Hi, I'm Tom Palmer, Equity Research Analyst at JP Morgan covering the food space. Joining us today is Billy Cyr, CEO of Freshpet. Freshpet manufactures and sells fresh, refrigerated pet food. The company has a network of three plants to produce product and has over 38,000 company-owned refrigerators at retailers around the country. Billy has been CEO of Freshpet since 2016. The company's trailing 12-month sales are approaching $1.1 billion, and the company is guiding for approximately 13% sales growth this year. Billy, Freshpet has built an impressive network of three manufacturing facilities. I think the growing pains that Freshpet faced over the past decade-plus could maybe help inform your competitive moats today when it comes to both the quality of your product and your margin structure. Maybe we could go over that, just the challenges that you've faced and how much progress you've made up to this point. Yeah, obviously we've invested quite a bit, and for a relatively young organization, the magnitude of the investments is enormous, and the complexity that that brings is enormous. I did a review for our folks, and if you look at from 2017 to the present, we spent over $1.3 billion in capital, and that's a pretty big number. We're now to the point where all that spending, all that organizational capability that we've put in place is generating the benefits that we expected it to generate. Think of this as we now have, as you described, an enormous competitive moat. It's not just the amount of money that we spent; it's the technology that we put in place, the scale that that creates, the breadth of the lineup that we've been able to build and enable. It's also the margins that it's now starting to deliver. It's been tough getting here. Those who've been with us for a while know that we had some stumbles along the way, but we've gotten to the point where all that investment that we've made is finally yielding the fruit. We announced in our earnings call a week ago that we're finally free cash flow positive. We'll be free cash flow positive this year on a going-forward basis. Those NOLs that we've accumulated forever now can actually be counted as real assets because we're consistently profitable enough that we'll get to use them. We're finally growing into that sort of the size 15 sneakers that we had as a 12-year-old a couple of years ago. We are now that 18-year-old who fits in the body that we've built, and we feel pretty good about it. Right. I think when we look at the current environment, there has been a slowdown in terms of pet food demand. You've obviously experienced some of that slowdown as well. What are the key changes that you've seen in the pet food industry and dog food specifically over the past couple of years? To what extent do you view this as maybe more of a secular shift, or is this really kind of more of a cyclical case and when it might pass? Thanks. We really do not see any of the long-term drivers changing. The long-term drivers of people want to have pets. They provide important social benefits, important health benefits. They are just valuable members of our family. The desire to treat the pet as a member of your family, there is nothing in any of the attitudinal data that we gather, anything in the behavioral data that we observe that says that people feel any less strongly today about the need and desire to get a dog than they did a couple of years ago. In fact, it is getting greater because the younger generations are more predisposed to getting a pet, and they are more predisposed to getting a pet and treating it like a member of their family. Nothing has changed in that. We are clearly in a short-term hiccup, and we have seen two specific observable phenomena. One is consumers' willingness to trade up their pet food is not what it used to be, not what it was several years ago or over the last several years. Historically, roughly three to five percentage points of growth have come from people trading up. And what that meant is companies like us and brands like ours benefited disproportionately. So it was not just three to five percentage points on our growth rate. It was 10 or 12 points of our growth rate. And people who are low and mid-tier brands lost. The category premiumized, they were not beneficiaries because it was migrating upward. That stalled this year. It completely stalled. It is hitting people like us, the Farmer's Dog. Farmer's Dog, according to the credit card data we have seen, their growth dropped from 43% in Q3 last year to 16% in Q3 this year. It is not unique to us. It's a phenomenon that's occurring. We don't think that it's going to stop. We think that the reality is the consumers will, when they feel confident, they feel economically secure, they will return to the same behaviors that they had before, and we'll see this move up. The second behavior that we are seeing is that people are pausing and getting the replacement dog or getting the new dog for the first time. The natural cycle is that a 65-year-old or 70-year-old, their dog would pass away. They say, you know what, I'm really not ready to make another 15-year commitment to a dog. I want to go on cruises. I want to visit the grandkids. They don't get the dog, and they get replaced by a 24-year-old who's getting their first dog. The 65-year-old is doing what they said they would do, but the 24-year-old doesn't feel economically confident enough to do it. We are seeing that that cycle is not working the way it used to. It will. People don't, the desire to get a dog doesn't go away. It just becomes pent-up demand. Thanks for that. You noted in your response the competitive environment a little bit, right, in terms of maybe new entrants over the last several years that you've seen. How do