reports of harm to pets or their owners as a result of this potential contamination, this recall resulted in production delays and significant diversion of management time to identify and remediate the issue.
Added
In addition, a product recall or withdrawal may require significant management attention and result in production delays, as was the case with a voluntary recall of a single lot of product that we initiated in June 2022.
Removed
Adverse weather conditions may be impacted by climate change and other factors.
Added
Our ability to introduce new products and execute our growth strategy depends, in part, on our ability to successfully launch new proprietary technologies.
Removed
Further, to the extent we develop, introduce and acquire products, the risk of such claims may be exacerbated.
Added
If these technologies fail to perform as expected, we encounter unexpected difficulty training employees on use of these technologies, or we or our business partners are unable to implement these technologies in the time frame, at the cost, or with anticipated efficiencies and beneficial impact on product quality, our results of operations could be adversely affected.
Removed
In general, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its “pre-ownership change” NOLs to offset future taxable income. In general, under the U.S.
Added
Although to date Freshpet has not experienced a material adverse impact on our business and results of operations as a result of such tariffs and foreign trade relations, we continue to monitor and assess their potential impact.
Removed
We have completed several analyses under Section 382 of the Code in the past which concluded that certain annual limitations exist. Purchases or sales of our common stock in amounts greater than specified levels, which are generally beyond our control, could create additional limitations on our ability to utilize our NOLs for tax purposes in the future.
Added
Both international regulations and state regulations have Extended Producer Responsibility (EPR) laws which do, and in the future, may impact our business. These EPR regulations require annual reporting and fees. Failure to pay these authorities in a timely manner can result in large penalties.
Removed
Limitations imposed on our ability to utilize NOLs could cause an increase in the amount of our aggregate payments of U.S. federal and state income taxes in future years.
Added
Our increasing use of artificial intelligence ("AI") technologies presents operations, legal, ethical and reputational risks that could adversely affect our business. We use and plan to increase our use of AI across multiple parts of the business, including in our manufacturing process.
Removed
Furthermore, we may not be able to generate sufficient taxable income to utilize our pre-2018 NOLs before they expire. If any of these events occur, we may not derive some or all of the expected benefits from our NOLs. In addition, NOLs incurred in one state will not be available to offset income earned in a different state.
Added
While AI technologies offer efficiencies and performance improvements, their adoption can present significant risks with respect to data quality, reliability and bias, cybersecurity and data security, intellectual property, regulatory and reputational risk. AI outputs depend on the quality, representativeness and timeliness of the training data and prompts.
Removed
During periods of rising interest rates, our cost of borrowing could increase, the fair value of our investments could be affected, and it could constrain the purchasing power of our customers.
Added
Errors, 'hallucinations', model drift or degraded performance can lead to faulty decisions, product defects or inaccurate consumer-facing content. Detection and remediation can be costly and time-consuming and may not be successful.
Removed
As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products.
Added
Additionally, any outputs or efficiencies generated by AI, including with respect to our manufacturing process, could potentially infringe third party intellectual property or create inventions or content that is not capable of protection under intellectual property laws.
Removed
As of December 31, 2024, we had 48,701,787 shares of common stock outstanding, and our Certificate of Incorporation authorizes us to issue up to 200 million shares of common stock. In the future, we may issue additional shares of common stock or other securities if we need to raise additional capital.
Added
AI systems can also produce biased or discriminatory outcomes which may be inconsistent with applicable laws, intent or expectations, or be otherwise inconsistent with our stated policies. 24 Table of Contents Increased adoption of AI within Freshpet's operations can amplify cyber risk across our systems and create new opportunities for bad actors to test and exploit system vulnerabilities, which could result in a cyber security incident or otherwise compromise data security.
Removed
The number of new shares of our common stock issued in connection with raising additional capital could constitute a material portion of the then outstanding shares of our common stock. Any future sales of our common stock, or the perception that such sales may occur, could negatively impact the price of our common stock.
Added
A security incident involving AI inputs, outputs or model artifacts could result in regulatory scrutiny, litigation and reputational harm. Training or deploying AI within our systems may involve the collection or processing of personal information. If our controls are ineffective or insufficient, we could face regulatory investigations, fines, private litigation or loss of public trust.
Added
Furthermore, the legal framework governing AI is rapidly evolving across international, federal and state jurisdictions and such regulations may impose restrictions relating to risk assessments, documentation, human oversight and use.
Added
New or expanded obligations or limitations on our ability to use AI could increase costs, limit certain features or necessitate changes in our data practices or supply chain, and any violation of such regulations could adversely affect our business, reputation, and results of operations.
Added
These and similar risks related to rapidly evolving adoption of AI technology by us or third parties on whom we rely could result in litigation and remediation may require costly re-engineering, additional human review or curtailing certain uses, which could result in decreased operational efficiencies and increased costs.
Added
The annual limitation is determined, in part, by the value of the company immediately prior to the ownership change and the applicable federal long‑term tax‑exempt rate. We have completed several Section 382 analyses in prior years, which concluded that limitations apply. We have incorporated those limitations into the NOL carryforwards we expect to utilize in future periods.
Added
However, additional ownership changes can occur based on market trading activity outside our control, and future transactions or fluctuations in the ownership of 5% shareholders could trigger additional limitations. Such limitations may materially restrict our ability to use our NOLs and could cause some NOLs to expire unused, adversely affecting our financial condition.
Added
Section 382 calculations are inherently complex and require ongoing monitoring, including periodic analysis of testing dates, movements in 5% shareholders, and constructive‑ownership rules. Future analyses may differ from prior conclusions.
Added
State NOLs are also subject to separate limitations and may not be available to offset income in other jurisdictions. If these limitations apply, we may not be able to realize the full value of our NOLs, which could result in increased tax liabilities and potential valuation allowances in future periods.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur information security organization, led by our Chief Information Officer (our "CIO") who reports to our Chief Financial Officer (our "CFO"), is comprised of both I.T. security leadership and dedicated cybersecurity staff. 26 Table of Contents The information security organization, collectively, has extensive technology security and program management experience including cybersecurity professional certifications such as Certified Information Systems Security Professional ("CISSP"), advanced degrees in Information Assurance, and numerous years' experience assessing and managing cybersecurity risk within the Department of Defense and other public companies.
Biggest changeThe information security organization, collectively, has extensive technology security and program management experience including cybersecurity professional certifications such as Certified Information Systems Security Professional ("CISSP"), advanced degrees in Information Assurance, and numerous years' experience assessing and managing cybersecurity risk within the Department of Defense and other public companies.
Additionally, some of our Board members have completed specialized director training on cybersecurity risk.
Additionally, some of our Board members have completed specialized director training on cybersecurity risk. 27 Table of Contents
Risk Factors— We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks".
Risk Factors— We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks". Our information security organization, led by our Chief Information Officer (our "CIO") who reports to our Chief Financial Officer (our "CFO"), is comprised of both I.T. security leadership and dedicated cybersecurity staff.
Added
We also utilize a third-party Virtual Chief Information Security Officer ("vCISO"). The vCISO works with the CIO and security team, including preparing and/or presenting key information to the Company's Audit Committee, as necessary.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES In August 2023, we entered into a lease arrangement for a to-be constructed office space for our corporate headquarters, which will contribute right of use assets and lease liabilities upon lease commencement, which is currently anticipated to occur by the first half of 2025. We own the Freshpet Kitchens Bethlehem ("Kitchens 1.0" and "Kitchens 2.0").