you view Freshpet as being positioned with that environment, and to what extent might it, I guess, color your view of your addressable market? Yeah. I mean, first of all, it validates the addressable market. I mean, it's not a surprise that all these people decided to enter the category because we've believed for a long time, and now everybody else has finally realized that what we thought was going to happen is happening. So we're frankly grateful for them for validating the category. We're also grateful to them for the amount of money that they're going to spend to create awareness and visibility of the category, and that'll only help us. I think it would be naive to think that we just woke up and realized we're going to get competition at some point. I've been with the company for nine years, and from the day I got here, I've been thinking about at some point we will be big enough that people will pay attention and will want to compete with us. We can't wake up on that day and decide what our defense plan is. We need to build the franchise in a way that protects us from somebody coming in and taking our business. What does that mean? One is we had to build the consumer franchise the right way. Highly loyal consumer franchise who's not buying you based on price. They're buying you because the product is a better product. Secondly, we had to have better products. We had to know that we were investing in and developing a broad array of products that were going to be better products than what people could produce, and we think we've got better products today. Third is we had to build scale that created a cost advantage. It's kind of interesting. Nobody's been able to come in and really undercut us on price because we have, over time, invested the time and energy to build a cost structure that we believe puts us in a very good position to broaden the appeal of the category, but also insulate us from people who might undercut us on price. The last piece is think about it as the technology that we've invested in and that we're developing puts us in a position where by the time people finally race to get into the category, we're on to the next generation, whether that's fridges in store, because the fridges we put in today are dramatically better than the ones we did before, or the manufacturing technology that we've created, which we think by the time we have a real bag competitor in the market, we'll be on to the next generation, which is higher quality at a lower cost and much more capital efficient. We feel very good about the position we've built, and we'll see what happens with the competition. Historically, one way you've helped to drive growth is through your marketing. Yep. We've seen maybe an evolution this year in terms of both marketing message and the medium on which you focus, right, shifting from maybe a little more television towards more digital. Maybe an update on kind of what you've seen that is working and maybe areas that you're still targeting some incremental improvements. Yeah, I would break it into a couple of buckets. The first bucket is we got to get the message right. The message that was right a year ago is not the message that's right today. The message that we had a year ago was much more about you and your relationship with the pet. If you, I felt strongly about my dog. If you did not think my dog deserved to be treated well, frankly, I was going to kick you out. That was a very strong emotional relationship. In an environment where consumers are economically constrained, we know that they are much more focused on making sure that I know I am getting full value for every dollar I spent. The product points of differentiation need to be made clear. We have new advertising on air today that is designed to bring that out. It's been on the air since late August and early September. Another version went on the air in October. We feel very good about the message. It's compelling. We'll see if it delivers the results we expect, but that's a very important part of the story. The second part is we need to be much more focused on the people who are in the market now, here and now. Tailoring the media buying to much more match the people who have the economic means to either trade up or to get a new dog. That looks like going after the people with the potential to be the MVPs that we've talked about, most valuable pet parents. We've skewed from less of the linear or broadcast television and more into digital or social. At the same time, I want to be very clear. We still view us as having a very broad net at the top of the funnel, bringing in as many people as we can. It's just as we move them through the funnel, we will superserve the people who have the potential to be the heaviest users and try to bring them into becoming loyal users of the brand. The media buying has changed. It's skewing more towards that down the funnel activity, but it doesn't mean we have less presence. I mean, our media spend at the top of the funnel is bigger this year than it was last year. Thanks. I wanted to get your thoughts on price points. You noted the price advantage relative to some competing products. To what extent do you view price points and maybe the possibility of some more tactical actions as a way to drive volume? What I mean by this is you've rolled out one-pound rolls or new ones. You have multi-packs. You have the new Complete Nutrition line. You are taking some action, but at the same time, you traditionally have not really used more traditional promotional activity as a tool. Maybe an update on kind of how you think through that pricing dynamic. We really don't want to make this category into a price category, and there's a lot of reasons why that's bad for this category. One is people adopt their pet food, and they choose the pet food. They really don't want to switch, so why encourage them to switch? The second thing is in a perishable products business, you really can't build inventory, and you do not want to create spikes and valleys in your production. We are going to work really hard to maintain everyday value pricing that we deliver to our consumers every day and our retailers deliver. Because we have a broad product lineup that appeals to a wide range of economic groups, dog sizes, and whatnot, if we find ourselves in a situation where we have a need to bring consumers in and get them their first exposure, we have over time gotten a little sharper on the price point on the one-pound roll. The one-pound roll is the most common entry point item. It is the lowest total dollar outlay. It's the most affordable product. We have from time to time sharpened the price point in that, but it does not have a material effect on the total product's profitability or the total lineup because it's a very small amount of our volume, but it becomes that gateway that people can come in. We have launched other products that were designed to be in that sort of available price point range, an entry point price point. At the end of the day, almost every time we bring one of those folks in, they migrate up into the platform into larger sizes, more specialized items, or even more expensive items. In the third quarter, when you reported last week, you noted e-commerce reached 14% of sales and grew 45% year over year. You have a relatively early stage D2C offering, and I think much of your e-commerce sales today are fulfilled out of stores, often via pickup. How do you see the channel evolving in coming years? Is there opportunity for expanded distribution with retailers perhaps using more of a warehouse distribution? Yeah. So we think e-commerce is a big opportunity for us. We're well underdeveloped versus the category. We're at 14%, as you said. The category is 36% or 37% is done via some form of e-commerce. I don't think we'll match the category because there's some dynamics that are present with a shelf-stable, bulky product like a dry dog food that makes it so you want to have it delivered to your house in some way or that you may not with a smaller perishable product. But we can certainly be much bigger than we are. We're playing all the hands, and the number of hands that we can play expands every year. Today, we have a D2C business. We didn't have that a year ago. That's been around for about 11 months at this point. We're really excited by what Amazon is doing and Walmart+ are doing to create same-day grocery delivery. In essence, if you want all the things that you can get from a D2C offering, excluding the personalization, you might be able to get that from Walmart + or from Amazon. It will be the item you want delivered to your house, delivered on the same day, very fresh, high-quality delivery. At the same time, some people are buying curbside. Some people are buying via Instacart, and all those are growing for us. All of them are growing quite nicely. We have to play in every one of those segments, and we will. We will let the consumer decide how they want to buy, recognizing someone might want personalization over here, and they'll do D2C subscription. Other people might want just the best Freshpet food, but they want it at the best value, and they're going to go to Costco. They're going to go to Walmart. They're going to go to one of their favorite value-oriented retailers. One last one on channels. The veterinary channel is one where Freshpet has been underpenetrated, I think, relative to some others. I appreciate maybe refrigerators at vets are not a significant opportunity, but I do wonder if there's a different path to getting more support from vets and more referrals. Yeah. It's going to be a tough road. Let's be really clear. Our competitors have invested very heavily in that space for a very long period of time. For us, the first and foremost is we want to get ourselves in a position where the vet is not an obstacle to the consumer adopting fresh pet food. That requires us to do the right kinds of clinical studies, to publish those studies, to show up at the vet conferences and make sure they have basic awareness and understanding of the virtues and the benefits of fresh pet food. Fortunately, as more and more people enter this space, it does provide a sense of validation. It makes a more relevant conversation. I mean, I'll give you the example is for ever and ever and ever, Hills' talked about only science-based nutrition and whatnot. They just entered the fresh space with the acquisition they made in Australia. I think that validates that fresh is a form that people who are really concerned about the science and what nutrition can really feel good about. We'll see the same thing from other competitors over time. Our job is to get the vet from being an objection to being at least a neutral and let our marketing and the word of mouth be the driver. Over a long period of time, we do need to invest in and have started investing in the studies that would prove it. We call it an evidence-based culture where we can provide further and further evidence of the life-enhancing quality of a fresh diet. Good news is others are doing the same thing. We're starting to see more competitors on shelf. It does not seem to be coming at your expense. This past quarter, and maybe you want to run through it, you noted expanded presence at several key club and mass retailers, including Island Fridges. Maybe one, just an update on kind of some of those initiatives. Two, what are you hearing from your retail partners about the fresh pet food category broadly? Are they looking to both expand your