Biggest changeIn August 2025, we entered into a lease arrangement for a to-be constructed warehouse space, which will contribute right of use assets and lease liabilities upon lease commencement, which is currently anticipated to occur during the first quarter of 2027. We own the Freshpet Kitchens Bethlehem ("Kitchens 1.0" and "Kitchens 2.0").
At the completion of phase 2 and 3, the Freshpet Kitchens Ennis facility will grow by approximately 400,000 square-feet. 27 Table of Contents We believe that our properties have been adequately maintained, are in good condition generally and are suitable and adequate for our business as presently conducted.
At the completion of phase 2 and 3, the Freshpet Kitchens Ennis facility will grow by approximately 400,000 square-feet. We believe that our properties have been adequately maintained, are in good condition generally and are suitable and adequate for our business as presently conducted.
Added
ITEM 2. PROPERTIES We lease our corporate headquarters in Bedminster, New Jersey, which contribute right of use assets and lease liabilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRisk Factors” and Note 10 - Commitments and Contingencies to our Consolidated Financial Statements for a discussion of certain legal proceedings involving the Company.
Biggest changeRisk Factors” and "Note 10 - Commitments and Contingencies - Legal Obligations" to our Consolidated Financial Statements for a discussion of certain legal proceedings involving the Company.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Freshpet, Inc. under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act. 28 Table of Contents The following graph compares our total common stock return with the total return for (i) the NASDAQ Composite Index (the “NASDAQ Composite”) and (ii) the Russell 3000 Index (the “Russell 3000”) for the five-year period ended December 31, 2024.
Biggest changeIssuer Purchases of Equity Securities None. 28 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Freshpet, Inc. under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Shares of our common stock are publicly traded on the Nasdaq Global Market under the symbol "FRPT". The number of stockholders of record of our common stock as of February 18, 2025 was approximately 332.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Shares of our common stock are publicly traded on the Nasdaq Global Market under the symbol "FRPT". The number of stockholders of record of our common stock as of February 19, 2026 was approximately 508.
NASDAQ Composite Russell 3000 Dec 31, 2020 $ 100.00 $ 100.00 $ 100.00 Dec 31, 2021 $ 67.10 $ 121.39 $ 124.00 Dec 31, 2022 $ 37.16 $ 81.21 $ 98.61 Dec 31, 2023 $ 61.10 $ 116.47 $ 122.23 Dec 31, 2024 $ 104.31 $ 149.83 $ 150.18
NASDAQ Composite Russell 3000 Dec 31, 2020 $ 100.00 $ 100.00 $ 100.00 Dec 31, 2021 $ 67.10 $ 121.39 $ 124.00 Dec 31, 2022 $ 37.16 $ 81.21 $ 98.61 Dec 31, 2023 $ 61.10 $ 116.47 $ 122.23 Dec 31, 2024 $ 104.31 $ 149.83 $ 150.18 Dec 31, 2025 $ 42.91 $ 180.33 $ 172.69
Our ability to pay dividends may also be limited by covenants of any future outstanding indebtedness we or our subsidiaries incur. Issuer Purchases of Equity Securities None.
Our ability to pay dividends may also be limited by covenants of any future outstanding indebtedness we or our subsidiaries incur.
Added
The following graph compares our total common stock return with the total return for (i) the NASDAQ Composite Index (the “NASDAQ Composite”) and (ii) the Russell 3000 Index (the “Russell 3000”) for the five-year period ended December 31, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeConsolidated Statements of Operations and Comprehensive Income (Loss) Year Ended December 31, 2024 2023 2022 Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales (Dollars in thousands) Net sales $ 975,177 100 % $ 766,895 100 % $ 595,344 100 % Cost of goods sold 579,221 59 % 516,023 67 % 409,311 69 % Gross profit 395,956 41 % 250,872 33 % 186,033 31 % Selling, general, and administrative expenses 357,957 37 % 281,318 37 % 238,016 40 % Income (loss) from operations 37,999 4 % (30,446) (4) % (51,983) (9) % Interest and other income, net 11,868 1 % 13,029 2 % 1,710 — % Interest expense (12,262) (1) % (14,097) (2) % (5,208) (1) % Gain on equity investment 9,918 1 % — — % — — % Income (loss) before income taxes 47,523 5 % (31,514) (4) % (55,481) (10) % Income tax expense 598 — % 210 — % 282 — % Loss on equity method investment — — % 1,890 — % 3,731 1 % Net income (loss) $ 46,925 5 % $ (33,614) (4) % $ (59,494) (10) % 31 Table of Contents Year Ended December 31, 2024 Compared To Year Ended December 31, 2023 Net Sales The following table sets forth net sales by class of retailer: Year Ended December 31, 2024 2023 2022 Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales (Dollars in thousands) Grocery, Mass, International and Digital $ 800,775 82 % $ 642,306 84 % $ 503,753 85 % Pet Specialty and Club 174,402 18 % 124,589 16 % 91,591 15 % Net Sales $ 975,177 100 % $ 766,895 100 % $ 595,344 100 % Effective March 31, 2024, the Company is providing a more meaningful breakout of its sales, which now combines pet specialty and club, as both classes of retailers service a specific consumer through specialized offerings, which include value focused and or premium products.
Biggest changeAs a result, we recognized a deferred income tax benefit of $68.8 million for the year ended December 31, 2025. 31 Table of Contents Consolidated Statements of Income (Loss) Year Ended December 31, 2025 2024 2023 Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales (Dollars in thousands) Net sales $ 1,102,015 100 % $ 975,177 100 % $ 766,895 100 % Cost of goods sold 652,389 59 % 579,221 59 % 516,023 67 % Gross profit 449,626 41 % 395,956 41 % 250,872 33 % Selling, general, and administrative expenses 373,954 34 % 357,957 37 % 281,318 37 % Income (loss) from operations 75,672 7 % 37,999 4 % (30,446) (4) % Interest and other income, net 9,221 1 % 11,868 1 % 13,029 2 % Interest expense (14,120) (1) % (12,262) (1) % (14,097) (2) % Gain on equity investment — — % 9,918 1 % — — % Income (loss) before income taxes 70,773 6 % 47,523 5 % (31,514) (4) % Income tax (benefit) expense (68,364) (6) % 598 — % 210 — % Loss on equity method investment — — % — — % 1,890 — % Net income (loss) $ 139,137 13 % $ 46,925 5 % $ (33,614) (4) % Year Ended December 31, 2025 Compared To Year Ended December 31, 2024 Net Sales The following table sets forth net sales by class of retailer: Year Ended December 31, 2025 2024 2023 Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales (Dollars in thousands) Grocery, Mass, International and Digital $ 892,941 81 % $ 800,775 82 % $ 642,306 84 % Pet Specialty and Club 209,074 19 % 174,402 18 % 124,589 16 % Net Sales $ 1,102,015 100 % $ 975,177 100 % $ 766,895 100 % Net sales increased $126.8 million, or 13.0%, to $1,102.0 million for the year ended December 31, 2025 as compared to $975.2 million for the year ended December 31, 2024.
The Company recognizes share-based compensation based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. The Company estimates grant date fair value of its options using the Black-Scholes Merton option-pricing model.