presence and explore others? Yeah. I mean, if you're a retailer today and you want to be in the pet food space, which most of them do, you've quickly realized that your best way to compete for that sort of place-based shopping occasion or one where the store is used as the replenishment center is going to be by having a bigger presence in fresh. That's where the category growth is coming from. We are by far the biggest driver of category growth, and it's a driver of foot traffic into your store. Somebody comes in to buy Freshpet food, buys a variety of other things in whatever store you're in. If you're a retailer, you've decided to make this bet. Walmart's decision to put Freshpet Islands in the 17 stores they're in now kind of is a validation. They're building, they literally are building a pet center, and this is the centerpiece of the pet center. We think it'll work. We'll let the results speak for themselves as time goes by. That's not unlike the decisions that other retailers are making, which is, okay, if we want to be in pet food, this is the way to play in pet food. We're going to invest in an increasingly large amount of space. They won't make it exclusive to us. I mean, they're putting in Blue Buffalo fridges. They've got our Fridge Islands. They're trying to get private label guys in there. They're trying to get other manufacturers in the space. Ultimately, we feel good about the offerings that we have and that will be the preferred offerings. At the end of the day, we expect to see more brands in that space. You've provided very helpful margin outlooks for a variety of cost items, maybe to a level some others we wished did. Over the past couple of years, the margin expansion has really been aided by, at least your disclosures, lower ingredients, logistics, and then quality, which I think has largely shrunk. Going forward, it would appear that maybe some of the targeted margin expansion shifts a bit, and it is more related to operating leverage. You've expressed confidence in 48% gross margin, even if sales are high single digits versus maybe mid-teens expectation a year ago. I guess your SG&A leverage, a little bit more variable, but still see opportunity. Maybe an update on kind of the key drivers as we think about both that incremental gross margin expansion and what we should look for on SG&A. Yeah, we're incredibly proud of what we've accomplished over the last several years on logistics, quality, and input costs, which is yield for us. We're equally excited about what opportunities we have going forward. We think of it purely in our manufacturing sense as conversion costs. We made some pretty big investment decisions over the last several years that are designed to get higher operating efficiencies. One of them was we invested in our labor and talent, and that has paid dividends over and over again. It's allowing us to drive up utilization, throughput, yield, and whatnot. We think the opportunities for that going forward remain enormous. That's going to probably be the single biggest driver of margin expansion is the operating effectiveness that's created by our team. We've also invested in technology. You've heard us, we've been investing in the new production technology for seven years now. We had the first production scale line of this new bag technology that is in its startup phase, and we're very excited. I literally look at the lines and look at the line on a kind of couple of times a week basis, and what it's doing and what it can produce is really remarkable, but the efficiency of it is amazing. I kind of look at it and go, that's a long-term strategic decision that we made that's going to drive efficiency, and that will help us get gains going forward. The other part of it is the G&A side. We have historically, and it varies from year to year as you indicated, we have historically added G&A at about half the rate of sales growth. We think we continue to do that. We have to be smart. We have to invest in technology. We have to upgrade our systems. We have to be smart about how our organization evolves. We think we can do that and get the leverage that we need to get. Combined, that gets us to the margins that we've been talking about. You noted the new line technology. How scalable is that solution across your facilities? You have to think of the technology as having two parts. There's the new technology in its entirety, the full-fledged version of it, which in order to implement it, you have to start with a new line because its layout, its utilities, its configuration is completely different. It cannot be retrofitted to the existing lines readily. As we have increased demand and are putting in new bag lines, you can expect that that's an option that we would use to put the new bag line in. It's a little bit more capital, but a whole lot more throughput. It's a much better return for us. The really cool thing that our team did is after we got that technology vetted and we started doing all the engineering work to put in the first line, we tasked them with figuring out how to do a light version of it that could retrofit existing lines so we could go back into our supply network. They came up with a version of it. It does not have all the same benefits. It has or it has most of the same benefits, but not all the same benefits, but a dramatically lower capital cost and with significantly less disruption to our system. We are piloting or we are going to start up the first production scale version of the light technology in the second quarter of 2026. If it works, we can go back through all of our lines with the exception of maybe one or two and reapply it. Now, that's not going to happen overnight because you can't take lines all out of commission at once and you may not want to do all of them. Think of it as by the end of 2027, we could have a meaningful part of our lineup is using the new technology as well as the full-in version and the retrofit version. That would be a huge improvement in our quality or input costs of throughput, and it would help us further defer CapEx spending. Just on the CapEx question, I guess, if sales growth does persist at maybe a lower rate than you once anticipated, what are the main changes we should be thinking about both from a CapEx standpoint? I don't know if there are P&L implications as well to be thinking about. From a CapEx perspective, and we've been pretty agile. We came into the year thinking we're going to spend $250 million in CapEx, and we're now projecting $140 million. We cut $110 million of CapEx out of the plan by basically pushing projects back because we didn't think we needed them as immediately. If you're still growing at the rate that we're growing, you still need incremental capacity, and there are long lead times on that. We will have CapEx next year. We said in the earnings call, CapEx next year would be about the same as this year, with the wild cards being if the fridge islands that we talked about pan out, then you can expect to see that we might spend a little bit more on fridge islands. If the new technology works really well, we might spend a little bit more to pull forward some of those lines. Outside of that, I think it's the same. The reason for that is right now we're working on the increments of capacity that we'll need at the beginning of 2028. We have enough capacity to get us through 2026 and 2027. We're thinking about what we need in 2028, and that's what we'd be spending money on in 2026. From a P&L perspective, we have enough capacity to produce $1.5 billion in sales today. The key is staffing. We just have to manage the staffing so that it comes on when we need it. Frankly, I've gotten to the point where I like pushing the efficiencies of the lines and making them work a little bit harder to drive efficiency before you add the next increment of staff. So far, that's worked well for us. When we think about the billion five in capacity, are there areas you have? I know historically there have been callouts where maybe bagged versus rolled. There's been some different flex. Any constraints today or one of the two that you might see constraints on sooner? The next line that we need to put in is a roll line. It's under construction now. We also have some specialty products. We have these Chicken Bites that we sell. We also have Homestyle Creations, which is a more premium item in our lineup. That's made on a similar but not identical line, has a couple of pieces to it that are different. That was the most capacity constrained thing. That actually is the one that is unconstrained this year and as a result is growing quite nicely. For the most part, rising tide lifts all boats. We add increments of capacity in roughly the proper proportion on a sort of continual basis. Okay. Thanks for that. The last one on CapEx. Sorry to hurry. Let's do it. Last week you discussed a starting point. You just noted it again for $26 of $140 million. What are the main projects just embedded in that outlook? Any breakdown of the spending? I know there's a maintenance component, a fridge component, lines. Think of it as there's routine maintenance that we have to do. As we get an expanding footprint, there's obviously more maintenance. Also, the kitchens in Bethlehem are getting a little bit older, so they need more maintenance. I'd also highlight that included in what we would consider sort of that maintenance CapEx is upgrades to older technology. If anybody had been in our kitchens five years ago and walked in today, they would be amazed at how many fewer people are on the production floor because we've found ways to automate previously manual systems. We put that under our maintenance bucket, but it's really upgrades. We have fridges. We spend $20 million-$30 million a year on fridge expansion. The big chunk, the big hitter is capacity expansion. When you think about next year, when we built Ennis, we designed the facility to be built in three phases. Phase one was three production lines and all the infrastructure for the site: wastewater treatment facility, energy, central utilities building, loading docks, cold storage, locker rooms, all that. We put on second phase. When we built the second phase, it was designed to house four lines, but we did not know what technology we wanted to put on the third and the fourth line. We built the shell, finished off half of it, and put two lines in and started them up. Right now, we are making decisions about what the technology is going to be. We have to go into the second half of that shell and put in drains and floors and ceilings and wiring and all that other stuff. When people say, "What are you spending on?" To get that capacity we need in 2028, we have to finish off that second part of that building with all the infrastructure it needs so that we can lay lines in there and put the lines in basically at the end of 2026 and into 2027 so they're ready to start in 2028. That's a big part of the capital spending. Beyond that, we do not need to build new buildings for quite some time. Okay. Thanks for that. Concurrent with the earnings announcement last week, there was a second press release, and it did disclose the planned sale of some of your holdings in Freshpet. Perhaps you could just give an update on maybe what drove the release. Thank you. Yeah. First of all, everybody should know I have no interest in selling stock at the current price. The reality is that I own stock options that were granted to me in September of 2016 that expire in September of 2026, and I have