Share-based Compensation —The Company recognizes share-based compensation based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. The Company estimates grant date fair value of its options using the Black-Scholes Merton option-pricing model.
GAAP measures and may not be comparable to similarly named measures used by other companies. • Adjusted Gross Profit • Adjusted Gross Profit as a percentage of net sales (Adjusted Gross Margin) • Adjusted SG&A Expenses • Adjusted SG&A Expenses as a percentage of net sales • EBITDA • Adjusted EBITDA • Adjusted EBITDA as a percentage of net sales Such financial measures are not financial measures prepared in accordance with U.S.
GAAP measures and may not be comparable to similarly named measures used by other companies. • Adjusted Gross Profit • Adjusted Gross Profit as a percentage of net sales (Adjusted Gross Margin) • Adjusted SG&A Expenses • Adjusted SG&A Expenses as a percentage of net sales • EBITDA • Adjusted EBITDA • Adjusted EBITDA as a percentage of net sales (Adjusted EBITDA Margin) Such financial measures are not financial measures prepared in accordance with U.S.
Components of our Results of Operations Net Sales Our net sales are derived from the sale of fresh pet food products to retailers, through direct sales and distributor arrangements. Our products are sold to consumers through a fast-growing network of company-owned branded refrigerators, known as Freshpet Fridges, located in our customers’ stores.
Components of our Results of Operations Net Sales Our net sales are derived from the sale of fresh pet food products to retailers, through direct sales and distributor arrangements. Our products are primarily sold to consumers through a fast-growing network of company-owned branded refrigerators, known as Freshpet Fridges, located in our customers’ stores.
We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA and/or Net Sales targets as a condition of vesting. At each reporting period, we reassess the probability of achieving the performance criteria and the performance period required to meet those targets.
We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA margins, Adjusted EBITDA and/or Net Sales targets as a condition of vesting. At each reporting period, we reassess the probability of achieving the performance criteria and the performance period required to meet those targets.
We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA and/or Net Sales targets as a condition of vesting. At each reporting period, we reassess the probability of achieving the performance criteria and the performance period required to meet those targets.
We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA margins, Adjusted EBITDA and/or Net Sales targets as a condition of vesting. At each reporting period, we reassess the probability of achieving the performance criteria and the performance period required to meet those targets.
Sales are recorded net of discounts, returns and promotional allowances. Our net sales growth is driven by the following key factors: • Increasing sales velocity from the average Freshpet Fridge due to increasing awareness, trial and adoption of Freshpet products and innovation.
Sales are recorded net of discounts, returns and promotional allowances. Our net sales growth strategy is driven by the following key factors: • Increasing sales velocity from the average Freshpet Fridge due to increasing awareness, trial and adoption of Freshpet products and innovation.
Other companies in our industry may calculate the non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures. 34 Table of Contents The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure presented in accordance with U.S.
Other companies in our industry may calculate the non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures. The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure presented in accordance with U.S.
For example, the non-GAAP financial measures do not reflect: • our capital expenditures or future requirements for capital expenditures; • the interest expense, or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness; • depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, nor any cash requirements for such replacements; and • changes in our cash requirements for our working capital needs.
For example, the non-GAAP financial measures do not reflect: • our capital expenditures or future requirements for capital expenditures; • the interest expense, or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness; • depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, nor any cash requirements for such replacements; and 34 Table of Contents • changes in our cash requirements for our working capital needs.
For more information regarding our consolidated results and liquidity and capital resources for the year ended December 31, 2023 as compared to the year ended December 31, 2022, refer to "Part II, Item 7.
For more information regarding our consolidated results and liquidity and capital resources for the year ended December 31, 2024 as compared to the year ended December 31, 2023, refer to "Part II, Item 7.
Changes in estimates and policies are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.
Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.
The following critical accounting policies reflect significant judgments and estimates used in preparation of our consolidated financial statements: Revenue Recognition and Incentives —Revenue is recognized when performance obligations under the terms of the contract with the customer are satisfied, which occurs once control is transferred upon delivery to the customer. 40 Table of Contents Revenue is reported net of applicable trade incentives and allowances.
The following critical accounting policies reflect significant judgments and estimates used in preparation of our consolidated financial statements: 40 Table of Contents Revenue Recognition and Incentives —Revenue is recognized when performance obligations under the terms of the contract with the customer are satisfied, which occurs once control is transferred upon delivery to the customer.
Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2023 Annual Report on Form 10-K, which information is incorporated herein by reference. 29 Table of Contents Overview Freshpet's mission is to elevate the way we feed our pets with fresh food that nourishes all.
Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2024 Annual Report on Form 10-K, which information is incorporated herein by reference. Overview Freshpet's mission is to elevate the way we feed our pets with fresh food that nourishes all.
Our investments in marketing and advertising help to drive awareness and trial at each point of sale. • Increasing penetration of Freshpet Fridge locations in major classes of retail, including Grocery, Mass, International, Digital, Pet Specialty, and Club.
Our investments in marketing and advertising help to drive awareness and trial at each point of sale. • Increasing distribution and penetration of Freshpet products in major classes of retail, including Grocery, Mass, International, Digital, Pet Specialty, and Club.
We continue to roll out Freshpet Fridges at leading retailers across North America and parts of Europe and have installed Freshpet Fridges in approximately 28,141 retail stores as of December 31, 2024. Our products are sold under the Freshpet brand name with ingredients, packaging and labeling customized by class of retail.
We continue to roll out Freshpet Fridges at leading retailers across North America and parts of Europe and have installed Freshpet Fridges in approximately 30,235 retail stores as of December 31, 2025. Our products are sold under the Freshpet brand name with ingredients, packaging and labeling customized by class of retail.
The increase in gross profit as a percentage of net sales was primarily due to lower input costs, reduced quality costs and improved leverage on plant expenses.
The increase in gross profit as a percentage of net sales was primarily due to lower input costs and reduced quality costs, partially offset by reduced leverage on plant expenses.
We normally carry three to five weeks of finished goods inventory and less than 30 days of accounts receivable. As of December 31, 2024, our capital resources consisted primarily of $268.6 million of cash and cash equivalents on hand. As of December 31, 2023, our capital resources consisted primarily of $296.9 million of cash and cash equivalents on hand.
We normally carry three to five weeks of finished goods inventory and less than 30 days of accounts receivable. As of December 31, 2025, our capital resources consisted primarily of $278.0 million of cash and cash equivalents on hand. As of December 31, 2024, our capital resources consisted primarily of $268.6 million of cash and cash equivalents on hand.
We expect to make future capital expenditures in connection with the completion of our planned development of Freshpet Kitchens Ennis Phase 2 and 3. During fiscal year 2024, we spent approximately $187.1 million of capital to meet our capacity needs as well as recurring capital expenditures. In fiscal year 2025, we expect to spend approximately $250.0 million.
We expect to make future capital expenditures in connection with the completion of our planned development of Freshpet Kitchens Ennis Phase 2 and 3. During fiscal year 2025, we spent approximately $148.2 million of capital to meet our capacity needs as well as recurring capital expenditures. In fiscal year 2026, we expect to spend approximately $150.0 million.
Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Note 1 (Summary of Significant Accounting Policies) to our audited consolidated financial statements included in this report. Segment We have determined we operate in one segment: the manufacturing, marketing and distribution of fresh dog food, cat food, and dog treats. 41 Table of Contents
Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Note 1 (Summary of Significant Accounting Policies) to our audited consolidated financial statements included in this report. Segment The Company operates in one consolidated operating and reportable segment: the manufacturing, marketing and distribution of fresh dog food, cat food, and dog treats. 41 Table of Contents
This was partially offset by: • $13.7 million decrease due to changes in operating assets and liabilities.
This was partially offset by: • $32.2 million decrease due to changes in operating assets and liabilities.
GAAP: Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Gross profit $ 395,956 $ 250,872 $ 186,033 Depreciation expense 49,056 41,209 20,774 Non-cash share-based compensation 7,761 10,995 7,293 Loss on disposal of manufacturing equipment 696 3,547 — Adjusted Gross Profit $ 453,469 $ 306,623 $ 214,100 Adjusted Gross Profit as a % of Net Sales 46.5 % 40.0 % 36.0 % The following table provides a reconciliation of Adjusted SG&A Expenses to SG&A Expenses, the most directly comparable financial measure presented in accordance with U.S.
GAAP: Year Ended December 31, 2025 2024 2023 (Dollars in thousands) Gross profit $ 449,626 $ 395,956 $ 250,872 Depreciation expense 61,426 49,056 41,209 Non-cash share-based compensation 3,078 7,761 10,995 Loss on disposal of manufacturing equipment 1,020 696 3,547 Adjusted Gross Profit $ 515,150 $ 453,469 $ 306,623 Adjusted Gross Profit as a % of Net Sales 46.7 % 46.5 % 40.0 % The following table provides a reconciliation of Adjusted SG&A Expenses to SG&A Expenses, the most directly comparable financial measure presented in accordance with U.S.
For the year ended December 31, 2024, Adjusted Gross Profit was $453.5 million, or 46.5% as a percentage of net sales, compared to $306.6 million, or 40.0% as a percentage of net sales, in the prior year. See "—Non-GAAP Financial Measures" below.
Adjusted Gross Profit for the year ended December 31, 2025 was $515.2 million, or 46.7% as a percentage of net sales, compared to $453.5 million, or 46.5% as a percentage of net sales, in the prior year. See "—Non-GAAP Financial Measures" below.
If we issue additional equity or if the Convertible Notes are converted to common shares, existing stockholders may experience dilution, and such new securities could have rights senior to those of our common stock. These factors may make the timing, amount, terms and conditions of additional financing unattractive.
If we issue additional equity or if the Convertible Notes are converted to common shares, existing stockholders may experience dilution, and such new securities could have rights senior to those of our common stock.
Adjusted SG&A for the year ended December 31, 2024, was $291.6 million, or 29.9% as a percentage of net sales, compared to $240.1 million, or 31.3% as a percentage of net sales, for the prior year. See "—Non-GAAP Financial Measures" below.
Adjusted SG&A for the year ended December 31, 2025, was $319.4 million, or 29.0% as a percentage of net sales, compared to $291.6 million, or 29.9% as a percentage of net sales, in the prior year. See "—Non-GAAP Financial Measures" below.
GAAP results and the reconciliation to the closest comparable U.S. GAAP measures, provides a more complete understanding of our business than could be obtained absent this disclosure. We use the non-GAAP financial measures, together with U.S.
We believe that each of these non-GAAP financial measures provide additional metrics to evaluate our operations and, when considered with both our U.S. GAAP results and the reconciliation to the closest comparable U.S. GAAP measures, provides a more complete understanding of our business than could be obtained absent this disclosure. We use the non-GAAP financial measures, together with U.S.
When the probability of achieving such performance conditions changes, the compensation cost previously recorded is adjusted as needed. When such performance conditions are deemed to be improbable of achievement, the compensation cost previously recorded is reversed. (b) Represents costs associated with the implementation of an ERP system.
When the probability of achieving such performance conditions changes, the compensation cost previously recorded is adjusted as needed. When such performance conditions are deemed to be improbable of achievement, the compensation cost previously recorded is reversed.
When the probability of achieving such performance conditions changes, the compensation cost previously recorded is adjusted as needed. When such performance conditions are deemed to be improbable of achievement, the compensation cost previously recorded is reversed. (b) Represents costs associated with the implementation of an ERP system.
When the probability of achieving such performance conditions changes, the compensation cost previously recorded is adjusted as needed. When such performance conditions are deemed to be improbable of achievement, the compensation cost previously recorded is reversed.
The increase was primarily due to the change in accounts receivable, accounts payable and accrued expenses, primarily offset by the change in inventories, prepaid expenses and other current assets, other assets and operating lease liability.
This was partially offset by: • $13.7 million decrease due to changes in operating assets and liabilities. The decrease was primarily due to the change in accounts receivable, inventories, other assets, and operating lease liability, partially offset by the change in accounts payable, accrued expenses, and prepaid expenses and other current assets.
Selling, General and Administrative Expenses Our selling, general and administrative expenses consist of the following: Outbound freight. We use a third-party logistics provider for outbound freight that ships directly to retailers as well as third-party distributors. Marketing & advertising.
We use a third-party logistics provider for outbound freight that ships directly to retailers as well as third-party distributors. Marketing & advertising. Our marketing and advertising expenses primarily consist of television advertising, digital, and social media channels.
Gain on Equity Investment The $9.9 million gain on equity investment for the year ended December 31, 2024, resulted from the change in fair value of the Company's equity interest in a privately held company.
Gain on Equity Investment The $9.9 million gain on equity investment for the year ended December 31, 2024 resulted from the change in fair value of the Company's equity interest in a privately held company, as discussed in Note 1 - Summary of Significant Accounting Policies of our consolidated financial statements.
The decrease was primarily due to the change in accounts receivable, inventories, other assets, and operating lease liability, partially offset by the change in accounts payable, accrued expenses, and prepaid expenses and other current assets. 2023 Net cash provided by operating activities of $75.9 million in 2023 was primarily attributed to: • $61.7 million of net income adjusted for reconciling non-cash items, which excludes $95.3 million of non-cash items primarily related to $58.5 million of depreciation and amortization, $24.9 million of share-based compensation including amortization of warrants, $4.3 million of loss on disposal of property, plant and equipment, $4.1 million of write-off and amortization of deferred financing costs and loan discount, $1.9 million of loss on equity method investment, and $1.5 million of change in operating lease right of use asset. • $14.3 million increase due to changes in operating assets and liabilities.
The decrease was primarily due to the change in accounts receivable, prepaid expenses and other current assets, other assets, accrued expenses, and operating lease liability, partially offset by the change in inventories and accounts payable. 2024 Net cash provided by operating activities of $154.3 million in 2024 was primarily attributed to: • $168.0 million of net income, adjusted for reconciling non-cash items, which excludes $121.0 million of non-cash items related to $73.6 million of depreciation and amortization, $51.8 million of share-based compensation including amortization of warrants, $2.1 million of amortization of deferred financing costs, $1.4 million of change in operating lease right of use asset, $1.3 million of loss on disposal of property, plant and equipment, $0.3 million of a reserve for inventory obsolescence, $0.5 million of provision for loss on accounts receivable, partially offset by $9.9 million of gain on equity investment.