to exercise them. With them, because the stock price was really low, comes a fairly significant amount of tax and exercise price. The unusual part that required me to create the plan was that the stock is not just held by me, it is held by my wife and my kids and in trust for my kids. The stock that is held in trust for my kids, lucky my kids, but I own the tax liability for the trust. When I sell shares, I cannot just sell to cover. I have to sell more shares in my holdings to pay their taxes. That required a 10b5-1 plan to be put in place. The options would not expire on exercise. That is really the driver of it. SEC rules do not allow me to disclose what the specific plan of it is, but everybody should know I am not happy with the current price. I do not think it is the price to sell. My intention is not to be less invested in the company, but I do have to pay taxes for my kids and on my holdings. Thanks for that update. You're guiding for approximately 13% sales growth in 2025. I think guidance implies more of a high single-digit rate to close out the year, although that does include some degree of shipment timing headwind. I guess as we're rolling into 2026, what are the key items that you're watching to help determine expectations? Yeah. We look at this extremely closely. We're watching the Nielsen's just like everybody else is on Monday mornings. We see the Nielsen's and we understand where they are. We also look at the household penetration. That's probably the single best indicator, not just for us, but for everybody else. We look at household penetration. We look at it by demographic. We also look at the sum of household penetration plus buying rate because as the penetration gains go up, sometimes the buying rate gains go down and vice versa. If you look at the most recent data that we showed over the last 52-week period, the household penetration plus buying rate growth was about 15%. Coincidentally, over the last 52 weeks, so Q4 last year, first three quarters of this year, our growth is about in that range. It's a pretty reliable predictor of where the net sales are going to come in. We're looking at that on a 52-week basis, on a 13-week basis, and really trying to triangulate where we're going to come out. Right now, we're feeling like it's looking like the world has gotten a little bit more stable, but it's very volatile. The consumer sentiment that came out on Friday was not encouraging. We know this category is very sensitive to consumer sentiment. Our hope is that the consumers who are most sensitive to this dynamic have taken the actions they're going to take. We'll see going forward. Those are the metrics we look at the most. We obviously pay attention to what retailers are going to do because that amplifies our growth quite a bit. We look at what returns we're getting from our advertising investment, so the customer acquisition costs, but all at the end of the day has to turn into household penetration and buying rate gains. All of us can look at the data and see what we see, but our phenomenon is no different than everybody else's. We're just in at a higher number. We're doing better than everybody else. This year does seem to be a bit bigger of a fridge rollout year than maybe we've seen in a few years. To what extent should we think about, one, do those fridges maybe ramp in terms of productivity versus when they're initially rolled out? That could be a driver next year. Two, to what extent you can kind of maintain that rate of growth in terms of new fridges? Yeah. We think about new fridges as they add to the franchise to the extent that they bring in net new households. One of the things we talked about with Costco when we rolled out Costco was Costco is high volume, high foot traffic, but it means nothing if it's not net new households. We think that about two-thirds of the households who bought us in Costco were net new to the franchise. It's too early on sums to see whether that net incremental distribution, which is great and it's doing very, very well. We're very happy with how it's doing. If it's net new users or to what degree it's net new users, they have distinctive assortment. They have distinctive SKUs, but they sit in the parking lot of Walmart in many cases. We'll have to see how many of those users are distinctly new. We're now in 10 lifestyle retailers. It's Tractor Supply in a test. Our bet is that the shopper who shops there is very distinctive and very net incremental. Over time, as we think about the plan and the rollouts that happen this year, we love it. It increases the visibility and availability of the brand, but we're really focused on does it bring in net new users? Some do that more than others. As I look at next year, depending on how the Tractor Supply thing goes, depending on how the Walmart fridge islands go, those could be big drivers in net new households for the brand. I'd expect next year to be like this year, a good year. Whether it's a great year or not remains to be seen. One area that maybe you've highlighted in the past as greater opportunity, I think one, smaller dogs tend to have higher penetration than large dogs. Then two, you've tried maybe some new SKUs that have different types of attributes associated with them. Maybe an update on kind of both of those initiatives and to what extent now is a good time to be pushing those versus waiting for a more robust demand environment. Yeah. I mean, you have to remember at any given time, there are people who have money and people who are looking to enhance the lifestyle of their dog. Yes, there are some times that are better than others. If you have a large dog and you have money, you might be considering Freshpet. Launching a large dog product like we've done has helped. That's a big nice next step for us. We clearly would like to see our franchise move from being a smaller medium-sized dog franchise to having more large dogs. It's not like we have to jump from having 20-pound dogs to having 100-pound dogs. We need to get the 20-pound dogs to turn into 30-pound dogs, turn into 40-pound dogs, turn into 50-pound dogs, and kind of let the curve slide to the right as we increase the size of the franchise and bring in more and more users. Over time, history would show that as you get broader and broader acceptance and adoption of this kind of a new habit, eventually it becomes the norm for the people across sizes, income spectrums, breeds of dog. It keeps moving in that direction. It just takes time. We just want to continually encourage it and nurture it, see how it develops. I guess the other side of pet food and what trends have held in a little bit better here would be on the cat food side. I think there's a guess a couple of questions here. One is, do you view the Freshpet brand as being able to bridge from dog into cat? Secondarily, do you think there's the same captive demand for fresh pet food on the cat food side that we've clearly seen on the dog food side? Yeah. I mean, we have cat food today. It's a very small part of our business. For a long time, it was because we just didn't have the capacity to chase it. That day is gone. We certainly have the capacity to chase it today. We think it's a big opportunity. The question is the right way to pursue it. We have had an R&D team working on it for a while. We do not want to enter the cat food space just to say that we're there. It has to be a product that is demonstrably better than what the alternatives are. There needs to be a marketing system and marketing model that works for it. It has to cat food aisle separate from dog food aisle. The characteristics of the product, cats eat with their tongues, dogs eat with their jaws and their teeth. You have to have the right product in the right place with the right packaging format. Most cat food is in single-serve formats. We're in a bulk size format. You have to think through all those pieces. How does it fit with our system? You should know that we're working on it. We've been working on it for years, but we won't do something until we're sure we've got something that's a winning proposition. Can the Freshpet brand name go there? Absolutely. Freshpet brand name can go there. We think that that's a very viable proposition for us. Thanks for that. Just on the manufacturing side, I guess that you noted the different form factors. How hard is that to introduce? It depends on what the product is that you want to come up with because there's some things where you just have to change the back end, so the packaging that it goes into, but all the front end stays the same. There are some things where you have to completely change the whole process. Until we've locked on what it is that we want to do, it's hard to say. The one thing that is the virtue of our business as we've created scale is we can afford to have dedicated lines. We can afford to have a line. The Kitchens One in Bethlehem is the original technology. It's small scale, slower speed lines. If one of those ended up being dedicated to making a cat food, it would be in great use for a relatively low utilization piece of equipment. I'm not saying it will be, but I'm using that as an example of the options you have when you're at our scale is you can decide to dedicate assets to a specific line. That's what we do today. I mean, I described before the Homestyle Creations product that we have, which has very distinct characteristics. The Chicken Bites, very distinct characteristics. There's a line that is dedicating to making those at Kitchen South. Okay. I I wanted to ask on the input cost side. We have heard from a lot of food companies about heightened protein inflation this year. I think I know you're buying a little bit differently, but also you contract annually, and we're getting to the point where that contract will roll over soon. Contract. Yeah. Contract. Yeah. Any update on kind of how to think about the pricing environment as we move into next year in terms of what you're seeing and maybe how that differentiates between protein types? Yeah. So we have done our contracting. Normally it's a little later. This year we got it done. The beef is no surprise. Beef is a lot more expensive, significantly more expensive. We're going to have to do some things related to that to manage that cost. Chicken prices are modestly down year on year for us. That's encouraging since we buy so much chicken. There are other things that we're buying that are up a little bit, and we have a little bit of tariff exposure on vegetables from Eastern Europe and whatnot. On average, we don't see significant enough inflation that would merit us taking any broad scale price increases. We may look at something related to the beef products in particular, but nothing that's across the board that may be necessary. We're pretty encouraged by the position that we're sitting in today that we can basically go and market without having to change the vast majority of our prices. Okay. And then just another one on, I guess, thinking through forward decisions. You noted the SG&A growing at half the rate of sales as kind of a longer-term target. As we think about next year, how much might it make sense or not to lean into advertising? Yeah. This is an ongoing source of discussion. We believe that advertising is the primary driver of our growth. We always want to lean in where we can lean in, but we do not want to do it recklessly. The floor that I would set is it cannot have any negative impact on our ability to expand our margins. Think of it as if we decide to