Year Ended December 31, 2024 2023 (Dollars in thousands) Cash at the beginning of period $ 296,871 $ 132,735 Net cash provided by operating activities 154,288 75,940 Net cash used in investing activities (187,092) (239,093) Net cash provided by financing activities 4,566 327,289 Cash at the end of period $ 268,633 $ 296,871 Net Cash Provided by Operating Activities Net cash provided by operating activities consists primarily of net income (loss) adjusted for certain non-cash items (i.e., provision for loss (gains) on accounts receivable, loss on disposal of property, plant and equipment, share-based compensation, change in reserve for inventory obsolescence, depreciation and amortization, write-off and amortization of deferred financing costs and loan discount, change in operating lease right of use asset, loss on equity method investment, and gain on equity investment). 38 Table of Contents 2024 Net cash provided by operating activities of $154.3 million in 2024 was primarily attributed to: • $168.0 million of net income, adjusted for reconciling non-cash items, which excludes $121.0 million of non-cash items related to $73.6 million of depreciation and amortization, $51.8 million of share-based compensation including amortization of warrants, $2.1 million of write-off and amortization of deferred financing costs and loan discount, $1.4 million of change in operating lease right of use asset, $1.3 million of loss on disposal of property, plant and equipment, $0.3 million of a reserve for inventory obsolescence, $0.5 million of provision for loss on accounts receivable, partially offset by $9.9 million of gain on equity investment.
Year Ended December 31, 2025 2024 (Dollars in thousands) Cash at the beginning of period $ 268,633 $ 296,871 Net cash provided by operating activities 160,561 154,288 Net cash used in investing activities (148,184) (187,092) Net cash (used in) provided by financing activities (3,035) 4,566 Cash at the end of period $ 277,975 $ 268,633 38 Table of Contents Net Cash Provided by Operating Activities Net cash provided by operating activities consists primarily of net income adjusted for certain non-cash items (i.e., provision for loss on accounts receivable, loss on disposal of property, plant and equipment, share-based compensation, change in reserve for inventory obsolescence, depreciation and amortization, amortization of deferred financing costs, change in operating lease right of use asset, change in deferred income taxes, and gain on equity investment). 2025 Net cash provided by operating activities of $160.6 million in 2025 was primarily attributed to: • $192.8 million of net income, adjusted for reconciling non-cash items, which excludes $53.7 million of non-cash items related to $68.8 million of deferred income tax benefit, $89.7 million of depreciation and amortization, $12.1 million of provision for loss on accounts receivable, $13.9 million of share-based compensation, $2.2 million of amortization of deferred financing costs, $2.2 million of loss on disposal of property, plant and equipment, and $2.3 million of change in operating lease right of use asset.
GAAP: Year Ended December 31, 2024 2023 2022 (Dollars in thousands) SG&A expenses $ 357,957 $ 281,318 $ 238,016 Depreciation and amortization expense 21,747 15,849 13,781 Non-cash share-based compensation (a) 44,046 13,941 18,799 Loss on disposal of equipment 588 774 396 Enterprise Resource Planning (b) — 2,457 8,558 Capped Call Transactions fees (c) — 113 — Shareholder activism defense engagement (d) — 8,177 — Organization changes (e) — (67) 734 Adjusted SG&A Expenses $ 291,576 $ 240,074 $ 195,748 Adjusted SG&A Expenses as a % of Net Sales 29.9 % 31.3 % 32.9 % (a) Includes true-ups to share-based compensation expense compared to prior periods.
GAAP: Year Ended December 31, 2025 2024 2023 (Dollars in thousands) SG&A expenses $ 373,954 $ 357,957 $ 281,318 Depreciation and amortization expense 25,446 21,747 15,849 Non-cash share-based compensation (a) 10,805 44,046 13,941 Loss on disposal of equipment 610 588 774 Distributor transition costs (b) 10,680 — — Legal obligation (c) 5,703 — — International business charges (d) 1,273 — — Enterprise Resource Planning — — 2,457 Capped Call Transactions fees — — 113 Shareholder activism defense engagement — — 8,177 Organization changes — — (67) Adjusted SG&A Expenses $ 319,437 $ 291,576 $ 240,074 Adjusted SG&A Expenses as a % of Net Sales 29.0 % 29.9 % 31.3 % (a) Includes true-ups to share-based compensation expense.
GAAP: Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Net income (loss) $ 46,925 $ (33,614) $ (59,494) Depreciation and amortization 70,803 57,058 34,555 Interest expense, net of interest income 335 1,069 5,208 Income tax expense 598 210 282 EBITDA 118,661 24,723 (19,449) Gain on equity investment (9,918) — — Loss on disposal of property, plant and equipment 1,284 4,321 396 Non-cash share-based compensation (a) 51,807 24,936 26,092 Loss on equity method investment — 1,890 3,731 Enterprise Resource Planning (b) — 2,457 8,558 Capped Call Transactions fees (c) — 113 — Shareholder activism defense engagement (d) — 8,177 — Organization changes (e) — (67) 734 Adjusted EBITDA $ 161,834 $ 66,550 $ 20,062 Adjusted EBITDA as a % of Net Sales 16.6 % 8.7 % 3.4 % (a) Includes true-ups to share-based compensation expense compared to prior periods.
GAAP: Year Ended December 31, 2025 2024 2023 (Dollars in thousands) Net income (loss) $ 139,137 $ 46,925 $ (33,614) Depreciation and amortization 86,872 70,803 57,058 Interest expense, net of interest income 4,887 335 1,069 Income tax (benefit) expense (68,364) 598 210 EBITDA 162,532 118,661 24,723 Non-cash share-based compensation (a) 13,883 51,807 24,936 Loss on disposal of property, plant and equipment 1,630 1,284 4,321 Distributor transition costs (b) 10,680 — — Legal obligation (c) 5,703 — — International business charges (d) 1,273 — — Gain on equity investment — (9,918) — Loss on equity method investment — — 1,890 Enterprise Resource Planning — — 2,457 Capped Call Transactions fees — — 113 Shareholder activism defense engagement — — 8,177 Organization changes — — (67) Adjusted EBITDA $ 195,701 $ 161,834 $ 66,550 Adjusted EBITDA as a % of Net Sales 17.8 % 16.6 % 8.7 % (a) Includes true-ups to share-based compensation expense.
GAAP. We define Adjusted Gross Profit as Gross Profit before depreciation expense, non-cash share-based compensation, and loss on disposal of manufacturing equipment.
GAAP. We define Adjusted Gross Profit as Gross Profit before depreciation expense, non-cash share-based compensation, and loss on disposal of manufacturing equipment. We define Adjusted SG&A as SG&A expenses before depreciation and amortization expense, non-cash share-based compensation, loss on disposal of equipment, distributor transition costs, legal obligation and international business charges.
Selling, General and Administrative Expenses Selling, general and administrative expenses ("SG&A") were $358.0 million for the year ended December 31, 2024, compared to $281.3 million for the prior year. As a percentage of net sales, SG&A remained consistent at 36.7% for both years ended December 31, 2024 and 2023.
Selling, General and Administrative Expenses Selling, general and administrative expenses ("SG&A") were $374.0 million for the year ended December 31, 2025, compared to $358.0 million in the prior year. As a percentage of net sales, SG&A decreased to 33.9% for the year ended December 31, 2025, compared to 36.7% in the prior year.
Gross Profit Our gross profit is net of costs of goods sold, which include the costs of product manufacturing, product ingredients, packaging materials and inbound freight, as well as depreciation and amortization and non-cash share-based compensation. We expect to continue to mitigate any adverse movement in input costs through a combination of cost management and price increases.