lean into spending more money on advertising, we have to know that we have some sort of an offset somewhere else. That does not mean, and I am not telling you we will not because, frankly, the way we are performing from an operations perspective gives us degrees of freedom that we feel really good about. I also do not want us to invest in incremental marketing support if we do not get a good payback. One of the lessons that we've learned in our kind of analysis of the market of late is we know we need to get to those margins that the industry says, you know what, these are the kinds of margins a high-quality consumer-branded product with a well-insulated moat should be making, and do not go below those. If you can invest to get growth above those, that's a good idea. Do not invest and take those down because that, in essence, erodes the value of the consumer franchise. From our perspective, we're going to look at each of those sort of as a guidepost for how we make those investment decisions. Okay. Thank you. You did have recent CFO departure. Maybe just any update on kind of the qualities that you're looking for as you think about a future partner? Yeah. Obviously, losing Todd was not something that we wanted to have happen. He was a fabulous partner. We feel really good about what he did for us. He was not just a talented guy, but from a cultural fit perspective, he did many good things for us. We do not fault him for the decision that he made. It is closer to home. It gave him the opportunity to work at a big company in the place where he wants to live. That made all the sense in the world. As we think about this, we are in a very different place today than we were when we hired Todd three years ago. Three years ago, we had an organization that did not have the bench strength that we have today. We needed somebody who had mastery in a wide variety of areas. Three years ago, we were a company that was not positive free cash flow, was not generating cash, probably did not need to think about how you do a whole lot of capital allocation besides investing in capital. Had to do a little bit of thinking about debt financing, which we did do, and he did a nice job on that for us. As we think about it, the unique characteristics of this business, one is we need somebody who is familiar with and comfortable with growth. If you are not familiar and comfortable with growth, you will struggle in this environment. It is a very dynamic place. Secondly, ideally, we would like to have some experience with manufacturing. A lot of high-growth companies, unfortunately, are not self-manufactured. You could have the high-growth experience, but you have no manufacturing experience, or you have had to have it in a previous experience. Manufacturing brings a level of complexity that is not something that you inherently have. You have to sort of have lived an experience, at least some element of that. The third thing as we think about it is we think about you as not just a CFO. We think of you as a member of a team. We look for the qualities that are going to make somebody a really valuable member of the team. One of the things that Todd had going for him was he was a natural skeptic, which is good. We needed a natural skeptic. He was also a guy who wanted everything to be simple. Do not get me complicated. We have people who can make things really complicated. We need somebody who, when they put them inside of our team, brings the qualities that amplify the value of everybody else rather than being redundant with what everybody else is. That is what we are looking at. I am encouraged to say we have got a very robust field. We have assembled. We are in the early stages of that process. We are just reaching out and having the conversations with the field that we have assembled. We want to move quickly, but there is not the urgency to move. Ivan Garcia, who is the Interim CFO, has been with us for 11 years, is a fabulous talent. He is doing a great job. The team that works for him is doing a great job. We are not in a hurry, but we are moving with urgency. This might be the last question, but you're now free cash flow positive, and you expect to remain so. What are your priorities as you generate this free cash flow? Yeah. We're obviously spending a lot of time thinking about that. We've got some decisions to make. We obviously have the convertible debt offering that we did a couple of years ago that's out there. We can't call that until March of 2026. I'm not saying that we will call it, but I'm just saying that certainly is an opportunity that if we want to do that, we have that possibility. We obviously have no other debt, so we can invest our capital to support our growth. We do not want to get over-levered. We're not interested in being over-levered. We think that we're at the point of maturity that we should be able to fund our own growth and do it within a reasonable amount of leverage on the balance sheet. We're not averse to looking at any opportunities that can help us accelerate our conversion of the category to fresh pet food, whatever that looks like. We spend a fair amount of time these days thinking about technologies that might make a difference for us and where those could accelerate what we're doing, whether it be on nutrition technologies or anything else like that. We're interested in that kind of stuff. Right now, the big focus is now that we're kind of getting to being free cash flow positive, figure out what you're going to do from the balance sheet perspective going forward, lay out a clear plan, and we expect to do that sometime next year. All right. Thanks for joining us today. Very insightful. Thank you very much. Thank you. Good questions. Thank you. Very nice questions. Thank you. Thank you.