Gross Profit Our gross profit is net of costs of goods sold, which include the costs of product manufacturing, product ingredients, packaging materials and inbound freight, as well as depreciation and amortization and non-cash share-based compensation.
Restricted stock units are measured based on the fair market value of the underlying stock on the dates of the grants. Share awards are amortized under the straight-line method over the requisite service period of the entire award. The Company accounts for forfeitures as they occur.
Service and performance based restricted stock units are measured based on the fair market value of the underlying stock on the dates of the grants whereas market based restricted stock units, such as total shareholder return awards, are measured using the Monte-Carlo simulation. Share awards are amortized under the straight-line method over the requisite service period of the entire award.
We cannot assure you that our business will generate cash flow from operations in an amount sufficient to enable us to fund our liquidity needs. Expanding certain of our Freshpet Kitchens primarily comprises our material future cash requirement.
We cannot assure you that our business will generate cash flow from operations in an amount sufficient to enable us to fund our liquidity needs. Expanding certain of our Freshpet Kitchens primarily comprises our material future cash requirement. The Company reduced its capital expenditures for manufacturing expansion during 2025, reflecting both a moderation in demand and significant operational efficiencies.
(e) Represents a true-up to transition costs related to the organization changes designed to support growth, including several changes in organizational structure designed to enhance capabilities and support long-term growth objectives. 36 Table of Contents Liquidity and Capital Resources To meet our capital needs, we issued approximately $402.5 million in convertible notes in March 2023 (the "Convertible Notes"), used $66.2 million of the proceeds to enter into capped call transactions, and used $11.0 million of the proceeds on debt issuance related costs.
(d) Represents termination costs due to a business change in our international go-to-market strategy. 36 Table of Contents Liquidity and Capital Resources To meet our capital needs, we issued approximately $402.5 million in convertible notes in March 2023 (the "Convertible Notes"), used $66.2 million of the proceeds to enter into capped call transactions, and used $11.0 million of the proceeds on debt issuance related costs.
The impact of new Freshpet Fridge installations on our net sales varies by retail class and depends on numerous factors including store traffic, refrigerator size, placement within the store, and proximity to other stores that carry our products. • Consumer trends including growing pet ownership, pet humanization and a focus on health and wellness. • At times we increase our sales price to offset any adverse movement in input costs.
The impact of new Freshpet Fridge installations on our net sales varies by retail class and depends on numerous factors including store traffic, refrigerator size, placement within the store, and proximity to other stores that carry our products.
At each reporting period, we reassess the probability of achieving the performance criteria and the performance period required to meet those targets. Determining whether the performance criteria will be achieved involves judgment, and the share-based compensation expense may be revised periodically based on changes in the probability of achieving the performance criteria.
Determining whether the performance criteria will be achieved involves judgment, and the share-based compensation expense may be revised periodically based on changes in the probability of achieving the performance criteria. Revisions are reflected in the period in which the probability assessment is changed.
Amounts billed and due from our customers are classified as receivables and require payment on a short-term basis and, therefore, we do not have any significant financing components. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, including estimates of trade incentives the Company offers to its customers and their consumers.
Revenue is reported net of applicable trade incentives and allowances. Amounts billed and due from our customers are classified as receivables and require payment on a short-term basis and, therefore, we do not have any significant financing components.
Restricted stock units are measured based on the fair market value of the underlying stock on the dates of the grants. Share awards are amortized under the straight-line method over the requisite service period of the entire award. The Company accounts for forfeitures as they occur. Other general & administrative costs.
Service and performance based restricted stock units are measured based on the fair market value of the underlying stock on the dates of the grants whereas market based restricted stock units, such as total shareholder return awards, are measured using the Monte-Carlo simulation. Share awards are amortized under the straight-line method over the requisite service period of the entire award.
While our revenue recognition does not involve significant judgment, it represents a significant accounting policy. Share-based Compensation —The Company recognizes share-based compensation based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. The Company estimates grant date fair value of its options using the Black-Scholes Merton option-pricing model.
These brokers visit our retail customers’ store locations to ensure items are appropriately stocked and maintained. Share-based compensation . The Company recognizes share-based compensation based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. The Company estimates grant date fair value of its options using the Black-Scholes Merton option-pricing model.
Our inability to raise capital could impede our growth or otherwise require us to forego growth opportunities and could materially adversely affect our business, financial condition and results of operations. 37 Table of Contents The following table sets forth, for the periods indicated, our working capital: December 31, December 31, 2024 2023 (Dollars in thousands) Cash and cash equivalents $ 268,633 $ 296,871 Accounts receivable, net of allowance for doubtful accounts 68,419 56,754 Inventories, net 80,794 63,238 Prepaid expenses 16,026 7,615 Other current assets 3,126 2,841 Accounts payable (39,164) (36,096) Accrued expenses (56,263) (49,816) Current operating lease liabilities (1,322) (1,312) Current finance lease liabilities (2,120) (1,998) Total Working Capital $ 338,129 $ 338,097 Working capital consists of current assets net of current liabilities.
The following table sets forth, for the periods indicated, our working capital: December 31, December 31, 2025 2024 (Dollars in thousands) Cash and cash equivalents $ 277,975 $ 268,633 Accounts receivable, net of allowance for doubtful accounts 63,762 68,419 Inventories, net 76,766 80,794 Prepaid expenses 9,807 16,026 Other current assets 7,404 3,126 Accounts payable (42,429) (39,164) Accrued expenses (31,610) (56,263) Current operating lease liabilities (2,241) (1,322) Current finance lease liabilities (2,315) (2,120) Total Working Capital $ 357,119 $ 338,129 Working capital consists of current assets net of current liabilities.
See "—Non-GAAP Financial Measures" below. Non-GAAP Financial Measures Freshpet uses the following non-GAAP financial measures in its financial communications. These non-GAAP financial measures should be considered as supplements to the U.S. GAAP reported measures, should not be considered replacements for, or superior to, the U.S.
GAAP reported measures, should not be considered replacements for, or superior to, the U.S.
The performance-based awards with financial criteria either have a Net Sales and/or Adjusted EBITDA target from FY 2023 through FY 2027. We recognize the estimated fair value of performance-based awards as share-based compensation expense over the performance period based upon our determination of whether it is probable that the performance targets will be achieved.
We recognize the estimated fair value of performance-based awards as share-based compensation expense over the performance period based upon our determination of whether it is probable that the performance targets will be achieved. At each reporting period, we reassess the probability of achieving the performance criteria and the performance period required to meet those targets.
Gross Profit Gross profit was $396.0 million, or 40.6% as a percentage of net sales, for the year ended December 31, 2024, compared to $250.9 million, or 32.7% as a percentage of net sales, for the prior year.
The net sales increase was primarily driven by volume gains of 12.0% and favorable price/mix of 1.0%. 32 Table of Contents Gross Profit Gross profit was $449.6 million, or 40.8% as a percentage of net sales, for the year ended December 31, 2025, compared to $396.0 million, or 40.6% as a percentage of net sales, in the prior year.
Net Cash Provided by Financing Activities 2024 Net cash provided by financing activities of $4.6 million in 2024 was primarily attributed to: • $9.1 million cash proceeds from the exercise of stock options. 39 Table of Contents This was partially offset by: • $2.6 million for tax withholdings related to net share settlements of restricted stock units. • $2.0 million for principal payments under finance lease obligations. 2023 Net cash provided by financing activities of $327.3 million in 2023 was primarily attributed to: • $393.5 million net proceeds from Convertible Notes. • $4.5 million cash proceeds from the exercise of stock options.
This was partially offset by: • $2.1 million cash proceeds from the exercise of stock options. 2024 Net cash provided by financing activities of $4.6 million in 2024 was primarily attributed to: • $9.1 million cash proceeds from the exercise of stock options.
We use third-party brokers to assist with monitoring our products at the point-of-sale as well as representing us at headquarters for various customers. These brokers visit our retail customers’ store locations to ensure items are appropriately stocked and maintained. Share-based compensation .
Research & development. Research and development costs consist of expenses to develop and test new products. The costs are expensed as incurred. Brokerage. We use third-party brokers to assist with monitoring our products at the point-of-sale as well as representing us at headquarters for various customers.
Income (Loss) from Operations As a result of the factors discussed above, income from operations increased by $68.4 million to income from operations of $38.0 million for the year ended December 31, 2024 as compared to a loss from operations of $30.4 million for the prior year. 32 Table of Contents Interest and Other Income, net The Company recorded interest and other income, net of $11.9 million for the year ended December 31, 2024 as a result of interest income generated from cash and cash equivalents as compared to $13.0 million for the prior year, which also included interest income generated from short-term investments.
Interest and Other Income, net The Company recorded interest and other income, net of $9.2 million for the year ended December 31, 2025 as a result of interest income generated from cash and cash equivalents as compared to $11.9 million in the prior year.
This was partially offset by: • $66.2 million for the purchase of a capped call option. • $2.0 million for debt issuance costs. • $1.4 million for tax withholdings related to net share settlements of restricted stock units. • $1.1 million for principal payments under finance lease obligations.
This was partially offset by: • $2.6 million for tax withholdings related to net share settlements of restricted stock units. • $2.0 million for principal payments under finance lease obligations. Indebtedness For a discussion of our material indebtedness, see Note 6 and 7 to our Consolidated Financial Statements included in this report.
Trade incentives consist primarily of customer pricing allowances and merchandising funds, and consumer coupons offered through various programs to customers and consumers. Estimates of trade promotion expense and coupon redemption costs are based upon programs offered, timing of those offers, estimated redemption/usage rates from historical performance, management’s experience and current economic trends.
Estimates of trade promotion expense and coupon redemption costs are based upon programs offered, timing of those offers, estimated redemption/usage rates from historical performance, management’s experience and current economic trends. While our revenue recognition does not involve significant judgment, it represents a significant accounting policy.
Working capital remained consistent as the increases consisting of an increase of $17.6 million in inventories, net, an increase of $11.7 million in accounts receivable, and an increase of $8.4 million in prepaid expenses were fully offset by a decrease of $28.2 million in cash and cash equivalents, an increase of $6.4 million in accrued expenses due to timing, and an increase of $3.1 million in accounts payable as a result of timing.
The increase was partially offset by a decrease of $4.7 million in accounts receivable, a decrease of $4.0 million in inventories, net, a decrease of $6.2 million in prepaid expenses, an increase of $3.3 million in accounts payable, and an increase of $1.1 million in lease liabilities.
The net sales increases were driven by year-over-year growth in the Grocery, Mass, International and Digital channel of $158.5 million and $138.6 million in 2024 and 2023, respectively, with the remaining growth in the Pet Specialty and Club channel. This growth was primarily driven by year-over-year volume gains of 26.1% and 20.0% in 2024 and 2023, respectively.
The $126.8 million increase in net sales was driven by growth in the Grocery, Mass, International, and Digital channel of $92.2 million, with the remaining growth in the Pet Specialty and Club channel.
SG&A as a percentage of net sales remained consistent as the decreases due to reduced logistics as a percentage of net sales and the absence of non-recurring charges incurred in the prior year were fully offset by increased media as a percentage of net sales, higher share-based compensation and increased variable compensation accrual.
The decrease in SG&A as a percentage of net sales was primarily due to decreased share-based compensation, driven by the reversal of previously recorded expense in the current year related to performance-based conditions deemed improbable of achievement as of year end, and decreased variable compensation accrual, partially offset by increased media spend as a percentage of net sales and higher non-recurring charges in 2025.
(e) Represents a true-up to transition costs related to the organization changes designed to support growth, including several changes in organizational structure designed to enhance capabilities and support long-term growth objectives. 35 Table of Contents The following table provides a reconciliation of Adjusted Gross Profit to Gross Profit, the most directly comparable financial measure presented in accordance with U.S.
(d) Represents termination costs due to a business change in our international go-to-market strategy. 35 Table of Contents The following table provides a reconciliation of Adjusted Gross Profit to Gross Profit, the most directly comparable financial measure presented in accordance with U.S.
Net Cash Used in Investing Activities 2024 Net cash used in investing activities of $187.1 million in 2024 was primarily attributed to: • $187.1 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend. 2023 Net cash used in investing activities of $239.1 million in 2023 was primarily attributed to: • $239.1 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend. • $113.4 million purchase of short-term investments.
Net Cash Used in Investing Activities 2025 Net cash used in investing activities of $148.2 million in 2025 was primarily attributed to: • $148.2 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend. 2024 Net cash used in investing activities of $187.1 million in 2024 was primarily attributed to: • $187.1 million of capital expenditures related to Freshpet Kitchens, plant recurring capital expenditures, expenditures relating to investment in fridges, and other capital spend. 39 Table of Contents Net Cash (Used In) Provided by Financing Activities 2025 Net cash used in financing activities of $3.0 million in 2025 was primarily attributed to: • $3.0 million for tax withholdings related to net share settlements of restricted stock units. • $2.1 million for principal payments under finance lease obligations.
Interest Expense Interest expense decreased $1.8 million to interest expense of $12.3 million for the year ended December 31, 2024 as compared to interest expense of $14.1 million for the prior year.
Interest Expense Interest expense increased $1.9 million to $14.1 million for the year ended December 31, 2025 as compared to $12.3 million in the prior year. The increase was primarily driven by a $1.6 million decrease in capitalized interest compared to the prior year period as a result of assets placed into service.
Freshpet Fridge operating costs consist of repair costs and depreciation. The purchase and installation costs for new Freshpet Fridges are capitalized and depreciated over the estimated useful life. All new refrigerators are covered by a manufacturer warranty for three years.
The purchase and installation costs for new Freshpet Fridges are capitalized and depreciated over the estimated useful life. Freshpet Fridges purchased in 2025 are protected by a manufacturer warranty of five years, while those purchased prior to 2025 carry a three-year manufacturer warranty. We subsequently incur maintenance and freight costs for repairs and refurbishments handled by third-party service providers.
Net Income (Loss) Net income increased $80.5 million to net income of $46.9 million for the year ended December 31, 2024 as compared to a net loss of $33.6 million in the prior year, primarily due to contribution from higher sales, improved gross margin, reduced logistics costs as a percentage of net sales, and gain on equity investment, partially offset by increased SG&A expenses.
Net Income Net income increased $92.2 million to net income of $139.1 million for the year ended December 31, 2025 as compared to net income of $46.9 million in the prior year, due to the deferred income tax benefit resulting from the release of the valuation allowance as a result of sustained profitability and the expected future profitability, and contributions from higher sales, partially offset by increased SG&A expenses, including increased media spend of $29.2 million and $17.7 million of non-recurring charges in 2025, compared to a $9.9 million gain on equity investment in the prior year. 33 Table of Contents Adjusted EBITDA Adjusted EBITDA was $195.7 million for the year ended December 31, 2025, compared to $161.8 million, in the prior year.
Our marketing and advertising expenses primarily consist of national television media, digital marketing, social media and grass roots marketing to drive brand awareness. These expenses may vary from quarter to quarter depending on the timing of our marketing and advertising campaigns. Our Feed the Growth initiative focuses on growing the business through increased marketing investments. Freshpet Fridge operating costs.
Our digital efforts span a range of platforms and environments, including company and retail websites, retail media networks, search engines, blogs, and online reviews. These expenses may vary from quarter to quarter depending on the timing of marketing and advertising campaigns. Freshpet Fridge operating costs. Freshpet Fridge operating costs consist of repair costs and depreciation.
We have outstanding share-based awards that have performance-based vesting conditions in addition to time-based vesting. Awards with performance-based vesting conditions require the achievement of certain financial criteria as a condition to the vesting. For certain performance-based awards, the quantity of awards received can range based on the level of performance achieved.
We have certain outstanding share-based awards with performance-based vesting conditions that require the achievement of certain Adjusted EBITDA margins, Adjusted EBITDA and/or Net Sales targets as a condition of vesting, with such target periods through fiscal year 2027.
Adjusted EBITDA Adjusted EBITDA was $161.8 million, or 16.6% as a percentage of net sales, for the year ended December 31, 2024, compared to $66.6 million, or 8.7% as a percentage of net sales, in the prior year. The increase in Adjusted EBITDA was a result of increased Adjusted Gross Profit partially offset by higher Adjusted SG&A expenses.
Income from Operations As a result of the factors discussed above, income from operations increased by $37.7 million to $75.7 million for the year ended December 31, 2025 as compared to $38.0 million in the prior year.
EBITDA represents net income (loss) plus interest expense net of interest income, income tax expense and depreciation and amortization expense.
EBITDA represents net income (loss) plus depreciation and amortization expense, interest expense net of interest income and, income tax (benefit) expense. Adjusted EBITDA represents EBITDA less gain on equity investment, plus non-cash share-based compensation expense, loss on disposal of property, plant and equipment, distributor transition costs, legal obligation, and international business charges.
Removed
We subsequently incur maintenance and freight costs for repairs and refurbishments handled by third-party service providers. 30 Table of Contents Research & development. Research and development costs consist of expenses to develop and test new products. The costs are expensed as incurred. Brokerage.
Added
Digital orders include any purchases made online, including our direct-to-consumer business, and may also be fulfilled by our Freshpet Fridge network in brick and mortar stores. • Consumer trends including long-term growth in pet ownership, pet humanization and a focus on health and wellness. • At times we increase our sales price to offset any adverse movement in input costs.
Removed
Other general and administrative costs include non-plant personnel salaries and benefits, as well as corporate general & administrative costs. Income Taxes We had federal net operating loss (“NOL”) carry forwards of approximately $391.5 million as of December 31, 2024, of which, approximately $146.7 million, generated in 2017 and prior, will expire between 2028 and 2037.
Added
We expect to continue to mitigate any adverse movement in input costs through a combination of cost management and price increases. 30 Table of Contents Selling, General and Administrative Expenses Our selling, general and administrative expenses consist of the following: Outbound freight.
Removed
The NOLs generated from 2018 through 2023, of approximately $244.8 million, will have an indefinite carryforward period, but can generally only be used to offset 80% of taxable income in any particular year.
Added
The Company accounts for forfeitures as they occur. Other general & administrative costs. Other general and administrative costs include non-plant personnel salaries and benefits, as well as corporate general & administrative costs. Income Taxes At December 31, 2024, the Company determined that a full valuation allowance against its $98.5 million of net deferred tax assets was appropriate.
Removed
We may be subject to certain limitations in our annual utilization of NOL carry forwards to off-set future taxable income pursuant to Section 382 of the Internal Revenue Code, which could result in NOLs expiring unused.
Added
At December 31, 2025, the Company concluded that it was appropriate to release a majority of the valuation allowance against the $71.4 million of deferred tax assets recorded as of that date based on the weight of available evidence, which now supports the conclusion that it is more likely than not that the majority of deferred tax assets will be realized.
Removed
At December 31, 2024, we had approximately $278.4 million of state NOLs, which expire between 2025 and 2046, and had $27.6 million of foreign NOLs in the United Kingdom which do not expire.
Added
Based on sustained profitability, including three-year cumulative income before taxes of $76.9 million, excluding the prior year gain on our equity investment, the significant deferred tax liabilities expected to reverse in future periods, and the projections of future taxable income sufficient to fully utilize the Company's federal and state NOLs, the positive evidence supporting the release of most of the valuation allowance outweighed the negative evidence supporting a full valuation allowance.
Removed
At December 31, 2024, we had a full valuation allowance against our net deferred tax assets as the realization of such assets was not considered more likely than not.
Added
Income Tax (Benefit) Expense Income tax benefit increased $69.0 million to $68.4 million for the year ended December 31, 2025 as compared to income tax expense of $0.6 million in the prior year.
Removed
In contrast, grocery, mass, international and digital offer a wide variety of products. Net sales were $975.2 million and $766.9 million for the years ended December 31, 2024 and 2023, respectively, representing increases of $208.3 million and $171.6 million, or 27.2% and 28.8%, as compared to the respective prior years.
Added
The increase is primarily due to the deferred income tax benefit resulting from the release of the valuation allowance in 2025, partially offset by deferred income tax expense.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCommodity Price and Inflation Risk We purchase certain products and services that are affected by commodity prices, including, but not limited to agricultural products.
Biggest changeCommodity Price and Inflation Risk We purchase certain products and services that are affected by commodity prices, including, but not limited to agricultural products, including beef.
Historically, the foreign currency forward contracts have not been designated as hedges and, accordingly, any changes in their fair value are recognized on the Consolidated Statements of Operations and Comprehensive Income (Loss) in Interest and Other Income, net, and carried at their fair value in the Consolidated Balance Sheet with gains reported in prepaid expenses and other current assets and losses reported in accrued expenses.
Historically, the foreign currency forward contracts have not been designated as hedges and, accordingly, any changes in their fair value are recognized on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) in Interest and Other Income, net, and carried at their fair value in the Consolidated Balance Sheet with gains reported in prepaid expenses and other current assets and losses reported in accrued expenses.
The percentage of our consolidated revenue for the year ended December 31, 2024 recognized in Europe was less than 1%. The Company may, from time to time, enter into forward exchange contracts to reduce the Company's exposure to foreign currency fluctuations of certain assets and liabilities denominated in foreign currencies.
The percentage of our consolidated revenue for the year ended December 31, 2025 recognized in Europe was less than 1%. The Company may, from time to time, enter into forward exchange contracts to reduce the Company's exposure to foreign currency fluctuations of certain assets and liabilities denominated in foreign currencies.
As of December 31, 2024, there were no forward contracts outstanding. 42 Table of Contents
As of December 31, 2025, there were no forward contracts outstanding. 42 Table of Contents

Other FRPT 10-K year-over-year comparisons